Every company at the end of the day strives to monetize its product and services. The million dollar question (hopefully, literally) is how to monetize the product. This dilemma is shared equally among founders, stakeholders and users who equally want the products to be sustainable and bring long-term value.
The first model we will take a look at is the Smartwatch Business Model. This particular model applies to producers who use premium features in their devices. We can take a smartwatch as an obvious example of this model.Customers pay a premium price upfront and the cost of maintaining the digital infrastructure is covered by the company. The challenging part starts when sales slow and the cost of maintaining the digital infrastructure rises.
This model is probably the most common IoT monetization model. The companies using this model are not only charging customers for the product, but also software updates, cloud storage and other premium features. Imagine a smart home where advanced features like remote monitoring come with a yearly subscription. This model ensures continuous support and innovation as well as a predictable revenue stream.
This model is utilized by companies that build large networks of inexpensive sensors that are offered at a low cost or at no charge. This approach values the data collected by these sensors. This data is highly valuable for IoT companies that monetize it by selling it to various industries like healthcare, energy or city planners. Next serves as a prime example of this model. The company provides a smart thermostat that collects energy usage data, which is then used by energy companies to adjust to consumer usage by balancing grids.
This is my favorite model. Here companies offer a product at an attractive price. The obvious example here is electric scooters or hotel smart umbrellas. This model is a Win-Win-Win scenario for the the client, the producer and the planet, as the product needs to be long-lasting and of high- quality. Long-lasting products means happy clients and profitable sales.
This model is based on customers being charged for the usage of IoT devices. Logistics is an industry benefiting heavily from this model. IoT devices such as GPS trackers are used for real- time monitoring. Companies generate revenue by offering low cost hardware and generate revenue through pay-per-use services. This model is perfect for sectors where flexibility and affordability are crucial and customers are not willing to pay high upfront prices.
Monetizing IoT is a game that needs to be played with creativity and strategy. No matter which model the company chooses, the ultimate goal is to create sustainable revenue streams benefiting the company as well as the customer. Founders need to keep in mind that initial sale success is not enough and they need to ensure continued support and innovation. Stakeholders and users should rest assured that the company has a strategy to keep the hardware and software functional and relevant for years to come.
Please tell us about your IoT product. The more we know about it, the more effectively we can assist you with choosing the right strategy for monetization.
