Key concepts and considerations for brand success in the friction-free world of XaaS.
Until relatively recently, a mention of the term “Anything-as-a-Service” (or XaaS) would have had many people – even within the marketing community – scrambling to their favorite search engine for a definition. It’s a broad term that refers to a variety of products, applications, and technologies that, enabled by the cloud, can be delivered as a service often on a pay-as-you-go or subscription basis. Still a bit hazy?
When you start to name some of the “poster children” for XaaS, it’s a lot easier to grasp. Think Netflix, Amazon Prime, or Spotify in the entertainment space of XaaS. Or rideshare services such as Uber in the Mobility-as-a-Service market. In the past decade, however, the XaaS model has expanded across various industries, including subscription-based food services, beauty and grooming, banking, media streaming, transport, and content platforms. And we’re still very much in the growth phase for XaaS.
In this article we’ll examine the rationale behind the XaaS boom and some key considerations for brands looking to capitalize on this market’s massive potential.
The why of XaaS
At first glance, businesses as diverse as consumer-facing brands, IT, retail, transport, and travel looking to sell their products as services (or servitize them) might seem an unusual step. Actually it makes a lot of sense on a number of fronts:
- Recurring revenue rather than one-off purchases.
- Creation of friction-free purchase journeys.
- Provision of services beyond the point of purchase.
- Direct access to streams of first-party data from which to generate a 360-degree view of customers and their buyer behaviors.
- Use of data insight to deliver enhanced, personalized customer experiences – generating repeat business/loyalty.
And it works. Based on a survey of business leaders and consumers, our report Beyond the Metaverse: CX Predictions for 2023 showed how positively the XaaS model is being welcomed. Over half (57%) of consumers said they get a better customer experience when brands offer their products as services – rising to 64% for consumers aged 25–34. Similarly,
54% felt that brands who adopt service-based models can better understand their needs (67% among the 25–34 age bracket). These are the kind of numbers that motivate business leaders to action. In fact we’re predicting the XaaS market to be worth $1.3 trillion by 2026. Let’s take a look at a couple of key considerations for XaaS success.
The Goldilocks Zone for XaaS friction
The paradigm shift that XaaS delivers is the change from selling products to selling outcomes – personalized, often self-selected, experiences. As well as allowing users to pay only for the services (or outcomes) they want, a core benefit of a XaaS framework is the removal of friction on the purchase journey, delivering ease of use at point of sale.
Think about all the embedded finance deals now widely available with countless purchase types. The pre-bundled, pre-populated insurance offers when you’re buying a car or a vacation, for instance, or the Buy Now Pay Later (BNPL) deals that eliminate immediate cash-flow obstacles to purchases of thousands of big-ticket items.
Before the quiet, cloud-driven XaaS revolution, people would have been herded toward a financial services page to submit a whole bunch of PII (personally identifiable information). A laborious process that often acted as a barrier to completion of the purchase. Now, thanks to the XaaS finance bundling, the same process is super easy to complete, click a couple of buttons and you’re done.
One interesting counterpoint to consider, however, is the concept of an appropriate level of friction. Brands don’t want to make it too easy for people to enter agreements – particularly financial agreements – without ensuring that users are fully cognizant of the commitments they’re taking on. This leaves brands open to accusations of using what UX folks call “dark patterns,” that is a user interface designed to trick the user into completing transactions. This would be a serious reputational risk.
The process needs to include clarity of communication and opportunities for consumer consideration. The ethical, responsible “Goldilocks Zone” at which brands should be aiming in XaaS execution reduces friction significantly without removing the means for users to make informed decisions.
The importance of partnerships in the XaaS ecosystem
When you put XaaS operations under the microscope, there’s a whole world of interactions and dynamics that the end user never sees. The frictionless B2C component they’re familiar with drives (but also relies on) a series of B2B processes and, importantly, partnerships. Let’s say, for example, a bank is trying to create a consumer experience embedded in a retail site, for BNPL. They need their own internal systems to have the scalability and flexibility to match the requirements and customer base of the retailer. This in turn creates a requirement for their own B2B relationships with their own vendors, to have this same scalability and flexibility.
Selection of the right partner, from the top-line XaaS partner through to the facilitating service partnerships, requires careful planning. Most fundamentally there needs to be a good match between XaaS partners. Looking at the above relationship from the other side, let’s say the retailer would like to reach the discount end of the market and would likely be misaligned, therefore, with a credit card or financial services company whose preferred clientele are high earners.
So far, so simple. But what about all the other midmarket providers that on paper look like a potentially good match? How do they ensure a solid alignment with partner organizations? What’s more, even if they’ve selected a partner, how do they make sure they’ve lined up all the expertise, capacity, agility, and infrastructure to provide the XaaS experience seamlessly? It’s a serious data and identity challenge – often beyond the reach of internal teams.
Increasingly the key to overcoming these challenges lies in a final dimension of our partnership discussion, the introduction of strategic data and identity partners (like Acxiom), capable of:
- Providing rapid, quantitative vetting processes to find a good XaaS partnership fit.
- Assessing, augmenting, and maintaining data organization to maximize commercial opportunities of XaaS model.
- Harnessing XaaS first-party data to drive enhanced personalized customer experiences.
- Upskilling internal teams in data and identity best practices.
In short, this sort of partnership provides the foundational data support that enables brands to maintain their focus on their products, innovating for their customers, and using their XaaS operations to stay ahead of the competition.
The more things change…
The paradigm has shifted. We’re all a lot more comfortable with XaaS than we used to be – even if we weren’t all familiar with the term itself! Exploration of B2B XaaS opportunities will keep finding nuggets of personalized, friction-free customer experience gold. And we, as consumers, will sign up to a lot of them. This trend will likely see some brands having to broaden or update established business processes, to align their data and identity capabilities with the requirements of XaaS execution.
But really the most important principles for success in this space are time-honored axioms that could have been taken from commercial best practice guides in the last 100 years: find partners aligned to your requirements and values, engage openly and honestly with customers, and manage how your information is handled with care. Get this right, and any offering (XaaS or otherwise) won’t go far wrong.
Don’t miss our report, Beyond the Metaverse: CX Predictions for 2023, to learn more about how both brands and consumers feel about developments in XaaS, and explore some of the other trends that will shape customer experience in the coming months.
