In this article, we examine five ways to reduce the billing cost of IoT devices, along with side solutions that will better address the particulars of this significant new technology.
The Difficulty of Maximizing Monetization
The traditional structure of 1-time payments between customers and providers doesn’t necessarily suit the planet of IoT. While sticker price economics may go surely devices that use self-contained features (i.e a “smart” coffee maker) it’s not as applicable for other products whose main point may be a service.
For example, IoT-based security systems or GPS management trackers are providing a long-term service that extends well beyond the day of purchase. Consequently, companies of this nature are better served to implement a hybrid billing system, charging one price for the device itself, then following up with subscription-based billing.
This billing method is admittedly complicated by the amount of various recurring services that a lot of vendors provide. within the case of a home security monitoring system, this might mean different charges for video, sensors, etc.
Providers must account for this by integrating different fees under one plan, fluid in how it adapts to new settings and services.
IoT-based services are starting to adapt to a usage-based billing method. While meter monitoring for utilities and telephone use has long been established, the notion is comparatively novel within the tech sector.
Fortunately, this method of billing is essentially abetted by the IoT device’s aptitude to require data on such things as minutes, bandwidth, and other usage-based tick marks that clearly establish what proportion a tool or service is getting used.
Consequently, usage monitoring is often automized to determine clear billing cycles that reset on different frequencies to match the usage needs of the consumer—who is subsequently often pleased to feel as if they’re only being charged for what they use.
Keep in mind, usage-based billing methods require that the provider have the power to pause services because it applies to the requirements of unique businesses. for instance, subscription-based services within the home gardening niche could also be of little use in January.
The Money in Data
IoT companies should look to monetize the info they collect. within the case of some devices, IoT data are often used for direct billing purposes to signalize to a replacement product that the buyer might need.
For example, an IoT toothbrush might naturally intuit when the buyer needs a refill on additional products like brush heads, toothpaste, etc. The manufacturer can then tailor that data and supply its customers with the chance to “subscribe” to those refillable items.
The customer is pleased because they never got to worry about running out of toothpaste, and therefore the manufacturer benefits from a dependable monthly revenue stream.
Companies can also monetize data by tailoring their business models to the precise trends demonstrated by their customers.
In the example of an IoT toothbrush, the corporate might quickly learn through subscription history and use records that one brush head is substantially more popular than others. Knowing that they’ll plan to pay less attention to the remainder of their line, opting instead to dote more development and marketing efforts on their star product.
The High Cost of Hardware
Though IoT devices aren’t as expensive as they once were, the sticker price can still be prohibitive for a few businesses and individuals. thanks to the sometimes high start-up cost of acquiring hardware—especially on top of service charges—some IoT businesses may have to think about monthly payments for both their products and their services. Indeed, the “layaway” approach is already common enough with computers, tablets, phones, etc.
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Providing customers the chance to stagger their payment democratizes the technology somewhat, making it cheaper for the buyer, and ultimately, more profitable for the manufacturer.
Revenue Recognition Complexity
Accurate revenue recognition is often complicated because it relates to IoT. this is often particularly true within the case of companies that are deriving most of their income through subscriptions. Technically, revenue can’t be recognized until a service has already been rendered. within the case of a subscription service, however, this unfolds gradually over time and isn’t completely realized until the top of the billing cycle—a date that will or might not vary for each subscriber.
Revenue recognition is further complicated by temporary trial periods, discounts, sudden cancellations, etc.
Inaccurate revenue recognition can, at the best force you to redo your reporting, and, at worst, end in legal ramifications. Fortunately, with the proper subscription billing platform, your business is going to be ready to automate and control its billing for stress-free bookkeeping.
Flexibility Wins the Day
If these considerations have one thread tying all of them together, it’s a dependence on flexibility. IoT devices are themselves extremely flexible and ask an equivalent thing of their stewards. because the number of IoT devices during this world grows at a rate of roughly 127 units per second it seems apparent that each one aspect of the industry will be got to be ready to adapt to the influx.
As this growth unfolds it’s going to be the devices themselves that best serve their manufacturers. Difficult though it’s going to be to take care of flexibility as you restructure the way you handle your billing, there’s a bright side: IoT devices exist with automation and data taking in mind—abilities that are bound to assist in whatever overhauls you’ve got in mind.