There's still a lot of ground to be gained for pay per use. So, how do you reach into this untapped market?
From streaming and mobility services to professional software. Pay per use models are taking many industries by storm. Providing high quality products and services at a low barrier of entry, the prominence of this business model is the logical consequence of an era of growing consumer expectations. Access to quality products, and not ownership, is becoming the norm. No wonder pay per use models are seeing increasing popularity.
However, pay per use is all but a surefire way to success. Many consumers are still sceptical about the benefits, and often see no added value in this model - especially when dealing with tangible goods such as washing machines or razors. Additionally, pay per use can be risky for the producers of goods and services, since no revenue is gained from the initial sale of a product, but rather from long lasting adoption on a larger user base. So, how to overcome these barriers? We believe IoT and connected devices are the key. Check out our 3 reasons why.
Digital services such as streaming have been using pay per use models (often in the form of monthly subscriptions) to great success already, and competition is stiff in this area. However, tangible goods such as coffee machines or dryers present a relatively untapped market for pay per use models, as presented by the graph below (source).
In no small part because consumers expect explicit added value for tangible products when using these products with pay per use. This challenge is solved by offering connected versions of these devices to customers, since they inherently offer added value over their non-connected counterparts. Like a coffee machine making coffee when you ask your Alexa to do so, or even ordering new coffee cups by itself and paying for them – or a water meter autonomously requesting maintenance. Combining a pay per use model with IoT will therefore allow makers to access an untapped market – and customers to reap the benefits of both worlds.
One of the greatest advantages of IoT is data collection. Connected devices can easily monitor and send data related to usage patterns. This is especially useful in a pay per use environment where revenue is linked to the usage of the product – and not the initial sale of a product. For example, when offering a washing machine on a pay per use basis, the supplier runs a risk that a customer will use the machine enough to create profit over the initial purchase cost of the machine.
To offset this risk, makers can provide additional service to their customers based on the data gathered by the connected device. For example, the maker of a cleaning machine might see a machine which hasn’t been turned on in three days. Then, the maker could proactively contact the customer offering maintenance thus creating benefits for both parties. A good example of additional services offered through a combination of IoT and pay per use would be a company which produces smart bicycles. When your bike is lost or stolen, a service can be provided to track it down using the built-in connectivity. Furthermore, the bikes alarm could automatically arm and unarm depending on your vicinity to the bike.
Successful pay per use models offer great UX and a complete overview of costs and usage to their customers. Customers should be easily be able to change their payment method and personal information – and cancel or renew their subscription (when relevant). Many products and services offer an online portal to do this, and payment is often handled through a monthly subscription.
While this is a functional way to do it, the approach has downsides. For example, the customer needs to log in to separate portals or applications for every product or service they use with different payment options for each service. With FINN, we use the strengths of IoT to provide an improved experience for maker and user. A FINN-enabled smart device handles payment autonomously. In the mobile companion app, the customer manages all their connected devices and services, from different providers, in a single overview. Payment methods and billing information are also readily accessible in the app, giving a clear oversight of spending.
So, in conclusion: there’s still a lot of value to be gained with the combination of IoT and pay per use. And it’s something we work on every day with FINN, adding autonomous payments to smart devices. Are you ready to supercharge your pay per use model, or do you have a smart device that’s just missing payments? Get in touch for a demo. Let’s build something new today.