As manufacturers are put under pressure by servitization, they need to come up with new sources of revenue. There are many different types of product-service offerings that some companies have not even heard of. For companies that want to servitize their business, it’s important that they invest wisely in their service business so they don’t fall victim to the “service paradox.” In this paradox, some companies invest heavily to increase their service offerings, but only achieve higher costs with no return on their investment.
There are two main types of services that businesses can offer to their customers. These services can be built around the product or the customer. Both of these types of services require different relationships between the service provider and the customer. The titles of these classification models were originally mentioned in a report by Cambridge Service Alliance.
Read on to discover ways to servitize your business.
When building a servitization element around your business, 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’ve purchased. Still, there are so many other options.
In the medical industry, GE’s healthcare division offers the services of installing their large medical devices throughout a whole hospital, and offering post-installation performance maintenance and monitoring.
Once you’ve sold a product to a customer, you may be able to offer these additional services:
Updates and upgrades
Inspection and Diagnosis
Servitization looks a lot like subscription services such as Netflix, in this model. 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 manufacturing 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 predict failures and allows the company to create better maintenance schedules.
For businesses that want to look outside of product or use-oriented services, this model focuses more on results. With results-oriented services, businesses pay-per-use for services instead of paying for the whole product. For example, Coresystems cloud services requires customers to only pay 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.