[[{"@context":"http:\/\/schema.org","@type":"Article","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article","articleBody":"As manufacturers face increasing pressure from the servitization model, they need to come up with new sources of revenue. There are a number of service offerings that some may have never even heard of.\nBut for companies that want to servitize their business, it\u2019s important to invest wisely so they don\u2019t fall victim to the \u201cservice paradox.\u201d That\u2019s when companies invest heavily to increase their service portfolio, only to achieve higher costs with no return on their investment.\nServitization means that companies shift their focus from only making, selling and installing equipment to making money servicing them. This poses a challenge for manufacturers because their products are often so good in quality that a customer won\u2019t come back for 30 years to buy a new one.\nSo what\u2019s a successful approach to the servitization model? There are three classification servitization models, originally mentioned in a report by Cambridge Service Alliance, that businesses can offer their customers: product-oriented, use-oriented, and results-oriented.\nTo these servitization models, I would argue for a shift towards a new one: customer-oriented.\nHowever, let\u2019s start by looking at existing and successful methods of servitization.\nServitization model: Product-oriented services\nWhen integrating servitization into your business model, offering product-oriented services gives you the most options. Many businesses choose to go the route of offering advice, training, consulting, or help-desk services for product use. This helps their customers efficiently use the product they\u2019ve purchased. Still, there are so many other options.\nIn the medical industry, GE\u2019s healthcare division offers installation of their large medical devices throughout the entire hospital as well as post-installation performance maintenance and monitoring.\nOnce you\u2019ve sold a product to a customer, you may be able to offer these additional services:\n1.Delivery 2. Product installation 3. Spare parts 4. Updates and upgrades 5. Refurbishing, cleaning 6. Recycling 7. Inspection and diagnosis 8. Extended warranty 9. Maintenance contracts\nUse-oriented services: Taking a cue from Netflix\nThis servitization model most resembles subscription services such as Netflix. With use-oriented services, companies can offer product leasing, sharing, renting, and pooling with short-term or long-term contracts. Leasing a product means you pay a set fee to be the sole user of a product. If you offer a product renting service, it means the customer renting it can use the product exclusively for a limited amount of time.\nWith a sharing service, exclusive rights are waived, and the products can be used by a customer for a set amount of time before the product must be passed on to the next customer. Pooling service means a number of customers can use the product at the same time. For the eco-minded, both sharing and pooling products are better for the environment.\nRolls-Royce created the TotalCare package, which lets the company rent airplane engines to customers who then pay only for the hours the airplane is in flight. Simultaneously, Rolls-Royce collects data on their engines that predicts failures and allows the company to create better maintenance schedules.\nResults-oriented services: Pay only for what you use\nFor businesses that want to look outside of product or use-oriented services, this servitization model focuses more on results. With results-oriented services, businesses pay-per-use for services instead of paying for the whole product. For example, a field service management software product could require customers to pay only for the amount of storage space they actually use.\nIn this model, how much or how little a product is used is left up to the customer, not the service provider. Xerox also provides a pay-per-use model to its Managed Print Services customers that allows them to have two-year or longer contracts for document solutions.\nMaking the leap to customer-oriented services\nAs mentioned, customer-oriented services are an attempt by companies to distinguish themselves in a market saturated with similar products and savvy consumers.\nIt\u2019s no longer enough to offer the best product on the market. Consumers are looking for more: real-time responses, effective self-service options, predictive maintenance, and more. They want solutions that cater to their digital products, busy schedules, and global locations.\nManufacturers have to expand their goals beyond production and sales to include lifelong service support. Consumers want to know that technical support is available for the lifespan of their machines and devices. Successful manufacturers will be the ones who integrate digital solutions into their business plans. This can range from AI-powered self-service tools to augmented reality assisted field service technicians to digital twins that provide virtual imagery for the operating life of industrial machinery.\nWhatever the service solution, this model enables a business to convey a clear message to its customers: We\u2019re here for you and your devices beyond the purchase date. An approach like this will win customers for life.\n2020 has been wild. What does 2021 look like? Make the most of what comes next. Learn more HERE.","author":{"@type":"Person","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article_Person","image":{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article_Person_ImageObject","url":"https:\/\/23x6xj3o92m9361dbu2ij362-wpengine.netdna-ssl.com\/wp-content\/uploads\/2019\/08\/Anna-Irniger-150x150.jpg"},"name":"Anna Irniger","sameAs":"https:\/\/www.linkedin.com\/in\/annairniger\/","url":"https:\/\/www.the-future-of-commerce.com\/contributor\/anna-irniger\/"},"dateModified":"2020-12-21T22:22:03+00:00","datePublished":"2020-12-22T06:16:06+00:00","description":"How can manufacturers succeed with the servitization model? Here's how businesses expand their focus beyond products to services.","headline":"Servitization model: How successful businesses do it","image":{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article_ImageObject","height":"630","url":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2020\/12\/FCEE081_Servitized_HB-1200x630.jpg","width":"1200"},"mainEntityOfPage":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/","name":"Servitization model: How successful businesses do it","publisher":{"@type":"Organization","@id":"https:\/\/www.the-future-of-commerce.com\/","additionalType":"https:\/\/www.wikidata.org\/wiki\/Q1193236","description":"Relevant, timely information & analysis on commerce trends, both consumer-facing and B2B.","logo":{"@type":"ImageObject","@id":"https:\/\/23x6xj3o92m9361dbu2ij362-wpengine.netdna-ssl.com\/wp-content\/themes\/hybris_foc\/assets\/images\/layout\/logo-new-2x.png?_=1","height":"96","url":"https:\/\/23x6xj3o92m9361dbu2ij362-wpengine.netdna-ssl.com\/wp-content\/themes\/hybris_foc\/assets\/images\/layout\/logo-new-2x.png?_=1","width":"500"},"name":"The Future of Customer Engagement and Experience","sameAs":["https:\/\/podcasts.apple.com\/us\/podcast\/a-call-for-a-better-experience\/id1479742201","https:\/\/twitter.com\/FutureOfCEC","https:\/\/www.linkedin.com\/groups\/4844282","https:\/\/www.the-future-of-commerce.com\/feed\/"],"url":"https:\/\/www.the-future-of-commerce.com\/"},"url":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article"},{"@context":"http:\/\/schema.org","@type":"Organization","logo":{"@type":"ImageObject","url":"https:\/\/23x6xj3o92m9361dbu2ij362-wpengine.netdna-ssl.com\/wp-content\/themes\/hybris_foc\/assets\/images\/layout\/logo-new-2x.png?_=1","height":"96","width":"500","@id":"https:\/\/23x6xj3o92m9361dbu2ij362-wpengine.netdna-ssl.com\/wp-content\/themes\/hybris_foc\/assets\/images\/layout\/logo-new-2x.png?_=1"},"name":"The Future of Customer Engagement and Experience","sameAs":["https:\/\/podcasts.apple.com\/us\/podcast\/a-call-for-a-better-experience\/id1479742201","https:\/\/twitter.com\/FutureOfCEC","https:\/\/www.linkedin.com\/groups\/4844282","https:\/\/www.the-future-of-commerce.com\/feed\/"],"additionalType":"https:\/\/www.wikidata.org\/wiki\/Q1193236","url":"https:\/\/www.the-future-of-commerce.com\/","description":"Relevant, timely information & analysis on commerce trends, both consumer-facing and B2B.","@id":"https:\/\/www.the-future-of-commerce.com\/"},{"@type":["Article"],"@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article","@context":{"@vocab":"http:\/\/schema.org\/","kg":"http:\/\/g.co\/kg"},"url":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/","publisher":[{"@id":"https:\/\/www.the-future-of-commerce.com\/"}],"author":[{"@type":"Person","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article_author_Person","image":[{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article_author_Person_image_ImageObject","url":"https:\/\/cdn-bijap.nitrocdn.com\/AuMaQmessFRMSicXmZsEecJFLEquAyoT\/assets\/static\/optimized\/rev-b3d386d\/wp-content\/uploads\/2019\/08\/Anna-Irniger-150x150.jpg"}],"sameAs":"https:\/\/www.linkedin.com\/in\/annairniger\/","url":"https:\/\/www.the-future-of-commerce.com\/contributor\/anna-irniger\/\nhttps:\/\/www.the-future-of-commerce.com\/contributor\/anna-irniger\/","name":"https:\/\/www.the-future-of-commerce.com\/contributor\/anna-irniger\/\nhttps:\/\/www.the-future-of-commerce.com\/contributor\/anna-irniger\/"}],"subjectOf":[{"@type":"FAQPage","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article_subjectOf_FAQPage","mainEntity":[{"@type":"Question","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity0","name":"Servitization model: Product-oriented services","acceptedAnswer":[{"@type":"Answer","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity0_acceptedAnswer_Answer","text":"When integrating servitization into your business model, offering product-oriented services gives you the most options. Many businesses choose to go the route of offering advice, training, consulting, or help-desk services for product use. This helps their customers efficiently use the product they\u2019ve purchased. Still, there are so many other options.In the medical industry, GE\u2019s healthcare division offers installation of their large medical devices throughout the entire hospital as well as post-installation performance maintenance and monitoring.Once you\u2019ve sold a product to a customer, you may be able to offer these additional services:1.Delivery
2. Product installation
3. Spare parts
4. Updates and upgrades
5. Refurbishing, cleaning
6. Recycling
7. Inspection and diagnosis
8. Extended warranty
9. Maintenance contracts"}]},{"@type":"Question","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity1","name":"Use-oriented services: Taking a cue from Netflix","acceptedAnswer":[{"@type":"Answer","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity1_acceptedAnswer_Answer","text":"This servitization model most resembles subscription services such as Netflix. With use-oriented services, companies can offer product leasing, sharing, renting, and pooling with short-term or long-term contracts. Leasing a product means you pay a set fee to be the sole user of a product. If you offer a product renting service, it means the customer renting it can use the product exclusively for a limited amount of time.With a sharing service, exclusive rights are waived, and the products can be used by a customer for a set amount of time before the product must be passed on to the next customer. Pooling service means a number of customers can use the product at the same time. For the eco-minded, both sharing and pooling products are better for the environment.Rolls-Royce created the TotalCare package, which lets the company rent airplane engines to customers who then pay only for the hours the airplane is in flight. Simultaneously, Rolls-Royce collects data on their engines that predicts failures and allows the company to create better maintenance schedules."}]},{"@type":"Question","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity2","name":"Results-oriented services: Pay only for what you use","acceptedAnswer":[{"@type":"Answer","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity2_acceptedAnswer_Answer","text":"For businesses that want to look outside of product or use-oriented services, this servitization model focuses more on results. With results-oriented services, businesses pay-per-use for services instead of paying for the whole product. For example, a field service management software product could require customers to pay only for the amount of storage space they actually use.In this model, how much or how little a product is used is left up to the customer, not the service provider. Xerox also provides a pay-per-use model to its Managed Print Services customers that allows them to have two-year or longer contracts for document solutions."}]},{"@type":"Question","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity3","name":"Making the leap to customer-oriented services","acceptedAnswer":[{"@type":"Answer","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity3_acceptedAnswer_Answer","text":"As mentioned, customer-oriented services are an attempt by companies to distinguish themselves in a market saturated with similar products and savvy consumers.It\u2019s no longer enough to offer the best product on the market. Consumers are looking for more<\/a>: real-time responses, effective self-service options, predictive maintenance, and more. They want solutions that cater to their digital products, busy schedules, and global locations.Manufacturers have to expand their goals beyond production and sales to include lifelong service support. Consumers want to know that technical support is available for the lifespan of their machines and devices. Successful manufacturers will be the ones who integrate digital solutions into their business plans. This can range from AI-powered self-service tools to augmented reality assisted field service technicians to digital twins that provide virtual imagery for the operating life of industrial machinery.Whatever the service solution, this model enables a business to convey a clear message to its customers: We\u2019re here for you and your devices beyond the purchase date. An approach like this will win customers for life."}]},{"@type":"Question","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#subjectOf_FAQPage_mainEntity4","name":"2020 has been wild. What does 2021 look like? Make the most of what comes next. Learn more HERE."}]}],"image":[{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#Article_image_ImageObject","url":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2020\/12\/FCEE081_Servitized_HB-1200x630.jpg","width":"1200","height":"630"}],"mainEntityOfPage":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/","articleBody":" As manufacturers face increasing pressure from the servitization model, they need to come up with new sources of revenue. There are a number of service offerings that some may have never even heard of. But for companies that want to servitize their business, it\u2019s important to invest wisely so they don\u2019t fall victim to the \u201cservice paradox.\u201d That\u2019s when companies invest heavily to increase their service portfolio, only to achieve higher costs with no return on their investment. Servitization means that companies shift their focus from only making, selling and installing equipment to making money servicing them. This poses a challenge for manufacturers because their products are often so good in quality that a customer won\u2019t come back for 30 years to buy a new one. So what\u2019s a successful approach to the servitization model? There are three classification servitization models, originally mentioned in a report by Cambridge Service Alliance, that businesses can offer their customers: product-oriented, use-oriented, and results-oriented. To these servitization models, I would argue for a shift towards a new one: customer-oriented. However, let\u2019s start by looking at existing and successful methods of servitization. Servitization model: Product-oriented services When integrating servitization into your business model, offering product-oriented services gives you the most options. Many businesses choose to go the route of offering advice, training, consulting, or help-desk services for product use. This helps their customers efficiently use the product they\u2019ve purchased. Still, there are so many other options. In the medical industry, GE\u2019s healthcare division offers installation of their large medical devices throughout the entire hospital as well as post-installation performance maintenance and monitoring. Once you\u2019ve sold a product to a customer, you may be able to offer these additional services: 1.Delivery 2. Product installation 3. Spare parts 4. Updates and upgrades 5. Refurbishing, cleaning 6. Recycling 7. Inspection and diagnosis 8. Extended warranty 9. Maintenance contracts Use-oriented services: Taking a cue from Netflix This servitization model most resembles subscription services such as Netflix. With use-oriented services, companies can offer product leasing, sharing, renting, and pooling with short-term or long-term contracts. Leasing a product means you pay a set fee to be the sole user of a product. If you offer a product renting service, it means the customer renting it can use the product exclusively for a limited amount of time. With a sharing service, exclusive rights are waived, and the products can be used by a customer for a set amount of time before the product must be passed on to the next customer. Pooling service means a number of customers can use the product at the same time. For the eco-minded, both sharing and pooling products are better for the environment. Rolls-Royce created the TotalCare package, which lets the company rent airplane engines to customers who then pay only for the hours the airplane is in flight. Simultaneously, Rolls-Royce collects data on their engines that predicts failures and allows the company to create better maintenance schedules. Results-oriented services: Pay only for what you use For businesses that want to look outside of product or use-oriented services, this servitization model focuses more on results. With results-oriented services, businesses pay-per-use for services instead of paying for the whole product. For example, a field service management software product could require customers to pay only for the amount of storage space they actually use. In this model, how much or how little a product is used is left up to the customer, not the service provider. Xerox also provides a pay-per-use model to its Managed Print Services customers that allows them to have two-year or longer contracts for document solutions. Making the leap to customer-oriented services As mentioned, customer-oriented services are an attempt by companies to distinguish themselves in a market saturated with similar products and savvy consumers. It\u2019s no longer enough to offer the best product on the market. Consumers are looking for more: real-time responses, effective self-service options, predictive maintenance, and more. They want solutions that cater to their digital products, busy schedules, and global locations. Manufacturers have to expand their goals beyond production and sales to include lifelong service support. Consumers want to know that technical support is available for the lifespan of their machines and devices. Successful manufacturers will be the ones who integrate digital solutions into their business plans. This can range from AI-powered self-service tools to augmented reality assisted field service technicians to digital twins that provide virtual imagery for the operating life of industrial machinery. Whatever the service solution, this model enables a business to convey a clear message to its customers: We\u2019re here for you and your devices beyond the purchase date. An approach like this will win customers for life. 2020 has been wild. What does 2021 look like? Make the most of what comes next. Learn more HERE. ","name":"Servitization model: How successful businesses do it","dateModified":"2020-12-21T22:22:03+00:00","datePublished":"2020-12-22T06:16:06+00:00","headline":"Servitization model: How successful businesses do it","description":"How can manufacturers succeed with the servitization model? 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