A well-documented example of selling equipment by use comes from a compressor manufacturer that, in this model, does not ask the customer to buy a compressor. Kaeser describes its SIGMA AIR UTILITY operator model in one line: “all you pay for is the compressed air you actually use.” Kaeser analyses the customer’s needs and then will “build, install and operate the compressed air system.”
Read the detail, though, and it is not quite pure pay-per-use. The customer pays “a fixed basic price that covers an agreed quantity of compressed air. When larger amounts are needed, a fixed contractual price applies for the additional quantities used.” There is a floor, and then a meter. That detail says a great deal about what it takes to sell equipment this way.
Key Takeaways
- Selling by use turns a one-off sale into a long contract in which the manufacturer carries the risk that the machine sits idle.
- Even well-established usage models often combine a fixed base fee with a metered charge above it, because pure pay-per-use shifts all of the volume risk onto the manufacturer.
- The meter becomes the contract: what is measured, who measures it, and whether both sides trust the reading.
- Revenue now depends on the machine running, so uptime stops being a customer problem and becomes the manufacturer’s income.
What Changes When You Sell Use Instead of a Machine
In a conventional sale, the manufacturer’s revenue is fixed on the day the invoice is paid. What happens next, how hard the machine is worked, whether it breaks down, whether it sits unused for months, is largely the customer’s concern, softened by a warranty.
A usage model reverses that. The customer avoids the capital purchase; as Kaeser puts it, investments in the equipment “are no longer needed.” The manufacturer takes on a stream of income that depends entirely on the machine being used, over a contract that may run for years.
That is attractive for a customer whose demand varies, and potentially valuable for a manufacturer that wants a closer, longer relationship with its installed base. It is also a completely different risk profile, and the risk has to be priced.
Why Even the Pioneers Keep a Base Fee
If revenue depends only on use, the manufacturer absorbs every quiet month. A customer’s slowdown, a seasonal dip or a line that is idle for retooling all become the manufacturer’s lost income, while the costs of owning, installing and maintaining the machine continue regardless.
That is why a fixed element is so common. Kaeser’s model pairs a basic price covering an agreed quantity with a contractual price for anything above it, and states that “all prices remain in effect for the entire duration of the contract.” The customer gets predictability and variable cost above the floor. The manufacturer gets a revenue base that covers its fixed commitment.
The practical lesson is that “pay-per-use” is usually a spectrum rather than a switch. Deciding where on it to sit depends on how well you can predict each customer’s usage, which depends on having data about how comparable machines are actually used.
The Meter Becomes the Contract
In a usage model, the unit of measurement is the price list. It might be a volume of output, a number of cycles or operating hours. Whatever it is, both sides have to agree on it every billing period, for the life of the contract.
That raises questions a conventional sale never asks. Who takes the reading, and how? What happens if the measurement fails for a week? Does time spent running idle count as use? What if the customer disputes an invoice by pointing at their own records?
A meter that the customer does not trust turns every invoice into a negotiation. The models that work tend to rely on measurement that is automatic, continuous and visible to both parties, so the invoice is a summary of a record both can already see rather than a claim one side has to accept.
Choosing What to Charge For
The ideal unit reflects the value the customer receives. Compressed air lends itself to volume. For many machines, output is harder to measure directly, and operating hours become the practical meter.
Runtime is a reasonable proxy, and it is honest to acknowledge its limits. A machine idling for an hour is running but not producing, and a customer paying by the hour will notice. That argues for measuring enough to separate genuine work from idling where the difference matters, or for pricing that accounts for it.
The same data answers the pricing question before the contract is signed. How many hours does a typical customer actually run this machine, and how widely does that vary? Without that, a manufacturer is setting a price on a guess. Utilisation itself, and how to calculate it properly, is covered in how to calculate and measure fleet utilisation rate.
Uptime Becomes Your Revenue
The largest operational change is in incentives. Under a sale, a breakdown costs the customer production and costs the manufacturer, at most, a warranty repair. Under a usage model, a machine that is down earns nothing.
That makes preventive maintenance a revenue decision rather than a service cost. Knowing a machine’s condition, catching problems early and scheduling work around real usage all protect the income stream directly. Kaeser’s own description leans on this, pointing to its teleservice and service network to keep supply available. The operator-side view of the same economics is in how to prevent equipment downtime before it costs you.
It also means the manufacturer needs to know, continuously, whether each machine under contract is running. A usage business that learns about downtime from the customer’s complaint is already losing money.
What to Decide Before Offering It
Decide the unit of measurement and how it will be recorded automatically. Decide what counts as use, including idle running and time lost to faults. Set a base fee from real usage data for comparable machines, not from an estimate. Agree how both parties can see the readings, and how disputes and measurement gaps are handled. And plan who carries maintenance, since under this model downtime is your cost.
Most of these are commercial decisions that rest on a technical foundation: a reliable, shared record of how each machine is being used.
Where ARMOR™ Fits
ARMOR™ provides the measurement a usage model depends on. ARMOR 4+™ reports runtime hours, voltage and current from each machine into ARMOR Asset Central™, continuously and automatically, creating a usage record that the manufacturer, dealer and customer can each see.
That serves both halves of the problem: pricing, from real usage data across comparable machines, and billing, from a meter neither side has to read by hand. The same data shows when a machine under contract has stopped running.
ARMOR™ does not design pricing or handle billing, and whether a usage model suits a product is a commercial decision. It supplies the trusted usage record those decisions rest on. The unit installs non-destructively on standard wiring harnesses, with no bill-of-materials redesign; how it is built in at the production stage is described on the ARMOR™ for Equipment Manufacturers page.
Frequently Asked Questions
Is pay-per-use better than selling the machine?
Not universally. It suits customers with variable demand and manufacturers able to carry and finance the equipment and the utilisation risk. For many products and customers, a conventional sale with a service contract remains the better fit.
Do we have to own the machine to offer this?
Not necessarily. Arrangements vary, including models involving a financing partner. What does not vary is the need for a reliable meter and for someone to be responsible for keeping the machine running.
Is runtime a fair basis for billing?
It can be, if both sides understand its limits. Runtime measures time running, not output, so idle running needs to be addressed in the contract or measured separately where it matters.
What happens if the connection drops and a reading is missed?
The contract should say. Possible approaches include estimating from the surrounding readings or falling back to the base fee for the gap. What matters is agreeing the rule before it happens, not during a dispute.
See how ARMOR™ is built into equipment like yours, at the build stage. ARMOR™ for Equipment Manufacturers
