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The productized service business model explained

May 16, 2024
  • 9 min read
  • Omid G

    Running a service business is like two jobs rolled into one.

    For starters, a lot of work goes into delivering a service to your client. That could be things like marketing, accounting, design, etc. Then, your other job is the all time-consuming, and often mundane, admin work involved in finding and onboarding clients, outlining the scope of your deliverables, and making sure your invoices get paid.

    Sure, you can play both roles at once. However, the constant back and forth can zap your energy. What’s more, scaling a business model like that is near impossible because each new client you add requires additional resources, like your precious time.

    Thankfully, there is a workable solution out there for service businesses who want to simplify and scale their operations. Welcome to the productized service business model.

    Why do you need a productized service business model?

    Before we share how to productize a service, it’s important to define the concept.

    Put simply, a productized service business model is a process that allows you to package and sell your service in the same way that you would a product. It’s a way to take all the messiness and differing expectations around your service, and standardize them into an easily communicated offer.

    The best way to understand the concept is by thinking about how it differs from typical service business models.

    Traditional service business models require meeting with clients, establishing what they need, and charging them based on hours worked or deliverables. In a lot of situations, this model works out pretty well. However, if you’re a freelancer or service business owner, you’ll know just how much the exceptions can throw you off course.

    For example, let’s say you are a graphic designer. You typically charge around $500 for your designs. A client reaches out to you and explains they need a shiny new logo for their business. You discuss requirements and deliver the logo. But then they change their mind because sometimes clients don’t really know what they want until you’ve completed the work already.

    Now, you’ve got to make radical changes to the design. In essence, you’ve got to do the work all over again. Now, you’re basically taking home $250 for each logo and possibly turning down work from other clients. Sadly, this is a very common scenario.

    However, it gets worse. You submit another design to them, but it’s still not what they were looking for. In the most trying situations, this back and forth can drag on, eating into the time you need to deliver work for other clients. On the same token, a job that you originally priced at $500 has turned into something far bigger.

    While the example above is about graphic design, all service businesses deal with the phenomena of scope creep in one way or another. Productizing your service is one way to eliminate this process. Here’s how.

    Let’s say that instead, you offer three different logo design tiers. Your tiers can look something like what we’ve laid out below.

    • Bronze: Requirement meeting, a prototype, and three revisions.
    • Silver: Requirement meeting, two prototypes, and three revisions.
    • Gold: Requirement meeting, several prototypes, and unlimited revisions.

    Each tier has different prices that accurately reflect the work you have to do to deliver for your client.

    As you can see, a productized service business model helps you offer levels of service to suit different clients. It also protects your profit margins from scope creep because your clients know what they should expect when they sign up for your service.

    Of course, while our example above refers to graphic design, this model can work for a variety of services. Check out this article to find examples of other productized services.

    The benefits of a productized service business model

    Let’s take a look at the benefits of a productized service business model for you and your clients.

    Business benefits

    Productizing your service has lots of great benefits for your business. Let’s take a look at a few of the most compelling reasons to adopt this business model.

    Predictable revenue

    One of the most interesting benefits of a productized service is the potential to transform your offer into a recurring monthly service. For example, if you’re an accountant, one tier could offer basic bookkeeping, with additional tiers offering audit preparation or even strategy.

    ViralCuts' pricing packages
    ViralCuts' packages

    Packaging your services as a subscription means you’ll have recurring revenue, which helps with cash flow and makes things a lot more predictable for your business.

    Scale

    Growing a business means adding more resources to meet extra work. Scaling your business, on the other hand, means adding more clients without upping the work needed to serve them. A productized model means you can cut down on the admin and discussions and spend more time on delivering for your clients.

    Streamline your service

    Onboarding clients and trashing out what they should expect from your service takes time. For many service businesses or freelancers, it’s exactly the type of repetitive work that takes away from their core duties.

    Establishing clear parameters around the scope of work saves everyone time. When you standardize your service, your clients know exactly what they are getting, which saves a lot of discussions and time wasting.

    Additional revenue

    Offering different tiers means you can generate extra revenue from premium services. While not every customer will choose the bells and whistles option, it does give you the option to reach different segments of the market.

    Better marketing

    Productized services are also easier to market. With set prices and a very clear value proposition, you can go to market and target different buyer demographics with an easy-to-understand offer.

    Self-service

    Customer self-service options are vital in modern business. Instead of emailing or booking a call to discuss requirements, productized service models let your clients stay in control and select the service that aligns with their needs. The upside here is that you cut down on customer service, which saves time and resources.

    Client benefits

    Of course, while specific business models will work well for your businesses, they also need to benefit your clients. Thankfully, there are several reasons why modern clients embrace the productized service model.

    Convenience

    Productized services make things easy for your clients. They can select the precise service they need without getting into a back-and-forth about prices or deliverables. Anything that reduces friction for your clients is worth exploring.

    Transparency

    When your clients select a service, they know exactly what they are going to get in terms of service, price, timelines, and any other parameters you choose.

    Streamlined onboarding

    We mentioned the benefits of self-service above. Another element of that approach lies in how it helps you cut down on onboarding new clients. When you standardize your service, it means you can onboard clients easily with pre-built forms and contracts. That means you spend less time on customer interactions, and more time on delivering your service.

    How to offer a productized business service

    Okay, so now that you understand the benefits of this business model, it’s time to understand how you can implement it for your own service business.

    Identify your core strengths

    Think about your service and what you do best. Ask yourself what parts of your service you consistently excel at.

    Next, do some market research to ensure there is some level of demand for your service. If you’re just starting out, it can be hard to offer something with very broad appeal, so consider offering a niche service where possible.

    Solve a problem

    Products are built to solve problems or pain points for their users. So, think about your ideal client and the issues they have within your niche. The aim here is to align what you do with what your clients need from a service.

    Again, research is key here. Reach out to current customers or prospects to find out what they want from a service and use that to inspire the next steps.

    Package your service

    Packaging your service is a key step. You need to draw upon the research you’ve done in previous steps and think about what your different clients want.

    First, outline your basic service, including deliverables, expectations, deadlines, and so on.

    Then, build out your next tier. For example, if you’re an SEO agency, your client’s most obvious pain point is directing relevant traffic to their website. You can help them accomplish this goal in a number of different ways. For example, here are a few different products you could offer:

    • A site audit that looks at on-page and technical SEO.
    • Keyword research for their niche.
    • The production of SEO-friendly content like landing pages or blogs.
    • A service that rolls all of the above into one product that your client can pay for monthly.
    • Consider add-on or value-added services.

    Of course, it’s important to note that you don’t have to offer tiers. You can offer just one productized service, too. Choose whatever works best for your business.

    Set a price

    Setting your prices is a fine art. If you’ve run a freelance or service business for a while, you’ll have a good idea of market rates and the amount of time that it takes to deliver your service. However, there are other moving parts at play, including your competitor’s pricing and the habits and budgets of your target audience.

    So, think about where you want to position your service relative to the competition. On top of that, remember that most clients want value, first and foremost. You don’t need to undercut your rivals to gain market share. Instead, you can compete on service and the value that you provide.

    Price your service in a way that lets your clients feel like they’re getting a good deal while still allowing you to keep the lights on and take a tidy profit. As we said, it’s a fine art.

    Consider subscriptions

    Subscription business models have become standard in the SaaS space. However, you’ll notice that many other types of businesses have pivoted to a subscription model in recent years, with all or part of their service available in this manner.

    There are two things at play here. Firstly, having predictable revenue is essential for both cash flow and reinvestment. By tracking (and addressing) metrics like churn rate, your business can keep a steady flow of money rolling in, giving you more clarity on what you need to invest to grow your business.

    Secondly, customer acquisition costs (CAC) have accelerated over the last few years. Data privacy regulations have limited the precision of paid ads, meaning reaching your target audience costs more money.

    This scenario means that running marketing campaigns each time you need to win a new client is prohibitively expensive. As such, subscription models help you focus on keeping the clients you do have, meaning you’re less reliant on generating revenue from acquisitions and less beholden to the ups and downs of that process.

    Copilot’s billing options mean that you can accept payments for your services in a variety of ways, including subscriptions.

    Streamline your service

    Now that you’ve productized your service, it’s time to consider streamlining your operations so that you can deliver it with minimal friction for both you and your clients.

    Tools like Copilot were built to address these scenarios and make the process as painless as possible. One way to do this is by automating as much of your service as possible.

    Onboarding new clients is time-consuming. You need to send them contracts and other documents, get them signed, send them back, and deal with any modifications in between. Instead, you can automate the process, saving everyone time and getting your clients onboard right away.

    What’s more, you can also use Copilot’s templates to create contracts, agreements, NDAs, and anything else you need to ensure a legally sound working relationship with your clients.

    Of course, there are other inefficiencies that can emerge when working with clients. For example, communication and document sharing by email can become messy, resulting in missed details that delay projects.

    Once again, Copilots has features that solve this issue in the form of a client portal that centralizes communications, document sharing, invoices, and project management all in one polished, white-labeled place.

    Continuous improvement

    Finally, once you’ve productized your service, your work is not complete. Instead, you need to gather feedback and conversion data to stay on top of how your clients and prospects feel about your offer. This information can help you adapt and adjust to your market and give you ideas about where your service needs to be improved.

    Fine-tuning your offer is important. So, stay on top of relevant metrics, and don’t be afraid to make changes until you’re getting your desired results.

    Top tips for running a productized service business model

    Before we tap out, here are a few bonus tips for starting a successful productized business model.

    1. Start small

    You can delay offering your service until it’s perfect, or you can get out and learn your lesson. You’ve probably heard of a minimum viable product (MVP) before, so adopt that principle and build a minimum loveable product (MLP) for your service. It allows you to get going, learn lessons, and make iterative improvements.

    2. Experiment with pricing

    While you can set your prices by calculating costs and margins, it’s worth being a bit more dynamic with your pricing. Experiment with how different tiers or subscriptions affect revenue and retention and how they affect active users or profit margins.

    3. Focus on retention

    Mashing new users into a product that doesn’t work is unsustainable. Keep an eye on customer retention metrics and try to find out why you’re losing clients. Exit interviews or surveys are key here. So, gather the relevant data and use it to improve your service.

    Conclusion

    The productized service business model allows you to streamline your operations, boost customer satisfaction, and generate recurring revenue. For service-based businesses, this extra clarity means you spend a lot less time on admin and communication and a lot more time on delivering value to your clients. Get a 14-day trial of Copilot today to see how our platform can help you unlock the benefits of a productized service business model.

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