The Rise of Services and the Fall of Products, Marketing & Advertising News, ET BrandEquity

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Representative image (Source: iStock)

By Rajendra Prasad Sharma

There are no pure products or services in the world. Just as intangible services become tangible or productized, products also become servitized. In the “differentiate or die” marketing war, services have always enjoyed a clear advantage. Even pure products like Tata salt tried to add consultation services i.e. measuring blood pressure and recommending low sodium salt to hypertensive patients. Skincare companies already offer consultation services based on skin and hair types, for example, normal, oily or dry.

The trend is helping to create opportunities for branded service experiences for consumers and for brands to switch to services. Lakme and L’oreal Salons are examples of products where product brands eventually became services.

We are seeing business model innovations such as Accessories as a Service (AaaS), Buildings as a Service, Apparel and Accessories as a Service (CAaaS), Car as a Service (CaaS) , Device as a Service (DaaS), or Gadgets as a Service. Service (GaaS), Furniture as a Service, Agriculture as a Service (FaaS), Fuel as a Service, Software as a Service (SaaS), Cooling and Heating as a Service, and Everything as a Service. Lenovo and other device manufacturers offer devices as a service (DaaS) or gadgets as a service (GaaS). They manage the device lifecycle, freeing up customers for their core tasks.

Servitization tendencies

The following practices by Indian companies illustrate the rise of servitization in India. Samsung India offers a “Try Now, Buy Later” rental program for their devices. Startups like SabRentKaro and IndianRenters.com are one-stop solutions for full range of 3G -5G Android/ Apple/ Windows mobile phone rentals across India. Chartered app is a great example of renting bikes on its app, making buying bikes redundant in the catchment area (New Town smart city, Kolkata).

Hungry Brain offers parenting programs for the early brain development of newborns, infants and toddlers rather than just flashcards for sensory stimulation and life skills development for young babies. They allow parents to seed the brains of infants in the first three years before they are handed over to the formal school system. Their subscription model ensures that services offer more value than products.

Eureka Forbes served the B2C and B2B segments. Annual service contracts generate a better and higher revenue stream for the company than the sales of its products, and that too with a superior customer experience. Since 2006, the company has been monetizing services to Indian Railways in cleaning and maintenance of hygiene in stations and train carriages.

In India, the problem of urban filth has become a national emergency. With a mission to provide cleanliness and hygiene in homes, offices and places of public importance, Eureka Forbes, India’s leading consumer sustainability brand in the health and hygiene segment, joined the “Swachh Bharat Abhiyan” in launching a mega nationwide cleanliness campaign across public spaces such as train platforms and police stations. Contracts for housekeeping services in institutions and factories are also growing.

Equipment manufacturers are leveraging five key technology trends to enable servitization in the future: predictive analytics to predict specific failure modes, remote communications to resolve issues remotely, power monitoring to create customer-specific service offerings, to transmit information to employees/customers via mobile platforms to remotely access enterprise software for maintenance support. Servitization guarantees the availability of assets with a service level agreement.

Not only is Rolls Royce’s power-to-hour program, but any equipment manufacturer that doesn’t view their business as a service business is at risk. Manuservice, i.e. the increasing dependence of industrial manufacturing on services, i.e. the servitization of manufacturing, is the trend.

Asian home paint solutions are another success story in transitioning from selling paints to a hassle-free home painting experience for time-pressed customers. Asian Paints Home solutions offer healing marketing since identifying a painter and getting the job done within a given budget and time remains a nightmare. A salesperson meets the prospect for a consultation on the choice of shade. The relationship managers ensure the delivery of the equipment and the periodic monitoring of the site.

Charges are per square foot. Authorized and trained applicators do the job. They prepare the surface for painting. The value proposition includes time-limited completion and a service guarantee in the event of a problem. AP Beautiful Homes is all about home improvement services promoting a toll-free number where 90% of calls convert into sales. Several companies have taken the lead in this direction.

Ambuja Cement offers technical services, one-stop solutions, ready-mixed concrete (RMC), construction services, architectural services, mason training and financial services. BaaS (Building as a Service) can reduce time and resource constraints by offloading everything to a knowledgeable third party. This includes responsibility for design, construction, energy efficiency management, ongoing construction operations and even financing.

CERA Sanitaire does not want to remain confined to sanitary products but aspires to be the leader in bathroom improvement services. Once the client has approved the 3D visualization, the renovation, including the complete redesign of the bathrooms, including the lighting and the fixing of the geysers, is carried out qualitatively within a week.

Tire manufacturers like Michelin and Ceat sell miles, i.e. tires as a service (TaaS). Michelin Fleet Solutions (MFS) designs, develops and markets interesting services for commercial vehicles (trucks and buses) by taking advantage of the Internet of Things (IoT). The service has become smart with sensors inside vehicles to collect data on fuel consumption, tire pressure, temperature, speed and location. For best performance and durability, tires require regular monitoring, inflation, mounting/demounting and mounting/demounting for regrooving, retreading, switching and switching back to front and vice versa .

Michelin has developed an ecosystem called EFFIFUEL. A cloud solution processes data analysis for Michelin experts to make recommendations and train the customer in eco-driving techniques. The recipe for success is simple: create value through servitization, communicate the value of service, for example, better-maintained tires that last longer, align internal incentives for the sales team to sell miles, and manage Cost complexity due to servitization.

Changing consumer preferences

India is a unique example of an economy going beyond the traditional model of economic evolution – from the primary sector (agriculture) to the tertiary sector (services). India is making a nice transition to a service-oriented economy, even before the manufacturing sector. Additionally, subscription-based payment models help overcome budget constraints. Even small businesses can adopt robust, modern services by spreading the total cost of ownership over time.

Millennials and Gen Z value experiences over ownership. They want to feel the adrenaline rush but without ties. Uberization or the sharing economy helps them.

Transient Consumers (Transumers) desire only fractional ownership, making their status-seeking needs subordinate to larger goals like sustainability. With the growing culture of celebrity fashion and accessory auctions, they find that permanent product ownership is fraught with hassle. They think along the lines of ‘why buy when you can rent.’ There is also a segment that rents due to the affordability of fashion during the pandemic-induced economic downturn.

Some critical enablers of servitization trends include consumer preference for experience over ownership and hassle-free services without any downtime. Customers buy (rent) products for specific jobs they perform for them. Customers can switch without connection or commitment if the brand promise is not delivered. Occasional use products, such as generators, construction and agricultural equipment, are not needed every day of the year.

Durability is also an important aspect. Designs based on take, make and waste are not sustainable. Servitization offers an affordable solution with overall value. The win-win of servitization is to save businesses from ruinous price competition. For consumers, servitization makes services not only easy and accessible, but also fast and flexible.

The author is Professor of Marketing at Indian Institute of Foreign Trade, Delhi and Kolkata. The opinions expressed are personal.


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