Productized Services

Productized services are services that are sold with clearly defined parameters and pricing. In short, that is about taking any product and transforming it into a service. This trend has been strong as the subscription-based economy developed.

Understanding productized services

When you visit the supermarket to buy coffee, you look for your favorite blend, compare prices and sizes between brands, and choose a product to place in your basket. 

The idea behind productized services is much the same. The service for sale has a fixed price, well-defined parameters, client testimonials, and a buy now button just like any product.

When marketed in this way, the service can be sold multiple times over and the business can leverage the attractiveness of price predictability which was once the domain of products only.

While customers see productized services as a compelling value proposition at a fixed price and scope, the individual or company offering the service sees it as a way to scale the business with or without their direct involvement.

More information on who will benefit from productized services is detailed in the last section.

Characteristics of productized services

Productized services differ from more general services in that they target a very specific customer pain point.

In keeping with the predictability of a productized service, the company must utilize a standard, repeatable delivery process that is smooth, efficient, and enjoyable for the customer.

Productized services tend to be presented as ready-made packages with price tiers that are simple to understand.

This enables sellers to avoid repeatedly explaining their offering to new clients and helps them better predict future cash flow.

For clients, there is extra peace of mind because they clearly understand what they will receive (and what is expected of them) and can choose an option that fits within their budget.

In terms of revenue models, there are a few options to choose from. Many SaaS providers offer subscriptions, for example, while others may use retainers or bill for one-time jobs.

In most cases, it’s worth reiterating that the price is fixed and there are several options to select from.

Who will benefit from productized services?

Where do productized services work well? Here are some examples:

  1. Freelancers – productized services may be ideal for freelancers such as writers, designers, and marketers who have become burnt out billing by the hour and trading their time for money.
  2. Agencies – digital and non-digital agencies can also use productized services to scale and drive more predictable revenue growth. This enables them to offer their best services to their best clients without the chaos that ensues when simultaneously dealing with clients who have different needs.
  3. Software companies – these companies can use productized services to help clients implement or onboard software (even if they are not the creator of the software themselves).
  4. Start-ups – in the life of a new company, a productized service can be used to validate the business idea, grow revenue, or self-fund operations. These services can also assist with the rapid creation of an MVP that can be built out over time and help the business survive into the next phase of growth.

Productized service examples

Productized services can be found in most industries from accounting to SEO and content writing to marketing. Below are some examples for a few different industries:

  • High Spark (design) – a creator of presentations and stories for Fortune 500 marketing and sales campaigns.
  • Audience Ops (content) – a company that offers content, podcasting, and case study services to help clients grow their businesses.
  • Growth Geeks (marketing) – offering on-demand digital marketing services such as Facebook Ads, social media content, newsletters, and LinkedIn Groups.

Key takeaways:

  • Productized services are services that are sold with clearly defined parameters and pricing. They differ from more general services in that they target a very specific customer pain point.
  • Productized services tend to be presented as ready-made packages with simple price tiers. This enables sellers to avoid repeatedly having to explain their offering to new clients and helps them better predict future cash flow.
  • Productized services work well for freelancers who are tired of trading their time for money. They are also ideal for start-ups, software companies, and those utilizing the agency business model.

Read Next: Subscription Business ModelHow Does BoxyCharm Make Money, How Does Birchbox Make MoneyHow Does Dollar Shave Club Make Money.

Related Visual Concepts

Subscription Business Model

Subscription-based business models are built on a recurring customer base, where customers usually have access to the product or service rather than their own. The customer can have the upside of the service without owning the good underlying it, which is maintained by the company running the subscription-based business.

Ipsy Business Model

Ipsy is a monthly subscription service for cosmetic and beauty products founded in 2011 by Michelle Phan, Marcelo Camberos, and Jennifer Goldfarb. Phan used her large YouTube following to launch and grow the platform. Ipsy makes money by charging customers monthly for beauty subscription boxes. Various subscription plans are available depending on the beauty product size and customization level. Ipsy also operates an eCommerce store selling branded and in-house beauty products. The company also sells product placement spots to brands eager to receive highly targeted exposure.

Birchbox Business Model

Birchbox is an online American monthly subscription service for skincare, perfume, and other cosmetic items. Birchbox was among the first players to start leveraging a subscription-based model to reshape how value is delivered to customers. Instead of a one-off purchase, Birchbox curates a set of samples that each time are sent to its subscribers, enabling them to discover new cosmetic products while reducing the friction and cost of discovery for new products.

FabFitFun Business Model

FabFitFun is an online subscription box service sending electronics, cosmetics, fitness, wellness, and fashion items every quarter. Founded in 2010, it started as a simple website, and as it gained popularity, thus following later on a similar subscription-based model to Birchbox. It now generates revenues through membership services and brand sponsorships.

Dollar Shave Club Business Model

Dollar Shave Club is an American online subscription service delivering razor blades and grooming products monthly. The Dollar Shave Club business model flipped upside down the “razor and blade” model popularized by Gillette. In short, where Gillette sold its razors at cost while making fat margins on its blades, Dollar Shave Club offered a subscription model to cut off the costs and friction of getting new blades and grooming products with a curated package.

BoxyCharm Business Model

BoxyCharm recognized a gap in the popular beauty subscription box market. Most companies were shipping boxes with sample-sized products that were not on trend or seasonally appropriate. As a proponent of the subscription box business model, BoxyCharm makes money via subscription revenue.

Razor and Blade Business Model

The razor blade business model, also known as the razor-razorblade model, involves selling a product at a lower price to sell a related product later for a profit. The razor and blade business model was popularized by King C. Gillette, founder of the safety razor company Gillette, which sold a durable razor at cost while selling disposable blades at a premium.

HelloFresh Business Model

HelloFresh is a German provider of meal kits founded by Dominik Richter, Thomas Griesel, and Jessica Schultz (née Nilsson) in 2011. HelloFresh has a relatively simple revenue generation model. The company makes money by charging users a weekly subscription fee for meal deliveries.

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