April 14, 2021
The traditional line between products and services are getting thinner and used interchangeably. More products are cross sold as a service, and more Services are up sold as products.
As there are commonalities between service offerings and products, there is also differences. By understanding the nuances, you can choose the best option to maximize your revenue potential.
Traditionally, product is tangible that you can touch, feel, smell, etc. For example, we use many physical products on a daily basis such as phones, computers, automobiles, etc. We’re intrigued by their elegant design, quality workmanship, pricing, etc. We can touch it, feel it and want to have it.
The software industry has created many products such as Microsoft Office 365, TurboTax, etc., that doesn’t quite fit the physical product standards, but are offered as products. Either way, some of the common characteristics are:
Service is intangible, which is hard to touch or feel, but creates an internal satisfaction.
For example, a good cleaning service makes feel good, a tailoring service makes look good or catering services makes happier. In the service scenario, it is hard to see the value upfront until it is consumed.
The challenge of the service is it changes person to person. The result produced by service can be viewed differently by two different individuals. At the same time, the same service offered to the same person at different times can be perceived differently. Hence, the variability leads to customization and personalized based on the unique needs.
Some of the common characteristics of a Service are:
Irrespective of the differences, both are created for addressing customer needs. While product offers quick off-the-shelf solution, service offers more customized solution. By choosing the right offering, you can maximize the revenue potential.
Some of the benefits of turning services into products are:
Start with a service
Services are a great way to properly understand customer problems or pain points. Service gives the opportunity to meet with customers, find their specific needs and provide appropriate solutions. By continue servicing the customer, you can see the commonalities of customer problems, which might help translate into a product.
Bypassing this critical step and productizing services upfront, will reduce the opportunity to learn customer needs properly, and take longer time to find product-market fit.
Additionally, offering service to multiple customers help to build necessary assets overtime. The assets may include building necessary human resources, process improvements, tools and techniques.
Products need a large customer base with similar needs. If you see increased number of customer asking for the same service, then it might be a right time to productize the service.
One of the key aspect of product is repeatability. Can you create consistent value at a certain price point? Few things to consider are:
As a first step, identify the inputs, process and outputs (deliverables) of your service.
Inputs – prerequisite or items that you need from the customers to successfully deliver the productized service. This may include scope of work, specifications, meetings, information requirements, etc.
Process – How do you intend to deliver the product? What are the resources or tools required to deliver it?
Output – What are the deliverables (or tangible outcomes) produced by the product? These are tangible items (documents, pieces of code, etc.) that the customer will get as a result of the delivery.
The inputs, process and outputs should define a clear boundary of the product – what it can or can’t do.
Outline the service items (or steps) or plan creating deliverables. Each step should produce an incremental value or tangible deliverable to the customer. If you’re productizing a website development service, this may include creating sitemaps, mockups, graphic design, etc. The customer should realize what he/she getting during or end of the delivery.
Identify resources required to produce the deliverables. This may include your delivery team (project managers, designers, developers, etc.), materials, tools, etc.
By understanding the resource requirements and availability, you can establish appropriate timelines. If there are any resource constraints, include additional buffer. Once the customer place the order, you should have the ability to deliver the service within the timelines.
At this step, you should have a clear service description, deliverables, resource requirements and timelines. As a next step, create a fixed fee and time & material pricing model as you see fit.
If there are any pricing assumptions, include those into the service description. Ensure the service can be delivered within the price.
You can offer customers flexibility by creating multiple service packages with different price points. FreelancingTeams supports 3 packages – basic, standard and plus. You can package “must-have” service items as a basic package, and include additional items as part of standard and plus package.
Each service package must be different and provide incremental value to the customers. For example, a basic website package can offer the following packages:
The service package offers your customer certain level of personalization based on their unique needs.
Services are a great way to start a business, and products are best way to scale your business. Service provides better understand customer unique needs. If you see large customer base, repeatability and improvements, you can productize a service. FreelancingTeams provides templates, tools to turn your services into product and successfully deliver to customers.