Product life extension business models prolong the lifespan of products via durable design, reuse and repair, and remanufacturing/refurbishment strategies.
What is it?
Product life extension models – as the name already indicates – involve extending the usage lifespan of products (OECD, 2019). The goal is to make sure that materials remain in the economy for longer, and thereby reduce the extraction of new resources. To achieve this, manufacturers can design their products in a way that increases their longevity and durability (also known as long life model), such as the LED light bulb (OECD, 2019; Rizos et al., 2017). Additionally, reuse and repair activities ensure that products are used for a longer period instead of being discarded after a few months or years. Furthermore, remanufacturing processes ensure that products can enter an entirely new service or product life (OECD, 2019). Product improvement through design seems to be less common than through maintenance and recovery procedures (Ertz et al., 2019).
Lüdeke-Freund et al. (2019) reassembled the above-mentioned three strategies and outlined three business model patterns, which fit the product-life extension category, namely, Repair & maintenance, Reuse & redistribution, Refurbishment & remanufacturing.
In which context is product life extension useful?
Product life extension models are not necessarily done by the original equipment manufacturer (OEM) with the exception of the classic long-life model (explained below). Thus, this provides business opportunities to third parties, which can offer repair, refurbishment, or remanufacturing services. The (re)produced products are of similar quality but come at a considerably lower cost (OECD, 2019). OEMs mainly adopt life extension activities mainly because of two reasons. First, adoption of these models is a strategic decision to address competition of third parties and fosters customer loyalty at the same time. Second, if we consider remanufacturing, procurement risks of certain materials can be partially mitigated (OECD, 2019).
What is important to keep in mind when aiming to extend the product life of your offerings?
Classic long life: Companies that produce higher quality products have the option to charge customers higher prices, which enables them to offset low sales volumes by a premium pricing strategy (OECD, 2019). These types of products are usually more durable and focus on customer service, e.g., via repair services (Bocken et al., 2016; Rizos et al., 2017). This reduces the so-called planned obsolescence (i.e., products are made to break) which often triggers the excessive use of natural resources and causes environmental damage (Guiltinan, 2009; Lacy and Rutqvist, 2015). Selling the product as a service, rather than the product itself might be a solution (see more details in the “product as a service” business models section) (Rizos et al., 2017). However, this might in some cases postpone market penetration, e.g., for household appliances or cars as the transition from one product ‘generation’ to another could be characterized by certain benefits such as reduced energy or fuel consumption.
Direct use: In many cases, consumers decide to replace existing products with updated versions. The direct use strategy tries to discourage the disposal of functioning products and tries to keep them in circulation. Instead of OEMs, third parties occupy this space in the market by distributing existing goods, e.g., via internet reselling (OECD, 2019). The remaining value of the product should be high enough for reselling as the obtained margins are usually small. This can only be ensured if mostly undamaged products are resold that are in a good condition. However, internet selling platforms need to make sure that a critical mass of sellers and buyers is existing (OECD, 2019). Maintenance and repair and refurbishment/remanufacturing: By fixing or replacing broken components, product maintenance and repair ensures that products reach their full expected service life. A higher premium and building customer loyalty are central advantages. higher brand loyalty (OECD, 2019). Refurbishment and remanufacturing involve the restoration of used products, either for resale or an additional fee to (new) owners. For refurbishment, aesthetic improvements is of central concern whereas remanufacturing involves the restoration of used products to their original level of functionality (OECD, 2019).