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In an increasingly competitive global market, almost all industries are in the midst of a servitization transformation. By shifting from just selling manufactured products to also providing services, product-driven companies are unlocking new revenue streams, enhancing customer satisfaction, and gaining a competitive edge.
Service oriented, service contracts, customers based, servitization models, remote monitoring, proactive maintenance, servitized business model, support services
Redefining Manufacturing Through Services
Servitization, also known as solution selling and advanced services, involves the bundling of manufactured products with value-added services, such as maintenance, repairs, training, and data analytics. With this shift, manufacturers move beyond selling individual products to selling comprehensive solutions that address evolving buyer needs.
By adopting a customer-focused strategy, businesses use a “solution selling” model to drive growth and thrive in today’s competitive landscape.
In essence, this value-based strategy expands a company’s capabilities to deliver a greater customer experience.
How Does Servitization Work?
Harvard Business School Professor Theodore Levitt famously said: “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!” It’s probably one of the most well-known quotes in marketing, and it’s just as true today.
Imagine you’re a manufacturer of industrial equipment. Selling just a drill press doesn’t solve the buyer’s problem because it doesn’t address their core need: creating the hole. By just focusing on the drill press, you’re missing the bigger picture and limiting your potential.
By adding maintenance services, you’re not just selling a drill; you’re providing a solution to your customer’s problem: the need to drill a quarter-inch hole. You’re delivering the desired outcome, not just the tool to achieve it.
Examples of buying the outcome, include:
- Philips offers “Lighting-as-a-Service” to airports. Instead of selling lamps, they provide LED lighting systems and take full responsibility for performance and durability. This approach cuts electricity use by 50% and lowers costs.
- Rolls-Royce no longer just sells jet engines. With their “power-by-the-hour” model, customers pay for engine performance instead of owning the equipment. It’s a clear shift from ownership to outcomes.
- Caterpillar provides “Equipment-as-a-Service,” which includes equipment rental, maintenance, and repair. This gives customers the tools they need—when they need them—without the hassle or cost of owning and maintaining them.
- Software-as-a-Service (SaaS) follows a similar model. Instead of buying and maintaining software, customers access it through a subscription. It’s simpler, always up to date, and focused on delivering value, not just a product.
The Drivers Behind the Shift to Service-Based Models
The shift from selling products to providing services, is behind driven by a perfect storm of factors. We are seeing three key factors driving the shift to this outcome-based business models.:
#1 Evolving Customer Needs
Today’s customers demand more than just products; they seek solutions and outcomes. In fact, the rising demand from a new generation of consumers is also driving the need to “not own things.”
This minimalistic idea of using rather than owning is making its way into the B2B segment, as well. ‘Outcomes-as-a-Service’ is quickly emerging as the way companies buy services from vendors. Increasingly, B2B customers no longer purchase products but rather purchase access to the value or the output these products deliver.
From the vendors’ perspective, instead of pushing more products, they are aligned with customers on efficient operations and preventative maintenance. This reinforces the customer relationship, creating longer lifecycles and more strategic positioning. From the buyer side, non-ownership of assets or outcome-based pricing reduces their risk and preserves cash.
#2 Sustainability Demands
Environmental concerns are demanding that we eliminate supply chain waste and aim for the continual use of resources. This is part of the quest to use the world’s scarce resources in a much more efficient way – which is a key pillar of the circular economy.
Outcome-based selling offers businesses, particularly manufacturing companies, the opportunity to reconfigure their product lifecycle from a linear model to incorporate more circular principles. Conserving production resources makes products more refurbishable and sustainable long-term.
In the new economy, wasteful sellers will not be tolerated by buyers. And as pressure increases, we may even find they are legislated against.
#3 Profitability
From a business perspective, including advanced services can help avoid the steep investments needed to launch new products. Moreover, instead of one-time revenues arising from product sales, value-added services deliver a continuous revenue stream. Costed correctly, these can create higher profit margins compared to only selling products.
What’s more, selling services connected to the company’s product base helps balance the unpredictability of customer demand and the seasonality of sales. This can also bring an opportunity to capitalize on products during the entire life-cycle. For buyers, advanced services can reduce risk and free up cash.
Recommended Customer Stories
Key Challenges
Outcome-based selling offers immense potential for manufacturers to unlock new revenue streams, strengthen customer relationships, and differentiate themselves in a highly competitive market. It also presents a number of challenges when implementing this strategy successfully.
Key challenges include:
- Organizational Structure: Employees, particularly those in sales and operations, may need to adapt to new roles and responsibilities. Building new teams and processes require systems to support data capture, collaboration, and transparency.
- Customer Relationship Management: A deep understanding of customer needs, preferences, and evolving expectations is required to effectively define and bundle products with relevant and profitable services.
- Risk Management: Services often involve long-term contracts and commitments. Operational risks, such as equipment failure, supply chain disruption, labor shortages, or cost overruns, put those contracts at risk.
- Implementing Complexity: Developing and managing diverse service offerings is challenging. These packages can include a variety of complex components and options, as well as various pricing options.
How CPQ Empowers Servitized Manufacturing
The servitization megatrend is happening now. More manufacturing companies are moving to outcome-based and as-a-service business models. The best part? Both buyers and sellers see real value—financially and socially.
It’s a true win-win, with more predictable revenue streams, better competitiveness, and happier customers.
To unlock this value, manufacturers need their sales teams to work fast, handle complex offers, and always meet customer expectations. That’s where a modern CPQ solution is essential.
A strong CPQ platform helps businesses configure advanced service contracts, bundle products with support services, and price dynamically based on usage, outcomes, or subscriptions. It supports a truly service-oriented sales model, enabling quick, flexible quoting that builds long-term customer relationships.
But that’s just the start.
With XaitCPQ, manufacturers go further. It integrates smoothly with top CRMs like Salesforce, Microsoft Dynamics 365, and HubSpot, creating a smart, unified sales system. Sales reps get real-time customer data to craft personalized proposals that combine products with remote monitoring, proactive maintenance, and other advanced servitization models.
The transformation is clear: instead of slow, error-prone manual quotes, teams create accurate, scalable offers in minutes, not days. The process is collaborative, automated, and always current. Customers don’t just buy equipment anymore—they subscribe to outcomes. Sales teams don’t just react—they lead the way.
Why choose XaitCPQ?
Because complexity is our strength. Whether handling highly customized equipment or bundled service offerings, XaitCPQ manages deep configuration logic without slowing down. It helps manufacturers move from simply selling products to delivering lasting, real value—powered by smart automation, deep integration, and unmatched ease of use.
This is quoting for the future of manufacturing
Learn how CPQ software enables businesses to achieve this:
