Usage Data: The Key to Monetizing the Internet of Things
- Nov 24, 2015 | Brendan O'Brien
By Brendan O'Brien, Co-founder and Chief Evangelist for Aria Systems.
With the rise of the IoT (Internet of Things), the era of truly BIG data is upon us. And buried in those endless data streams from billions of connected “things” is customer usage – a type of data that’s essential to recurring revenue success. Unfortunately, most companies only incorporate usage in their billing systems when it directly relates to services they can bill (ex: data charges on a smartphone). As a result, they stand to miss out big time because usage is a key driver of recurring monetization in IoT.
Why is usage such a big deal? To begin, IoT is the most data-centric phenomenon of all time. And a good bit of that data will involve recurring payment models that rely on consumption-based pricing, such as cloud-computing capacity on AWS (automated warehouse system).
And while usage plays a major role in these recurring payment models, it plays an even more valuable role in increased customer retention. Recurring revenue success depends on customers buying your offerings on an active and repeating basis over time, which requires that you know them very well. Do you know your customers well enough to anticipate their needs, maximize their satisfaction, and present them with cross-sell and upsell opportunities that truly hit the spot? Guess where knowledge like that comes from? Yup, usage data. Understanding how customers consume your products and services gives you insights into their habits, behaviors, and patterns.
Beyond the Numbers
While every recurring revenue business tracks customer churn, most never look beyond the churn report numbers. The raw figures don’t provide actionable insight to make a change. But what if you drill down and discover that the light users make up the majority of the churn while the heaviest users often move to the paid version after the free trial ends? You can use that knowledge to create campaigns that boost conversion rates. For example, try encouraging greater freemium use among less engaged customers during the trial.
Consumption data improves recurring revenue outcomes across the board. And when it comes to recurring monetization, insights from usage just might separate the winners from the losers in the Internet of Things.
Consumption: Edge in the IoT
The technology today is so cheap that it’s rapidly becoming ubiquitous. Think of the IoT like it’s Moore’s Law in overdrive. As a result, you’re going to get to market very quickly (good). But so are your competitors (bad). When it comes to recurring revenue dollars, the edge will belong to those who provide the most attractive pricing and packaging combined with highly personalized customer experiences, not those who have the best or most expensive technology.
How does the IoT help gain that competitive edge? Because it delivers an unbelievable amount of data, including tons of usage and consumption data, which will provide you with the insights you need to get (and stay) ahead in today’s competitive environment. Knowing how people consume the services you offer can provide massive value to your monetization efforts above and beyond the role usage has traditionally played in billing.
Taxing New Models
As you build and launch new pricing and packaging models around usage and consumption data, a couple of questions about taxation might come to mind. How can you tax data when it is the foundation of your offer? What are the tax implications for these offers? Insights from data consumption show that individuals consume data in a variety of ways. This results in different monetization strategies and tactics – usage/consumption, threshold, etc. – so it’s imperative to understand the tax implications across boundaries and currencies.
If you wish to maximize recurring revenues and monetize the Internet of Things, now is the right time to adopt a data-embracing strategy. Start by exploring ways to integrate a wider range of consumption data into billing, finance, and other key business systems. The opportunities are endless.
To learn more about monetization and the IoT, check out The Big Book of MoT™: Making the Most of the Monetization of Things.
About Aria: Aria was named #1 in cloud billing by MGI Research and a leader in subscription billing by Forrester. Aria helps enterprises monetize and grow recurring revenue at scale. To learn more, visit www.ariasystems.com.