servicizing

Servicizing is a business strategy where companies shift from selling physical products to selling the services that those products provide. Instead of purchasing a piece of equipment, a customer pays for the outcome or function that the equipment delivers. For example, instead of buying tires, a customer might pay for the kilometers driven or the uptime of the vehicle. This model often involves a long-term contract between the provider and the customer.

The core idea behind servicizing is that the product manufacturer or service provider retains ownership of the physical product and is responsible for its maintenance, repair, and eventual disposal. This incentivizes them to design and build more durable, efficient, and easily repairable products, as their own costs are directly tied to the product's performance and lifespan. For the customer, servicizing can reduce upfront capital expenditure, provide predictable operating costs, and ensure access to the latest technology without the burden of ownership.

Servicizing can be seen as an evolution of product-based business models towards a more service-oriented economy. It aligns the interests of the seller and buyer by focusing on shared outcomes and performance. This approach is increasingly adopted across various industries, including manufacturing, transportation, and technology, as companies seek to build stronger customer relationships and create new revenue streams.