Servitization refers to the trend away from a single sale, towards using products to sell additional services. These can be service and maintenance contracts, everything as a service (Xaas), or “outcome as a service.”
This is a common trend in the manufacturing industry, where manufacturers move from simply building and selling a product. They start adding additional services and products and may sell direct to consumers. In this approach manufacturers get closer to customers, provide more value to them, and retain them by providing different levels of service differentiation.
There are four levels of servitization within manufacturing:
- Distinct products and services: This is the basics of manufacturing businesses in which products and equipment are built and then sold to customers. There is very limited customer involvement once products are sold, and also limited revenue.
- Bundles of products: Similar to the above, but the products are more personalised.
- Aftersales and subscription servicing, repairs, and condition monitoring: In this level, the maintenance of a product provides an ongoing source of revenue for manufacturers.
- Advanced services: Taking aftersales to the next level, advanced services are more relationship focused and customer-centric than just selling and maintaining a product. In many cases, advanced services are delivered on a subscription model in which the consumer pays for the outcome.
An outcome-based business model is a type of XaaS in which customers are charged for services based on the amount or volume of usage of a service. This model requires that you collect and monitor, and bill, against the amount the service is used.