Consumer preferences in adopting product-service systems with a subscription revenue model

Abstract

Technological development has caused service business models to become the new norm in the market, replacing ownership-based consumption, e.g. in the fields of music and books. This thesis examines the pace of servitization development as it is reaching industries that have based on traditional ownership-based consumption models. As identified in multiple previous works, changing consumer preferences is one of the major factors affecting the appearance of new service business models. Therefore, this thesis aims to shed light into consumer preferences towards adopting new subscription services with an offering of a tangible product (i.e. product-service system (PSS) with a subscription revenue model).

To study consumer preferences, five focus groups were formed and presented with hypothetical services in themes of mobility, living, home appliances and clothing. Discussions were moderated with the objective of observing the value and barriers participants perceived in subscribing to new subscription PSS concepts. Exploratory study with focus groups was chosen as a method, because of novelty of the subject at hand, and its possibilities for free form participant ideation of potential new service concepts.

The theory base of the research combines literature about services, product-service systems and non-ownership consumption as well as consumer decision making and perceived value. Similar previous research on the subject has been conducted in the form of a few focus group studies. This study fulfills these previous findings by focusing on subscription PSS specifically and also updates the knowledge of consumer preferences in a different geographical area 10 years later, as some of these concepts have already appeared in the market.

Main findings show that PSS has great potential in the eyes of consumers in lessening burdens of ownership and in fulfilling their needs proactively with a holistic service. Consumers grasp PSS potential for value creation via its ability to fulfill a need, its ability to decrease perceived costs and finally, its ability to create experiential value. Experiential aspects are of critical importance for making PSS a viable offering, as consumers are not willing to pay a monthly fee for simply accessing products. Many concerns are stated for subscription PSS, especially related to uncertainty and fear of creating hassle and emotional burden. These barriers for adoption are most apparent in categories where products are lower in costs and that are needed regularly. The thesis concludes by introducing findings in Paradoxes of Tech framework by Mick & Fournier (1998).