What and who to target in your Product-as-a-service business model

Part 1: Identify your PaaS advantage

PaaS business models are better suited for some products and customers. Therefore, it is important to be strategic about what and who to target.

When it comes to product characteristics, there are certain aspects that make PaaS more or less feasible. Generally, cheap, consumable, and personal products are more challenging to include in a PaaS offering than expensive, durable, and non-personal products. There are, however, grey zones. Product segments with rapid technology development (e.g., smartphones) are one example that have traditionally been considered less suitable for PaaS as products quickly become obsolete. However, companies have been able to overcome this challenge by adopting strategies to counter fast obsolescence, such as using hardware and software upgrades.

To help businesses, we have put together a summary of advantageous and challenging product characteristics. Businesses can use these insights to evaluate their products, choose which products to first include in their PaaS offering, and take on actions to address challenges early on. Actions may include anything from changing the product design, developing added services, or working proactively to change your customer’s attitudes. Download the tool "Product Assessment example" to find out more.

Download Product assessment example

It is also important to carefully consider who your ideal customer is, as it will impact how you design your operations and activities. Generally speaking, PaaS is more likely to appeal to B2B or B2G customer segments, as B2C segments are often more trend-sensitive and less used to procuring a function instead of a product. Moreover, B2B and B2G segments tend to generate higher-value contracts, while B2C segments involve a larger number of smaller transactions. This risks increasing both your administrative and logistical burden. With that said, organisations that have a high digital maturity are well-positioned to reduce these burdens through efficient and automated systems to handle administration, logistics, and customer relations.