Servitization in Home Appliances

Dr. Arsham Mazaheri . July 30th 2023

Servitization in Home Appliances: Introduction

You've probably noticed it yourself. Your refrigerator no longer just chills food. It might have a screen that displays your grocery list, gives recipe suggestions, or even lets you know when food is expiring. It’s a sign of the times. Welcome to the servitization revolution in the home appliances industry. What once were simple, standalone devices in our homes are transforming into holistic service experiences. This isn't just a mere technological tweak; it's a paradigm shift.

Servitization Benefits for Home Appliances Services

When one ponders over the home appliances sector, servitization might not immediately ring a bell. But as mentioned above, with servitization steering the helm, the Home Appliances industry is on a transformative journey. Understanding this strategy's potential reveals a wealth of business opportunities:

Extended Appliance Lifespan: Dive deeper than mere durability. With servitization, appliances are no longer just static devices. Picture a washing machine offering predictive maintenance. This not only promises longevity but assures top-tier performance, translating to significant cost savings and bolstering brand reputation.
Minimized Downtime: No one enjoys disruptions. Servitization, through its proactive maintenance and predictive analytics, promises users an experience where their appliances rarely, if ever, take an unexpected break. The outcome is a consistently optimal performance and heightened user convenience.
Enhanced Customer Convenience & Engagement: Imagine a world where your coffee machine learns your preferences, or your oven gives you recipe recommendations! That's the servitized world for Home Appliances, where the experience is tailor-made and hassle-free, from reduced maintenance worries to a delightful morning brew!
Personalized Solutions & Customization: The one-size-fits-all era is behind us. Servitization in Home Appliances, similar to other industries, paves the way for businesses to craft personalized service packages, meeting the unique demands of every customer. Whether it is extended warranties, bespoke maintenance plans, or priority repairs, customization is the new norm.
Cost Predictability: The dreaded unexpected costs become a relic of the past. Subscription models usher in an era where customers enjoy predictable monthly expenses, mitigating any unforeseen financial strain.
Sustainability & Reduced E-Waste: In a world echoing sustainability chants, servitization offers a choir. Repair, upgrade, and energy-monitoring services not only enhance appliance value but champion eco-conscious consumption and reduced e-waste.
Value-Added Services: This isn't just about fixing a faulty toaster. Think broader—like integrating that toaster within a smart home system. Servitization, particularly in Home Appliances, empowers businesses to bundle these enhanced experiences, from seamless installations to smart integrations.
Brand Loyalty & Strengthened Reputation: Continuous engagement nurtures loyalty. Customers, having reveled in the holistic services, are likely to be repeat buyers, associating brands with reliability and exceptional experiences.
Innovative Features: Servitization isn't static. As appliances evolve, so do the services. Manufacturers can frequently update features, ensuring that appliances aren't just working but continually improving.

User Insights: This ongoing journey provides businesses with a goldmine of information. Understanding customer preferences, pain points, and behaviors can be pivotal in shaping future products and marketing strategies.

Types of Advanced Service in the Home Appliance Industry

I trust by now you have understood that in the evolving landscape of the Home Appliance Industry, advanced services aren't just a luxury but a necessity. As our homes become smarter and our demands more personalized, the services on offer are diversifying at a rapid pace. Here are some of the forerunners:

Predictive Maintenance: Moving beyond mere reactive measures, appliances now have the capability to alert users, and sometimes even manufacturers, about impending issues. Leveraging data analytics and IoT technology, this service predicts the need for repairs or part replacements, often before an actual breakdown occurs.
Subscription Services & Models: As we say in Avrogan, “the era of ownership is ending!” and the traditional purchase-and-own model is being revamped. Now, consumers can opt to lease appliances, paying a recurring fee, which encompasses not just the device, but also ongoing services. This includes regular maintenance, upgrades, replacements, and even the opportunity to swap out for newer models, ensuring a consistent and hassle-free user experience.
Integrated Digital Assistance: As the digital age thrives, appliances aren't left behind. Devices now come embedded with digital assistants. The digital component is crucial, whether it's for task assistance, automating supply reorders, or integrating into larger smart home ecosystems for remote control and real-time monitoring.
Maintenance, Repairs, and Upgrades: At the core of these advanced services is ensuring appliances are always in tip-top shape. Whether it is on-demand fixes, scheduled checks, or the option to upgrade to the latest model, these services prioritize optimal functionality and longevity.
Consultation and Personalization: In a world of overwhelming choices, expert guidance is invaluable. Tailored advice and recommendations assist customers in selecting appliances that align perfectly with their unique needs and lifestyles.
Energy Efficiency Audits: With sustainability taking center stage, energy efficiency audits have emerged. These assessments guide users toward energy-saving appliances, and they also suggest best practices to curtail energy consumption.
Extended Warranties: A very simple but very necessary service in the era of Servitization! The security of an extended warranty cannot be understated. Beyond the standard period, these plans shield customers from unforeseen repair expenses, instilling a deeper sense of trust.
Appliance Recycling and Disposal: In a circular economy era, if we welcome new appliances at our homes, it's crucial to bid goodbye to the old responsibly. Advanced services now ensure the eco-friendly disposal and recycling of dated devices, when and if needed depending on which phase of the circular economy it is.

Installation Services: To guarantee an appliance delivers its promised performance, correct installation and configuration are pivotal. This service ensures devices are set up safely and efficiently, right from the get-go.

Challenges in Embracing Servitization for Home Appliance Industry

The concept of servitization in the home appliance industry, while brimming with promise, does not come without its set of challenges. As businesses aim to make this paradigm shift, they face a multitude of hurdles:

Complex Business Model Overhaul: The leap from pure sales to offering intricate services demands a complete revamp of existing business models. This introduces complexity in reconfiguring established systems.
Cultural and Mindset Shift: This isn't just a business transition; it's a people transition. Teams are now expected to lean into a customer-centric approach, necessitating a massive cultural and mindset shift.
Technological Integration and Hurdles: The journey to servitization is paved with advanced technologies. From IoT integrations to data analytics, businesses grapple with both monetary investments and upskilling their workforce to navigate these technological terrains.
Appliance Diversity and Service Design: With a plethora of appliance types, sizes, and brands, crafting consistent and high-quality service solutions across this spectrum is undeniably challenging.
Supply Chain Reconfigurations: As the focus pivots to services, supply chain dynamics change. The need to always have spare parts at hand for swift repairs demands a reimagining of traditional supply chain strategies.
Physical Accessibility Constraints: Some appliances, by virtue of their installation or design, are tricky to access. Addressing maintenance and repair needs for such devices demands specialized tools and skills.
Overcoming Customer Perceptions: Generations, especially the older ones, have been conditioned to buy and own. Breaking this mold and introducing consumers to subscription or service-centric models, especially when seen as pricier, is a tough sell.
Sourcing Technical Expertise: The confluence of manufacturing with service provision, data analysis, and IoT demands a diverse skill set. Cultivating or hiring such a multifaceted workforce is easier said than done.
Data Management Dilemmas: The data deluge from connected devices is a double-edged sword. While it's rich in insights, handling, processing, and gleaning meaningful information from this data heap presents logistical challenges, especially with strict directives and regulations like GDPR.
Upfront Financial Implications: The initial cash outflow for technological infrastructures, training, and more can be substantial, requiring businesses to evaluate the long-term ROI meticulously.
Security Quandaries: In an interconnected appliance world, data security takes precedence. Safeguarding customer data and ensuring appliance functionality in the face of potential vulnerabilities is paramount.
Designing Balanced Service Models: Curating service packages that resonate with diverse appliance lifecycles and varied customer preferences, all while ensuring simplicity, is a delicate dance.
Navigating Regulatory Waters: Servitization might usher in new regulatory territories, especially concerning service quality and data handling.
Scaling Customer Support: Enhanced services demand enhanced support. Bolstering customer support capabilities to cater to diverse queries and technical issues is a monumental task.
Building and Maintaining Trust: The onus is on businesses to assure customers of consistent, high-quality service, particularly for premium appliances.
Legacy Product Conundrums: Integrating or offering services for products that predate the servitization era, without compromising profitability, is a jigsaw puzzle for many manufacturers.
Carving a Unique Niche: As the servitization wave sweeps the sector, standing out in a saturated market becomes crucial.

In a nutshell, while the journey to servitization is paved with unparalleled opportunities, it's interspersed with challenges that businesses must acknowledge, anticipate, and adeptly navigate.

Leading by Examples: Servitization Case Studies in the Home Appliance Industry

The journey of servitization in the home appliance industry has been illuminated by pioneers who not only adopted this model but also set benchmark practices. Their stories are a testament to the potential of servitization:

Whirlpool's Connect to Care Program: Whirlpool's "Connect to Care" exemplifies proactive customer service. Through IoT, it bridges the communication between select appliances and the company's service network, facilitating real-time diagnostics and preemptive customer assistance.
Bosch's Home Connect Platform: Through its Home Connect platform, Bosch has expertly woven a variety of home appliances into a single, cohesive network. This integrated system gives users remote access and monitoring capabilities, opening the door to a connected home environment.
Lowe's Extended Protection Plans: Lowe's extends a safety net for its customers with its protection plans. These plans go beyond the conventional manufacturer's warranty, ensuring customers are always covered.
General Electric's Subscription Model: GE took the servitization route in 2019 with its holistic laundry solution. Subscribers enjoy a bundled offering that encompasses laundry machines, their upkeep, and even replenishment of detergents.
Electrolux Professional's Assisted Cooking Program: Targeting the professional culinary realm, Electrolux Professional's assisted cooking program offers a combination of top-notch kitchen equipment coupled with continuous training and support.
Philips' Hue Lighting Ecosystem: Philips diverges from the traditional appliance mold with its Hue smart lighting. Customers who purchase these smart bulbs gain access to a wide range of services, including remote control, automation, and integration with larger smart home systems.
Miele's Dedicated Service Contracts: Miele, synonymous with luxury in home appliances, furnishes its customers with service contracts. These contracts envelop maintenance, repair, and tech support, ensuring prolonged excellence in appliance performance.
Samsung's Family Hub Refrigerator: Samsung's Family Hub refrigerator is an example of the company's move toward servitization. It offers more than just cooling thanks to its touchscreen and IoT capabilities. Through their refrigerators, users can manage their groceries, enjoy entertainment, and even communicate.
LG's ThinQ Appliance Range: With its ThinQ technology, LG brings smart capabilities to its appliance lineup. Users can command, diagnose, and fine-tune their devices through a dedicated mobile application, making everyday chores more streamlined and efficient.

The aforementioned leaders in the home appliance industry serve as an example of how servitization can be transformative. Their success tales serve as an example and compass for the industry as it moves toward a service-centric future.

Conclusion

The home appliances industry is no longer just about appliances. It’s about experiences. As the lines blur between product and service, it's clear that the future is servitized.

Now, where do we at Avrogan - Your Partner for Smarter Business, fit into this picture? We're here to streamline this transformation for businesses. With our advanced service contract management SaaS solution, Avrogan Service Excellence™, we're equipped to guide you through every facet of configuring, pricing, managing, and monitoring advanced service contracts that your business can design and offer to the customers. Dive into the servitization wave with confidence. Partner with Avrogan. Because with us, the future is not just smart; it's service-smart!

Dr. Arsham Mazaheri

Chief Operating Officer

Arsham is a data scientist by background, with 17+ years of industrial and managerial experience in various disciplines. Throughout his career, Arsham has helped many of Fortune 500 companies with their data and requirement challenges and has been involved in many IT solution implementation projects. Arsham has both mechanical and industrial engineering backgrounds and has a D.Sc. in Risk Management from Aalto University in Helsinki, Finland. He is a certified change and problem manager (CCM & CPCM) and holds an MBA in shipping and logistics.