The service industry has evolved continuously over the past three decades. At every step, the underlying ethos has aimed to enable client success. This has forced service providers such as consulting firms and agencies to continually reinvent the way they work. Digitization has additionally fueled this opportunity space on a massive scale. Productization of services is an increasingly popular way of realizing this ethos and is one of the major trends in the industry.
But what is productization actually?
The word is appearing more and more frequently in the service sector. It refers to the process of developing a service into a product. But it has hardly penetrated the German market so far, and somehow no one seems to know quite what this is really all about. The line between product and service is becoming more blurred than ever. But in order to recognize and exploit the true potential, companies today need to make structural changes, develop a “product mentality” and build internal product organizations that focus on this niche. So once again, the service industry urgently needs to evolve and transform, and productization is a promising path.
This means productization in concrete terms
Services can be made productive, packaged and marketed just like physical products. Productization here represents the process of developing or modifying a process, idea or service to make it marketable for sale to the public. By transforming intellectual capital or knowledge into a product, customers receive a cohesive and standardized step-by-step guide to solving a specific business problem. This empowers them to work on their own to a high degree without having to have methodological expertise to do so. It does not matter whether customers come from the same or a completely different industry.
A productized service also makes it possible to clearly present the services before customers commit resources to the new project. Potential customers can thus better decide whether it is the right solution for them and whether they want to use the service. They know from the start what the end result of the product will be and how much time and resources it will take. The appropriate tools needed before starting the project, as well as individual instructions for each phase of the project, content description of the procedure, as well as all documents (e.g. templates) and information about helpful digital tools for support are provided to the customers. This gives customers unprecedented transparency and enables them to work independently, efficiently and flexibly.
Whereas most services involve working closely with a customer to create an individual and precisely tailored solution, productization generates a solution for a large number of buyers. Instead of a customized service, a pre-defined process delivers the same result for every customer. In essence, then, productization is about reusing a customized service and product package that has already been provided to a specific customer and turning it into a standard product.
As complex issues are difficult to map in a product, Productization does not replace conventional, individual services. Productized services are particularly suitable for smaller, self-contained projects and thus represent an ideal extension of the classic service business.
Productization of services holds enormous potential
The productization of services offers potential for a real revolution. It not only delivers numerous added values for end customers, but also represents a strategic extension for service companies.
- Scalability
Productized offerings offer better scaling potential compared to individual services, as the same solution can be sold to multiple customers with minimal time required for customization, reducing resource dependency. Establishing a productized service offering that is easy to market also reaches new customer groups and thus supports greater market penetration. Productization thus creates an unprecedented opportunity to scale service business models. - Cost reduction through standardization
Preparing pitch presentations and writing proposals are two of the biggest bottlenecks for service companies. By productizing services, this time can be used for other tasks. Selling a product-based offering is a standardized and repeatable process that significantly reduces overall costs in the sales cycle and results in lower acquisition costs. - More capacity for knowledge development
Methods and expertise are among the most important assets for many service providers. At the same time, the half-life of knowledge is decreasing. Productization creates free capacities that can be invested in supporting new customers or new subject areas. - Incentivizing knowledge work
Productization makes it possible for the first time to market one’s own knowledge directly and to allow everyone involved in development to share in the success. The knowledge of the employees thus contributes directly to the company’s success and knowledge work takes on a completely new significance. - Improvement through data and collective intelligence.
Unlike an individual service, where only a single customer feedback is given, a productized service has the data of several customers available. Their problems and approaches can be collected and analyzed in detail. This in turn enables continuous improvement of the product based on market and user data. As a result, the project approach becomes increasingly efficient from customer to customer. In addition, this approach enables effective risk management and avoids unnecessary expenditure of resources. - Radical focus on customer added value
Last but not least: customer benefit! At the heart of every service is added value for the customer. However, services are intangible activities that can’t be seen or touched. This is scary for potential customers because they don’t know what they’ve bought until they actually use it. This fear delays the purchase decision. However, if you choose to productize and specifically define your service, it becomes much easier and safer for a customer to say yes. This gives customers unprecedented transparency and allows them to work independently, efficiently and flexibly. These are undeniable added values, which in turn become a real differentiator and competitive advantage for the service company offering the productized services.
From the service to the idea to the finished product
There’s one big secret to successful productive services consulting that most people don’t talk about. And that is: Focus.
As the scope of the project creeps up, it becomes difficult to create a successful product-specific offering. If you don’t focus on the process, the customer profile, and the problem to be solved, you end up with an unprofitable, complicated mess. Therefore, it is essential to reduce the productized service to its essentials. It is therefore very important to have a well thought-out concept of what the productized offering could look like, based on what customers actually need. To this end, product ideas should first and foremost be narrowed down. At this stage, the target market, the problem to be solved, and the format of the product must be defined:
- Service target market vs. product target market
The first thing to do is to define the customer group that is to be reached with the finished product. It is important to find out why customers would prefer the product over a service. Possible arguments for this are the budget and the resources required for this, such as personnel and time. But complexity also plays an immense role. - The problem
In conventional services, customers usually solve several problems at the same time. However, this is not possible with a product. Consequently, a problem must be identified that can be solved with a specific product. This can be an already known problem or something completely new. When making the selection, it can be helpful to look back at the email conversations with customers and ask yourself what your own customers have most often asked for help with or what projects, in the past. - Product format selection
Considering the target market to be reached and the problem to be solved, the format that best fits the solution must be chosen. Popular product formats so far are:
* Books and e-books: They help customers find solutions themselves and are therefore very suitable for problems that require little guidance.
* Tutorials and courses: When problem solving requires a lot of visuals or demonstrations, these formats are best.
* Licensed products: They are useful when the capabilities sold by means of a product are capable of producing things that can be used or reused by many people or organizations.
* Templates or stencils: If the processes, capabilities or solutions can be documented or presented in a way that customers can copy and adapt, the two formats are ideal.
* Apps or Software-as-a-Service (SaaS) are a good approach if software can solve the problem.
Once it has been determined which format will be used, it is important to figure out how much time product development will take and how it can be spent. To get the product ready in time for the chosen launch date, it is important to follow lean development with agile principles, which makes it possible to do smaller launches while getting feedback from customers.
The marketing industry paves the way
Productization of services are not only profitable for small businesses, solo consultants and freelancers. Agencies and consulting companies can also scale their impact and revenue with products. OMR, the largest knowledge and inspiration platform for the digital and marketing scene in Europe, shows how successfully. Since 2011, the platform has been networking marketing experts from various countries with its conferences and has grown significantly to date. In addition to studies, seminars, parties and podcasts, the platform also offers a variety of reports for marketers. The team around founder Philipp Westermeyer decided to productize their concentrated knowledge by compiling the knowledge of numerous experts into reports, which are offered for purchase as PDF downloads via their homepage.
By means of practical guides and analyses on the most important online marketing topics, customers can now educate themselves independently and delve deeper into the world of marketing. In the process, they are shown possible approaches to solving their problems themselves. One example of such a report is the Professional Guide to Instagram Marketing. In addition to expert Instagram marketing knowledge, customers can also expect downloads and best practices to help them implement their own solutions.
Which industries will follow next?
The success of productization in the marketing industry should be an incentive for other service industries. One industry in which I see great potential for productizing individual offerings is the consulting industry. We have developed Squills to leverage this potential.
