5 Monetization Strategies for Beacon Vendors

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Beacon technology — and the type of customized, personalized marketing it enables — is one of the fastest growing segments of the local industry. As beacons graduate from the “experimental” phase, interest among retailers is expected to explode. In the U.S. alone, in-store retail sales influenced by beacon-triggered messages are predicted to reach $44.4 billion this year, according to BI Intelligence.

In order for this burgeoning vertical to flourish, beacon vendors need to find a monetization strategy that makes sense. Building a sustainable stream of revenue has proven to be harder than building a piece of hardware that detects nearby smartphones, and vendors of all sizes throughout the industry will have to refine their strategies if they want to stay in the game in the long term.

Here are five examples of monetization strategies for beacon vendors.

1. Try a one-time fee for the hardware. “Monetization strategies for beacon vendors depend on their product offering, which can generally be divided into hardware, software and service products. For hardware, charging a one-time upfront fee is the no-brainer—and most common—offering. Hardware-as-a-Service or a deferred, SaaS-like payment scheme, as we have at Kontakt.io, characterizes a more flexible option.” (Philipp von Gilsa, Kontakt.io)

2. Develop value add services. “Beacons themselves have become commodities. To distinguish themselves, beacon vendors need to develop value add services that enable end users to realize the potential of the technology. This includes beacon management and content delivery capabilities. These services give vendors the ability to monetize the service as a SaaS model, as opposed to a hardware sale. The hardware costs are bound to go down with time, and adding functionality to the beacon itself, and layering management capabilities, are critical to a sustainable business model. Services like traffic analytics, proximity alerts, or even simple welcome messaging can be powerful value add services.” (Shekar Raman, Birdzi)

3. The bigger the deal, the more flexible the pricing. “It gets more interesting with software and service products. Here, anything is possible—the pricing will depend on the type of product, how much value it generates, and the size of the deal. Beacon vendors charge for API calls over time, a fixed fee per beacon per month, or a tiered platform access. Our observation is this: The bigger the deal, the more flexible the pricing and business model should be. Companies are well advised not to dictate pricing in order to hit consistent growth metrics.” (Philipp von Gilsa, Kontakt.io)

4. Double down in the back of house. “Buying hardware as a monthly subscription effectively moves capital requirements onto the beacon hardware provider. The problem is that beacon manufacturers are smaller businesses that, unlike their marquee customers, have limited access to cheap capital; subscription pricing is therefore higher to cover the cost of hardware expenses. Over the course of multi-year contracts, the subscription model can be double or triple the cost verses the outright purchase of hardware. [The best option is to] double down in the back of house use cases that focus on efficiency.” (Pete Williams, Localz)

5. Avoid going the leasing route. “We’ve also examined models which lease beacons, provided the network can be accessed by other marketing organizations. The problem with these models is that our clients with the largest distribution are unwilling to share the trigger footprint and resultant interaction data.” (Pete Williams, Localz)

Stephanie Miles is a senior editor at Street Fight.

Interviews have been edited for length and clarity.

Stephanie Miles is a journalist who covers personal finance, technology, and real estate. As Street Fight’s senior editor, she is particularly interested in how local merchants and national brands are utilizing hyperlocal technology to reach consumers. She has written for FHM, the Daily News, Working World, Gawker, Cityfile, and Recessionwire.