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Occasional ramblings: Work, leisure, heart and lungs.

1 April 2015

Posted by Mark 4 years ago

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Leasing products: panacea, palliative or placebo?

Leasing products: panacea, palliative or placebo?

I'm old. I've been talking about the coming product-service shift for 25 years. I'm sick and tired of it. I'm bored of my own voice. Often held up as the panacea of our times of overconsumption; this era of crass disposability: does leasing really have the ability to change the way we consume? It's complex. That's because our relationship with stuff is complex. It's bound up with our self-identity, our self worth, and the way we compare ourselves to others. The key defining question at Sharnford C of E junior school was "do you rent or own your TV". This was a social filter. I was 7 when asked this. That's scary, but it's maybe worse now. Kids are hyper aware of the value of labels and brand. This is a world we have created. But there are some interesting developments. Research from the Doughty Centre at Cranfield suggests that Millenials are less wedded to the ownership of things and are happy with leasing and borrowing. Now, this opens up the opportunity for businesses to re-invent business models, to re-design services and re-imagine how they engage with customers. There are many business benefits of changing how services and products are charged for. I worked on a project funded by Innovate to explore a number of business models that would enable circular economy thinking and practise. The beauty of this work lay in the fact that there was not a one-size-fits-all solution. Each business, each product, each customer group, required different approaches. For some businesses a payment per unit output worked. This works for companies such as Kyocera who sell printing and copying and this can be charged for on a per-sheet basis. For others a straight leasing/rental model works. The work we delivered with Samsung has ultimately lead to experimentation with white-goods leasing via Housing Associations. For others neither of these approaches cuts the mustard. My work with RS Components identified that leasing was not an options. Customers wanted to buy the product (a high-bay lighting unit in this case). Furthermore the RS processes didn't embrace leasing, they would have needed to involve a finance house too. So the solution here was to offer a buy-back service.  When the units are no-longer required by the customer they are bought back, refurbished and sold again. Sales leapt by over 6,000% and RS won a couple of awards. In my other work with denim pioneers, Hiut, the approach has been to build a pair of jeans with extreme longevity. They last for years. Better than that, they have free repairs - for life. They are one of the most expensive pairs of jeans you'll buy; they are probably the cheapest pair of jeans you'll own.

So, back to the opening question: Is leasing a panacea? Nope. But new business models do offer an opportunity to change how companies engage with customers. They offer the change of increasing both income and product quality. Of making customers happier and closing loops. Of offering better products, better service and lower impact.  This is radical stuff. As brand owners have more direct relationships with customers through enhanced service models it fundamentally challenges the role of retailers. What are they for? That's another blog, for another day.

 

 

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