Do you remember when you last bought a CD?
Streaming started 15 years ago and today the world of music consumption has only one king: Spotify. What about photography? It hasn’t been long since Kodak set the pace for this market, but today mobile phones are cameras and Instagram is their platform.
Although we now take it for granted, at the time these changes were somewhat traumatic in the business world. Companies often insisted on seeing these trends as a passing fad. They did not know how to see the advantages of making the leap to services, instead of continuing to think about the material product. And we have not reached the end of the road: the trend will continue to be driven by resource scarcity and price volatility.
And this is where service sales and the circular economy come together. The environmental depletion that our planet suffers from the overexploitation of raw materials and the measures that are being taken to protect it (Agenda 2030, Paris Agreement…), lead us to a horizon in which we must manufacture less in order to sell more. But what does this mean?
Produce less to sell more
The circular economy requires a “re-education” because it implies a change in the processes of production and consumption. The challenge is to find a way to continue growing, without using more and more resources, and to continue consuming without creating mountains of waste that our planet cannot cope with.
The only way to achieve these goals, and become companies and consumers committed to the environment, is to bet on a paradigm shift. It is necessary to stop thinking about manufacturing products that will be acquired and discarded and to extend their useful life by betting on the services associated with them.
The first necessary step is to eliminate the idea that growing within environmental limits is growing less. We are really talking about growing more responsibly and securing a place in the immediate future. And to create this new value chain, the business world must forget about production based on volume and transform it into the value of the services associated with a product.
A new type of company…
Managing the maintenance and continuous improvement of the products we market will be the business of the future. In order to do this, the industry must work on a durable product, susceptible to updates and which is really a service support for the customer. This will become a purchaser of updates and improvements, not of the material good itself.
Are we talking science fiction? Not at all, and proof of that is that many of the big brands are already moving in this direction. They know that this is the way to be competitive in a future where environmental requirements will be higher and customers more demanding in the fight against climate change.
For example, Seat is focused on developing services that respond to the problem of urban mobility. For this reason, in 2018 it created a division that works to offer the brand’s new service: car sharing. In a short period of time, car ownership can be a problem when moving around cities with millions of inhabitants.
For its part, the giant Michelin is also looking for a niche in the truck services market and is offering tyre hire. Users pay for kilometres travelled, but they don’t have to worry about maintenance.
These measures translate into enormous ecological benefits for the planet and form one of the pillars of the circular economy. On the one hand, it reduces the consumption of raw materials and energy, but also reduces the amount of waste because, from the design of the product, we work so that each piece that is used can be reused in the chain. Result? Saving costs, maximising profits, working within the framework of social responsibility, having greater independence from suppliers, complying with increasingly strict environmental regulations, giving greater value to the brand, etc.
… to reach a new customer
There is no doubt in anyone’s mind that we are dealing with a new customer profile: a trained person, in many cases with a high level of purchasing power, but who prefers what we might call the freedom not to possess. He is willing to pay for the use of what he needs, but he is not looking for his property. He prefers the rent of houses that his purchase, he travels with Airbnb, he watches cinema in Netflix, he shares transport… In addition, he behaves responsibly with his environment, he worries about the origin of the products he consumes and about the environmental action of the brands.
So it’s important to ask what can I offer my customers beyond the product itself? What service can differentiate me from the competition and put me at the forefront? In this search it is essential to increase customer knowledge. Marketing has been specifically working on this for the last decade, and the provision of services, which are increasingly customisable, also gives us very valuable information about their consumption in real time.
There is no doubt that business growth, the use of new technologies and the fight against climate change walk hand in hand and mark the destiny of the business world (already) today.
Cover image: Paulo Carrolo