More and more companies are using IoT to network their products to establish new digital offers and services on the market or to increase the attractiveness of their product portfolio. Also, and especially in medium-sized companies, the realization has prevailed that this approach is a critical success factor for their future viability. There are many concepts and ideas for promoting digital offerings, and the companies that use the IoT for their solutions are correspondingly numerous. But long-term success also requires concrete monetization approaches.

Direct Monetization Approaches At a Glance.

A basic distinction can be made between direct and indirect monetization approaches. Direct approaches generate deposits through the IoT solution, and indirect approaches enable sales of other products to increase. Direct approaches include:

Selling The IoT Device.

The most obvious way to generate sales with the Internet of Things is to sell the connected products themselves. Smart home gadgets such as digital kitchen appliances, language assistants, and sports and fitness trackers are among the best-known examples. In addition, manufacturers may also offer usage licenses to use associated apps or platforms.

Charging a Setup

Smart and connected products often need to be installed and set up before customers can use them. Especially for less technically savvy users, it can make sense to offer the initial setup as a service for a fee – for example, activating a product on an IoT platform. The best-known example of such a service is probably the setting up of Internet access by the respective provider.

Freemium and Premium Services

The freemium model adds fee-based extensions to a free basic product. Customers have the advantage that they can first convince themselves of the benefits of the product before they spend any money. Companies can address a wide range of potentially paying customers with this approach. The freemium model for the appropriate Software for an IoT device is often encountered. For example, an app for condition monitoring can be available free of charge and expanded with paid features that can analyze the monitoring data.

Transaction

Fees Transaction fees are common in financial applications. In this case, it is not (or not exclusively) the purchase or general use of an IoT product subject to a fee, but rather individual transactions or the amount of data generated by use. The advantage for companies is that the transaction fees are directly proportional to the operating and hosting costs of the required software infrastructure.

Licensing And Subscription, Usage Models

Licensing and Subscription

Companies can offer licenses and subscriptions for their IoT solutions to cover the development effort and ongoing costs of operating the underlying infrastructure. This includes IT infrastructures in your data center or rented cloud resources and Time-limited offers to achieve an endless cash flow. For example, license fees can be monthly or per user and are often found with Software as a Service (SaaS) offerings.

Compared to one-time license costs, the subscription model allows companies to regularly contact their customers and address customer needs with tailor-made offers. Customers can use the solution as needed and can adapt the subscription to their needs. In addition, similar to classic transaction fees, monthly pricing can scale with resource requirements.

Sharing, Renting, Leasing

With shared use (sharing), several users can share products and services to minimize the costs for everyone involved compared to a new purchase. The usage costs are calculated based on actual use. The IoT enables offers, processing, and billing here. For customers, this means only bearing a portion of the cost instead of the total cost. The provider can optimize and maximize the utilization of the product. An example of such models is car-sharing offers.

Renting and leasing do not focus on purchasing a product but rather on satisfying the actual need. Slogans like “hole instead of the drill” and “mobility instead of the vehicle” illustrate this approach. Here, too, the IoT enables billing, for example, by documenting the use of a solution.

Pay-per-use models align the price even more closely with the actual use of a product – for example, according to time units, the number of uses, or quantities used. Here, too, the advantage is that it is not the product itself that is paid for, but the use and thus the added value.

Indirect Approaches

In addition to these six direct monetization opportunities, there are three indirect approaches companies can use IoT solutions to increase their revenue:

IoT-Based Servitization

Servitization describes the business models of manufacturing companies that build new and innovative services on networked products. These new services in the IoT environment are created through knowledge and insights into the product portfolio. For example, the data generated can be used to maintain and optimize existing products. In addition, companies can forward the data from their IoT solutions to their (end) customers – as raw data or already filtered – to offer them completely new user experiences or added value. Manufacturers of swimming pool technology can, for example, use networked IoT data to improve water quality by adding chlorine and permanently reducing the environmental pollution. The advantage for the manufacturer of the IoT solution:

Cross-Selling

Cross-selling aims to facilitate or initiate the sale of other products or services through the IoT product. The sale of the IoT solution itself is not the focus of the monetization process – the solution may even be completely free for users. Such cross-selling approaches, such as printer cartridges and razor blades, are common for consumer goods in the B2B and B2C sectors. A product is automatically reordered with a simple interaction with the IoT solution or when the minimum stock is reached. Users save themselves the entire process of an online purchase and ideally always have a well-stocked inventory.

Advertising

Companies can also use data generated by using an IoT solution for marketing. In this way, conclusions can be drawn from the information collected about user behavior and their interests to be able to place targeted advertising in a second step. This is common practice in the B2C sector, for example, to use data from fitness trackers profitably.

Also Read: Big Data – The Strategic Ally Of Electronic Commerce

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However, this scenario of connected devices has become one of the preferred targets for cybercriminals: no less than half of the exploits target connected devices. In fact, the world suffered 80% of global cyberattacks towards IoT devices in 2019.

So what can an SME do to protect itself?

• A good first step is to change the default password of the router since it has been the most attacked IoT device in 2019.
• Similarly, you need to change all the default passwords on all your IoT devices. This step is especially important for security cameras.
• Remember that your new passwords must be strong. That is, contain more than 8 characters, mix uppercase, lowercase, numbers, and special characters whenever possible. Also, you should not include personal information in them.
• Use a different password for each device. You can use a password manager like Keepass to manage them.
• Deactivate the remote control function in those devices where it is not necessary to have it activated.
• Create different Wi-Fi networks (if your router offers this option) and isolate the connected devices. In this way, if one of them is attacked, it will not spread to the rest of the devices.
• Never assume that a connected device, no matter how small or insignificant it may seem, is safe: all your devices must be properly updated and have a firewall and antivirus installed and updated.
• Check what data is stored on your IoT device and who is requesting access to it. Before using any device, carefully read the permissions that you grant it and check that they do not endanger your company’s confidential information.
• Put these tips into practice and exercise extreme caution with your connected devices as they are one of the preferred targets for cybercriminals.

Also Read: IoT – WHAT ARE THE MOST IMPACTED SECTORS?

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What exactly is meant by IoT and what possibilities does the Internet of Things offer? The answers to these questions can be found here.

What does the term Internet of Things mean?

The term Internet of Things refers to the networking of objects with one another and the connection between these objects and the “normal” Internet.

These objects are given artificial intelligence by equipping them with processors and sensors. The sensors can be compared with the human senses. This enables machines to recognize what is in their environment and how it is behaving. The processors, however, are the communication center. They make it possible for the objects to receive commands and, in individual cases, to issue them.

How can people communicate with these objects?

Everyone who surfs the Internet leaves a “digital fingerprint”. This is the so-called IP address. This is necessary in order to be able to precisely identify the recipient. If, for example, a website is called up, the IP address is also sent during this process so that the corresponding web server knows where to send the desired data.

Every object on the Internet also has its own IP address and can thus be easily identified and addressed. Put simply, the Internet of Things can be described as a world in which all objects (the so-called smart objects) are connected to one another and can communicate with both people and other objects via M2M (machine-to-machine).

Due to the complete networking, it is possible for the objects to adjust independently to different situations and to react accordingly to different scenarios.

The Internet of Things for industry and consumers

A famous example that is used again and again for the Internet of Things is the refrigerator, which automatically reorders the right food on the Internet as soon as someone removes it. It is a classic example of the Internet of Things for consumers.

The Internet of Things for Industry must be distinguished from this. This branch is not just about household appliances, but above all the processes that take place every day in factories, warehouses, and production areas. Robot programming is an important business area. Companies such as access GmbH are specialists in the field of process automation and industrial IT systems. They help plant operators to connect products, plants, systems, and machines and to use the wealth of data from the Internet of Things with extensive analyzes.

Present or future?

Does the Internet of Things already exist or is it still just a dream of the future? In many areas, at least entry has already been made. The development will continue rapidly in the next few years. The Internet of Things will change and simplify processes in a way that we cannot even imagine today.

But a lot is already working in a way that we could hardly imagine a few years ago. Robots have been used in General Motors’ automotive industry since 1961. But they have developed a lot since then. They only require very little floor space and support people, especially in tasks that require high precision. Today’s robots are able to learn through simulation (ie “show”) and therefore require less programming effort. In addition, they are able to react to human touch.

Many apartments are now also largely connected to the Internet. For example, the light in the entire apartment can be regulated by voice control. Many things can be done while on the go. The air conditioning can be activated on the way home from work so that the apartment is pleasantly cool when entering in the hot summer. Future music? No, it’s normal these days.

Also  Read: These Are The Layers Of The (IoT)Internet of Things

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