Alternative Revenue Streams in The IoT: Creating a Profitable Environment for Service Providers
In 2016 consumer adoption of connected home devices experienced a huge leap forward. IHS Markit estimated that 80 million smart home devices were purchased by consumers, a 64% increase over 2015. Device adoption is on the rise, and consumer expectations is connected living tech is growing and evolving. Understanding these expectations and building upon them offers service providers a unique opportunity to grow their businesses.
But beyond the one-time purchase, how can service providers build stable, long-term revenue streams from connected living tech? The answer, we believe, is comprised of three concepts: integrated services, vertical differentiation and big data analytics; and a bonus: voice control.
Integrated services — offering complete service for strengthened customer satisfaction
As the consumer adoption curve shifts from early adopters to mainstream consumers, many find themselves overwhelmed: they don’t know how to integrate their devices from different manufacturers into a single system. This offers a unique opportunity for service providers to differentiate themselves by providing installation assistance (Do It With Me), full integration services and follow up support.
According to a research by PlumChoice, “consumers expect more help and support from the brands they’re buying from.” More specifically, installation support is cited as a top need by 68% of consumers. As the report states, “this data presents smart device manufacturers, distributors and brands with an opportunity to become a true partner for consumers who need more information and help.”
The solution to consumers’ confusion is offering the complete package: service, interoperability, continuity and support. Providing consumers with integrated smart home solutions is the biggest opportunity that service providers have had in years. Buying from a service provider customers will be guaranteed a system that works, devices that are interoperable, and ensure that in the event of technical problems they will always have a single point of contact that will offer them support.
Vertical differentiation— specific advantages from each vertical to suit customers’ need
Smart home services are now being offered by many mass market service providers from a number of verticals. Offering these services benefits the providers in many ways – each connected to their core business. It also gives the consumer a choice of provider that will offer them incentives according to their needs:
- Insurance – reduced premiums, fewer claims, prevent risks or minimize its effects.
- Energy – savings on power usage, incentivized by reduced energy costs.
- Security – flexibility between 24/7 monitoring/monitoring on demand.
- Telcos – bundles with other services such as broadband, cable or mobile.
- Healthcare – Lowered long-term costs, less hospitalizations, healthier lifestyle.
You can read more about each specific vertical in the linked posts.
Big data analytics— the path to profit with added information
But the real profit in IoT isn’t in selling and integrating devices, it’s in creating value to enable recurring revenue. And the future and real value of the IoT is in the data. The winners will be those who can collect and analyze the data, and innovate, becoming data-centric.
Big data analytics play a huge role in the revenue streams of all verticals that aim to offer connected home services. Intelligent data analysis helps service providers discover user behavior and preferences and presents them with a complete understanding of how the customer is using the system. These benefits can be split into two separate branches.
On the one hand, data analytics offers internal improvement through performance monitoring and predictive maintenance. Understanding real usage and consumers’ needs, will not only help service providers offer better, more useful products, but also remotely discover, diagnose, and fix issues as they happen, reducing churn and warranty claims, while achieving greater customer satisfaction and loyalty. Service providers can learn from their historical data, using predictive analytics and learning models to prevent glitches and predict future behavior. This could, for example, optimize the role of service technicians by designing routes that geographically group the areas anticipated to need visits.
On the other hand, there’s the commercial side. Knowledge based on customer data will improve marketing campaigns by making audience targeting more effective; for example, through classifying needs by gender, usage, geographic, or even demographic properties. Also, data analysis will allow verticals to upsell related products and services, present customers with highly tailored offers, create incentive programs and offer targeted advertising from themselves or from third parties.
The Powerful Voice – A Revenue Bonus
As technology advances, service providers have the opportunity to add value by offering new features within solutions already in place. Voice interactivity is becoming the new interface to manage connected home solutions. According to comScore’s U.S. Connected Home data, the smart speaker category has hit a “critical adoption threshold.”
Some security providers, for example, are already profiting on voice technology either by making it a premium option within the existing safety and security system, or by building a complete home management solution around it.
Within home management solutions, voice delivers true customization and personalization. With hands-free control, customers don’t have to remember where they left their mobile device or tablet. They simply state their instructions, and it happens.
IoT profit awaits for service providers from different verticals – insurance, telco, security, utilities, and healthcare management organizations, each with its unique advantages and strengths. For all of them, offering end-to-end IoT lifestyle solutions is a rapid way to increase ARPU and expand their customer base. All these service providers have a unique chance to further engage with their customers by enriching their offerings with a whole ecosystem of smart home devices and new long-term services based on data analytics that will allow them to take advantage of the growth and business expansion opportunities in the connected home market.
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