_AAS fill in the blank… ok so there may be a shortage of acronyms left but why aren’t more businesses using this beneficial billing model?
So, it seems Nike is getting in on the ‘As A Service’ act with its Nike Adventure Club trainers for kids program. This begs the question, are there any products or services that cannot be sold through an ‘As A Service’ billing model?
What is ‘As A Service’
In simple terms, it’s a change of product ownership and the way in which product use is paid for. With an ‘As A Service’ model the customer never actually owns the product and pays at a frequency for continued use rather than a one-time payment.
It’s a subscription service, which while you’re paying you to have access to when you stop paying your access ceases. Born out of the digital world Software As A Service, or SAAS, is fast becoming the billing model of choice, Microsoft is certainly one company moving away from the perpetual license with its Microsoft 365.
Can ‘As A Service’ Work with Any Product or Service?
As A Service is appearing in all sorts of businesses, products, and services, but can it be applied to every business?
Consider some of the following but make sure you keep your imagination open and read on the Caveats to get it right.
- Solicitor as a Service, paying a solicitor a fixed fee per month every month and for this, a person gets to call on their legal expertise at critical times of their life (house buying, wills, power of attorney, divorce)
- Food as a Service, could families pay a fixed monthly amount to accommodate their weekly shopping. Based on selecting a family size, appetite size, and quality (value, mid-range, and premium), enables the selection of your shopping within the ‘features’ you have selected.
- Predictive Maintenance As A Service — a factory owner pays a machine parts distributor a fixed amount each month for which they get access to any components needed to keep their machines running.
- Any Digital Services as a Service — if you’re a provider of development, marketing, coding, or IT services, all these can be wrapped into a subscription service where there is no initial outlay to build or implement, instead it is distributed across an agreed period of time.
OK, so just some random examples but by getting a few things right (and being brave and disruptive in your market) I believe it’s possible to apply AAS to any product or service.
Essential Points to getting As A Service Right
Continued Value, customer perception must be one of continued value and fairness, without both they will leave in droves. We must ensure the value is easy to see and a fair price is levied. Confidence in the product and its adoption by consumers is essential unless you’re going to tie customers into minimum period terms which will cover the cost of the product but be careful as this will only serve to cause brand animosity if the wrong customer signs up.
Simplicity — with complexity comes uncertainty as the saying goes, so keep it simple and be careful with the combination model, layering on lots of billing levels could cause customers to lose clarity on payment and they might get a big shock at the end of the month.
Ability to serve, logistics is everything, whether you have a physical or a digital product it will need to be seamlessly delivered, upgraded, exchanged, downgraded, and supported.
Ability to manage (and cancel!), customers must have the ability to easily access and manage their services and most importantly of all, easily cancel. Don’t make customers jump through hoops to cancel and make it very transparent how to do it upfront because customers will always check if you make it difficult to find this out it will only raise alarm bells for potential buyers.
Caveats, be sure to understand exactly what should and should not be included as part of the service. If your product or service has the potential to incur huge costs due to a particular scenario beyond your control (consider the solicitor scenario above), you must decide how these will be managed and communicate them to your customers at sign-up.
Cashflow, Ask yourself (or your accountant) if you can afford the cost to outlay the product to the customer and essentially not have the money required to pay for it until some time in the future.
The Mathematics, OK this is not school, but the numbers have to stack up. The amount invested must be returned for any business to survive. A clear understanding of the following is a good starting point:
- The TOTAL cost of your product or service
- The initial outlay to get setup
- Cash flow
- Minimum term required to return this cost
- How maintaining customer use for the minimum term will be achieved (contractually or through continued customer value)
- How the value of your product decays over time
- What other revenue channels will be opened through the approach (advertising, services, upgrades, data, insight, etc)
Back to the Question
So, Can the ‘As A Service’ Billing Model be applied to any Product? At the moment we cannot see why not but time will tell. Like it or not, the world is seemingly moving away from ownership towards subscriptions due to the value that business gains from it.
Can you think of any products or services that cannot be sold through this route?