Product as a Service
Attract new customers and increase revenue by launching a rental, subscription, or pay-per-use business model.Status Quo
In today’s competitive market, Enterprise businesses must seek new ways of generating revenue and attracting customers. One opportunity lies in the ‘Product as a Service’ business model. Much like in the B2C world where customers can rent items like a high-fashion dress or lawnmower.
Product as a Service in the B2B world represents an opportunity where large, expensive products, such as industrial machinery, 3D printers, power generators, or laboratory equipment, are not purchased outright by customers but are instead ‘rented’ through a subscription or pay-per-use agreement.
Gartner reports that 70% of companies across industries are now offering subscription models, illustrating the rise in popularity of rental sales channels.
One of the key drivers behind the rise of Product as a Service is the increasing interconnectedness of devices through the Internet of Things (IoT). With IoT, products can be equipped with sensors that gather valuable data about their usage, performance, and condition. This data can be analyzed to optimize product functionality, monitor performance, and provide proactive maintenance, ensuring a seamless user experience. By leveraging IoT technology, businesses can rent products and provide added value through continuous monitoring and improvement.
The cloud computing infrastructure has also played a significant role in enabling the Product as a Service model. Cloud-based platforms and services allow businesses to manage and deliver product functionality remotely, making it easier to offer subscription-based or pay-per-use agreements. These cloud-based solutions provide the necessary infrastructure to support the scalability and flexibility required for successful product service offerings.
This business model offers many advantages and benefits, including an enhancement of the overall customer relationship by offering flexibility and financial freedom.
In addition, 'Product as a Service extends product access to new customers who may otherwise not be able to afford products outright. This increases returns overall by creating new and recurring revenue streams.
The global device as a service market size was valued at $51.7 billion in 2021 and is projected to reach $1.8 trillion by 2031. – Allied Market Research
Challenges Solved by Product as a Service
Acquiring, using, and maintaining complex products can be challenging for businesses, with high entry costs, limited usage, product obsolescence, and operational complexity being some of the key issues. Product as a Service addresses these challenges by providing a subscription-based model that offers access to products and services, ongoing support, and upgrades.
- High Product Entry Costs
Customers tend to avoid high upfront investments of expensive products due to the financial burden and potential risk associated with it. - Limited Time of Usage
Certain products are only needed for a specific timeframe are not attractive for permanent product ownership. - Product Obsolescence
Offering customers access to the latest products and upgrades helps combat product obsolescence and encourages continuous innovation. - Operational complexity
Complex products require deep understanding or on-site knowledge to use and maintain them effectively, adding to the products overall cost.
How Does Product as a Service Work?
There are three main models for selling your products as a service:
Rental
Instead of purchasing, customers can pay a fee to use or receive access to a product temporarily
- Predetermined timeframe; return afterward
- Typically, a one-time fee for the rental duration
- Examples: Automotive, equipment
Subscription
Instead of purchasing, customers pay a recurring fee for ongoing access to a product or service
- Ideal for products or services that require regular usage (continuous access) or updates
- Often includes regular maintenance, support, and upgrades
- Examples: Software, streaming, meal kits
Pay-per-use
Usage of a service or product is paid based on the actual level of consumption
- For customers who may only need the product sporadically
- Often involves an initial setup or registration fee, followed by usage-based charges
- Examples: Bike sharing, cloud computing
Important
Product as a Service solutions need to account for operational and technological dependencies for sustainable success.
What does that mean?
Companies must take into account:
- Deployment
- Upgrade & support
- Monitoring
- Reuse, refurbish, recycle principles
- Maintenance
Business Outcomes of Product as a Service
Offering Products as a Service can create opportunities to tap into new audiences and revenue streams. Time and again, history has shown that when products require a high acquisition cost, complex upkeep from an on-site team, or simply when a customer needs access to cutting edge technology, Product as a Service offerings are an optimal method by which to overcome these challenges.
Enhanced customer satisfaction
- Increased flexibility – customers can access the latest products and services without the commitment of ownership
- Increased customer freedom improves overall retention
- Reduces financial burden on the customer
- Gives them access to advanced technology
- Proactive support and maintenance
- Continuous product improvement
Increased sustainability
- An increasingly sustainable consumption pattern is encouraged due to a more efficient use of resources.
- Extend product lifespan through encouragement of building durable and repairable products.
- Encourages product reuse and refurbishment.
- Aligns with ‘circular economy’ principles.
Spryker Capabilities
- Concrete and abstract products
- Configurable products
- Price management
- Promotional discounts
- Inventory management
Success Enabling Services
- Customer Journey Analysis
- Operating Model Sparring
- Process Design Workshop
- Capability Mapping
Technology Partners
- Channel Pilot Solutions
- Tradebyte
- Stripe
- Adyen
- Citcon
- Minubo
- Econda
About Spryker
Spryker is the leading composable commerce platform for enterprises with sophisticated business models to enable growth, innovation, and differentiation. Designed specifically for sophisticated transactional business, Spryker’s easy-to-use, headless, API-first model offers a best-of-breed approach that provides businesses the flexibility to adapt, scale, and quickly go to market while facilitating faster time-to-value throughout their digital transformation journey. As a global platform leader for B2B and B2C Enterprise Marketplaces, Thing Commerce, and Unified Commerce, Spryker has empowered 150+ global enterprise customers worldwide and is trusted by brands such as ALDI, Siemens, Hilti, and Ricoh. Spryker was recognized by Gartner® as a Visionary in the 2023 Magic Quadrant™ for Digital Commerce and was also ranked as a Strong Performer in The Forrester Wave™: B2B Commerce Solutions, Q2 2022. Spryker is a privately held technology company headquartered in Berlin and New York. Find out more at spryker.com