Wednesday, 29 April 2009

To sell the brand, stop selling the product?

Are people becoming less attached to owning things?

Increased financial pressures are encouraging more people to rent life’s luxuries (and sometimes life’s basics) and eager to fill this need, new services like Zilok- essentially the ebay of rentals - are popping up

Online rental firm erento, where you can rent anything from carpet cleaners to a handbags saw a 92% rise in site traffic at the start of the year – and if handbags are your thing, specialist company Handbag Hire HQ does nothing but this.

Indeed, it seems you can rent everything - including amazingly carpets, from Interface Re:Source.
Ray Anderson - founder and Chairman of Interface Inc says:-
“We sell only the services of the carpet: colour, design, texture, warmth, acoustics, comfort under foot and cleanliness, but not the carpet itself”. 
Their model relies on supporting the customer from “cradle to cradle” as they term it – essentially from purchase to purchase in a cyclical fashion, ensuring the product is reused, reclaimed or recycled. 

[Update 2013: This concept has now been popularised as the Circular Economy.  See book Mid-Course Correction by visionary industrialist Ray Anderson written back in 1999]

Whilst many of these services were setup prior to the credit crunch for more altruistic reasons such as helping to prevent the environmental impact of stampeding consumerism, they are also now seeing a boom from the more hard pressed consumer - keen to keep an element of their lifestyle, but not so desperate to have that lifestyle 24/7.

I think the Re:Source approach does make for an interesting example though. 

 By shifting consumers to the “service” rather than the product, they not only get the desired environmental benefits, but will also get customer retention benefits, turning an infrequent but expensive purchase like a carpet into a lower cost but more regular purchase of a service – a service which then bypasses the purchase recycle, removing the (re)evaluation of suppliers when the product needs to be replaced.

There is another side to this trend that also interests me. It seems in someway a natural extension of what Theodore Levitt wrote in his paper “Marketing Myopia” in the 60’s when he discussed how companies need to focus on the business they are in, not the products they make – causing for example oil companies to redefine their business as “energy” rather than just “petroleum”.

This was taken another step forward in the 80’s when brands realised that focusing on the benefits delivered rather than the product made could allow them to essentially remove the manufacturing altogether - with companies like Kimberly Clarke and Levis shutting down their own factories and instead simply sourcing this elsewhere, focusing their attention on the brand itself, the real reason for people purchasing the product.
It makes me wonder though whether renting or at least purchasing a “service” rather than a product is the next natural step for many brands.
Brands could cease selling a “product” and instead focus their energies delivering the “benefit” – allowing consumers for example to buy “entertainment” not a TV – and in the bag, benefiting from ongoing loyalty as their needs are constantly being met through product change and upgrade.

If rentals could be lifted from their previous positioning as essentially hire purchase – allowing people who couldn’t afford to buy the item outright to have it now – and instead be positioned as a way of obtaining a lifestyle, buying into the brand proposition, it could act as a
Christenseniandisruptive innovation, essentially changing the way consumers consume.