How IoT can turn your HVAC product into a recurring revenue machine
Over the past few years, the internet of things has been quietly growing behind the scenes and now it is likely that the majority of people in the world own at least one product that is connected to the internet. From SmartPhones, to SmartWatches, to SmartLocks, it seems like everything is ‘smart’ these days–and it’s about time your HVAC product became smart too!
The internet of things (IoT) can elevate your HVAC product to the next level, as it already has done for products like Nest (the Smart thermostat) and Foobot (the Smart air quality monitor).
The HVAC industry has traditionally been seasonal in nature–people need heating in the winter, AC in the summer, and occasional ventilation problems pop up in between–but this makes cash flow unpredictable and can lead to you being off-your-feet busy one month and twiddling your thumbs the next!
With the introduction of IoT, you can eliminate this seasonality and turn your HVAC business into a recurring revenue machine. In this article, we’re going to show you how…
Develop New Business Models
By connecting your HVAC product to the internet you can expand your business models to become subscription models of some sort, a bit like what software startups are doing with “SaaS” (software as a service). This kind of model allows you to build better connections with your customers over time and sell more than just heating, ventilation, and air-con to them.
Focus on SLAs
When a HVAC product or system is connected to the internet, you can gain new insights into how it is performing. This real-time visibility means that you can spot any maintenance issues or problems before they arise.
This not only allows you to increase the longevity and lifespan of your HVAC products, it also gives you the ability to sell more SLAs so that you can keep generating revenue on a regular basis.
Did you know: companies with active SLAs are 34% more likely to experience greater year-over-year ROI than those companies that aren’t.
Just increasing customer retention by 5% can boost profits by 25% or more, according to Bain & Co.
And, in this new world of connected devices, SLAs can take on an even more innovative form. Take a look at this video about the new Samsung fridge:
This smart fridge allows people to order groceries directly from their kitchen whenever they are about to run out of something. Although this isn’t a HVAC example, it is clear that this method can be applied to the HVAC industry. For example, if you have a connected air purifier, then filters could automatically be ordered so that customers never run out or forget to order! This requires minimal effort from both the customer and the business, and yet it creates a recurring source of revenue.
For more information on how to increase your SLAs, check out our previous article: 10 Tips for Increasing HVAC Service Level Agreement Sales
Monetize Your Data
As mentioned above, connecting your HVAC device to the internet gives you access to a range of data and insights that you can use to improve your offering.
It is likely that your customers will be interested in accessing data about their HVAC systems, especially if you sell to large companies and facility managers. For example, a facility manager could be very keen to know how their A/C benchmarks measure up against their competitor’s (when it comes to energy consumption), or how air quality relates to employee productivity.
A great way to use this to your advantage from a recurring revenue point of view would be to link your HVAC product to a freemium business model. This involves offering a basic level of data to your customers for free and then giving those that want access to more in-depth insights the opportunity to access that for a monthly fee.
This is something that Nest has implemented recently. Nest was originally a WiFi-enabled thermostat that allowed owners to control the temperature of their offices and homes from anywhere (with their Smartphone), but the business has now expanded into the security camera space to offer even more peace of mind to their customers.
More recently, they have introduced cameras for both inside and outside the buildings that offer 24/7 HD footage, night vision, and security alerts sent straight to your phone. This is a way for the company to make recurring revenue as they have set up 3 different subscription models for the data linked to these security cameras:
So now, in addition of making a one-off sale, Nest makes a continuous stream of revenue from their customers.
This is essentially upselling your existing customers, and, when you consider that a study by Invesp found that the probability of selling to an existing customer is 60-70% while the probability of selling to a new prospect is only 5-20%, this is a perfect way to increase your sales.
What Else Can You Monetize?
So, we’ve already talked about how to monetize your data and how you can make more revenue from your SLAs…but what else can you monetize?
One of the most efficient ways to turn your HVAC product into a recurring revenue machine is not to add flashy new features or change your sales tactics, it is simply to look for anything of excess from your existing offering that you can monetize.
Heatmine, a startup cryptocurrency mining company has done just that. They noticed that their computer processors generated a lot of excess heat that was wasted, so they decided to recycle this thermal energy and use to it to power central heating systems. Admirably, Heatmine is doing this for free. Their units can generate enough to heat 2,230 square feet of space every day, and they are using this to give free heating to homes and churches across Quebec.
While Heatmine is doing this as a charitable endeavour, it still raises the question of how other companies (like yours!) can use their existing products, or anything of excess, to generate recurring revenue.
If your business has a recurring revenue stream and happy customers, then you will be successful. And with IoT, you can have both! The internet of things marks a change in the way all industries will do business in the future, HVAC included. By adopting this technology as early as possible, you can give yourself a head-start for the future.
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