Professional services firms who are among the first in their industry to productize their services have a distinct competitive advantage over their competition. Firms who follow can still close the gap by productizing their own services, especially by offering innovative service products that differentiate them from the early productizers. Here are six reasons why service productization will either give you a competitive edge (if you’re early), or restore it (if you’re late).
1. Services Are Difficult to Evaluate, but Products Are Easy
Those utilizing professional services often seek various forms of assurance that their problems can in fact be solved by the prospective supplier of those services, because services are intangible. One can pick up an mp3 player and evaluate its merits: listen to the sound quality, see if the interface is easy to use, evaluate the storage capacity, check out the features, and decide on whether or not it is the right shape, size, or weight to meet one’s needs. However one cannot evaluate accounting, marketing, consulting, or other professional services the same way. Instead, prospective clients seek client references, look for examples of past work, inquire about industry expertise of individual service delivery personnel, and attempt to evaluate various other “features” of the proposed solution.
Alleviate these concerns by making your services more tangible: productize them. By adding tangible features and benefits to your offerings, you can put your prospective clients more at ease during the buying process: physically holding a brochure seems to make the service more “real”; establishing a fixed price reduces the risk of runaway costs; identifying the actual names of people who will do the work adds credibility that the supplier will actually meet its obligations.
These are all ways of productizing professional services – resulting in performance improvements, both in selling and delivering professional services.
2. Products Have Set Prices
With predictable pricing, clients can more easily make buying decisions, making it faster and easier for firms to sell services to both existing and new clients. I run a marketing communications agency. When I put together a campaign that integrates traditional PR with email marketing, social media marketing, blogging, and Google Ads, I often get asked if I can take one of those elements out and knock 20% off the price, or if my agency can produce less blog articles and email newsletters, in exchange for a discount. I know that weakening the services provided will weaken the results, but most clients don’t lower their expectations of outcomes as the fee comes down.
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By creating service products, I can tell a client “We’ll set up a blog for you, write 30 engaging, SEO-optimized 300-word posts on topics approved by you, do a mini-campaign to drive readership, and write 8 guest posts on higher profile blogs to further boost your blog’s visibility, and that costs $X.” When some prospects say “Can you just skip the mini-campaign?” or “Can we just do 20 posts?” I say “We productized our services to standardize our service delivery and pass on cost efficiencies. We can leave elements out, but the price of the product remains the same.” Usually I go on to explain how the mini-campaign resulted in good traffic for another client, or how the 30-post mark is where search engines first “notice” a new blog. So far, I’ve never had a client decline. A couple times I’ve even (gently) told clients “These are products, just like cans of soup. In the same way that one doesn’t haggle on the price of goods at the supermarket, we’ve priced our products so that they provide a good return-on-investment, and we can measure that for you. And you’ll never have to worry that we charged you more than another client for the same service.”
3. Service Productization Makes Efficiency Profitable
In a billable hours scenario posited by Paul Roetzer, head of public relations firm PR20/20, in his book The Marketing Agency Blueprint, sub-par employees can cost clients quite a bit. In the PR industry, if a junior associate writes a press release (3 hours @ $150/hr), and spends an hour revising it (+1 hour) after a senior associate edits it (0.5 hours @$250/hr) and then undertakes a final review upon completion (+0.5 hours), the client is charged $850 for that release. On the other hand, if a more experienced (or talented) junior associate cranks that release out in 2 hours with just 30 minutes of review and editing, the client is charged half that. In this model, the junior staff are often trained at the client’s expense.
In an agency where services are productized, a press release has a set price. Let’s say it is $700. If that agency has talented staff that can get it done quickly, the agency sees more of that $700 as profit, thus efficiency becomes profitable. Not to mention client delight at getting deliverables ahead of schedule. And this isn’t limited to public relations. Accounting services, consulting services, legal services, and even medical services can be productized.
4. Delivery of Productized Services are Consistent When Replicated
What do Big Macs, iPhone 4s, and Mizuno Wave Enigma running shoes have in common? Each product is the same wherever you go. You don’t find a Big Mac with 3 patties in one McDonald’s and 2 patties in another. Productized services strive towards a similar level of consistency. Every client gets the same level and type of service. Of course the exact nature of the work completed differs from one project to the next, due to differences in business operations, client objectives, and so on. The productization effort does not try to create a cookie-cutter approach, it simply attempts to minimize the differences among projects. For example, one of my clients needed a blog about catering, and another about insurance, but each got the same number of posts, the same amount of lead time to approve them, and the same analytics and tracking. As a matter of fact, I have a Gantt chart template for each of my service products ready to go; I just have to input the start date and client name. It contains every deadline and milestone: a complete project schedule. Every time I sell the blogging product, we take a week to come up with all 30 story angles, a week to write the first four blog posts and have the client approve them, another week for the second four posts, etc. We produce the content this way even if the client is posting just once a week. The staff and the clients know what to expect, and because we’ve done this so many times, we know what sort of results to expect as well. This consistency comes out when we propose service products. The clients can sense it; because services are intangible, they’re drawn to ones that are demonstrably reliable.
5. It is Easier to Train Personnel in Productized Service Delivery
As I mentioned above, my staff is familiar and comfortable with the project timelines and they know what the workload will be like before ever getting started. In the same way that services are standardized, training for these services is standardized as well. There is nothing vague about productized services, and after you’ve sold a few, you’ll be able to imagine most any scenario that your staff must be trained to encounter when implementing a productized service.
6. Productized Services are More Credibile
Credibility is at the heart of the matter. Customers must experience an intangible service to really know it. Intangibility makes services more difficult to imagine (and desire) than goods. Services cannot be touched, smelled, tasted, or tried on before being purchased, which makes them riskier to buy. This perception of risk when considering an intangible purchase is a major obstacle for the professional services firm, because the stakes are often high: a failed IT implementation, unsuccessful ad campaign, or poor accounting advice could cost millions. As a result of these high stakes, prospective buyers of professional services want evidence – or at least some assurance – of probable success.
At the root of this need for assurance is credibility – credibility of the firm, of the people in the firm, and of the service offering itself. By productizing a service offering, the professional services firm is, in effect, improving the credibility of the offering by making it more tangible, thus providing a glimpse into the actual service experience.
A Sample Productized Service
Consider an accounting firm with a productized offering called “Tax Optimization Review”
Service Offering: Tax Optimization Review
Benefits: After completion of the project, the client will understand how to operate administration duties differently, resulting in a lower overall tax rate.
Features and Attributes:
- Two seasoned tax accountants assigned for three weeks; both CPAs and CFAs, one with more than 10 years of tax planning experience
- Project plan consisting of three one-week phases: Inventory, Analyze, Conclude
- Interim deliverables to include weekly status updates, a preliminary findings summary, and a midpoint scale assessment
- Final deliverable to be a recommendation of financing strategies, contract terms, and import/export policy
- Total cost: $48,000
References: Similar projects have been completed for three regional retailers, an industrial exporter, and a large direct marketing firm. Return-on-investment (from tax savings) ranged from 12% to 31% with an average of 18%
As you may be able to surmise, this service product will perform well against competitors that say “We’ll assign two seasoned accountants and bill you hourly. We expect it to cost around $50,000.” Those agencies must win business on their company reputations. Agencies with productized services are giving prospective buyers something to see, and as we all know, seeing is believing.