Customers increasingly ask for convenience and flexibility. Why? Mainly because they are experiencing it in their own private lives while using services like Airbnb, Spotify, Netflix, etc., and enjoying the freedom of these models. Naturally, they look for the same seamless experiences in their business interactions. But what does it mean for businesses to be flexible, in a manner that also maximizes convenience for the end customer? How can they accommodate this need for flexibility? And, how can sustained flexibility be found in a market that’s rapidly, and continuously changing? The answer, more often than not, rests in the As-A-Service model.
Flexibility in the corporate world
Flexibility in general means being able to move fast and respond to changing stimuli without compromising on structural integrity – i.e. maintaining the same quality in product/service delivery. It helps businesses avoid market volatility and manage growth predictably. At the same time, it attempts to ensure that you maximize convenience for your customers by being present at the very moment they need you. This is often the differentiation between quick-burning and sustainable businesses. It is also where the ‘As-a-service’ business model truly shines. By removing the costs associated with a full purchase (and usually offering subscriptions instead), it makes product/capability ownership more economical while guaranteeing consistent support and maintenance. On the other hand, vendors/sellers get a steady stream of revenue periodically, which makes weathering market volatility a lot easier.
Strategies to increase sales by offering pricing and payment flexibility
While there are multiple benefits to building an As-a-service business (e.g., a larger Total Addressable Market), almost all of them stem from offering transactional flexibility to customers.
Non-ownership means your customers are free to pay monthly or quarterly rather than a huge upfront amount or defer bills into the next fiscal year. Many are also interested in switching to a consumption model (pay-per-use) and being free to opt-in/opt-out. Hybrid revenue models (subscriptions + usage-based pricing) are also increasingly in demand for companies looking to do a slow move into flexibility, supporting multiple payment gateways to avoid platform risks and the ability for pricing/packaging/billing experimentation.
As-a-service businesses offer this and much more, to ensure solid and stable customer experiences without being a heavy drain on their wallets. Implementing pricing flexibility requires careful considerations such as asset specificities, audit usage behavior, customer segmentation, cost structure, competitive landscape, and demand-supply dynamics.
Since ‘As-a-service’ businesses essentially rent out their product/capability, they are also more hands-on and privy to first-party data from customer usage. This makes collecting critical backend information to improve customer experience, and hence determining/implementing pricing flexibility easier. As-a-service businesses are, therefore, better poised to increase their profitability while providing customers with the best value for their money.
Then again, the ‘point of sale’ is the most sensitive part of a transaction between a business and a customer. With the rise of alternative payment methods, customers are also expecting more choice and convenience in transactions (e.g., paying in the native market currency securely, not being pressured to pay in the vendor’s preferred method, etc.).
The ‘As-a-service’ ecosystem is prone to, and hence aware of, the latest in the payments and transactions ecosystem. This is why payments-as-a-service (PaaS), subscription management and billing have evolved into significant markets, enabling ‘as-a-service’ vendors to better regulate and optimize their point-of-sale and recurring transactions.
With modern technology at hand, ‘As-a-service’ businesses are well poised to offer the flexibility of modern revenue and pricing models like usage-based or subscriptions.
Top features to consider for your As-a-service solution
There are many articles on subscription-based solutions, but not much is said about how to concretely deploy such models. Putting a monthly fee to your offering is far from being enough! Many focus areas of the businesses are going to be impacted when deploying As-a-service models.
The first one is your “strategy” as a whole. How to integrate As-a-service into your company’s vision? How to define the right go-to-market strategy? How to set the ambition and which KPIs to track to assess what good looks like? Think carefully about these strategic aspects when deploying such models, as they will guide you through your transformation.
When it comes to sales, remember that the pitch for As-a-service is different and involves different decision-makers (usually finance, IT, and CSR heads are the top decision-makers for subscription-based models). It will also become increasingly important to pick and train some sales champions and define a reward scheme accordingly to incentivize them to sell your As-a-service solutions.
Of course, marketing will also be impacted by this change of model. If you’re transitioning an existing business to As-a-service, marketing needs to support your GTM by clearly communicating your new value proposition. This also requires new customer-facing documentation to be designed from scratch. Additional considerations include – deciding if you need to instate a separately branded entity for your As-a-service offer.
The operations department will have to adapt, too, by changing its tools, software, and processes to accommodate recurring payments.
Driving growth at scale in a competitive market requires funds. When you define your ‘As-a-service’ and the associated revenue model, it will also define the leading metrics that make their way into your pitch deck. Yet, often more importantly, you will also need to consider how you’re building relationships with the right partners who know the XaaS ecosystem well, and how to approach and engage with such sources. These will be of tremendous importance when setting up and scaling your own As-A-Service solution.
From a finance perspective, your team will need to understand how to recognize margin & revenue in this new model.
As-A-Service models require a wide ecosystem to be scalable. So, it will be essential to onboard your ecosystem properly, negotiate supplier contracts and SLAs accordingly and ensure data reporting.
And, of course, As-A-Service being one of the roads to the circular economy, integrating it into your CSR strategy will become one of your top priorities.
As-A-Service models are one way to achieve flexibility in the corporate world. Deploying such models increases shareholder value by generating recurring revenue and boosting profit. Customers love the flexibility of subscriptions, leading to increased loyalty & retention. On top of this, switching to recurring revenue models differentiates your offerings as you appeal to eco-conscious customers. And of course, as you remain the owner of the assets you rent to your customers, you have control over their lifecycle and can increase their lifespan, so you become more circular.
However, the switch to such models is complex and requires strong expertise. You can do it yourself or via experts, such as Black Winch.