8 Steps For Turning A Service Into A Product
Does your business offer a service or a product that you differentiate through a higher level of service?
If so, you’re probably disproportionately impacted by the economic disruption caused by the coronavirus pandemic. Consumers are cutting back on services to avoid human contact and conserve cash, but we are still buying products that solve a specific problem.
Businesses are buying products like Zoom, and Slack for teleconferencing and consumers are dropping services in favour of products. Italy was the first western democracy to experience the brunt of the coronavirus pandemic, and it changed everything about daily life, right down to what people bought from Amazon. For example, in the week after the Italian government quarantined most of its citizens, there was a 236% increase in Italians buying sports gear, presumably to set up a home-based exercise routine instead of services like personal training.
Instead of going out to enjoy the service at a great restaurant, we’re buying more alcohol. According to a recent Nielsen survey, overall sales of spirits like tequila and vodka were up 75% from the same period last year.
Service Providers Are Pivoting to Provide A Product
Many businesses have reacted by turning their services into what appears to consumers as a tangible product:
· Los Angels-based Guerrilla Tacos typically serves up a lively dining experience and has recently pivoted to offering a product called their “Emergency Taco Kit,” a take-out survival kit for the taco lover.
· Spiffy, a US-based mobile car wash service, has switched to offering its COVID-19 “Disinfect & Protect” product.
· U.K.-based Encore has pivoted from a talent booking service to offering their “Personalised Music Message” product, which enables you to commission an artist to create a customized video greeting for a loved one.
To take advantage of our gravitation towards buying products, service providers can take the following eight steps:
Step 1: Niche Down
The first step is to narrow your focus to a single type of customer. Many people feel uncomfortable with this stage – in particular in times like these when you need more customers, not less. It’s counterintuitive, but the first critical move in turning your service into a product is niching down because services can be adapted and customized for a variety of customers. In contrast, products need to fit one type of buyer.
Picking one niche also helps you design a great product and efficiently reach potential customers through things like Facebook groups set up to serve a specific target.
Niche down further than you’re comfortable, then niche down some more. Consider:
· Demographics: (age, gender, income)
· Firmographics (company size, industry)
· Life stage (just married, retirement)
· Company life stage (start-up, mature etc.)
Step 2: TVR-Rank Your Services
Once you’ve niched down more than feels comfortable, the next step in turning your service into a product is to identify the services you offer, which are Teachable to employees, Valuable to your customers who have a Recurring need for it. At The Value Builder System™, we call this finding your “TVR.”
Grab a whiteboard or blank piece of paper and make a list of all the services you offer the niche you picked in step 1. Then score each service on a scale of 1 to 10 on the degree to which you can teach employees to offer the service, how valuable it is to your niche and how frequently they need to buy it.
Pick the service that scores the highest and move to Step 3 (you can always come back to this step if you want to consider multiple products).
Step 3: Get Clear on Your Quarter Inch Hole
Harvard Professor Theodore Levitt was famous for saying, “people don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” Be clear about what problem your product solves for your niche. For example, “The Emergency Taco Kit” makes cooking at home fun for quarantined Angelinos, while the “Disinfect & Protect” product sanitizes cars for essential service providers who need to keep driving.
Step 4: Brand It
With a service, you’re typically hiring a person. Still, with a product, you’re selling a thing. Unlike people who have names, something like the “Emergency Taco Kit,” “Disinfect & Protect” and the “Personalised Music Message” have brands.
Step 5: List Your Ingredients
Service businesses customize their deliverables in a unique proposal for every prospect, but product companies list their ingredients. Pick up any package at a grocery store — whether it’s a bottle of dishwasher detergent or a box of cereal — and you’ll see an itemized list of what’s inside the box, which is why your offering needs to list what customers get when they buy.
Step 6: Pre-Empt Objections
When selling a service, you have the luxury of hearing your prospect’s objections first-hand, and you can dynamically address them on-the-spot. When selling a product, you don’t have the benefit of a person to overcome objections, so consider what potential objections customers might have and pre-empt them. When selling the “Disinfect & Protect” car cleaning product, Spiffy anticipated the four most common concerns customers raise and pre-empts each in their marketing material. For example, Spiffy assures prospects that they have:
- A money-back guarantee for people who aren’t sure
- Insurance in case they damage your car
- Trained technicians who know what they are doing
- Environmentally friendly cleaning products so they don’t damage the environment
Step 7: Price It
Services are quoted by the hour, day or project and usually come at the end of a custom proposal. Products publish their price.
Step 8: Manufacture Scarcity
One of the benefits of a service business is that you always have sales leverage because your time is scarce. You can’t make more hours in the day, so customers know they need to act to get some of your time.
With product businesses, you need to give people a reason to act today rather than tomorrow. This means you need to manufacture a reason to act through things like limited time offers, limited access products etc.
Service providers have been walloped, but if you make your service look and feel more like a product, you may be able to take advantage of our society’s flight to tangible products in uncertain times.
How To Inoculate Your Business From The Dangers Ahead
A new decade always comes with a slew of predictions that can be scary. Will a new superbug take hold? Will the stock market crash? Will the economy tank?
These are all excellent questions, but without a crystal ball, you can feel helpless. However, there are three practical steps you can take to inoculate yourself from whatever the coming years will bring:
Inoculation Strategy #1: Stop Trying To Time The Market
Many founders try to time the sale of their business to coincide with the peak of an economic cycle, reasoning they will get the best price for their business when the economy is booming.
While this is true in theory, when you sell your company, you need to do something with the money. Perhaps you’ll consider investing in real estate or buying stocks. Still, most investments are impacted by the same macro-economic environment your business enjoys, which means you’ll be buying into just as frothy a market.
The alternative to timing the market is to consider selling when your business meets two criteria:
First, if your company is on a winning streak, it will command a premium compared with average performers in your industry. Pick a time to sell when your revenue is growing, gross margin improving, employees are happy, and customers satisfied.
Second never sell before you have all of the information you’ll need to survive due diligence. After you agree to terms with an acquirer, they’ll need some time to verify your business is as advertised. A sophisticated buyer will look into every aspect of your operations, including your financials, customer contracts, employee agreements, the way you produce your product or service your sales and marketing approach and just about every other facet of your business.
You can’t wait until due diligence to prepare this package of information. The volume of questions will suck up too much of your time. React slowly to an acquirer’s request for information and “deal fatigue” will set in. This malaise happens when an acquirer loses interest in closing an acquisition because it is taking too long.
The way to immunize yourself against whatever the economy may be in the years ahead is to sell when you’re on a winning streak, and you have the data assembled to skate through due diligence with ease.
Inoculation Strategy #2: Pick Your Lane
The global economy has been expanding for several years, fueled by low-interest rates and optimistic consumers, which can be a dangerous time for founders. When the economy is hot, it’s tempting to expand outside of your original product and service category as customers seem to be willing to buy just about anything from you.
The problem with diversifying too broadly is that you can become less attractive to an acquirer over time. Acquirers buy what they could not quickly build on their own. When you diversify too broadly, a buyer may pass reasoning, that it would be relatively easy to compete with your similar products or services. They know you’ll want to get paid for all of your business, yet they may only want a small part of it.
Remember that acquirers only buy what they could not quickly build themselves, so they place a premium on buying a business with a definite competitive advantage — for example, a proven brand that consumers prefer or a protected technology innovation.
No matter what the economy has in store for the years ahead, do one thing better than anyone else, and you’ll always have a ready pool of potential acquirers for your business.
Inoculation strategy #3: Create A Vision Board
A vision board is a display of images that illustrate where you want to be in the future. Creating one by grabbing a stack of magazines and cut out pictures that appeal to you and communicate the life you want to lead.
A vision board is a compelling way to immunize yourself from the inertia that sets in once the startup years of your company are behind you. When you’re no longer struggling to find the next customer or wondering how you’ll make payroll, running a business may become less exciting. When you no longer need to draw on your creativity and problem-solving skills, one day may flow into the next, and you can become content, but perhaps not truly happy.
Think about a time when you were happiest. You were probably doing something new, perhaps in a new place with new people, learning, contributing and growing. Most owners are happiest when they are starting and growing a business, but when a company matures, it can become stifling.
The problem is, it can be challenging to leave a successful business. Your lifestyle needs are satisfied through your company, so why go? That’s where a vision board can be handy. It allows you to decipher the difference between being happy and merely content. When you find yourself feeling comfortable but not necessarily happy, that might be the perfect time to sell – regardless of what’s happening in the economy at the time.