This is the first article in a series about sustainable business and monetization for the internet of everything, from Pawan Dubey, Consultant, Infosys. In this article, he looks at monetization models. Dubey will be speaking at Internet of Everything InFocus 2017 in Amsterdam (October 17-18) during a talk called Designing Sustainable Business and Monetization Models for IoE.
Making big money from the internet of everything (IoE) is the big challenge. Communications service providers (CSPs) face the demands of short IoE product lifecycles (so much rapid innovation), catering to huge numbers of fundamentally different IoE verticals (transport, homes, even your gym), as well as integrating every possible pricing paradigm.
Companies would do well to adopt an industry-agnostic product catalog and flexible pricing. This can certainly help with:
- cross-selling services from different domains (e.g. smart home) or even different industries (e.g. telecommunications and retail);
- enabling rapid marketing and pricing decisions to cope with the real-time world of IoE; and
- supporting multiple and diverse charging models (e.g. subscription-based, usage-based, behavior-based, app feature-based, etc.) and their combination.
Service providers need figure out what type of charging model they want to use such as pay per use or revenue sharing. Since most network operators already have well-established billing, charging and settlement capabilities, this can also be offered as a service to partners.
Most companies are actively looking at monetization models right from the start. The illustration below shows four variants:
For each IoT monetization model, Capgemini has identified many pricing models for products and services that can be adopted for products and services:
- One-time charges – the customer pays a one-off price for purchasing the offering. This model is largely used with products, though it can be used with services as well.
- Subscription model – customers have the flexibility to customize service options and the duration of the service. Care level (prompt or total) for service can also be offered.
- Pay-as-you-go model – customers pay according to the actual usage of the service.
- Pay-for-results model – allows customers to pay only for realized results from the IoE offering – a strong value-based model where the customer can see the ROI directly. For instance, IoE startup Enlighted builds devices that can detect heat, light, and motion, and pairs them with a software system that can control lighting, heating and cooling based on the data these sensors collect. Customers pay Enlighted a percentage of the money the technology saves them each month, without paying anything up-front.
- Freemium models – by offering free services, with richer services at a cost, organizations attract customers that are not convinced of the value of the offering.
And for ecosystems, which typically tend to be different from those of product and service models:
- Fixed cost model – where customers pay a fixed fee for using the platform.
- Transaction-based fee – charged by the platform provider for every transaction carried out over the platform.
- Revenue share model – customers pay a share of their revenues to the platform provider in exchange for using the platform services.
Applying monetization models across IoE verticals
The blanket IoE monetization model does not exist; companies’ needs are in a constant state of flux. Here, Capgemini looks at various business scenarios and recommend the monetization model suitable for each.
|Monetization model||Potential marketplace||Success factors|
|Premium hardware||ODM/OEM, hardware companies||Enhanced value (intelligence, cognitivity, security, etc.) over traditional products|
|Service revenue||Companies having products with higher customer engagement||Multiple subscriptions with varying price points + free subscriptions also to capture subscriber base:|
|Data revenue||Companies which are in position to collect, store and analyze data from their customers||Addressing privacy and data regulations|
|Collaborative ecosystem||Companies having wide range of IoE products to offer||Platform is equitable to all stakeholders|
See the full Monetizing IoE InFocus 2017 agenda and register now.