June 2, 2020
In recent years, the ‘as-a-Service’ model has gained in importance. When I was in university, I was taught there is Infrastructure-as-a-Service, Platform-as-a-Service, and Software-as-a-Service (without really knowing what it actually means). But now, there is pretty much anything available ‘as-a-service’. How come and for what products is that model actually best suitable?
Most players don't explicitly use the term ‘as-a-service’ but think about Netflix or Spotify. Effectively it’s ‘movies as a service’, or ‘music as a service’. You don't go to a DVD store anymore to buy a movie or a CD, but you pay a monthly subscription fee to have access to as many movies and songs you want! End-consumers love it because they have high freedom of songs and movies at their fingertips but only pay a little fee every month.
So, ‘as-a-service’ means, you pay for the result, not for owning the actual product. Think about it: do you need a lamp, or do you need light at home? Do you need a car, or do you need to get from A to B? It’s the result that matters.
There are three categories of goods that work perfectly for ‘as-a-service’ models: Products that are only needed for a certain duration of time, products that are very service intense, and products that have a high value.
Imagine you just had a little baby. You only want the best for the baby and you buy a lot of expensive products, like strollers, baby clothes, etc. At the latest after a few months, if not weeks, the baby has grown out and you have to get rid of everything.
Why should you offer such products as a service? To increase usage and margin of your products by at least 3x, to get direct feedback from your customers, create a unique selling proposition to differentiate from your competitors, and control the second-hand market.
Do you have to go out to your customers a lot in order to maintain your product? Is the service due on a regular basis? It’s a perfect opportunity to establish a product as a service model - just like Rolls Royce did, offering their turbines-as-a-service measured by the flight hours.
Why should you offer your service-intense product as a service? To increase your service-based revenue by 40% (like Rolls Royce did) and keep the customer relationship and customer communication as active as possible. It is 60-70% more likely to cross- and upsell to an existing customer base than to establish a new customer relationship.
The most prominent example of expensive products as a service is probably good old car leasing. But also in the B2B realm, products-as-a-service are widely spread: companies offering dental equipment-as-a-service, smart home products-as-a-service, and furniture-as-a-service.
Why it makes sense to offer high-value products as-a-service? Because the car manufacturers can reach a whole new customer target group with a new price point for their product. Customers who would never be able to buy a BMW, are now leasing it and the whole service that comes with it.
Offering your product-as-a-service is a new business model, which can be easily implemented on top of your existing one. Check out my article ‘Product-as-a-Service: one step towards circularity in e-commerce’ to find out what to consider when implementing a product-as-a-service.