Apple and Tesla both have deeply integrated offerings between software & hardware. Integration not only creates a strong position in the market, it allows for a superior customer experience. Only this level of control allows for consistent and predictable outcomes for people that use your products. Now they are preparing for the next step, a fully service based proposition. Let's see how they do it, and how you can start too, today.
Apple's most recent keynote was fully about new services they are rolling out these year. Most of them subscription based. Making for a lasting and recurring relationship with their customers.
Keynote September, 2018. Apple shares the average iPhone now lasts three owners, compared to one for the very first iPhone they introduced. The number matters, as it will allow Apple to achieve their sustainability goals. For a hardware company, this doesn't sound right. Why would you try to make a product last longer when your company growth depends directly on selling new products?
To get to an answer, first we have to dive into why the Apple integrated customer experience matters.
The power of the integrated customer experience
I grew up a Microsoft Windows user. Partially because of my background in IT, partially because it was the obvious choice when I was young. Apple never appealed to me as they didn't have an extensive ecosystem.
That all changed in 2006 when I bought my first MacBook. I discovered how important the integration between hardware and software is. With my background, I didn't view this as something I'd want, since it limits your freedom as a customer.
Fast forward, I've grown to appreciate it and actually prefer it. For Apple to deliver on their 'it just works' mantra and approach, it's required to limit variables in the customer experience going wrong. It requires them to exert a level of control.
Owning the experience = massive economic opportunity
Over the past years, Apple has steadily been spotting gaps in the customer experience and introduced services to close them. These services are now netting huge amounts of money for Apple. In other words, Apple is monetising the fact that they own the customer relationship.
For every phone sold, Apple makes predictable amounts of service revenues. As a result it will be a small step for Apple to start offering their (physical) products as a service. Instead of paying for your phone to join the ecosystem, you pay Apple to use your iPhone, MacBook or iPad as part of it.
We are witnessing one of the biggest hardware companies fully shifting towards services.
Start with services that provide people with better outcomes of your products
Looking at your product through a services lens is simple. Start with the realisation that people use your product to create a certain outcome. 99% don't buy a car because they just want a car, it's a means to take them from A to B.
So let's take a look at Tesla. Even though most people refer to them as a car company, they do much more. And I'm not referring to their other products like solar panels and home batteries. When you buy a Tesla car, it comes with a set of services that create a bit part of the value of the car. Easily the biggest and most important one is the Tesla Supercharger network.
Tesla owners have consistently praised this as one of the reasons they chose a Tesla over, let's say, a BMW iSeries... Early on Tesla looked past the fact that they wanted to produce awesome cars, and designed a plan that would drive adoption of the cars and would make them successful.
Elon Musk often mentioned that buying a Tesla is like buying unlimited transportation. The free charging for his clients at the Supercharger network made it that you didn't just buy a car, you wouldn't have to pay more to actually drive it.
Apple does the same with their services. They have consistently introduced services that increase the value of buying their hardware. Online back-ups, online photos, family sharing, a huge ecosystem of applications. The list goes on.
The strategies are similar, focus on developing services that allow your customers to get more value from your product. The similarities of Apple and Tesla go on: direct sales channels to customers, owning the support & service provided with the products etc.
But where to start? These are big examples, as with everything in life, Apple and Tesla started small with all of their services they offer. And so should you.
Start small, today: compliment products with services
Apple and Tesla might seem like the obvious examples to give. Both are successful companies with vast resources and market penetration. But all of their services started small. Tesla started with a few Superchargers and worked hard to scale this offer to make it more relevant to customers around the world.
Before thinking of introducing services at scale, start small. Pilot with few customers and see how they have a better experience and outcome from your product. Scale what works, kill what doesn't.
Ideas for services are found by talking to your customers. What additional things are they doing with your product that you can offer in the form of a service?
These services don't have to be complicated, here are some ideas:
- Monthly batch of your product: flowers, wine, spices etc.
- Renewable on top of your product: new brusheads for your toothbrush, shaving heads for your shaver, etc.
- Early access in retail: first access to newly dropped sneakers, first selection of vintage clothes in your shop, etc.
See! It doesn't have to be complicated. It's easy to find yourself looking up to these big companies, but not realising how you can already start today. Don't overthink it, but look for new ways of helping your customers get more out of your product.
Adding a first service is a great way to start working towards product-as-a-service or subscriptions in your company. We have helped multiple companies of different sizes introduce services, products-as-a-service and subscriptions. Get in touch if you want to learn more!