Like SaaS, is BaaS the future?

Decades ago, Xerox made a crucial shift in their route-to-market strategy.
It started offering its high-end copiers on a pay-by-use basis. Xerox installed the machine at the user’s location (mostly corporates), maintained it and supplied all the consumables like ink. The machine kept track of the number of copies made, and the user paid, month to month, based on usage.
Since then, the pay-by-use has become a widely used route-to-market strategy in B2B markets, from CNC machine tools to jet engines. This trend will only increase with 5G-driven IoT as a widespread technology.
The pay-by-use model offers both the buyer and the seller a financial advantage. The buyer substitutes capital cost with a variable expense while the seller smoothens revenues with a steady cash flow while carrying increased assets on the balance sheet.
I like to think of this model as BaaS – Brand-as-a-Service – and believe it can engender a revolution in consumer marketing of the same magnitude as SaaS – Software-as-a-Service – is doing in the software industry.
BaaS’s advantage in the consumer marketing arena goes beyond the financial into the intangible but significant area of brand equity. Consumer brands build equity through a deepening relationship with their consumers.
Consider a car brand that goes BaaS. It would be in far greater touch with a buyer of its car. The usage tracking will also track consumer and product behaviour enabling the brand to deliver better products and more effective marketing. Its interface with the customer will be higher. Further, a consumer in a BaaS contract will be much more amenable to shifts to a new model or even for an upsell, given the spread-out nature of the financial implications.
The advantages of BaaS hold for in categories like consumer electronics, auto and household appliances. The technologies of 5G and IoT will, shortly, create a network of intelligent products in these categories connected to and constantly communicating with the brand owner and each other.
In developed markets like the US, Apple is on its way to becoming a BaaS brand. Its offers monthly fee contracts that enable customers to trade in their old models for the latest iPhones, iPad and Macs on launch.
Combined with Machine Learning, this intelligent network will enable brands to design products that better meet consumer needs while accomplishing societal goals like lowering carbon footprints. While master brands with an entire ecosystem of products will have an inherent advantage, an intelligent network of durable consumer devices will also incentivize cooperation among brands.
Does BaaS in FMCG categories like packaged food, personal care, and home care make sense?
I think it does.
While the buy-side and sell-side financial advantages of BaaS in consumer durables do not hold in the FMCG arena, the brand-building benefit of greater consumer connect and insight does.
Let us consider an uber personal care brand that offers oral care, hair care, and skincare products. The brand, through BaaS, can more strongly incentivize its consumers to opt for the entire ecosystem of the brand’s products.
With flexible manufacturing technologies like 3D printing, BaaS can finally enable consumer brands to explore customization.
Based on the deeper relationship that a brand will have with its BaaS customers, the brand can leverage its insight into consumer needs and behaviour to offer a more customized product.
For example, an AC manufacturer can offer a product that filters out specific allergens. Or say a car manufacturer provides a driver’s seat configured for an extra tall customer.
Even in FMCG categories, BaaS enabled customization can be a game-changer. Think of food products with customized spice levels or catering to special nutrition or dietary needs. In personal care and home care, it could be personalized perfumes. Or even special formulations to meet unique requirements.
In the services sector like BFSI, the BaaS model can offer a viable route to market. For example, BaaS could provide health insurance policies with renewal at monthly intervals combined with monthly health check-ups in the health insurance sector. Such policies would increase the interface between the insurance provider and the customer while also offering financial advantages to both.
The next generation of martech will drive the widespread adaptation of BaaS in consumer marketing. This new generation will consist of a technology stack of 5-G-enabled IoT, privacy-respecting data warehousing, analysis and machine learning and flexible manufacturing by technologies like 3D printing.
Beyond technology, BaaS will have a profound impact on consumer brands’ financial and marketing dynamics. Its progress will parallel developments and spread of IoT, 5G, AI and Flexible Manufacturing. Exciting times ahead!

PS: A version of this post appeared as a MxMIndia column on 17th March 2022