Working Paper | HBS Working Paper Series | 2008

Contracting for Servicizing

by Michael W. Toffel

Abstract

Servicizing, a novel business practice that sells product functionality rather than products, has been touted as an environmentally beneficial business practice. This paper describes how servicizing transactions mitigate some problems associated with sales transactions, but creates several others. The success of servicizing—or product service systems—requires manufacturers to develop contracts that attract customers while protecting their interests. Several propositions are offered to facilitate empirical testing of the concepts discussed.

Keywords: Customer Focus and Relationships; Contracts; Market Transactions; Service Delivery; Service Operations; Sales;

Citation:

Toffel, Michael W. "Contracting for Servicizing." Harvard Business School Working Paper, No. 08-063, February 2008. (February 2008.)