[{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#BlogPosting","mainEntityOfPage":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/","headline":"Servitization model: How successful businesses do it","name":"Servitization model: How successful businesses do it","description":"How can manufacturers approach the servitization model? Here's how businesses expand their focus beyond products to services - and succeed.","datePublished":"2020-12-22","dateModified":"2024-11-20","author":{"@type":"Person","@id":"https:\/\/www.the-future-of-commerce.com\/contributor\/anna-irniger\/#Person","name":"Anna Irniger","url":"https:\/\/www.the-future-of-commerce.com\/contributor\/anna-irniger\/","identifier":374,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/79924a10254e53835b6f61f79ec115e5fdbec2c0c8b53254af7a60bad233adb3?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/79924a10254e53835b6f61f79ec115e5fdbec2c0c8b53254af7a60bad233adb3?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"The Future of Commerce","logo":{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/01\/logo-foc-schema-app-1.png","url":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/01\/logo-foc-schema-app-1.png","width":172,"height":60}},"image":{"@type":"ImageObject","@id":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/08\/CPG-revenue-growth-management-FTR-1.jpg","url":"https:\/\/www.the-future-of-commerce.com\/wp-content\/uploads\/2023\/08\/CPG-revenue-growth-management-FTR-1.jpg","height":375,"width":1200},"url":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/","about":[{"@type":"Thing","@id":"https:\/\/www.the-future-of-commerce.com\/service\/customer-service\/","name":"Customer Service","sameAs":["https:\/\/en.wikipedia.org\/wiki\/Customer_service","http:\/\/www.wikidata.org\/entity\/Q1060653"]},"Field Service",{"@type":"Thing","@id":"https:\/\/www.the-future-of-commerce.com\/service\/","name":"Service","sameAs":["https:\/\/en.wikipedia.org\/wiki\/Service","http:\/\/www.wikidata.org\/entity\/Q7406919"]},{"@type":"Thing","@id":"https:\/\/www.the-future-of-commerce.com\/service\/service-general\/","name":"Service","sameAs":["https:\/\/en.wikipedia.org\/wiki\/Service","http:\/\/www.wikidata.org\/entity\/Q7406919"]}],"wordCount":812,"keywords":["Business Innovation","Customer Experience | CX","Customer Service"],"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’s 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’t come back for 30 years to buy a new one.So what’s 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 servicesWhen 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:DeliveryProduct installationSpare partsUpdates and upgradesRefurbishing, cleaningRecyclingInspection and diagnosisExtended warrantyMaintenance contractsUse-oriented services: Taking a cue from NetflixThis 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 useFor 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 servicesAs mentioned, customer-oriented services are an attempt by companies to distinguish themselves in a market saturated with similar products and savvy consumers.It’s 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.In order for servitization in manufacturing to be successful, 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’re here for you and your devices beyond the purchase date. An approach like this will win customers for life.  From entrepreneurs to enterprise, industries are soaring in the cloud.Grow with the brand that 96% of reviewers would BUY AGAIN."},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"2020","item":"https:\/\/www.the-future-of-commerce.com\/2020\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"12","item":"https:\/\/www.the-future-of-commerce.com\/2020\/\/12\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"22","item":"https:\/\/www.the-future-of-commerce.com\/2020\/\/12\/\/22\/#breadcrumbitem"},{"@type":"ListItem","position":4,"name":"Servitization model: How successful businesses do it","item":"https:\/\/www.the-future-of-commerce.com\/2020\/12\/22\/servitization-model-this-is-how-successful-businesses-do-it\/#breadcrumbitem"}]}]