To differentiate their offerings from competitors and generate new recurring revenue streams, manufacturers are incorporating services into what were once product-only business models. For example, these days you can get just about anything “as a service”—from software (SasS), infrastructure (IaaS) and platform (PaaS) to office printers, urban transportation (think Zipcar and Uber) and high-ticket equipment used in aircraft, healthcare, energy, and construction industries.
In tandem, product makers are also extending revenues by integrating products with advanced services, purchased on a recurring basis, that increase the business value of their products over time. It’s not a new trend. Companies like IBM and GE have been doing it for years. They offer a broad range of integration, optimization, and managed services designed to help customers make better use of their products to meet specific goals.
What is new, however, is that the Internet of Things (IoT) is greatly expanding recurring monetization opportunities for these and other services.
Digitally connected products generate new recurring revenue services
Through IoT’s combination of smart chips, embedded sensors, cloud innovation, and wireless technologies, product makers are creating digitally connected products that can be monitored and managed remotely and in real time.
Better yet, unlike traditional manufactured goods, connected IoT products can be improved after the sale. For example, a new self-parking feature is now available for Telsa Model S cars already on the road. But instead of coming into a dealership to have it installed, owners get it over the air as a software download.
With new recurring revenue services enabled by IoT, customers can remotely detect and repair problems, control products, track their location and use, and analyze the data they generate. Examples of new IoT-powered services include:
• MAX—a recurring revenue service from Germany-based ThyssenKrupp, one of the world’s largest manufacturers of elevators. The service uses embedded sensors and cloud connectivity that enable customers to conduct predictive maintenance remotely, dramatically cutting repair costs while increasing uptime.
• Cat Product Link—a service from equipment maker Caterpillar relies on smart sensors, GPS, and cellular and satellite technology that allow customers to remotely monitor and improve the efficiency of equipment fleets in the field.
• Mobile Link—a service from Generac, a maker of standby generators for homes, lets homeowners monitor generators from smartphones, tablets, or computers. Current operating status, maintenance schedule, and historical information can be managed as usage-based events, ensuring better levels of service.
• Nexia Home Intelligence—a subscription service that enables homeowners to remotely monitor and control IoT-connected lights, locks, thermostats, and appliances.
Connecting manufacturers with customers
With connected products, a sale is no longer a one-time transaction, but an opportunity to forge long-term customer relationships through ongoing services. That’s because IoT products connect not just with the environment in which they’re used. They also connect to product makers and channel sellers. Whether your customer buys a wearable fitness device, drives a new car off a lot, or installs a sensor-enhanced wind turbine, you can continue to engage that customer over time by offering continuous product innovations, communications, information, and enhanced services delivered directly to (and via) their products.
A treasure trove of data
In addition, as a manufacturer, IoT-powered services give you access to unprecedented amounts of data about your products—and your customers. Data streams provide continuous insight into product flaws, consumption patterns, and customer preferences you can use to bolster product quality, launch compelling new features and functionality, and improve your sales and marketing efforts.
One of the best ways to distinguish yourself in a crowded market is to add valuable recurring revenue-based services to your products. With the power and versatility of IoT-connected products, those services can become more valuable than ever to your customers—and more profitable for your business.