Product as A Service Business Model – How Does It Work?

With the recent expansion of the internet over the past few years, it can be seen that there have been numerous changes that have happened in the overall industrial setting.

As a matter of fact, it can be seen that there is an increasing need for companies to ensure that they are well-aware of their business surroundings, as well as the importance of retaining their competitive edge in the increasingly complex business environment. This calls for them to ensure that they are able to actively take part in shifting their core offerings in order to market them in a much attractive manner to their consumers.

The main premise here is not only to sell. In fact, it covers grounds to ensure that the company can service substantial value to their customers so that the company can perform well on metrics like customer acquisition and brand loyalty.

Product as a Service Business Model tends to be one such example, which is an offspring of business innovation, targeted towards creating better value for the customers, to say the least.

What is Product as a Service Model?

The product as a Service Model mainly works on ensuring that the clientele of the company can use and purchase the product as a service, as compared to a tangible product.

With IoT, Artificial Intelligence, and cloud computing, new horizons have been unleashed to enable companies to sell their product ‘as a service.

The main idea behind this particular business model is to offer the clients to use a product without exclusively buying it for their use. In other words, the manufacturer tends to lease out the asset so that the customer (or the user) can use it by paying a subscription fee or a rental against the utilization.

The manufacturer is also solely responsible for ensuring that he incorporates all mechanical or technical issues that may arise during the product itself.

How does Product as a Service Model work?

As mentioned earlier, it can be seen that the Product as a Service Business Model is referred to as a combination of products that are mixed and sold together with services.

In this case, the product is mainly joined by features or service contracts to attract customers to buy the product. This has been a continuous strategy that different companies have adopted across the globe.

They want to ensure that the consumers get an added benefit when they purchase the product, and they do not need to purchase that ‘extra’ element of service separately. Clubbing the two and offering it as a service is one such example.

The main backbone of this model can be defined as business models that are heavily reliant on customer service as part and parcel of their daily routine.

Being slightly different from traditional rental businesses, product as a service business mainly relies on the producer being responsible for product up-gradation and regular maintenance.

Examples of Product as a Service Model

Numerous different businesses now utilize the product as a service model to acquire different customers and ensure that they can make the most out of the existing state of affairs. In this regard, it is essential to note that this type of business model is often suited to products with a very high production cost or capital expenditure.

For example, a robot might be designed to carry out a certain task at a certain location. For a company that needs to use this robot for a smaller chunk of their overall work, it might not be practical to procure one for themselves.

Hence, in this case, they might rely on the product as a service to keep their costs low and get the required benefits from the product at a certain subscription fee. Similarly, Xerox and HP are some other practical examples of companies that use Product as a Service as their subsiding business model.


With the massive spread of the internet and exponential growth in technological services, Product as a Service can safely be deemed the next big thing.

This is because the trajectory of companies using this and relying on this has considerably increased over the past few years and is further expected to see a sharp increase because of the change in business dynamic compared to the past few years.