Business Models How Digital Services in the Industry Become Economically Successful

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FAULHABER Drive Systems

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Manufacturers of products have been facing the challenge for some time now to also offer complementary digital services – and to charge for them accordingly. The sales team plays a key role in this.

Many industrial companies invest in digital add-on offerings around their products. However, the anticipated market success often fails to materialize. A key reason: the developed solutions are insufficiently aligned with actual needs. The result: customers feel overwhelmed and are confronted with features they do not need – yet are expected to pay for them. This increases the entry barrier and negatively impacts their willingness to buy.

Two key success factors are therefore essential: digital services should be both scalable and focused on specific customer benefits. In addition, the early involvement of sales is crucial. Sales employees possess valuable market knowledge and are able to identify customer requirements at an early stage. This ensures that digital solutions are developed in a practical manner and can be successfully positioned in the market.

Fair and Flexible Contract Models Boost Sales

In addition to the early involvement of sales, contract design is one of the key success factors in marketing digital services. In this context—especially with usage-based models like Pay per Use or EaaS—fairness and transparency are crucial.

In practice, however, it often becomes apparent that many of these models do not deliver what they promise. For example, it is advertised that payments are only due when the machine is actually used. However, it later turns out that the usage-based rates are significantly higher than the usual rates of conventional financing models. It is also not uncommon that after a defined period, the remaining difference to the purchase price must still be settled.

This lack of transparency in design has led to a decline in trust in the model in the past, causing many potential customers to react cautiously.

Use Case: Pay-Per-Use Offering for Cleaning Devices

How a usage-based business model is successfully implemented in practice is demonstrated by the example of a manufacturer leasing company for cleaning devices.

The key to success lies in fair and transparent contract design – with clear rules, comprehensible terms, and customer-friendly flexibility. The model stipulates that payments are made only for actual usage of the devices. If one fails, a replacement is provided within 48 hours to ensure operational capability.

Although the rates for this model are slightly higher than those of traditional financing, the customer bears no risk in return: There is neither a redemption amount nor an automatic contract extension – but it does include a cost-free exit option after half of the basic term.

This "early-out" option is particularly perceived by customers as psychologically relieving—it facilitates the decision to sign the contract and significantly accelerates the process. Interestingly, this option is rarely used by customers in practice, indicating a high level of satisfaction with the model.

For the manufacturer, the risk is therefore limited – especially in comparison to external leasing providers. Unlike the latter, manufacturers can economically reuse returned devices much more easily and quickly, for example, through re-rental or resale. Flexible pay-per-use models thus create a win-win situation: they strengthen customer trust while simultaneously increasing the likelihood of closing sales in the distribution process.

The impetus for this offering came from a request by a customer, a hardware store chain, which suddenly no longer needed cleaning devices during the COVID-19 pandemic. The high pressure to adapt ultimately led to the idea of usage-based contractual design with maximum flexibility.

The example shows that a deep understanding of customer needs is critical to the success of digital business models—and this is achieved only through active listening and targeted questioning. This is especially true in the manufacturing industry, where processes and requirements are often very individual.

Outlook: Optimize Maintenance and Service With Data-Based Approaches

There is great potential for future digital products in the intelligent analysis of device data. This could allow service and financing models to be tailored even more precisely to the actual use of the devices in the future. One of the key focus areas here is maintenance. The lifespan of a device largely depends on how intensively it is used and under what conditions it operates.

With the help of data mining, these usage parameters are to be systematically recorded and analyzed in the future. This makes it possible to determine how heavily a device is used in everyday operations, allowing for the derivation of individual maintenance intervals and tailored service packages. At the same time, customers whose machines operate under relatively equipment-friendly conditions can be relieved.

Financing can also be tailored even more precisely as a result. Data mining thus becomes a key lever to further individualize digital business models—and to position them even more successfully in the market in the long term.

Learning: Anyone who wants to successfully market digital services needs not only innovative ideas but also a deep understanding of real operating conditions, fair contract models, and close customer relationships. This provides the manufacturing industry with the opportunity to establish new business models that are economically viable and sustainable.

*Achim Becker is Stream Leader Sales at Digital Industries World e.V. (DIW) and was Managing Director of Kärcher Financial Solutions GmbH from 2021 to the end of 2024.