By Max Valiquette
One of the larger challenges a marketer faces is dealing with a sudden shift in how a category, or industry, functions. And this is never more difficult than when consumers create and entirely new relationship with the category because of it. What happens when we go from selling a product to a service?
One of the larger consumer trends that is having an impact on how we sell almost anything right now is the move from asset-heavy to asset-light. From a retail perspective, the growth in asset-light isn’t coming from retailers themselves – many of whom are clinging to asset-heavy models – but rather from consumers, who are buying less and renting, or sharing or borrowing or subscribing – more and more.
The first industry that was truly transformed by this was the home entertainment business. We used to need a DVD if we wanted to watch a movie any time; and we went to stores like Blockbuster or HMV to rent or buy them. Now, of course, while we are buying downloadable digital copies of films, we can also rent a film whenever we want and have it appear instantly on our TVs or PCs. But we can also subscribe to subscription services and never own a single film, if we don’t want to. Instead, we can just access someone else’s library for as little of it, or as much of it, as we want.
Music – which used to lead other industries in the way it has been transformed by technology – has actually lagged film and TV here, with subscription services only really gaining popularity in the last year. And at the most recent WWDC conference, Apple finally announced their own streaming service, iTunes radio – even though it’s the number one retailer of music in the world, Apple will also be offering a rental service, because it’s what consumers want.
And this trend is even beginning to take hold in some very traditional retail industries that weren’t right for an asset-light model until very recently. Bixi and other bike-sharing services have meant that regular bike renting is replacing ownership for some, just as AutoShare and Zipcar are changing the perception that having regular access to a car means owning one. Even hotels – could there be anything more asset-heavy? – are being challenged by asset-light services like Airbnb.
This is significant for marketers used to dealing with traditional retail marketing and advertising, as there are some significant differences in marketing a product for sale versus a service that provides constant rentals.
1) Establishing a value proposition for your rental or subscription-based service is critical. And that value may have to be expressed in terms of not only a clear dollar amount in cost but also why that cost makes sense. Netflix, for instance, costs on a monthly basis roughly as much as renting a couple of movies, which isn’t a lot, comparatively. And yet, one of the barriers faced by Netflix is the perception that it might not be worth it. Rental and subscription models in categories that were built on customer ownership have a lot of work to do to explain how they make fiscal sense.
2) Figure out how the brand halos work. Stores – even online stores – often use brands they’re selling as a sort of lead messaging. New products, brands that are on sale – these are all things that we use to create excitement, to generate news. But rental retailers often have a much larger series of products in their stable, and communicating that breadth may be more important than leading with any single item or brand. If you’re buying a single car, you’ll be more connected to a single car or car brand. But if you’re deciding on an AutoShare membership, say, you’ll want to know that there are multiple brands and car sizes, and even that next year newer models will be available.
3) CRM is a critical part of this marketing relationship. Product marketers know that regular marketing initiatives are critical. But subscription and membership services often have much longer commitments – a year is common – than a single purchase. So there may be less of a reason to market to regular consumers through retail or mass advertising. But there is a huge need to connect to this consumer through CRM channels, as to replace that regular communication.
No industry is immune to this shift: if hotels and music can move from an ownership model to a temporary or streaming model, than anything we don’t fully consume can do the same. In a world of asset-heavy, we were selling products. In the world of asset-light, we may well be selling services. Our customers may not see these as one and the same, so neither should we.
