7 Pricing Strategy Challenges in the Telematics and IoT Ecosystem

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Vendors, manufacturers, resellers, distributors, and customers, along with third-party service providers make up a complex Internet of Things (IoT) ecosystem.

Billing can be a challenge in this mix; specifically recurring billing and subscription management. For example, a vendor or manufacturer may sell directly to customers and may also sell through a reseller or a distributor.

It’s also common to sell through a third-party who adds their own services, as in the case of some telematics and managed service provider (MSP) businesses. For example, selling GPS tracking hardware with additional services such as location notifications and remote monitoring for industrial equipment.

Telematics is a large part of the current IoT business landscape, and is a good example of both the growing monetization opportunities as well as the increase of billing and pricing complexity.

Technological advances in the IoT and telematics, as well as growing accessibility to data are driving changes across many industries and opening up new opportunities. For example, in the commercial transportation sector, business applications of telematics have evolved from simple GPS tracking for theft prevention to a range of comprehensive fleet management solutions.

From insurance, manufacturing, and supply chains to agriculture and health care, the number and array of IoT monetization models being brought to market are increasing rapidly.

Most business models in the telematics industry rely heavily on hybrid pricing—a combination of usage- or consumption-based pricing, recurring fees, and one-time charges.

Well beyond the simple mechanics of the traditional one-and-done purchase, hybrid pricing and flexible billing enable richer, multi-dimensional transactions. While the flexibility unlocks a wide range of pricing and billing options, it also comes with intricate layers of detail that need to be managed.     

When it comes to pricing and billing in the IoT ecosystem, many different elements need to work in unison. The IoT recurring revenue business opportunities introduces pricing related challenges on many fronts:

1. Billing for physical goods in combination with recurring service

Subscription IoT-based businesses often need to distinguish financial charges for their physical goods—such as devices—from those of the services associated with these items.

For example, a fleet-management vendor such as GPSTrackit typically offers an integrated system of GPS tracking and monitoring services. The result is a requirement to bill customers for the device as well as the services associated with it. This includes fleet management tools like real-time monitoring, live support, and online collaboration.

A one-time charge for a device plus a recurring charge is one of the simplest examples of hybrid billing.

However, the complexity can ramp up quickly when we add more layers like discounts or promotions, or additional tiers or configurations of pricing, such as charging a higher price for a service like maintenance during peak periods.

2. Multiple recurring services may be associated to a single device

For many vendors, their business requires devices to be associated with multiple recurring service fees for each device.

A GPS tracking business may need to associate not only its base monitoring fee service but also special services for temperature and geolocation services on the same physical device.

The challenge for invoicing correctly in this type of scenario is it involves combining and managing these different service fees under one plan structure with different pricing and timing settings for each component.

3. One or many transactional usage meters may be associated to a single device

Charging for transactional traffic in the form of a usage meter is becoming more common in the IoT space. IoT devices now have the ability to track a multitude of things, including bandwidth, mileage, minutes, and other forms of recurring transactional traffic.

These usage components often need to leverage advanced pricing options like tiered, stairstep, and volume billing in order to be attractive to consumers while still protecting the business from the financial risk of over-usage.

A robust and comprehensive modern recurring billing platform provides the ability to create automatic usage meters for IoT devices. These meters can reset on different billing frequencies and provide support for advanced pricing models and correct charge timing.

 
Did You Know? Fusebill has a native integration with telematics leader Geotab
Recurring Billing for Telematics & IoT

Maximize business opportunities around your telematics and IoT devices. Fusebill powers recurring billing & agile monetization through real-time billing communication between your device and the billing engine.

4. Inventory management challenges

Unlike standard software as a service (SaaS) providers, IoT vendors need to address the challenges of inventory management related to the storage, fulfillment, and delivery of their devices.

Additionally, they may need to handle the inventory for hardware accessories such as wires, sensors, and connectors—the elements necessary for their devices to operate.

The best comprehensive billing solutions available today support direct integrations to platforms like Netsuite, allowing for a seamless link to inventory management solutions that facilitate the shipment of goods to and from warehouses.

5. Handling the need for devices to be paused or resumed

A business offering IoT-based products or services affected by seasonality requires its devices to be able to be paused at certain times. For example, a GPS tracking device for a snow removal fleet would require a pause in operation during off-season.

The power to pause and resume billing according to a custom schedule answers the business need for flexible and intelligent billing.

Fusebill’s migration module can easily shift between peak season and off-season plans. Similarly, the expiry module and time-based discounting functionality can also be leveraged for these more complicated scheduling needs.

6. Billing for devices paid through installments

While the costs around IoT have come down in some ways, many IoT devices are still expensive and there’s a strong demand for paying through an installment plan.

Some IoT vendors offer a combination product or bundle of an installment plan to pay for a device along with a recurring payment for the associated service. For example, a GPS tracking device plus service as a bundled product offering.

Dynamic billing systems have functionality that supports billing for an equipment purchase over any number of months or years.

7. Operating with a large number of active devices

A large trucking business may have a large fleet of trucks with many monitoring devices and sensors installed. Most IoT vendors support larger enterprises that need to manage hundreds and possibly thousands of devices.

How do you handle the billing for a multitude of separate entities tied together by one single account? The best comprehensive billing systems can easily handle thousands of unique subscriptions stemming from one single billing entity. But that cascading complexity doesn’t have to impact the client. Even with thousands of subscriptions, the invoice should be simple, clear and easy to understand.

IoT-based technology is already delivering impressive capabilities and promises to bring immense value to both business and consumers. Even today, the power of the IoT is disrupting and transforming commerce and taking it in new directions and into a new dimension.

As IoT continues to spread to more industries we’ll see an explosion of recurring billing needs for entirely new market segments. Traditional industries like farming, storage, and security will all be transformed to meet the needs of the rapidly evolving marketplace. 

IoT vendors have a unique challenge. In addition to subscriptions, products and services, and customer and reseller relationships, they need to balance a wide variety of pricing models, including usage-based pricing, recurring fees, and one-time charges. Usage metering and device tracking add another layer to the picture.

Beyond products, catalogs, and subscriptions, one of the most important aspects of IoT businesses will be the ability to manage the relationships and the dynamics between all the interconnected elements.

As an IoT business scales, these challenges only intensify. A single robust monetization enablement process will be critical for keeping all these elements working together seamlessly. A dynamic and comprehensive automated billing system like Fusebill handles every aspect of IoT-based billing on a recurring basis, at scale.

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Tags: IoT Telematics

Serge Frigon

Serge Frigon is Fusebill's product architect. He is passionate about improving billing processes for SaaS companies. With 20+ years in SaaS and billing software systems, Serge has a first-hand view of how important financial insights can be to the health of a company.

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