„Pay-per-use“ – from own to use

For some time now, small and medium-sized enterprises across the industry have been in a state of upheaval or have been exposed to enormous economic fluctuations. In this context, the issue of liquidity also plays a major role. As a result, manufacturers of industrial production machinery, for example, are considering how they can adapt their business model to the new situation. "pay-per-use" makes it possible: instead of selling their customers the machines at full price, machine manufacturers charge for the actual use of a machine by the customer. This concept is called "pay-per-use." 

For example, when a company uses a printer today, the machine is not purchased, but instead a cent amount per printed page is usually paid to the manufacturer of the printer - "pay-per-page". The basic idea behind this is logical: only those who use a thing should pay for it.  

The streaming providers Netflix or Amazon Prime are also setting an example: flexible offers are made available that are geared to the consumer's wishes in the digital age. These companies do not aim to sell products, but to offer them in the form of a service. 

In the mechanical engineering sector, the manufacturer provides machines and equipment and the customer only pays for actual use, usually combined with a monthly basic fee. In the manufacturing industry, customers usually pay a flat rate, for example per component/product produced ("pay-per-part"). The advantage of this model is obvious: the customer does not need to make a high initial investment in the purchase of the system.  

From a customer's point of view, the model is particularly attractive if they cannot estimate the utilization of a machine from the outset and are therefore uncertain whether and when the initial investment will pay for itself or if it is clear from the outset that the purchased machine will only be used for part of the year, such as during campaigns in the sugar industry. Manufacturers who offer "pay-per-use" use this model primarily to address cost-sensitive customer groups who are not interested in amortizing a machine purchase associated with high one-time costs or who cannot currently afford it financially.  

In practice, the "pay-per-use" model is not only implemented between the customer and the manufacturer, but there is a 3rd partner in this network. This is because the manufacturer does not usually assume the economic risk alone but works together with a financing partner. These are often banks or insurance companies, which bear part of the investment risk and in return receive a share of the fees paid by the customer. The manufacturer often remains the owner and collects data on the use of the machine on site. The usage fees are then calculated on this basis. There are also models where the financing partner buys the machine and makes it available to the user. In this way, the manufacturer can profit from the purchase price without bearing the usage risk. 

The topic of "pay-per-use" has already been implemented in pilot projects throughout the industry for several years. And there are also some companies that have firmly adopted this model in their range of services.

For example, the TRUMPF Group, a supplier of machine tools and laser technology, has entered into a cooperation with Munich RE. The latter acts as a business enabler: it finances the machine and thus bears the economic risk.  This cooperation is intended to enable TRUMPF's customers to use fully automatic laser machines without having to buy or lease them. Instead, they pay a previously agreed price for each cut sheet metal part. 

The situation is similar at Philips. The "pay per lux" model was introduced there. Customers pay Philips a monthly basic fee for providing the light setup in their own house/apartment, plus only the actual number of luces they consume. Because intelligent measurement technology is required for this calculation, the customer can learn to understand his light and thus energy consumption and, if necessary, reduce it in a targeted manner.

To be able to offer functional and economical solutions, companies need transparency regarding the satisfaction and behavior of their customers. This can be achieved, for example, through customer accounts or apps that collect targeted feedback. In addition, however, the company receives the best information about user behavior from the networked machine.  

In order for this potential to be tapped, a cultural rethink must take place in the companies first. In addition to the engineering-driven enthusiasm for new machines that traditionally exists, the service concept must move into focus. Management must therefore ensure that customer needs are given greater weight. Organizational challenges also go hand in hand with the new business models. This applies in particular to billing - because it must be just as flexible as the services themselves. Whereas most companies in industry were used to selling machines and issuing a one-time invoice for them, a different approach is needed with "pay-per-use." Actual usage must be determined by sensors and IOT solutions and form the basis for invoicing.

Relayr - PAY-PER-PART: TRUMPF UND MUNICH RE PLANEN NEUES GESCHÄFTSMODELL FÜR DIE PRODUZIERENDE INDUSTRIE  (2020) https://relayr.io/de/pay-per-part-trumpf-und-munich-re-planen-neues-geschaeftsmodell-fuer-die-produzierende-industrie/ 

Adamos Redaktion  - Subscription & Pay-per-Use in der Industrie - Geschäftsmodelle mit hohem Potenzial (2021) https://www.adamos.com/blog/d/subscription-pay-per-use-in-der-industrie 

Royal Philips  - Mehr Umsatz mit grünen Produkten: Philips übertrifft eigene Ziele (2014) https://www.philips.de/a-w/about/news/archive/standard/news/unternehmen/20140225_Mehr_Umsatz_mit_gruenen_Produkten.html  

Lisa Goldapple, Editor, Atlas of the Future (21 November 2016) https://atlasofthefuture.org/project/pay-per-lux/