From Owning to Subscribing: A New Wave for Product Uptime

When it comes to the shift from owning to subscribing, both challenges and opportunities exist for manufacturers and rental companies alike. As we progress into the new year, organizations need to transform and optimize their after-sales service businesses to become more customer-centric and product uptime focused in 2018.

That’s why, in our newest eBook, “2018 After-sales Service Predictions: Strategies for Empowering Manufacturers to Deliver Game-Changing Value,” we asked Erik Lindholm, Head of Product Strategy at Syncron, about the rise of usership over ownership, and how product uptime will impact this new trend.

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“When it comes to after-sales service as a whole, we’re seeing another shift toward product uptime,” says Lindholm, “but, in this case, the shift is on the consumer side. The industry is moving away from buying and owning, to a more subscription-based model, which comes on the heels of the ever-evolving “share economy”. This change, where people are leaning more on rentals and services for things like homes, cars, equipment, and more, is traditionally used for services employed by car fleets and power-by-the-hour heavy machinery.”

For the consumer, it’s a win-win: there’s little risk associated with renting, replacement is less complicated, maintenance costs are lower, and there are fewer transportation and servicing requirements. As for manufacturers – organizations that don’t adopt sharing and rental models could get left in 2017. And, those that do so without improving the efficiency of their after-sales service functions will get left behind, as well.

“This new shift not only affects the purchasing use of certain products and services, but the purchases of service parts entirely,” says Lindholm. “While many think ecommerce options like Amazon are taking over the service parts market, that may not be the case with this new uptime model.”

Take the durable goods market, for example: “many parts are still captive to the original equipment manufacturer (OEM), and may not necessarily be available to the end-customer just yet,” admits Lindholm. “And, as the world evolves toward a subscription-based model, end-customers no longer need to maintain their own equipment, but rather rely on the performance of rented durable goods, paying for uptime and parts as part of the overall subscription fee.”

But it’s not just consumer products that are experiencing this shift – manufacturers and equipment rental companies have already been preparing to meet these new demands, as well. Take his earlier “Power by the Hour,” example: This is an agreement that allows a company to lease or rent equipment for a certain number of in-use hours, buying the functionality rather than the actual piece of equipment, meaning rental companies and manufacturers must maximize equipment uptime to also maximize revenue.

According to Grand View Research, the global construction equipment rental market is expected to reach 84.6 billion USD by 2022 due to increasing construction activities across the globe, as well as rising government investment in emerging economies. And based on a recent survey by Baird Research, average rental rates were up 2.1 percent year over year in the fourth quarter of last year, similar to the previous two quarters. Survey respondents expect rates to improve 3.5 percent in 2018 – the strongest rental rates since 2014.

“Either way, whether it’s a monthly subscription or a pay-as-you-go system, these performance-based business models are only going to continue if they keep uptime at the center of their strategies,” says Lindholm. “Maintenance and service will be the key to keeping gears turning, and OEMs are going to see why the investment in things like IoT and predictive analytics in after-sales service are crucial in the years to come.”

So, as we ride the wave of this subscription-based usership, the most successful organizations will be the ones who prioritize product uptime in their after-sales service models. This trend has the potential to be a significant revenue driver for manufacturers, but companies must invest in the right technologies and business practices to make it to the end of the year on top.

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Want more insight into 2018? Download our brand new ebook today to hear more from some of the industry’s thought leaders on the major trends manufacturers will see in 2018 and beyond, and how to implement new business processes and technologies to win.