Why should you buy something when you can just pay for usage? This and similar questions are quickly disrupting the old business models across industries. As more and more people can use digital tools as intended and to the fullest extent, subscriptions and product-as-a-service business models are becoming the go-to method for many consumers. Many of us already use subscription-based models for music, videos, and games, but there has been a proliferation of other products that can be purchased using a subscription-based model such as cars and appliances.
In this post, we cover the new home appliance as a service and equipment as a service business models and the benefits they bring to both customers and providers.
What is Home Appliance as a Service?
One industry after another, ownership is quickly getting replaced by usership. Music CDs have been replaced by Spotify and Deezer, while movie DVDs have been replaced by Netflix and HBO Max. Lately, newspapers are also being replaced by news portals offering subscription services for their premium and ad-free content.
This economic trend is slowly but surely extending to all industries. As Vala Afshar, Chief Digital Evangelist at Salesforce and Contributing Writer for ZDNet, says: “People aren’t as interested in filling their homes with physical goods anymore. They don’t want to deal with upfront costs, the hassles of maintenance, and the frustration of obsolescence. Why buy and own something if there is an easier way to get the same or even better outcome?”
Home Appliance as a Service is a business model in which consumers can get various home and kitchen appliances as a paid service. Home appliance as a Service makes the process of meeting consumers´ needs much easier as it allows them to use the appliance without having to worry about the appliance management such as insurance, repair, and replacement. With it, consumers can get new and more energy-efficient appliances at the end of the subscription period without the costs that would otherwise be associated with buying the new appliance.
Subscription management covers everything related to the actual appliance, which is the subject of the home appliance as a service agreement, including end-of-life disposal. In the agreement, the appliance provider defines the appliance(s), duration of the subscription, associated costs, and any additional services the consumer wants. The payments are usually on a per-device basis and the duration of the agreement is typically set to two years.
How to Get Started with Home Appliance as a Service?
How does a company start with a subscription-based business model? Do subscription-based business models vary between different countries? What factors influence these companies and what actions can they take to anticipate these factors?
When answered correctly, these are just some of the questions that can help companies launch and monetize their subscription-based business models more effectively.
As many companies expand to other countries, most simply copy and paste their business models onto the new markets.
Doing so, they completely avoid adapting to the new, and often different, business environments.
Factors affecting home appliance-as-a-service business model
- Supply chain factors
- Market factors
- Institutional factors
- Technological factors
Supply Chain Factors
Factors related to the supply chain are those connected with partner networks and resource exchange between every actor in the supply chain. Subscription-based business models such as home appliance as a service and equipment as a service depend on local partners that often provide critical resources or services such as appliance disposal and recycling.
Market factors include the local market conditions and consumers´ receptivity towards subscription-based business models. Here, innovation through quality services is vital as most consumers reject subscription-based models due to a lack of knowledge about the actual model and uncertainties related to cost and terms and conditions. One factor that can´t be significantly influenced with this is one related to social norms and that typically requires a cultural shift which often takes time.
Institutional factors include rules, incentives, and regulatory environment relevant for offering home appliance as a service and similar subscription business models. When it comes to the regulatory environment, this typically refers to the tax and sustainability policies and regulations which have the potential to hinder innovation and slow down the rollout of subscription-based business models. The good news is that new EU regulations on renewable fuels and circular economy creates a significant demand for new solutions and pushes companies to explore new and more sustainable business models.
When it comes to technological factors, these typically refer to new technologies and information-sharing platforms for subscription-based businesses. Recently, many new developments in the fields of IoT, analytics and subscription management platforms significantly help businesses launch and scale their new subscription business models.
Starting a Home Appliance as a Service: 5 Easy Steps
One of the many benefits of a subscription model is that it allows businesses to predict their revenue much more easily. In subscription-based business models, consumers are repeatedly paying, so it´s easy for a business to estimate how much revenue they will get each month. These business models can potentially attract more consumers as the price tag on some home appliances can be cost-prohibitive for some.
These are just a few benefits businesses can get when they launch a subscription-based business model.
So, let´s see the steps that businesses have to take to start offering home appliances as a service.
1. Set clear goals
Setting clear goals is the prerequisite for everything else, and defined goals will guide the whole process. For instance, many home appliances are old and energy-inefficient, with almost a third being over a decade old. Replacing them with more energy-efficient appliances can contribute to energy savings. Businesses can aim to sell more durable appliances using a subscription model that includes repair and maintenance services.
2. Define a pricing strategy
Based on the first step's goals, businesses must create subscription packages and tiers. Those who want to keep it as simple as possible can create just one model and then expand later with additional ones when they receive enough consumer feedback and learn more about their preferences.
3. Focus on the user experience
Signing up for a home appliance as a service should be as easy, straightforward, and simple as possible. Providers should avoid unnecessary complications as these can cause confusion among consumers. Informing your consumers about the pricing, subscription duration, and other relevant terms and conditions should be simple and relevant information should be put in a logical and visible place.
4. Create a seamless onboarding process
Let´s face it: subscription business models and subscription management services are still new for most consumers. Of course, the onboarding process will look different from provider to provider but still, the onboarding process should be as intuitive and simple as possible. Specifically, in case of home appliance as a service and equipment as a service, the onboarding experience can be done in a physical store or via email but again, simplicity and transparency is key.
5. Create an easy billing process
Most consumers that choose subscription instead of classic ownership want to avoid unnecessary complications and complex billing processes. Therefore, businesses need to establish easy and simple billing processes that have the ability to process recurring payments. Subscription renewals are an excellent way to build strong, lasting relationships with consumers and an even better way of increasing consumer lifetime value.
Business that decide to implement home appliance as a service or any other subscription-based business model can maximize their gain and lower their investments by partnering with a subscription management provider.
Investing in custom development to build a subscription management platform can be costly and time-consuming as it requires setting up or outsourcing a whole development team.
circuly allows businesses to launch and scale their home appliance as a service and equipment as a service subscription business within months. It provides a seamless customer-centric renting experience to customers by empowering businesses with an all-in-one platform to manage their new business model, from subscription management, recurring billing, asset tracking to return handling.
By moving quickly and offering home appliance as a service and similar subscription-based business models, companies can create stronger and more personalized relationships with their customers that will be more difficult to break by competition.
While other companies in the home appliance sector might be sticking to the old ways, the forerunners that are already offering subscription-based models to their customers are already becoming reference points for them to follow.
Still, for most consumers and providers, the idea behind home appliance as a service and appliance as a service business models is still very new. Therefore, they present both a challenge and an opportunity.
circuly helps companies of all sizes to overcome the challenges and seize the opportunities of the rising subscription-based business models.