The Subscription Model

iomando-subscription-model

Since the recent introduction of iomando in the Barcelona area we've been incredibly busy processing new requests and closing deals with official installers, in order to keep up with the unexpected demand.

The service has been well received and we've been congratulated several times by our customers and the press. But our customers have also complained about a particular (and controversial) aspect of our business model: the pricing based on a subscription.

To be honest, we saw it coming. For that reason we spent almost a third of the product announcement explaining our motivations and why we thought a subscription model was a better proposition.

We knew subscription based models are not loved in Spain. Before the announcement we iterated over this particular topic again and again, but in order to launch the product that matched our quality expectations, we needed to lean on this business model. For these reasons I'd like to write a few words about the topic and which were the motivations behind our decision.

Why we've considered it

To understand why we did it, we’ll need to clearly state what iomando stands for: our mission is to leverage technology in order to provide the best access experience, at any given moment. This statement has two direct implications.

  1. We rely on technology to enable the experience, and that’s good because technology is the most powerful driver for innovation.
  2. By definition technology evolves extremely fast, and that's also good because if we can keep the pace, we'll be able to develop better products that our customers could benefit from.

Based on those two premises, we can grant that iomando will always cost less than their traditional counterparts, but we can’t replicate their business structure, because our technological breed doesn’t allow us to do so.

 A slide extracted from one of our catalogues that features the hidden costs inside a community just accounting for remote replacement.

A slide extracted from one of our catalogues that features the hidden costs inside a community just accounting for remote replacement.

iomando works as an anual fee that it's billed directly to the community. Like the illumination, elevator maintenance or the cleaning service. With this annual fee we include:

  • An unlimited amount of licenses, that is, you can activate all the people you want. We won't charge you more if you have 2 or 2.000 users. So feel free to invite your family and friends and let them use your parking space when they come for dinner.
  • A tool that allows the administrator to manage who has permission to open the door.
  • The hardware equipment that goes with the door. Doors don't usually talk with smartphones out of the box, think of it as some kind of translator so the smartphone can open the door[1]. We also provide the installation service from our network of official iomando installers.

The price for all these services is 99€ / year, which by all means is way less than what it will cost you to set up an access system of any kind. Nonetheless, we've been facing some rejection in certain areas that I will argue below. 

Price Syndication

The replacement of accesses systems constitute a hidden cost in most communal spaces. That’s because people independently pay on their own lost and broken keys, but don’t syndicate the cost to the communal expenses. For this reason access systems are not perceived as a direct community cost. Therefore when we ask for a yearly fee the entire community has to pay for, it is perceived as something extra they didn't pay before.

The main rejection we face is that people don’t want to pay for the “other” neighbors. But this argument is the same as saying that the people living in the first floor has to pay less for the elevator maintenance just because his rides are shorter.

The reality, though, is that iomando can save up to 80% of the costs to a community in access controls. The bigger the community, the bigger the savings. Think of an average venue with 100 people. Suppose that the average lifespan of a remote is 2 years. That is 50 remotes a year at 40€ / remote. That adds up to 2.000€ / year. The problem is that nobody perceives this cost in their integrity, because when someone loses his own remote, he goes and buys another. Nobody ever knows that.

 Yet another slide featuring the savings that a community could benefit from iomando.

Yet another slide featuring the savings that a community could benefit from iomando.

We are trying to surface this cost and propose a better deal: 99€ / year. Yes it is a community expense, but it’s way lower than the sum of all the lost and broken remotes that people replace on its own every year.

Long Term Commitment

We are here for the long run. We truly believe in our mission and we want to build a sustainable business that focuses on delivering the best product. For this reason we think that a subscription based model creates a more truthful relationship between the customer and the company. Since we'll be paid in a recurrent basis, we'll always be under the customer evaluation. Subscription based revenue forces us to always deliver the best possible service, because if you are not fully satisfied with our service you can easily opt out whenever you feel like it.

One-shot payments might seem more appealing for some: “because I own the product”, “because I’m not locked in”… But we couldn’t disagree more. One-shot pricing frees companies of further improvement upon existing customers, because no additional revenue is generated from them. So all the efforts are placed in acquiring new customers, not in taking care of the existing ones.

The subscription based model incentivizes us to place the same or even more resources to existing customers, generating a long term commitment and a healthier relationship between the parties. But in this particular case, there are even more reasons that led us to start as a subscription based service.

The Best Product at any Given Time

Technology evolves, so do we: when you get a remote, you acquire a piece of plastic that’s not going to change any time. iomando gets better with time. We release new versions periodically with new functionalities and improvements based on your feedback. We want every customer on the same page, enjoying the latest version of our service.

New OS releases: every year there are major OS updates to mobile platforms. We’ll also update our apps in order to get the most of the new APIs, resources and capabilities available to developers. We want you running on the latest technology, but we don’t want you to pay extra for that.

New devices: think of 5 years ago. Just 5 years. A service like iomando could not be possible. There were another kind of devices that don’t look like anything of what we have today. So now imagine 5 years from now. Maybe in 5 years we use some kind of wearable technology or a new set of devices… who knows. Unfortunately we don’t know either. But we know that we will support whatever technological trend comes next. Because of the subscription model we are committed to offer the best experience, and that means providing new tools for whatever platform emerges in the future.

Recap

We are convinced that leveraging mobile technologies we can provide a better access experience. Mobile devices are evolving really fast and we want to keep innovating and offering new features that will delight our customers. Keys and remotes have stayed the same for almost fifty years, today we are faced with an amazing opportunity to approach the market with a fresh proposition.

This is also good news for the customer, because technology allows us to drive down costs and offer better prices, but to do that, we also have to change the pricing architecture. We truly believe that this is for the best and we are here for the long run, so we’ll continue to work in order to deliver the best product at the most competitive price.

To keep on with the story you can check out the iomando series, or you can also look for other blog publications about iomando, mostly about product design, business strategy or company culture.


[1] Installing a device to the door it's not an exclusive feature of iomando. Any automatized door that works with remotes or magnetic cards also have this kind of device.