What would a society where one did not own the goods & services that they paid for look like? While some would imagine this as some sort of collectivist dystopia, the reality is that this a partial reflection of and potentially a glimpse into the future for the world’s leading economies.
Technology has played a pivotal role in the progress of humanity and industry. Innovation has occurred in an exponential manner; changing human lives drastically in a relatively short time period. Computers and the internet in particular have fundamentally changed human behaviour, trade, and commerce through things like virtual marketplaces for the sale of goods & services, but also the provisioning of a number of goods & services via the internet. A combination of everyday household appliances with the internet has also resulted in the birth of the Internet-of-Things (IoT), with almost any electronic device accessible remotely, and not just to consumers.
The internet and IoT technologies have also brought about what can be termed as the ‘servitization’ of the economy. A product is no longer just a good but a service, offered for a lump-sum or a recurring charge, and whose access can technically be revoked at any time. Like the business model of rental cars, the past few years have seen far more products come under the ambit of such arrangements, or at least a reduction in the efforts needed to provide goods in the form of services – all of it facilitated by the internet, IoT, and other technological innovations.
These new models of product delivery present unique challenges and opportunities on a range of matters, chief among them consumer rights. The transition to service based offerings shift the effective ownership of a product from the consumer over to the producer. A producer can terminate access to a service for non-payment, that would be a reasonable cause to deny access to a service, but what about termination when it is not the fault of the consumer?
Take the example of Sony and its near termination of Discovery shows on the PlayStation. Due to ‘content licensing arrangements’, it was announced that all Discovery shows purchased by PlayStation users would be deleted from user libraries. Clarification was not provided on whether Sony or Discovery would provide some reimbursement or replacement, with the whole matter coming to rest when the decision to delete the shows was called off. The entire incident showed how little control consumers had over products that they had paid in full for.
The apparent non-ownership is further reinforced by the user agreements that consumers click-through in order to access these services. Many digital products are ‘licensed’ to consumers and not sold to them. What this means is that consumers are often leasing out a digital product and do not in fact ‘own’ them in any way. Should there be extenuating circumstances, the platforms from which the product was purchased might delete said product without consumers having much say in the matter. As Amazon stated in a motion to dismiss a lawsuit on this matter, content purchased on digital platforms only entitles buyers to a limited licence to view content and not ownership of said content.
The fallibility of the consumer in not reading the fine print is one of the things that disadvantages them in making informed choices. But one cannot fault them for it, after all, how can someone suddenly halt their decision to buy and consume a product to read the fine print? The potential behavioural constraints in the form of sunk costs, confirmation bias, and more make it difficult for consumers to make choices in an informed manner. Behavioural constraints also play a role in some consumers unwittingly continuing to pay for services that they would otherwise not pay for, through either inertia or inattentiveness on the part of the consumer.
While consumers are certainly disadvantaged in certain situations, it is also contingent on a number of factors, key among them the response by consumers. Who’s to say that consumers won’t alter their behaviours in response to an ever-increasing number of service-based products? And it is not all doom and gloom with the service-based model of product delivery. For there is a silver lining in the form of more affordable products and environmentally sustainable models of production.
Technology-enabled servitized products allow producers to adopt a multitude of pricing strategies, that includes the option to charge a recurring fee and customise it based on either usage or outcome. These pricing strategies can be advantageous for consumers, especially when the costs of acquiring and maintaining products are high. This can also act in a potentially complementary way with the rising demand for consumer credit, where easy access to credit and the affordability of service-based products allow more consumers to buy things they previously couldn’t.
From an environmental standpoint, providing a service or a solution instead of a product provides a greater incentive to be efficient and environmentally sustainable. If producers own the products, they have the responsibility of providing good service lest consumers abandon their product. At the same time profit maximisation pushes the producers to either increase revenue or reduce costs, all the while maintaining the standard of service. This can lead to companies focusing more on providing a solution in a cost-effective manner which can potentially be environmentally beneficial. For example, if the objective is to offer cooling as a solution, then efforts can be focused on having equipment that cools for less energy inputs, and on making effective and long-term use of cooling equipment.
As new technologies, business's need for stable revenue flows, and environmental concerns push us towards an economy that sells services rather than products, it is to be seen if this comes at the expense of consumer rights, receding product ownership, and ultimately pushback if consumer sentiments turn increasingly sour.
Abhishek Vajjala
