Smart Devices, Smarter Billing: Subscriptions in the IoT Age

Businesses across all industries are identifying new and increasingly innovative sources of revenue, thanks to the ever-growing opportunities presented by the Internet of Things (IoT). How can subscription businesses capitalise on the potential of embedded sensor-based technology?

While usage-based pricing is hardly a novel proposal, IoT technologies are creating new and extensive opportunities for gathering granular customer data, changing consumer expectations and the global market massively. According to the NCTA, there are now over 50 billion IoT devices in circulation, with revenues expected to rise from $200 billion to $1.3 trillion in the next five years.

Possible business models
As wireless technologies continue to improve – the ongoing rollout of 5G going hand-in-hand with this development – and the cost of manufacturing devices continues to drop, IoT will create increasing value for commercial and industrial businesses. IoT services delivered via software is the next big revenue opportunity with devices capable of providing “anything as a service” covering everything from computing and smart devices to Big Data analytics and embedded systems. And with this comes the opportunity for subscription businesses to utilise metering systems in order to authenticate users and track usage – be it by time, data volume (KB, MB, etc.) or other transactional metrics – in order to monetise task-based usage of software.

These pricing models can reduce initial costs for customers and incentivise ongoing need, enticing more users to try out products available on demand. Companies may also refine their offerings based on this consumption data and create additional value that can be delivered to their customers, creating a virtuous circle.

Customers are guaranteed an ever-improving service for the duration of their contract period, with updates beamed directly to their device of choice. Moreover, with the granular data that IoT sensors generate, the capacity for accurate pay-per-use (or even pay-per-outcome) billing is far greater.

With IoT hardware connected directly to networks, businesses have new and unprecedented ways to accumulate user data from smart devices and channel this into improving established services, whilst also creating new revenue streams.

IoT penetration begins at home
The rise of virtual assistants and smart speakers has given companies such as Amazon and Google another channel to deliver third-party subscription features to customers through their respective skills-based features, opening users up to services from trivia games and recipes, to playing classical music for pets left home alone.

Monitoring the power consumption for these devices, smart meters have already proven to be one of the most successful implementations of IoT billing technology so far, with 21.5 million in use in the UK as of March 2020, transmitting utility usage data from homes and businesses directly to the supplier and ensuring accurate bills without forcing the customer to self-report.

To protect these smart homes, various digital security services have emerged using subscription-based business models; for a monthly fee, schemes like Nest Aware will let users access their home cameras via an app, receive intelligent alerts and save footage for differing periods of time based on their tier of subscription package.

Meanwhile outside the home, the automotive industry is now waking up to the benefits of usage-based pricing by introducing subscription plans with overage. Packages such as Jaguar Land Rover’s DrivePivotal, Volkswagen’s Car-Net and Volvo’s Care by Volvo grant customers inclusive mileage, regular car trade-ins and access to certain features based on tiers of access, with added fees should their terms of use be exceeded.

Thanks to the increasing prevalence of connected cars supported by over-the-air updates, the potential for IoT billing implementation in vehicles is growing rapidly, although not without controversy. In fact, BMW recently took some flack after announcing that they would implement a subscription fee to access features such as heated seats or cruise control.

However, perhaps a more flexible approach would be to offer these features on a usage basis as and when the customer needs them? For example, only paying for heated seats when needed on a really cold day. Alternatively, a few days free trial or a wider freemium model may also be more fruitful. It’s early days for subscription-based services in cars, but perhaps a more flexible approach to pricing these add-on services may be better received?

IoT also comes in the form of smart communities; one example of this being a recent customer of ours in the US that builds connectivity amongst university campuses and military villages. The company offers a web app that enables inhabitants to book services from around the community – everything from streaming Netflix to having your grass cut. All of which can be organised from one central application on your smart devices, adding huge value to the communities and encouraging new tenants to move in, as well as offering additional value to the inhabitants by simplifying their lives.

Nevertheless, despite the unbridled potential of IoT, it can be hard for companies to predict customer trends and prevent churn. Traditional product businesses need to overcome significant challenges and transform their support systems and processes to be able to offer subscription and usage-based services in the IoT economy; a specialist billing and charging engine that can integrate with other systems and monetise big data collected from things is crucial.

Cerillion Skyline supports subscription and usage-based pricing, suited to IoT device and solution providers with recurring revenue business models. Contact us now for a personalised demo.