Product as a service (PaaS) for traditional product companies: an automotive lease practice evaluation

Abstract

Purpose Product as a service (PaaS) is a method of business innovation for traditional product companies to make their offerings more attractive, move up the value chain and find more customers. However, the customer acceptance of PaaS depends on the market in which it operates. The purpose of this study is to understand, through an automotive lease PaaS evaluation and from an outside-in user perspective, the effects of the main intrinsic and extrinsic factors of a product, its design and brand, on the lease versus buy decision of automobiles by consumers in an emerging market, to help companies transition to a PaaS business model. Design/methodology/approach A survey of actual car owners and lease car users was conducted. Confirmatory factor analysis was used to test the measurement model, followed by logistic regression for statistical modeling. As a practice evaluation of an existing PaaS example, this study further explored the expectations and experience of automotive lease users to link practical insights to analytical results and help businesses make a successful transition to PaaS. Findings The results of the study showed the effect of the brand as significant in lease versus buy decisions. Brand loyalty is more important when leasing than when buying a car. However, brand awareness/association is less important for leasing than buying. There was no significant difference in consumer expectations of product design in automotive lease PaaS. Customers who buy and lease cars have the same expectations of the overall product in terms of its key design attributes. Originality/value The literature on PaaS has mostly focused on strategies, frameworks and guidelines for implementation and empirical studies are limited. Comparative analyses between PaaS and traditional ownership models are also limited. It is unclear how consumers’ expectations differ between PaaS and traditional ownership models, especially in emerging markets, because PaaS’s success depends on the market in which it operates. This study addresses this gap in the literature.