The obsolescence of household appliancesEverybody suspects that household appliances are designed to last just a little more that the warranty covers.

If we performed a modification in the life of a consumers’ good, a plenty of business model inconsistencies would be found and to get this way off.

Then, a technology that helps to improve a washing machine duration, that is POSITIVE for the consumer, for environment (less KgCO2) and for society, could be totally rejected by the sector rules.

¿How might we change that?

The game rules

A higher duration means that, at mid term, the number of units in the market to be lower. Then, market could decrease, and nobody would be interested in this: nor the manufacturers, nor the distributors.

This feature (long lasting) may be perceived as an opportunity to increase the product price, but only at short term. Competitors’ technology productivity only assures a short opportunity window, but in few months they’ll achieve a similar or better technology. So, at mid-long term, the competition will erode the price.

Repairs and extended warranty are a business with high margins and interesting for manufacturers and their technical assistance partners. This renenue stream, despite being less, would be reduced more (more reliable means less faults).

¿How might we transform these problems in opportunity sources?

Revenues performed by product, extended warranty and repair part sales.

Orthodoxies of the modelGetting customer process is based on promotion and advertising (mass media) and upselling brand values and new model features.

“If the older model didn’t fail, I consider to follow with the same brand”. This is the only loyalty evidence I’ve percieved from this sector. And their actions are not effective because the getting process of competition is powerful.

Available in supermarkets, household stores (some online)

Some trends to consider

Our society is demanding a more responsible behaviour with the environment: less energy consumption, natural resources responsible use and improve the lifecycle (reduction, reutilization and recycling)

Collaborative economy is about to start to show us its potential (Uber, Airbnb…). We are more consciuous about the non-sense of novelty and the benefits of sharing.

The smartphone is the key interface element (nowadays) and screen revolution is coming. The concept “app” is also in our way to understand and consume in the digital world.

The Internet of Things (IoT) shows that products will be connected, but we may strive to think the purpose.

Conventional homes for heterosexual couples with two children are from the past history: to share appartment, monoparental families, 3 and 4 generations living together… Homes change as families as well.

In few years, 55 year old people living alone more than in couples, with uncertain incomes (pension threat), and behaviours quite different than our generation’s.

New lifestyles and home organization change and, in consecuence, may change products to adapt to. Which business model might fit to these trends?

Other inspiring business models

Taxi drivers (owners) use to buy vehicles with an intense criterium of long-lasting than a standard buyer. The duration is translated in an intensive utilization, higher than the average, but not in time. The more lasting is a vehicle, the more profitability of this investment.

In some countries, houses are builted with concrete and cement and they last more than 100 years.But nevertheless, the consumers use to rent. So, several users consume the same good during the product life. Often, they perform a setup and redecor ate to adapt to the new tenant.

The typical business pattern “razor and blade” looks for the customer engagement drawing a good that needs a consumable that brings the margin and rotation to the brand. One sucessful case is Nesspresso, but other one more interesting is Keurig’s(*) where the consumable is what adds value and the machine is only the means to achieve it.

Corporate world has assume that, for its criticity and cost, printing is not an equipment anymore, but a service, with a specific payment model: pay per print.

(*) https://medium.com/@BoltVC/keurig-accidentally-created-the-perfect-business-model-for-hardware-startups-18e9c3b4e796

The challenge

I’ll propose a business model in which the washer machine is a good to rent: a service.

To rent helps to exploit the main requirement: a long lasting good. With this, the washing machine units will be reduced but without reducing the market size (in dollars).

The relation lever is in brand loyalty, but otherwise, in selection freedom of the service provider.

To whom might this be interesting and what might we offer them?

Customers

55+ year old people. In this life time, family unit use to decrease, children leaves, married to divorced (rate is growing) but also to increase to house a dependent parent, promptly to grandchildren (and their parents). Needs are decreasing but can be growing as well.

The model is to pass from a ownership model to a rent/service model.

Our customers will be people with a high rate of vital changes and oriented to solution buying (not products)

The segmentation driver will be the vital moments and household demands related.

Young people between 20 and 40 years old change from sharing an appartment with a fried, to move due to a new job, to live together, having children… Needs are growing.

The proposal

Value proposition is to adapt instantly to the laundry needs of the family unit (in-house)

That means, that if a person lives single and needs less utilization will contract an economic service and if the family grows he/she will demand a more complete service.

The company might answer to these needs changing the washing machine model to rent. And if a machine was fault, the company might send and install a new model, without charging the customer.

I figure out a standard product, long-lasting, with a modular aesthetic finish (customizable by the renter) , a minimal physical interface and a powerful virtual interface (smartphone and/or web).

Revenues come from the specific rented model.

New idea:New revenues by “customized parts” to a client. If the customer wishes a wood front-end, a vintage design or iron finish should pay for it. These incomes may be financed though the monthly subscription or a rewards program. Do you remember the loyalty concept?

New idea:The washing machine programs are supplied as the client buy them via App. So, a “baby clothes wash” may be purchased apart by only $0.99

Changes to do

In this case, the customer relationship is more interesting because the get process can be done through an innovation or specific need (household, change, older machine with fault, etc). Loyalty can be managed by contract and rewards (as mobile companies teach us).

Finally, the grow process is easy by up-selling the model, cross-selling of accessories and a viral effect in friends, families and neighbors.

The main novelty is that the channel can be changed or complemented to new companies like utilities (gas, water, energy), telecom and even other non-specialised retailers (Fnac, bookstores, hardware stores…)

The technical service channel could get new revenues by installation and removal of new parts (with proprietary fixation system), that should give them an opportunity to gain a often relation with the customer. Even more, some of them could become “assemblers” or “decorators”. Which activities should be key in this business model?

Probably, a manufacturer should have the same as currently, but adding news like rent risk management (and financing), customization design and new channel management (with lower negotiation power). Some of these activities could be considered a new business themselves.

Going forward

Lets think, do we buy washing machines or the possibility to wash our dirty clothes in-house? What do really achieve the result: washing machine or the laundry soap?

Facing this new paradigm, are we able to offer a global solution to the customer? Why not we brand the washing machine with the soap and softener brand? I’m completely sure that Reckitt Benckiser, P&G, Henkel and other would be excited to have a captive system for their commodity products.

I encourage the manufacturers to explore these possibilities but always starting from the business model and defining a product that fits this model.

With its deployment, we’ll get improvements for environment, reducing low value intermediaries, a market access cost reduction and precise sale forecasting for this value chain that only expenses the product.

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About the author

Miquel Angel Pérez is Telecommunication Master Degree and MBA by the UPC (Spain). He has more than 15 years experience in Marketing for B2B industrial markets and Technology based companies. Expert in research and innovation networks of Spain, he has carried out research about methodologies and systems for innovation, with the aim to assure market uptake and financial viability.

Miquel Angel adds his knowledge in new product, service and business model conceptualization based on exploitation of intangible assets for clients and internally for The Knowledge Agents Alliance as well.

@maperez1977

es.linkedin.com/in/miquelangelperez

Business Designer Innovation Advisor Marketing Manager #DesignInTech

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