Product as a service
What is Product as a Service?
Product as a Service (PaaS) is a business model in which customers pay for the use or outcome of a product rather than owning it outright. Instead of making a one-off purchase, customers subscribe to a service that gives them ongoing access to a product and its benefits, typically through a recurring payment model. In this setup, the supplier retains ownership of the product and is responsible for its maintenance, performance, and longevity. Physical goods are often paired with digital tools such as usage tracking software, remote diagnostics, or predictive maintenance systems, allowing providers to manage performance in real time and deliver a more seamless service experience. This model isn’t entirely new, for example, Rolls-Royce introduced it in the 1960s through their “Power by the Hour” model, where airlines were charged per hour of engine usage rather than purchasing the engine itself.
Why Does It Matter?
By focusing on service and outcomes rather than ownership, the PaaS model shifts the emphasis from selling products to building long-term customer relationships. For businesses, it provides a steady and predictable revenue stream, improving cash flow and allowing for more accurate financial forecasting.Customers benefit from a lower upfront cost, flexible access, and the reassurance that the product will be maintained and supported throughout its use. Meanwhile, businesses can use data collected through the service to deliver more personalised experiences, improve product performance, and increase customer satisfaction over time.
PaaS is particularly relevant for sustainability-focused companies, as it encourages longevity, circularity, and the reusability of products. As more consumers shift towards experience- and outcome-based value, this model is gaining popularity across industries ranging from manufacturing and mobility to home appliances and IT.
