Product-as-a-Service is the business model in which customers no longer own a product, but only use it. It leverages cloud computing, artificial intelligence, the IoT, mixed reality or even digital twins to strenghten the customer relationship and create new revenue streams for manufacturers and wholesalers.
What is Product-as-a-Service?
The biggest difference between traditional B2B sales and "Product-as-a-service" is that the company remains the owner of the product and also takes it back at the end of the term of use. With advancing digitalization, such a business models can be an additional source of revenue for manufacturers and wholesalers.
If customers opt for such a subscription, they pay recurring fees, without having to invest heavily upfront. This enables manufacturers (for example of machines) to tap into completely new customer segments - for example, companies that only need special machines for a specific purpose and only for a short period of time.
In addition, providers of product-as-a-service have the opportunity to leverage cross-sell and up-sell potential: with services, consumables or training that complement the leased product.
The product-as-a-service business model arises from cloud computing, and is particularly suitable if the B2B e-commerce solution is used as a software-as-a-service. Modern B2B self-service portals allow for easy management and ease of doing business for the buyer.
Is Product-as-a-Service more sustainable?
Yes. Here are three reasons, why:
1. Product-as-a-service is saving resources and closes resource cycles. This is of great advantage both economically and ecologically, as resources become scarcer and raw materials more expensive.
2. Since a product remains the property of the manufacturers, they have an interest in ensuring that the product lasts as long as possible. High-quality manufacturing, product information, training material, parts that are easy to repair - these aspects reverse the prevailing "throwaway society" into a sustainable model.
3. Manufacturers can actively support sustainability by offering (a side line of) products, parts and consumables that have been produced sustainably; for example, in terms of raw materials, but also in terms of human rights and working conditions. Modern e-commerce solutions offer filters or CPQ systems in which B2B buyers can then put together the required products (as-a-service) in terms of their sustainability.
How does Product-as-a-Service work in B2B?
Companies in the manufacturing industry have a great need for a fully connected system that provides a centralized view of customers and their equipment. Such customer portals, which can map digital twins of the installed base, enable proactive services that can accelerate supplier and technician productivity and simplify the technology stack to ultimately reduce maintenance efforts.
In such a "My Account" Dashboard, features and information about the installed base differ for the logged-in user. Technicians can gather IoT data and monitor the machines smartly, whereas business users can track information of the cost of service, connected contracts, accumulated revenue or Pay-per-use options of the Product-as-a-Service agreement.
On the one hand, the period of time in which the machine is used can be the basis for billing. But also the usage itself (e.g. mileage, revolutions, and throughput) is a factor that can be billed via a fee. However, this requires intelligent devices, connected via IoT.
Product-as-a-Service example
Here you can see an example of a drill that is billed based on consumption, with three different power options:
This drill is not sold, but billed by the pay-per-use method. In this case, billing takes place promptly, using a cryptocurrency and up-front payments. In order to start the machine, the user pays an amount into their account.
The drill reports utilization and speed in real time to the e-commerce platform, which in turn translates these figures into the intensity of use and debits them to the crypto account - also in real time.
The advantages are obvious: no investment is required on the customer side. The customer has no capital commitment, he or she can scale freely up and down. The supplier in turn has fast access to the market. He doesn't have to argue the ROI for higher investment sums. Suppliers and demand come together faster because there is no investment risk for the customer. The cash flow is guaranteed.
What's more, the supplier always knows where the device is. Thanks to the location information also integrated into the drilling machine. And last but not least, the sensor data can be used for predictive maintenance concepts.
As you can see, Product-as-a-Service can improve your margins and intensify customer loyalty. It's also the recipe for success for manufacturers to stay competitive and produce more sustainably.
A digital customer portal empowers you to offer your customers a seamless user journey across all channels and stages of the customer journey. It is the next evolution of the B2B online shop, providing a full spectrum of services during the various phases of the customer lifecycle.
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