Why IoT Solutions and Subscriptions Are a Perfect Combination

Dan Heredia
Jan 7, 2021 11:36:09 AM

IoT Solutions = Ongoing Value and Ongoing Costs 

The promise of IoT Solutions are the convenience they provide, the new, granular insights they deliver and the efficiencies they enable. Everyone can agree that these benefits are not delivered once, but rather all the time on an ongoing basis. IoT solutions are designed that way, to deliver consistent value to their stakeholders – in some cases consumers, and in other cases businesses. 

Consider examples like the average temperature inside of a refrigerated truck moving critical vaccines, or the number of times a worker lifts a heavy box incorrectly risking injury, or whether a family member missed their daily dose of heart medication. This data clearly has tangible value, and because it is delivered over and over again over time, it may also have costs which many overlook at first. One of these costs is the cost of data storage. When IoT solutions are churning out data minute by minute, day by day or even year over year, the costs of this data storage can start to rise fairly quickly, which necessitates a review of a solution provider’s business model in order to adapt. 

Very quickly, one might begin to ask: How are we going to cover these rising costs? How will we be able to keep delivering these solutions to customers while also expanding our business even further? 

The answer is one, simple word… Subscriptions. 

 

The Perfect Pair: IoT Solutions and Subscription Services 

 By now, many consumers and businesses have subscribed to one or many different subscription services and are familiar with how they work. These business models have become more popular for businesses over the past several years thanks to their predictability from a revenue and cash flow perspective. 

Just like some of those other products and services, IoT solutions have the tangible, ongoing costs of data storage and, likely, cellular network connectivity that enable devices to communicate and transmit valuable data from anywhere. 

 

Cracking the Code on IoT Subscriptions 

For the companies that are jumping into the IoT subscription world for the first time, it can be difficult to quantify the ROI from an IoT solution over time - and to price subscription offerings accordingly so that the company not only covers its development costs and the costs of running the solution, but actually makes significant revenue from the value it is delivering. 

 This is why many manufacturers may try to avoid subscriptions all together and “bundle-in” their future costs with the one-time upfront transaction. This is a mistake however, because those data storage and connectivity costs will not go away in 1, 3 or 5 years. This means the common “bundle approach” may buy some time, but even that time can be limited. For example, if a camera company wants to price their offering to include 3 years of access to a cloud-based platform along with their device hardware but forecasts usage numbers that end up being too conservative, then they may begin to lose money before the 3 years are up.  

 From our own experience at Zipit, we know that this example is not purely hypothetical. Customers have struggled with this for years and more companies will run into these challenges as they bring new IoT solutions to market.

 

Examples of IoT Subscription Plans 

Subscriptions, like IoT solutions, can come in all shapes and sizes. Some cover cellular services in a month-to-month model. Others may ask subscribers to commit to a year or more (annual plans) in order to get a discount on the ongoing cloud and cellular connectivity, and still others may bundle service and hardware so the subscription covers everything and the customer is, in effect, renting the entire solution for as long as they want/need to. 

Here are some real-world examples of IoT solutions using a subscription model: 

  • A cold chain monitoring solution includes the cost of hardware, software platform and cellular service in the price of their subscription. 
     
  • A GPS tracker includes 1 year of “free” cellular data upfront for customers, who will then be asked to subscribe month-to-month after the one-year period expires. 
     
  • consumer electronics company charges customers a one-time fee for a camera, then requires monthly subscriptions for access to cloud-storage and cellular connectivity.  

Whatever the subscription plan looks like, the key to future success is to effectively balance the need for ROI on the solution with a fair price for customers – determined by quantifying the value the IoT solution brings. 

 

Quantifying Value to Create Compelling Subscription Offerings 

How are you supposed to know what type of subscription offering is right for your business? 

Here are a couple tips to help companies quantify their value and price their subscriptions fairly:

  • Consider the industry and the use case. Are there regulations in the industry pushing for the transparency that IoT solutions can deliver? In the Food Service industry, more regulations continue to be put in place to keep food clean and keep consumers safe. Hefty fees can be levied against businesses that do not keep food refrigerated at the correct temperatures during transport or storage. Even an hour of downtime can be costly and potentially dangerous. 
     
  • Take a look at the competition. Are you delivering a much better experience than your competitors? If your products and services are saving your customers valuable time or giving them some additional convenience that your competitors are not, this can be a sign that your solution is more valuable and your subscription offerings can be priced accordingly.  
     

Accelerate Your Journey to Success 

If you’ve never created IoT subscription offerings before, you may find that you need help putting all the pieces in place and managing everything efficiently. From architecting the solution to operationalizing connectivity to pricing subscription tiers and more, there are a lot of moving pieces to keep track of and to get right. A competent partner can help you avoid costly mistakes and find success with your subscription offerings.  

Let us know if you think you could benefit from Zipit’s years of experience and proven IoT subscription platform 

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