Let’s look at Electrolux’s latest robotic vacuum cleaner. Which, in the Swedish market, has been released as both a product and a vacuum cleaning as a service. It is this service that we will explore.
We are in a relentless march towards service economies. In 2017 the UK’s economy was reported as 79% service-based (14% production and 1% agriculture). Nigeria, as another example, reported an increase in GDP from services from 50% in 2010 to 55.8% in 2017. If you focus only on products, it looks like a bleak future.
We’ll position the service on the product-service continuum. And, we’ll explore which of the reasons behind the ongoing shift to the service economy this addresses.
Electrolux robot cleaner
First, here’s a quick introduction to the product.
You can buy and own Electrolux’s Pure i9 robot vacuum cleaner if you want.
But here on the Swedish market, Electrolux has recently introduced a floor cleaning service (link is in Swedish) around this product. Now you can use, and pay for, the Pure i9 the way you would hire a human cleaner.
Robotic Vacuum cleaning as a service
For the cost of 1 Swedish Kronor (around 10 euro cents) per square meter, Electrolux will send you a device that stays in your apartment. Through an app, you choose how often you want it to clean and the area to clean. You can pause usage when on your long summer holiday hiking in the mountains. Or schedule an extra clean the morning after your unscheduled dinner party. Having an unexpected date coming around your place this evening? It’s simple to give your place an extra safety clean before you get back. You pay monthly only for what you have cleaned. With a set minimum and maximum cost per month.
Electrolux monitors the health of the device remotely. A free service kit arrives in the post when needed. If the device stops working, they know and a replacement is on its way. They will take care of the old unit in a safe and environmental way (which sounds a little too like sending an old pet to stay with your aunt that owns a farm…).
And in a perhaps stroke of marketing genius, there is no binding time, only a circular-economy fee for cancellations within 18 months. A fee which, Electrolux says, goes to refurbishing early returned units so they can be re-used by another subscriber.
Also, offering as a service helps address various innovation adoption attributes such as trialability. And it helps minimise the postponement aspect of innovation resistance by reducing the initial cost barrier.
Let’s explore what aspects of service shift this service addresses.
Shift to a Service
The product is clearly on the left of the goods-service continuum (which I show in Figure 1). Where would we place the service? To me, it is one step to the right of the product. That is to say, the positioning is still focused around a tangible product: the robotic vacuum cleaner. To which supporting services (a mobile app to schedule cleaning, health monitoring, and timely provision of service packs) have been added. Rather than it being marketed as a service with the product supporting.
It is in competition with more traditional services provided by human cleaning service. Those where a cleaner lets themself into your apartment and uses your products to clean on a periodic basis. Or where the service provider lives in your house.
So, this shows two things. First, the shift to services doesn’t have to be a complete move along the continuum. Second, marketing (or the positioning in the consumer mind) can affect how far along the continuum we have shifted. Either way, there has been a shift.
Now let’s think about why this is a shift. There are 4 main reasons. And I show these again in Figure 2.
For the robotic vacuum cleaner as a service neither of the economic reasons – de-industrialisation or cost disease – are applicable. There is neither a move of manufacturing abroad nor a productivity increase in the manufacturing industry that is driving this shift.
Rather, it is for the reasons I highlight in Figure 3 that are underlying this particular shift.
Let’s explore each of these in turn, starting with the hierarchy of needs.
Due to…Hierarchy of needs
Increased salaries support us in deciding what we need to do, what we want to do, and what we might decide to “outsource”. The robotic product itself is already addressing this need. Since we just turn it on and let it clean. We don’t need to spend our precious time.
However, it is quite a costly product. Or we could at least say it is costly enough to act as a barrier to adoption. We have options to use other services to handle that cost. We could use a credit card service, or a store provided loan or another similar thing.
By offering as a service with a flexible monthly fee depending on usage, Electrolux is taking away that barrier. Allowing us to pamper our hierarchy of needs. Another benefit Electrolux get, over let’s say you buying with a credit card, is that they anchor themselves as your service provider. That makes it easier for them to offer, and for you to accept, the next service they bring along. Which would be a relatively small addition to the fee you are already paying.
Due to…Exogenous Demand Shock
Households that have “spare” resources are rapidly reducing. More people are living a single life, or if in a couple both are busy. Or even single households with children. Long gone are the days of servants, and then later the housewife, spending all day at home cleaning the floor.
Just like the previous reason, the product itself addresses aspects of this reason. But again, turning into a service takes away the time needed to remember right service it, or deal with it if it breaks down. Electrolux is counting on that appealing to consumers.
Due to…the Changing notion of ownership
You have probably picked this reason up already from the previous two. As our society shifts views on ownership, a service-based monthly fee becomes more attractive. Given that Electrolux monitor health of the device and replace of broke. Plus they send me service packs when certain usage levels are reached. It’s a hassle-free non-ownership experience.
Due to…Differentiating product
There are several robotic vacuum cleaners I could choose from on the market. Until now I would base my choice on product capability, price and what value I perceive at purchase time.
Now, the same aspects as above, help to differentiate Electrolux’s product in news ways. Low initial cost; pay for use; maintenance is taken care of, etc.
Due to…Leveraging Data
Service innovation shifts from the predominantly product logic thinking of value-in-exchange to value-in-use/context and to co-generation of value. This change supports the leveraging of data that can now occur. Let’s break this into the value from data Electrolux gets, and the value the customer gets.
Data Value to Electrolux
When selling a product Electrolux gets valuable data such as the number of and location of sales. Further, if the customer fills in warranty documents they may get some insight into the customer itself. And, if the product is returned as faulty, they can get some insight into product problems. But, what happens in between is a complete black box.
By running the solution as a service, Electrolux gets insights into how and when a consumer is using the device. They can observe if users start slowing down or increasing their use of the device. We could assume that people who are heavy users are likely to be very cleanly focussed. What up-sales can be made to those?
Through monitoring the health of the device, Electrolux gets early insights into potential product problems.
Data Value to the consumer
Consumers get value from data by knowing how often they are cleaning and how large a cleaning area they are servicing. Let’s say I use the service to clean my 67m2 apartment once a day. I could experiment and with cleaning once a week. If I see no noticeable difference in cleanliness then I am using data to free up money.
I can also experiment to clean heavy use areas more frequently than less frequently used. For example, the hallway could benefit from daily cleaning with all the people walking through it to get everywhere else. Whereas a couple of the rooms are rarely used, and so don’t need cleaning so frequently.
Where could Electrolux go next?
- Extend the service to new products
- Extend the target market
I’m sure this robotic vacuum cleaner is just the first toe in the water for Electrolux and for consumers. If it succeeds, there will surely be other devices following.
Can the service move into other markets? This is firmly targetted at consumer cleaning, could it work for professional cleaning? Could Electrolux re-package as a part solution, or even partner with, a professional cleaning company to incorporate it as part of its service? For example, a cleaning company may have a contract with a hotel. The robotic devices could run around all day cleaning the hallways. Whereas humans could take on the more focussed work of cleaning the bedrooms. Or maybe the human cleaner deploys the vacuum cleaner into the room as the perform all the other tasks, freeing up time that would otherwise be spent vacuuming.
Can the device be shared amongst people? A block of apartments wouldn’t necessarily need a device per apartment…It could be “hired” for the day. Or, Electrolux could horizontally expand the service by joining up with a smart lock service. That way the device could unlock and enter apartments itself.
The service economy is here, it is growing, and if you want to stay a product only company, be worried. But, we know why the shift is happening. So it is a case of looking at your products and determining how to harness those reasons; wrapped in a profitable business model.
That is what Electrolux appears to be trying. Will it succeed? That remains to be seen. Consumers are a fickle bunch and there is an ecosystem of cleaning services already in place this needs to add-to or replace. Is there consumer value in have your existing human cleaning service that does many things and then paying more to use the Electrolux service for just floor cleaning? Or, are there enough consumers that don’t have an existing human cleaning service but see the value in just floor cleaning? Hopefully, these are questions Electrolux have modelled using Bass diffusion models.
It will be interesting to follow!