Pricing Strategies for IoT Environments
- IoT devices might transmit small amounts of data, hundreds of times per day
- IoT devices might have to operate in real time and highly reliable
- IoT devices might operate for years unattended in remote locations
- IoT devices might have to exchange information with other devices or cloud services
- There might be very large numbers of IoT devices
Simply extending existing pricing models to IoT environments will not work in many cases. As an example, charging for the amount of information transmitted by sensors using a mobile operator service, will not be proportional to the actual network resources being used. The reason is, that the control messages required to set up and tear down each mobile connection will comprise of many more bytes than the actual data sent by the sensor. So traditional pricing will not work for the mobile operator. At the same time customers operating eight or ten thermostats in a residential home might not even be willing to pay a fee at all for transmitting data of their smart heating system to a cloud service. Therefore new pricing strategies, which are suited for IoT environments, are required. The questions:
– Who is paying for a service? and
– How is the price set?
need to be looked at from the perspective of the IoT value chain. One approach are so called „toll-free systems“, where third parties such as employers, advertisers or content providers help subsidize the cost of an IoT product or service. The question of „How to charge?“ can be answered by analyzing the relevance of time, location and congestion of the communication means for the service. This allows to develop use cases and business models with a variety of options for service providers, equipment manufacturers and customers. Some of the techniques which can be applied are
- preloading content
- postponing communication or
- static and dynamic pricing (TDP – Time Dependent Pricing)
The presentation provides an in depth discussion of the challenges for developing viable pricing strategies for IoT products and services. It describes new approaches for developing IoT compatible pricing models and looks at sample pricing strategies in the industry.
Editor in Chief Key Concept Press
Othmar Kyas is an internationally renowned expert in communication technology and strategic marketing. He is the author of several books and speaker at international congresses and seminars around the world.
Kyas has held positions as technology advisor, director of strategic marketing and CTO at international technology companies such as Hewlett Packard, Tektronix and Danaher. Since 2013 Kyas is Editor in Chief of the German publishing company Key Concept Press.
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