Guide to Productizing Your Services (Part 1)
For service providers like content marketers, SEO and web design agencies, bringing gross profit margins above 40% can become more challenging as they scale. In fact, businesses that sell products achieve much higher gross margins, at 60 to 90%.
If you’re a service provider, does that mean you’re in the wrong industry?
Not at all. By joining the growing wave of agencies that are productizing their services, you’ll reap the rewards that have traditionally belonged solely to companies that produce physical products.
The best part: A lot of your competitors are completely overlooking this strategy.
Take the example of Justin Gray, founder of LeadMD. When he started the digital marketing agency, which provides software that clients can license, the firm would have to reinvent itself for every client, he says. Clients also didn’t understand the full range of services that were available. A year later, the agency began offering packages of clearly defined software products that clients could easily browse through – and they never looked back.
Connex Digital Marketing, an SEO agency, realized that product offerings like its “SEO Audit” pack a much stronger punch than generic “SEO services.”
Other agencies have found offering a free product very helpful in drawing in clients – branding company WorstofAll Design gives clients a free one-hour online training.
This post is the first in a three-part series that will walk you through the whole process of launching productization. We’ll cover everything from technical decisions to how to share your new strategy with existing clients!
How It Works
Say you offer SEO services. Maybe you typically determine what you’ll do for a client, and the price of your services, after a phone consultation. You’re creating a new plan from scratch each time, and that takes a hefty chunk of time.
If you shift to productization, you might begin offering a set price for blogger outreach, a set fee for a certain number of pages optimized, and a set price for an 800-word blog post.
Face it; if you’re in the SEO business, your clients don’t know the rules of the game as well as you. Asking what they want won’t necessarily get them to where they want to be – offering standard services based on what works will.
You may still need to offer an element of customization, depending on how similar your clients’ needs are. Starting with a basic product model that you can expand on as needed will still boost your efficiency and simplify your initial conversations with clients.
The key idea Tilo Böhmann outlines in his book, is this:
Standardization captures learning curve advantages and economies of scale. It allows you to create high-demand products over and over, without reinventing the wheel every time.
It’s all about looking at trends in what your clients need and putting that into a service package that makes sense. You may tweak the offer a little for particular clients, but the results you’re offering are clear from the outset.
Likewise, many agencies are productizing their services while still creating custom solutions for higher value clients. In doing so, they’ve greatly simplified their consultation and design process, but nothing prevents them from picking up the phone and talking to a client as well.
From the client’s vantage point, productization makes a service more concrete and tangible by clarifying outcomes. When clients first visit your website, they immediately know what you’re offering them. They’re investing in a specific result that they can purchase over and over again in the future. This greatly simplifies your marketing as well.
Clients know exactly what a service costs upfront without having to go through the rigamarole of getting a quote. Because services standardized, you can list their prices on your website. Estimating what a service will cost takes much more work and time on your part, as each case may be different, which is an added burden for both you and the customer. Productization gets rid of time estimates, quotes and proposals.
Productizing positions you to earn recurring revenue. Having clearly defined offerings and packages encourages clients to purchase from you regularly, increasing their lifetime value dramatically.
Productization helps streamline processes so your team can deliver work more efficiently. Using software you can automate your processes and delegate tasks to your team, all while ensuring a smooth workflow.
Hiring and training new employees or contractors is a breeze when you have clear offerings, prices, and workflow processes.
It’s easier to get paid upfront when you’ve clarified outcomes. You can include upfront payment as part of your standardized, automated process rather than trying to collect invoices weeks, even months after project completion.
You minimize the problem of scope creep – when a client asks for a favor in the form of a “small” additional service without paying more – because deliverables are clearly defined at the outset.
If you want to sell your business one day, it will be much more marketable, because others can easily fill your shoes.
Here are a few ways of enhancing productization:
Packaging, or bundling, services together can show clients how they’ll receive greater value by investing in several services together. The package might give them a discount over purchasing each product alone. Better yet, modeling a package after best practices in your field (like optimum frequency and length of posts) ensures clients get maximum value for their purchase – and keep coming back.
Offering several packages at different fee levels lets clients test the waters at a cost they’re comfortable with. Each tier should spell out the exact services clients will receive for the price.
Subscriptions can allow clients to gain unlimited access to a certain type of service, or a range of services, for a set monthly fee. This allows them to pay a lower price per service in exchange for predictable revenue.
Industries That Are Productizing
A vast range of service agencies is productizing, although in many industries, it may not be the norm yet. The following are just a few examples of how agencies are implementing this sales strategy:
Restaurant Engine builds websites through an easily replicable process. Founder Brian Casel initially set out to create a DIY website builder, but soon found clients asking, “How much for you to set up my site for me?” When he offered a fee for setup, his cancellation rate fell to almost zero. Casel quickly realized that clients needed a combination of clear, replicable outcomes and hands-on service from professionals, and his business took off from there.
Undullify offers unlimited “small graphic design tasks” for a set monthly fee. This subscription service offers four plan tiers priced by the features they include, like turnaround time and the client’s number of brands.
Growth Geeks offers “pre-packaged digital marketing solutions” in areas such as lead generation, cold emailing, and social media management. Specific plans are offered for an array of areas. For example, an agency can purchase a plan that will provide “100 Hand Crafted B2B Leads” per month.
Content Pros, which provides a subscription for writing services with a focus on blog articles, began as a full-service agency offering everything from websites and content to consulting services. It soon became clear that trying to meet each client’s every need wasn’t scalable – so they began focusing on content, particularly blog posts. They now offer monthly subscription blog packages to some of the biggest names in SaaS and digital marketing, and their robust writing and editing team tailors each post to the client’s individual needs.
Data Stories, which handles analytics, helps companies make sense of data they’ve already collected. Companies send them the data, and Data Stories produces a report that helps them understand it.
Rev offers fast-turnaround transcription augmented by software, which makes production more cost-effective. Captions and translation are other product offerings.
Cashflow Podcasting creates polished podcasts for clients, editing recordings that clients make themselves. It offers monthly plans that provide a weekly edited podcast, which includes a complete transcript and “tweetable” quotes.
Custora optimizes AdWords spending to maximize customer lifetime value. It offers predictive value customer lifetime models to help agencies decide where to spend their advertising dollars, among other products.
Plenty of other types of service providers are productizing as well, such as bookkeepers, accountants, and copyediting agencies. If you haven’t jumped on the bandwagon yet, this might be the moment.
Making the Switch – First Steps to Success
Ready to start productizing the services you sell? Start by looking at the types of clients you’re attracting already, and their projects.
Check if you have customers who tend to purchase particular clusters of services – these might be good candidates for packaging. Alternatively, ask yourself if clients would benefit from something they’re not thinking about. By including it in a package, you might encourage clients to try something new that will help their business take off – making them loyal customers for years to come.
With your productized offerings in mind you can start figuring out the optimal way to deliver those services, whether it includes heavier automation, re-training your team or bringing on outside contractors.
At the end of the day customers will gain confidence when they know exactly what they’re getting and how much they’ll pay for it. As you begin productizing, you may get fewer initial inquiries but a higher percentage of clients who are serious about purchasing what you offer. That just means you’re sifting out those who aren’t really serious, and only spending your valuable time on those who are.
As you work to productize, Service Provider PRO can help. We’re equipped to handle productized services from sales and invoicing all the way to order delivery. Sign up for a free trial now to see how we can change the way you do business.
In the next post in this series, we’ll get you on the road to launching productization!