The last two decades of technological revolutions have changed our relation to possessions. Welcome to the golden age of the ‘servicization’ of products where everything and anything can be marketed as a service.
Young cheerful woman taking bicycle out from bicycle rack on the street with smartphone in her hand
Renting rather than owning: A Win-Win Solution?
There used to be a time when you could just buy a piece of software for your device and use it until your hardware would let you down. Software as a service (SaaS)– and the associated monthly or yearly subscription fee – is now the norm. Over the last decade, consumers and companies have become used to subscribing to products and services – rather than more traditional forms of consumption via ownership.
The advantage of this business model for companies is obvious: it provides a stable and recurring source of income for companies to regularly update their products and develop new ones. In fact, it is so useful that it has spread beyond immaterial goods and has been used to market goods such as clothes, furniture, or even umbrellas! The rental way of life also has advantages for consumers, who can try more expensive products before deciding to invest in one, or simply enjoy a commitment-free lifestyle.
The era of the servicisation of products also comes at a time when both consumer needs and companies’ business strategies continue to evolve in the digital age. It reflects a shift towards a ‘jobs to be done’ approach and the fact that companies are starting to understand that consumers use products as a mean to reach and accomplish specific goals.
A Changing Consumer Mindset
Consumer mindsets are changing, especially among younger generations, who see rentals as a more environmentally conscious way of consuming and creating less waste. Intense debates around planned obsolescence have led to consumer boycotts. Governments around the world are trying to nudge companies into offering more sustainable products and consumers are choosing products that are easier to repair. Renting rather than owning can be part of the solution.
The rise of the servicisation of products can also be traced to the emergence of digital nomads and modern urban lifestyles. Younger generations want and expect things faster, as fast as 10mn grocery deliveries. It reflects the quest for a simpler, ‘on demand’ lifestyle, where one can access anything instantly and get rid of material possessions easily if and when need be.
London, UK - July 31, 2018: The buttons of the music streaming app Spotify, surrounded by Podcasts, ... [+]
The Psychology of Not Owning
Scholars looking at this topic have been referring to this phenomenon as access-based consumption. Consumers have come to prefer, for certain product categories, access over ownership. It is typically the case for music subscription services or car sharing platforms. With access-based consumption, consumers favour the materiality and functionality of a product and accept a certain degree of constraints – from favourite artists being pulled out of a streaming platform to having no bike available at your favourite nearby docking station.
While not owning certain products - such as music - now sounds obvious, the psychology of ownership suggests that it may be difficult to apply it to certain product categories, given that possessions carry a special significance to consumers.
Consumer psychologists have long argued that possessions form an inherent part of our identity. We do not just consume to use products and derive tangible benefits and value from them, but we consume to share our identity with our friends, families, or colleagues. Brands, in turn, also form part of our identity – see the ‘cult-like’ followership that some brands such as Tesla have gathered. Car brands are especially important as they are used by consumers to signal status.
The Perils of an ‘Everything as a Service’ Future
Successfully disconnecting the value of product usage from its ownership is what allows consumers, whether in business-to-business or business-to-customer markets, to unlock the sole value of a product without ownership. It can however take time to convince and educate consumers to such business models. And issues of reverse logistics involved with certain product categories make this business model more perilous in certain industries, as illustrated by the difficulties of luxury fashion rental company Rent The Runaway.
Finally, companies may be more susceptible to consumers reassessing their priorities and cutting costs, especially when experiencing financial hardship or in economic downturns. The issue comes down to the fact that it is harder to get rid of a product you own than stopping a subscription, which can often be done in a few clicks. Alternatives to full rental options are already emerging, such as offering subscription-augmented products: products which can be bought, and customised with subscription to softwares, a path that the automobile industry has been exploring.
