What is a productized service?
When you build B2B SaaS products, your clients often come to you with the same requests, over and over. Each one, individually, sounds like professional services. But after hearing them often enough, I began to realize we could productize the service.
What is a productized service? Think of it as the delivery of an often-requested service without any of the customizations that often come with consulting or professional services.
This isn't restricted to B2B SaaS companies. Agencies and product companies alike will find benefit in productizing their services.
Instead of selling hours to migrate data, or to configure products, or to assess options, turn them into fixed priced engagements with clear definitions of scope.
What isn't a productized service?
The other day I was talking to a business owner who showed me their website and told me they were basically a productized service that competing with other hosting platforms. They were focused on one kind of site and had solved a lot of the features most people wanted / needed.
But here's where they went sideways. Instead of pricing different packages based on customer profiles (and needs) or based on features, they had a form to collect info for a “quote.”
When you are trying to productize your consulting services, you can't offer a “get a quote” form. That's not a productized service.
You have to do the hard work of creating the fixed packages. That often means working with enough customers in enough situations to know what most need, and how to segment them based on their situations.
Productized services isn't just a neat packaging trick. It requires that you scope the work correctly so that you make money and the customer doesn't feel frustrated.
The three things you need to get right to productize consulting services
Packaging – One of the hardest things to do when creating packages of productized services is to know what is included and what's excluded. It's a scoping effort that is critical because unlike consulting, no one expects to get change orders when buying a product.
That may mean articulating a scope of effort (hours) that are included, or use another limiting agent (like # of records, # of iterations, # of feedback cycles, etc).
Pricing – The second thing you have to get right is the pricing. This isn't just a time and materials calculation. Let's say you do the service 200 times. You don't want to price your effort based on the average. That means you'll barely break even.
You need to build in margin so that you're always profitable. But that means making sure your scope is right (from above). And if your scope is too narrow (for your price), you'll never sell. That's why this is critical to get right.
Progressions – The third thing you have to get right is the way you think about your productized services. You need to think about them as a la carte solutions that can also be purchased one after another. Selling one (and delivering the service well) creates the opportunity to sell another.
For me it meant that we would sell configuration as a product, followed by migration as a product, and then reporting as a product.
The one mistake you can't afford to make
The one mistake I see a lot of folks make, since productized services are still fundamentally work that requires staffing resources, is to get so excited that it's working that they forget to focus on the need to scale the service.
If you figured out how to initially sell a transcription service with a couple of friends, but then you need to hire more people – and suddenly the cost is killing your margins – you'll be killed by the need to scale.
If you figured out how to initially sell with lower cost resources in another time zone, but you can't hire any more folks from that company, you're suddenly going to get killed by the need to scale.
In other words, don't leave this to the end. Start thinking about scaling early.
Need Help? Want more resources?
There are two folks who've written much more on this than I have.
So check out what Brian Casel has to say
And don't sleep on Brennan Dunn either
Want to learn more about how to productize your consulting services? Check out their sites.
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