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.
Aspect
Explanation
Definition
Productized Services refer to a business model where services that were traditionally offered on a customized or project basis are packaged and sold as standardized, ready-to-use solutions, similar to products. These services are systematized, have fixed pricing, and are often delivered with defined processes, making them easier to market, sell, and scale. The goal is to provide efficiency, clarity, and value to customers while streamlining service delivery for the provider.
Key Concepts
– Standardization: Involves turning services into standardized offerings with fixed features and pricing. – Process Efficiency: Relies on defined processes to ensure consistent service delivery. – Scalability: Aims to grow the business by offering services to a larger customer base. – Customer Experience: Focuses on providing a seamless and predictable customer experience. – Value Packaging: Emphasizes the packaging of services in ways that deliver clear value to customers.
Characteristics
– Fixed Packages: Services are offered in pre-defined packages with set features and pricing. – Clear Pricing: Customers know the cost upfront, reducing ambiguity. – Systematized Processes: Services are delivered using standardized processes. – Limited Customization: Minimal customization is allowed to maintain efficiency. – Efficiency and Scalability: Designed for efficient delivery and scaling.
Implications
– Customer Convenience: Provides customers with easy-to-understand options and pricing. – Operational Efficiency: Streamlines service delivery for the business, reducing the need for customization. – Scalability: Allows for scaling the business more easily than purely custom services. – Competition: May face competition from traditional custom service providers. – Customer Expectations: Customers expect consistency and quality in service delivery.
Advantages
– Clarity: Customers have a clear understanding of what they’re getting and at what cost. – Efficiency: Standardized processes lead to efficient service delivery. – Scalability: Easier to scale the business as offerings are standardized. – Predictable Revenue: Fixed pricing can lead to predictable revenue streams. – Customer Focus: Emphasizes delivering value to customers through standardized offerings.
Drawbacks
– Limited Customization: Less room for tailoring services to unique customer needs. – Competitive Pressure: May face competition from both custom service providers and other productized service providers. – Complexity: Balancing standardization and quality can be challenging. – Customer Fit: Some customers may prefer fully customized solutions. – Initial Setup: Requires the development of standardized packages and processes.
Applications
– Digital Marketing Services: Offering standardized SEO, social media management, or content marketing packages. – Graphic Design Services: Providing fixed-price design packages for logos, websites, or branding. – Consulting Services: Packaging consulting expertise into fixed-topic workshops or reports. – SaaS Products with Services: Combining software with setup and support services as packages. – E-learning Programs: Offering pre-built online courses and training materials.
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:
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.
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.
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).
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.
Key Highlights
Productized Services Defined:
Productized services are services transformed into clearly defined offerings with fixed parameters and pricing.
They leverage the predictability and value proposition of products in the service industry.
This approach is aligned with the subscription-based economy’s development.
Comparison to Products:
Productized services resemble products in that they have a fixed price, well-defined scope, client testimonials, and a clear purchasing process.
They allow service providers to sell their offerings multiple times and offer customers price predictability.
Benefits for Providers:
Service providers can scale their business through productized services with or without their direct involvement.
They enable scaling by focusing on a specific pain point and utilizing a standardized, efficient delivery process.
Characteristics of Productized Services:
Productized services target specific customer pain points.
They have a standardized, repeatable delivery process that ensures efficiency and customer satisfaction.
Ready-made packages with clear pricing tiers simplify the offering and improve customer understanding.
Revenue Models and Pricing:
Various revenue models are available, such as subscriptions, retainers, or one-time billing.
Fixed pricing is a common feature of productized services, often with multiple options to choose from.
Beneficiaries of Productized Services:
Freelancers can benefit by shifting from time-based billing to productized services.
Agencies, both digital and non-digital, can scale while maintaining predictability and serving their best clients.
Software companies can use productized services for software implementation or onboarding.
Start-ups and Validation:
Start-ups can validate business ideas, generate revenue, or self-fund operations through productized services.
These services can aid in creating an MVP and surviving the initial growth phase.
Examples of Productized Services:
High Spark offers presentation and story creation for marketing campaigns.
Audience Ops provides content, podcasting, and case study services for business growth.
Growth Geeks offers on-demand digital marketing services like Facebook Ads and social media content.
Key Takeaways:
Productized services have clear parameters and pricing, targeting specific customer needs.
They help providers scale, simplify the buying process, and improve cash flow predictability.
They work well for freelancers, agencies, software companies, and start-ups.
Related Frameworks, Models, Concepts
Description
When to Apply
Productized Services
– A business model where services are packaged and sold as products, with defined scopes and pricing. – Streamlines service delivery by standardizing offerings.
– Ideal for service providers looking to scale operations and simplify client engagements by offering clear, predefined packages.
Service Design
– The activity of planning and organizing people, infrastructure, communication, and material components of a service to improve its quality and the interaction between service provider and customers.
– Applied in services that require a systematic approach to making services more useful, usable, efficient, and customer-friendly.
Subscription Model
– A business model where customers pay a recurring price at regular intervals for access to a product or service.
– Suitable for businesses aiming for steady revenue streams and long-term customer engagement, like software as a service (SaaS) platforms.
Value-Based Pricing
– Pricing strategy where prices are based on the perceived or estimated value of a product or service to the customer rather than historical pricing or the cost of production.
– Used when services or products offer significant unique value or benefits to customers, emphasizing quality or outcome over cost.
Freemium Model
– A pricing strategy where a product or service (typically a digital offering) is provided free of charge, but money is charged for additional features, services, or virtual goods.
– Effective in markets where scaling at low cost is possible and where a premium could be charged for advanced features.
Consultative Selling
– A sales approach that prioritizes relationships and open dialogue to identify and provide solutions to a customer’s needs. It is less focused on pushing a product and more on creating value for the customer.
– Ideal for complex markets where customer needs are specific and evolving, requiring a deep understanding and tailored solutions.
Managed Services
– A model where a company outsources specific IT or business functions to a service provider who manages and assumes responsibility for providing a defined set of services to its clients proactively.
– Used by companies looking to reduce operational costs, improve efficiency, and gain access to specialized expertise in IT and business processes.
Bundling
– Offering several products or services together as a single combined package often at a lower price than they would cost individually.
– Suitable for businesses that want to increase the perceived value of their offerings and encourage customers to purchase more by combining related services or products.
Performance-Based Contracting
– A contractual arrangement where payment is contingent upon achieving specific results or milestones that are agreed upon by the buyer and seller.
– Applied in scenarios where the focus is on delivering results and aligning incentives between service providers and clients.
Licensing Model
– A business model where the owner of a product allows someone else to use the product under certain conditions, often generating a continuous revenue stream from the licensee.
– Effective for intellectual property and digital products, where control over usage and distribution can be maintained while broadening market reach.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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