The Power of Productized Services
23 June 2017
UPS and FedEx are the big boys on the block when it comes to delivering stuff. In 2016, UPS delivered 4.9 billion packages and documents; FedEx delivers over 13 million shipments each business day.
Yet every time you send something with UPS or FedEx, you know exactly what you’re going to get. You know when your package is likely to arrive at it’s destination, you pay up front for the service you’re getting, and almost 100% of the time your package gets to the right place at the right time.
UPS and FedEx have productized their delivery services to the point where they are global powerhouses and in some countries are giving the government-run postal services a hard time.
If you’re in a service business, you can pick a number of lessons from UPS and FedEx.
What are productized services?
Productized services are services packaged just like products (obvious, right?). When you buy a product, you know what you’re getting. The price is set, you know what the features and benefits are, you know when you’re getting it and the terms and conditions are available before you buy.
Productized services have the same characteristics:
- The service you’re going to deliver is defined and fixed.
- The delivery schedule is fixed.
- The scope of the work is fixed.
- The features and benefits are defined.
But most importantly, the process you’re going to follow to deliver the service is defined up front. You – and your client – know what’s going to happen when, who needs to do what at each step in the process and what to expect next.
Why should you productize your services?
There are benefits to you and your clients to package your services as products. As a client I love productized services – because I know what I’m getting and how much it’s going to cost me. And as a provider of packaged services I know what I committed to deliver – and when.
But there’s more to it. With productized service your clients know:
- what to expect;
- when to expect it;
- how much it costs; and
- how it works.
As a service provider, there are benefits for you too:
- you know exactly what you need to deliver;
- you know when you need to deliver it; and
- you know what your revenue is (and you can collect up front).
And now the big benefits kick in. As you get more practiced at delivering your services, you can optimize. You can do things faster, speeding up your side of the process and reducing the time it takes to do stuff. So you spend less time delivering your service – and you’re getting the same revenue.
When you’re selling time for money this is not a bad deal. In fact, it’s great.
Both you and your clients benefit from productized services. Everyone wins.
How do you go about productizing your services?
Here are four steps you can take to start the journey of productizing your services:
1. Inventory your current services
Make a list of your current services. If it’s just one, that’s fine. But you probably already have add-ons or extras you optionally deliver to your clients. List those as well.
2. Get feedback from your clients
Now go speak to your clients (you’re going to need this information for the next step).
Ask them what made it difficult for them to hire you. Find out what they think would have made it easier to hire you and if they would recommend your services to others.
Keep your questions open-ended. Don’t ask if they would like productized services – that’s a closed question because they can really only answer “yes” or “no”. Try something along the lines of “what would make it easier to hire me next time?” – that’s an open-ended question.
3. Create a service ladder
A service ladder is a range of services starting small and going up in price, features and benefits. You want to make it easy for clients to buy from you the first time, so providing a low-cost entry-level offering is important. If they’re happy with what you delivered they are more likely to come back for more.
(For more information on product and service ladders, see the links at the bottom of this article.)
The easiest way to build your service ladder is as a sequence of services that build on each other. So, for example, if you design and build web sites, your entry-level offering could be a current web site review (you could even offer this for free as a lead magnet). Then your ladder could progress to a basic web site and add SEO and social media as you go up the ladder.
As you’re designing your service ladder, use your client feedback to make sure that you’re addressing their concerns. For example, if your clients suggest that web site design takes too long, you may want to design your services so that you can rapidly deliver the first version of a new web site.
4. Create processes around delivering your productized services
With your service ladder in hand, you now need to design a delivery process for each service. Both you and your clients need to know exactly what you’re going to deliver, when that will happen and who needs to do what.
This is probably the most critical part of productizing your services. You need to predictably deliver a service again and again – and only a well-defined process will help you do that. In addition, once you have a process, you can refine it to get faster and better the next time round.
You don’t need fancy tools to design a process – a simple spreadsheet with steps in sequence is good enough.
One of the things that can kill a process is getting clients to respond in time. So you want to not only design the process well with enough time for them to review and provide feedback, you also want to schedule feedback meetings or calls in advance. Keep your clients on track!
Should you productize your services?
If you trade your expertise (time) for money you should seriously consider productizing your services.
If you are a lawyer or accountant productizing your services is a no-brainer. One of the biggest objections I have to hiring a lawyer or accountant is that I don’t know what its going to cost ahead of time – and good lawyers and accountants are expensive. So if I know ahead of time what I’m getting and how much it’s going to cost me I am much more likely to engage one of these professionals.
Creative services are another prime candidate for productizing services. Web site design, marketing or branding services, photographers – make it easy for your clients to buy into your services by offering “no hidden costs” services.
Even technology services, such as app development, are much easier to buy into if I know what I’m getting into before the time. And I can hear the developers screaming already: “my clients dont know what they dont know!” This is true – but good app development starts with a roadmap (fixed price), wire frames (fixed price), prototypes (fixed price)… And so on.
But what if each client wants something different?
Your clients come to you because you’re the expert – so you need to guide them. That means that you are in charge of the process and delivering the results they’re looking for.
So take the lead. Explain to your customers how you work, and if they have something that requires you to bend your process or way of working – take a very conscious decision on whether they are the right client for you.
You can always modify your process or deliverables to meet a specific client’s needs. But you are the expert so keep in mind that you should be guiding how things happen – otherwise your client will be driving something they’re not expect at.
What if my business is too creative to be locked down?
Productizing your services does not mean productizing your creativity. But you want to wrap the magic that you do into a package and process that makes it easy for customers to understand and buy into.
So don’t try to productize your creativity – just the delivery.
I’ve mentioned Worst of All Design in my newsletters before. This branding agency has turned the creative branding process into a series of “products” with predefined activities, deliverables and price – and their customers love it.
Here’s another great example: Stash Wealth have turned the traditional financial advisory business model into a series of products for what they call HENRY’s (High Earners, Not Rich Yet).
With a tag line of “get your (financial) sh*t together” they’re attracting exactly the clients that they want – and doing very well out of it.
Productized services are services that are packaged like products. The price is fixed, deliverables are fixed, features and benefits are fixed. And most importantly, the services are delivered using a pre-defined process with a fixed timeline.
You should productize your services because they are easier to understand, sell and deliver. Clients will now be looking for the deliverables rather than the time you’re devoting to them – and as you learn what works you can get better and faster at delivering the packaged services so that you can work less without earning less.
Productized services are suitable for everyone who trades time for money. Lawyers, accountants, web designers, marketing service providers – even trades can benefit from providing productized services.
Let’s pick another lesson from UPS and FedEx
When you ship a package with UPS or FedEx you have a range of options. Same day, next day, express, sign for delivery (or not) – the list goes on.
Each one of these options is a productized service ranging in price, features and benefits.
UPS and FedEx have wrapped their services into well-defined “products” that are easy to understand and buy into. This is productization to the extreme – and it is the only way in which they can deliver the volume with the reliability we now accept as standard.
You don’t need to be the size of UPS or FedEx to benefit from productized services. But if you’re small you need to be efficient – so the more “productized” you are the easier it is to deliver a valuable service to your customers.
What to do next
For more information on product and service ladders check out my article titled How a product ladder makes it easier for customers to buy – and keeps them coming back for more.
And if you’re serious about productizing your services you will definitely want to grab my upcoming guide on how to do exactly that. This guide is under development right now and slated for release towards the end of June or beginning of July.
Have a great weekend!