Many product companies started as service firms who decided they could serve more clients by productizing their offering. This post isn’t on whether or not productizing is a good idea; rather its about what marketing considerations arise when you shift from service to product.
Marketing for a product company is very different from marketing for services. Switching from a service to a product-based business gives you options like expanding geographically. Products are also very scalable, so volume discounts and loyal buyer promotions can drive purchases in ways that would never work with a service offering. But you must anticipate how you’ll be marketing things differently when you transition. Here are the chief adjustments that you’ll need to make.
More concern for the long term
For marketing, products require more up-front thought since the initial branding and messaging will need to sustain itself through a changing environment. This isn’t the case in services marketing, where firms can change their direction by merely switching their services (or indeed the resources that provide them). No one knows at the outset which verticals a product will do well in, which languages and geographic markets, OEM vs sales to end-users, or how much it will scale (like MOZ’s revenues did in this chart). Yet marketing has to anticipate all these permutations in crafting the brand. If this planning isn’t done, the company may quickly outgrow the initial brand, requiring a painful rebranding exercise.
In a B2B world, time between purchases is longer for products (vs. services). This means we need to look for ways to continually enhance the user experience in order to maintain customer loyalty. You can’t kick-start someone’s decision to speed their purchase by selling them the same-old same-old. New product releases, therefore, must have real features if they are to accelerate the buyer’s purchase cycle.
More tightly-defined offering
Unlike services and their loose pricing, products have known costs and correspondingly tighter pricing. For marketing this means that value propositions must be designed to hit a certain threshold. If marketing falls short of the bar, the buyer will balk at the product’s price. If marketing raises it more than needed, the market will be skeptical of the product and rivals could enter with a discount product that exploits the unserved market segment. In a service business, it’s not possible to base price on future value – such as having a high school student do work that’s charged out at the rate of an MBA graduate, but businesses can price a product according to its potential future value to the client. As seen with technology roadmaps, products can even be marketed today according to where they’ll be in the future.
Eric Reis, author of “The Lean Startup,” notes that companies can lapse back into service sales even as they roll out the first version of their product. Businesses which can sell small quantities of product at high profit may stay in the comfort-zone of a service business (also called a lifestyle business) unless they discover how to quickly grow their customer base and simultaneously scale their processes.
Giving the client more control
When it comes to deciding how a product gets used, clients tend to run the show. B2B clients dwell on how the product integrates into their offering is that it directly affects their own ROI. You want clients to come up with product uses you didn’t think of, as that’s where you’ll find entirely new segments of new users. You want sales or service people to listen for these uses. A good sign is hearing them say, “you’ll never guess how the client is using our product!…”
Less about who, more about what
In a product setting, a buyer can invest much time in learning your product. You want to spend money to help them become proficient, even if it eats into your gross margin. This is to your benefit because when users promote your product to others, their product mastery enhances the weight of the endorsement far past any communications you can produce. Knowledgeable, happy clients can carry great weight.
The change from marketing services to marketing products feels strange at first and, yes, marketing products is more work. Products get built through learning the customer’s daily process and the accompanying pains, obstacles and mistakes it brings. But the deep focus required by firms who make and market products has a payoff: the ability to scale the business.
To learn how companies can smoothly transition by using internal KPIs and external web analytics, click below: