Pairing Sustainability with Profits: have you considered Product as a Service (PaaS)?
21st December, 2023
How can businesses reduce their own environmental impact without putting themselves at a competitive disadvantage, particularly when it is consumption and stock turnover on which many business models are predicated?
What is Product as a Service?
This approach provides customers with temporary access to products through rental or subscription services, as opposed to conventional sales. PaaS is gaining momentum for its eco-friendly and cost-efficient qualities, with more industries recognizing its potential to benefit both companies and customers.
Frog Bikes serves as an excellent illustration of a business successfully implementing the PaaS model. They have partnered with the Bike Club to enable families to lease their range of lightweight, sustainably designed children’s bikes, replacing them as children grow. Frog Bikes has leveraged this arrangement to gain valuable product insights, identifying wear-and-tear patterns in leased bikes and using this data to enhance their bike designs.
Notably, the PaaS model aligns seamlessly with Frog Bike’s sustainability principles. Used bikes are refurbished, worn-out components are replaced, and they are leased out again. This circular approach generates continuous revenue, extends product lifecycles, and curbs waste. Furthermore, many of Frog’s customers have found leasing and upgrading bikes as their children grow to be cost-effective, ensuring repeat business.
Founder and CEO Shelley Lawson commented, ““Frog Bikes’ mission is to get more kids cycling, and for a young rider, having a bike that fits you well as you’re growing is so important – for confidence and comfort. A subscription model appeals to lots of families who find it hassle-free and reassuring, knowing they will always have the right size bike – and we love that it means our bikes pass through many families over the years. Our bikes are built to last and we’ve designed them to be easy to repair should anything wear out, so they are ideally suited to a leasing model. We have attracted a new customer base through the Bike Club model, which is great for our business too.”
The Benefits of Product as a Service
Environmentally-Friendly
PaaS extends the lifespan of products, shifting a company’s focus towards optimising limited resources. This approach boosts resource productivity through refurbishment and recycling, substantially reducing raw material and processing costs. By reducing the environmental impact and costs associated with traditional supply chains, PaaS can contribute significantly to the journey towards achieving net-zero goals.
Increased Profitability and Sales
PaaS offers profits from both products and services. Services generally yield higher profit margins than products alone. By combining the two, your company can achieve a higher return on investment.
Additionally, PaaS provides several customer benefits, including reduced upfront payments, access to the latest products, and flexible subscription plans that allow customers to upgrade, downgrade, or terminate subscriptions as needed. This all helps to foster customer loyalty and therefore grow lifetime customer value.
Knowledge Enhancement
Businesses adopting the PaaS model can gather invaluable data about their products. This data can be employed to identify potential design flaws, make product improvements, and develop maintenance programs. All of these efforts further extend product lifecycles and enhance customer satisfaction.
How we can assist you
If you decide to explore the world of PaaS, we can help you to chart that journey. Our commercial lawyers have wide ranging experience addressing the legal aspects of transitioning to alternate business models, including drafting business-to-consumer terms of business for subscription agreements.
For more information on this topic, or any other commercial matters, please don’t hesitate to get in touch with Damien Charlton.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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