3 Ways Retailers Can Move Towards Monetizing the Internet of Things
You've undoubtedly heard of the Internet of Things, or IoT, the intelligent network that monitors, measures, meters and monetizes the vast quantity of data flowing through it.
By 2020, experts estimate that more than 26 billion devices will be installed and connected to the IoT, generating hundreds of billions of dollars in revenue from next-generation business models. Indeed, some say the revenue potential is in the trillions, not billions. Furthermore, the IoT is already reshaping how companies do business and, in particular, retail sales channels.
To claim your share of the IoT's $7 trillion in revenue pie, consider these three ways to help you move faster down the path to monetizing the IoTs:
1. Think beyond the device. What if your business has nothing to do with smart homes, fitness, health care, transportation or any of the other industries currently being heralded as first movers in IoT? Not to worry. Truth is, IoT monetization opportunities go far beyond the self-adjusting thermostats and wearable fitness devices of the early adopters.
The real money to be made in IoT will come from the services that connected devices make possible. The enormous amount of data that's generated will create incremental value for your customers and revenue opportunities for your business. And in most cases, that data will come from the "things" of the IoT, consisting of low-cost sensors and smart chips.
The hardware embedded in the IoT is the enabler, not the commodity. It follows that commodity pricing will help accelerate the explosion in the growth of the IoT's new revenue models.
Companies would be smart to think of strategic partnerships as an avenue to make their IoT concepts a reality. For example, Lindsay Corporation, a manufacturer and distributor of agricultural equipment, used the same strategy to develop its IoT application, FieldNET, which enables farmers to remotely manage crop irrigation from smartphones and tablets. The company's lack of expertise in software development didn't prevent it from jumping on a hot IoT opportunity. Instead, Lindsay teamed up and enlisted the services of a third-party cloud application developer.
2. Leverage IoT to boost your recurring revenue. The advent of these new services via the IoT fits perfectly within the concept of recurring revenue — i.e., repeat sales that are predictable and stable well into the future managed by monthly subscriptions and other recurring forms of payment.
With recurring revenue, you retain your customer over a long period of time, perhaps a lifetime. It's no longer one sale and done, wondering if the customer will come back to make another purchase.
As you learn more about your customers’ needs and meet them, the IoT will transform your retail operations into a predictable monetization engine in perpetuity. The ability to predict future purchases from customers is invaluable not only for revenue purposes, but marketing and inventory management as well.
3. Compete and win by creating agile business practices. As the IoT reshapes the world of retailing and other sectors, the No. 1 way consumer-focused businesses will differentiate themselves in this competitive market is through packaging and pricing of those services, which are being introduced to market at increasing speed.
To stay competitive, you'll need to respond quickly to changing conditions and make adjustments to meet the demands of how your customers use your service. Back-end billing systems that can handle these changes without IT intervention are key to the new business agility paradigm.
How do you quickly offer services to the market and how will people consume them? The answer to these questions is where innovation lies. The IoT will make it easier to get answers, get to market and adapt on the fly once there. However, you'll have to be agile, because you won't have much time to act.
Stripped of the hype, the IoT is just a foundation. It's what you do with that foundation that makes the difference between just another technology in the mix and true next-generation money-making opportunities.
The bottom line is if you're going to make money from the IoT, you'll do it by selling services that provide choice and add value — not the product or device. That's where you as a retailer will be successful in the new age of the rise of the machines.
Brendan O'Brien is chief evangelist and co-founder of Aria Systems, a provider of cloud-based billing solutions.