Product as a Service

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.

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

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.

Attract new customers

Temporary product usage without ownership means a lower cost of entry, which widens the potential pool of customers
Rental schemes expand the customer base by targeting customers with short-term needs
Attracts new pool of cost-conscious customers

Increased revenue

Recurring revenue streams with long-term commitments create a more predictable and consistent cash flow
Revenue generation from idle assets
Higher asset utilization
Cross-selling and upselling opportunities
Scalability. The company’s revenue grows with customer usage

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 global composable commerce platform for enterprises with sophisticated business models to enable growth, innovation, and differentiation. Designed specifically for sophisticated transactional businesses, 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, IoT Commerce, and Unified Commerce, Spryker has empowered 150+ global enterprise customers worldwide and is trusted by brands such as ALDI, Siemens, ZF Friedrichshafen, and Ricoh. Spryker is a privately held technology company headquartered in Berlin and New York backed by world class investors such as TCV, One Peak, Project A, Cherry Ventures, and Maverick Capital. Learn more at spryker.com.

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