Five key points to make the Internet of Things profitable

How the world is shouting the slogan of the Internet of Things, inspirational about everything to gather around the Internet of Things, but how much is really making your IoT products profitable. Many companies are joining the entrepreneurial wave of IoT products, but there is no clear monetization model, or, more simply, a lack of ways to make money from IoT products.

First, the subscription mode

One of the biggest benefits of connected devices is the ability to achieve continuous revenue. Now it's no longer a one-time transaction. You can provide a subscription model where you can charge customers for continuous service.

If your IoT solution is just a software service, then adopting a subscription model will give you a lot of revenue. Take the SaaS model as an example. You can use monthly subscriptions, paid upgrades, or even implement “freemium” (if you add Your strategy supports it) Make your products profitable.

Another advantage of this IoT business model is that it can help you build good relationships with your customers. In the past, hardware manufacturers rarely interacted with customers once they had finished selling their products. And IoT products break this pattern. As your devices collect more user data, you will be able to better understand your customers and provide more valuable services based on your specific needs.

Some common IoT applications that use the subscription model include "surveillance services" and "preventive maintenance services."

Second, the service model

The service model is an innovative solution for IoT products. Let the customer buy the service, not the product device itself.

I remember someone said, "People don't buy drill bits anymore, but buy holes directly?" Then, the service model is also the reason. Instead of spending money to buy a drill bit, customers pay for the “holes” they need.

For example, a water pump manufacturer, whose previous business was selling water pumps, measured the performance by the number of pumps sold in each quarter. But in fact, sometimes customers don't want to buy a pump, they just need to transfer water from A to B for some purpose. For example, they need to use water to cool, water plants or hydropower, which is the real needs of customers.

Now imagine an experienced pump manufacturer who produces an upgraded pump that monitors the pump's pumping capacity. Manufacturers can now discuss with their customers the issues they care about: pumping (similar to “drilled holes”). In this case, the customer does not purchase the pump, but can pay the corresponding fee according to the amount of water he needs. They are also paying for the final service, which is the cost of paying for the pumping service.

Companies can use the service model as one of the product sales models. For example, the manufacturer can decide whether to lease or sell the pump. If customers are only interested in services, they may not want to have depreciated assets (pumps) on their balance sheets. Therefore, simply letting them pay for the service instead of paying for the pump itself can reduce the hassle of customers buying expensive equipment.

Third, the asset sharing model

A major consideration when customers purchase expensive equipment is whether they can maximize the use of the equipment, which provides an opportunity for asset sharing. Sharing bicycles and shared cars has allowed us to see the successful use of this model. Imagine: If my car is parked at home for 90% of the time, then why do I need to pay the full price of the car, I just pay for the cost of using the car.

The Internet of Things has the ability to solve this problem, and we have begun to see shared solutions for driverless cars, virtual power plants, and shared drones.

This IoT business model puts extra or surplus of the products you own into the market. The ultimate goal is to maximize product usage through multiple customers. In this way, each customer can enjoy the service at a lower price than a single customer who owns your product, and you can get market share faster.

Someone is fortunate enough to participate in this shared business model. The company mainly provides smart batteries for commercial buildings; smart batteries provide electricity to buildings, and if they have remaining electricity, they can sell the remaining electricity to the grid. In this model, a smart battery is a shared asset between a building and a grid. This approach allows our customers to get our products at a lower price, because they don't have to pay for the entire product, whether or not they use the remaining energy.

You might think, "Why not install a smaller battery?" This is an excellent question. But sometimes, they don't produce smaller batteries (or smaller pumps or turbines, etc.) because most of these products are so complex that you can't get custom sizes. So, you can throw away this extra capacity or you can find a way to make money, of course, smart devices can help you.

Fourth, IoT products as a channel platform to sell other products

Your IoT product can be a channel for selling other products. In this model, you may sell IoT products at a lower cost than because your goal is to put the product in the hands of the customer so that you can take Sell ​​other products. This approach reminds me of Ford's early strategy. The Ford plan is not to make money from the car itself, but to make money through parts and services.

Amazon practices this model by using the Amazon Dash button, which is pre-configured to order specific product features, such as detergent or toilet paper, which when ordered, will order the item from Amazon and in a few days Delivery to your home.

Amazon's goal is to provide "situation shopping," which means you can order products as soon as you need them. For example, the "Internet of Things button" with the function of ordering laundry liquid is attached to the washing machine. When there is no liquid detergent, you can press the button at any time, and Amazon will directly deliver the goods to your home. By introducing this clever IoT button, Amazon is helping you remove the barriers to reordering any product. In this case, Amazon Dash itself is not a source of revenue, it is just a tool to sell other products in the Amazon catalog.

We are seeing more and more manufacturers adopting this method to sell consumable products. Printer manufacturers are creating "smart printers" that automatically order ink when there is no ink; we have a smart jug that can automatically order new filters, and so on, and many other examples.

The value of the Internet of Things lies in the benefits you can get from the collected data, which has become the world's most valuable resource. The question is who can benefit from the data? Think of a company like LinkedIn or Facebook. They collect a lot of data from everyone (usually free), and although they use the data to provide some services to us (users), the real value is to use this data to promote them to advertisers and other third-party companies. Products and services.

In this case, LinkedIn or Facebook is just a tool for collecting data to advertisers.

The same model can also be applied in the Internet of Things, your product can serve your end users, and you can collect valuable user data before selling it to third parties. With this approach, you can provide your IoT device to your customers for free, and you can quickly get enough users, with the goal of using as much data as possible to collect data. The more devices you have, the more attractive your data will be to third parties.

There are many IoT product cases that use this model, such as intelligent temperature control devices installed in buildings to monitor their energy consumption, building managers can benefit from this data, but utilities or other analysts may pay a large amount of Amount purchase collects aggregated data from thousands of buildings.

The same is true for devices that monitor driving habits, and they provide you with some interesting knowledge, but insurers are the biggest beneficiaries because they can learn the driving habits of drivers through data.

This IoT business model can be your most important business direction, which means that when you start, the main goal is to solve the needs of the end customers, but then you can decide to use the collected data to make money, as long as you let Customers know how their data will be used and ensure that their privacy is not violated, then the two models will not conflict.

It's worth noting that sharing data with other companies or organizations is not a complement to existing IoT solutions. It's a complete product solution. You need to understand the needs of third-party customers and evaluate whether it's for your infrastructure. Have an impact. I recommend that you use the IoT decision framework to see how this new feature will affect your existing product.

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