This week, Mike Evans, research director at Cambashi, discusses a trend for companies to market products on a try before you buy basis.
Experts at industry analyst and market consulting firm Cambashi contribute a regular blog for TM titled Silos Changing exploring how new software applications enable manufacturers to implement business initiatives in the new economy.
The publishing industry often uses ‘try before you buy’ to promote magazine subscription sales. Naturally, they extended this initiative to media’s intangible services such as cable TV, Smartphone Apps, and on-line services.
There has long been interest in making it easier for customers to buy products by reducing their risk of purchasing something that does deliver their expectations. ‘Money back if not satisfied’ has been a common approach to tangible products.
In today’s economy, both consumers and business show increasing interest in reducing up-front costs. Business customers find replacing capital expenditure with pay as you go expenses, scaling with usage, particularly attractive. Perhaps the most famous case of this is Rolls-Royce’s power by the hour where rather than buying engines, airlines pay for the time the engines are running.
These business initiatives make sense for customers. However, it is important that these are genuine offers that allow the customer to assess the product in use before they make a commitment. Locking the customer into a long-term payment plan is really just some kind of credit offer. A genuine offer would include a readiness to take the product back and recycle it for re-use.
We are all used to seeing offers with “three months free”. But usually, it is necessary to sign up for the service in the longer term, giving credit card details. The user has the obligation to take pro-active steps to terminate the service which may neither be clear or simple to execute. This tactic is ‘cockroach marketing’. The effort required to terminate the service during the free trial period is similar to that required to eliminate the pests.
LOVEFiLM is an Amazon-owned movie subscription service that delivers DVDs straight to the doors of its 1.7 million members. A report on BBC Consumer Programme Watchdog reported dozens of complaints about LOVEFiLM sales practices and more than 40 complaints from members who’ve had problems with cancellation. In response, LOVEFiLM promised to address all the points raised in the report, review its sign-up and cancellation processes and suspended the face-to-face selling activity by the particular third party agency involved in these complaints.
The message is that the whole point of try before you buy is to make the customer experience better. That’s not easy. Poor execution simply damages the brand.
Smart products and devices are particularly suitable for these business initiatives. They can connect to the internet (or mobile phone network). That gives opportunities to report usage and download new software that adds functionality. Perhaps mobile phone apps are the most widespread example today but this practice is extending to consumer goods from televisions to radiator thermostats.
We can see even greater benefits for industry using smart machines on plant floors. They could benefit from machine makers offering ‘pay as you make’ deals for their machines. For machine tools, it should also be possible to monitor sensors on the machines that identify inefficiencies in CNC programs. That might lead to downloading better control software to optimise tool paths and tool use.
At present, most of these applications have to be built by manufacturers themselves; it is not an area for packaged software. However, the software tools to build these applications are improving fast.
For example, US-Indian Systems Insights, has developed vimana. This could, using remote access technologies like LogMeIn, take remote data collected in real-time from a wide variety of data sources throughout the shop floor. vimana finds hidden patterns and trends that identify the sources of production losses, and indicates the best strategies to decrease, and ultimately eliminate them.
In future blogs, we will go on to write about other potential deployments that respond to more savvy consumers, such as dynamic case management.