Last editedNov 20222 min read
The Internet of Things (IoT) is an increasingly common part of our day-to-day lives. Interconnected, internet-enabled devices are now commonly seen in a range of business and domestic contexts. Everything from doorbells and refrigerators to industrial equipment offers new ‘smart’ features made possible due to internet connectivity.
New devices and new capabilities also bring new opportunities for monetization. An IoT ecosystem is slowly taking shape around us. One in which ownership has given way to flexible subscription models. Across a range of industries from fintech to agriculture, companies of all shapes and sizes are scrambling to develop and market IoT as a service solution using ongoing subscription models.
But while potentially fertile territory, the IoT subscription model is not right for every business. Here, we look at everything businesses need to know.
What is the IoT model of subscription?
Under the IoT subscription model, customers pay a monthly subscription to access smart features as and when needed. This model generates recurring revenues for businesses while mitigating upfront costs to the consumer.
Examples of IoT subscription models
Numerous instances of IoT as a service have already become woven into the fabric of our daily lives. Some common examples include:
Amazon Echo dot
Nest smart thermostat
Simplisafe customizable home security solutions
Benefits of an IoT subscription model
The IoT subscription model is understandably very appealing to prospective vendors. It offers a wealth of potential benefits, including:
Rather than selling a product once, businesses get to turn customers into recurring revenue streams. This can help to stabilise business cash flow and mitigate risk, especially in an unpredictable economic landscape.
As well as prolonging revenue streams, IoT subscriptions help to perpetuate customer relationships, presenting ongoing opportunities to generate value in your brand and increase customer loyalty.
Increasing market share
The subscription model can be used to mitigate upfront costs and make your offering accessible to consumers who may not otherwise be able to afford it. This potentially enables vendors to increase their market share and pursue a broader range of prospects.
The longer users stay subscribed, the more data they provide for vendors which can inform the development of future products. These can help vendors to better meet the needs of their customers and add even more value to their customer relationships.
The IoT model brings with it immense opportunities for enterprising companies. But it also comes with some caveats. The subscription model may not appeal to your target market, or it may take a while for your offering to gain enough traction to generate meaningful revenues.
Here are some important questions to consider.
Does the subscription model bring value to the customer?
Whatever the potential benefits to your business, the subscription model must also bring value to the customer. It should offer flexibility, empowering the customer to adjust their provision to suit their changing needs and budget.
What are your competitors doing?
Are your competitors also offering IoT subscription services? And if not, why not? If they are not, there may be some prohibitive regulations or legislation within your industry that preclude you from offering this service.
If they are, it behoves you to consider how your offering will compare to theirs, and how it will be more attractive and advantageous to consumers.
What payment platform will I use?
It’s important to use the right payment platform to mitigate costs. Recurring payments taken by credit or debit card come with hefty fees that can see your profit margins leaching away. Instant Bank Pay offers secure and instant bank-to-bank payments at a fraction of the cost.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.