My last post explored our fascination with volume discounts in a world moving rapidly toward “point of use” (get it when you need it) due to technology developments. Smart phones armed with hundreds of apps bring information to our fingertips when we need it. In the not-too-distant past, we relied on encyclopedias, maps and good old-fashioned phone calls.
Physical objects lag behind information in this regard because information became easily digitized. Thus, the first physical forms under threat in the information age were carriers of information like newspapers, magazines, photo prints and books. Digital and 3D printing are two technologies among many moving physical objects toward point of use.
The thrust of this post isn’t technology per-se, it’s how our long-held beliefs about pricing and value work in this new world. One tradition seems to carry forward well – we like to bulk-buy instead of paying per transaction
Convenience plays a role. Monthly or annual subscriptions simply reduce the number of transactions. It provides certainty. We know what it’s going to cost in advance. Who can forget the dreaded monthly phone bill surprises when we paid long distance by the minute?
Here’s the most important part: subscriptions also disassociate use from payment. Once we’ve paid a flat fee, the more we use it, the lower the perceived cost and the higher perceived value. Cellular phone use skyrocketed once phone companies went to a flat rate instead of pay-by-the-minute.
Physical assets haven’t historically been paid for that way. We buy stuff, claim ownership, and use it at will. If we want another we expect to pay for it. Someone figured out that we don’t use our stuff very often. Now you can sell your excess capacity via Apps like Uber and Airbnb.
Our value preferences – certainty, convenience, and low marginal cost are going to radically affect the way we make and purchase goods. This is why we’ve long advocated low quantity, low inventory, point-of-use (in some cases vendor managed) agreements with our clients. Of course it has to be at a fair price.
This is only the beginning, though. We and the entire manufacturing arena need to explore subscription-based models and other alternatives that fit our societies value preferences. In fact, we’re already started exploring such a model. There are challenges to be sure, but the goal remains – give the people what they want.