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 novel coronavirus (COVID-19) pandemic. Consumers are cutting back on services to avoid human contact and conserve cash but 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 COVID-19 pandemic, and it changed everything about daily life, right down to what people bought from the Amazon corporation online. 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 home-based exercise routines instead of using services like personal training.
Rather than going out to enjoy the service at a great restaurant, consumers are 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 Angeles-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 U.S.-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 a consumer to commission an artist to create a customized video greeting for a loved one.
To take advantage of this 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 – especially in times like these when you need more customers, not fewer. Niching down is counterintuitive, but it is the first critical move in turning your service into a product 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.)
- Psychographics (personality, values, attitudes, interests, 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 and Valuable to your customers who have a Recurring need for them. 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.)
Is your business exit ready?
If you’re planning to exit your company in the near future, you may find EastWind’s Exit Strategy Playbook helpful in developing your own exit strategy, making your company more sellable.
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 Angelenos, 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. 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 dishwashing 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 would raise and pre-empted each in their marketing material. For example, Spiffy assures prospects they will have:
- A money-back guarantee for those unsatisfied with the product
- Insurance in case of damage to vehicle
- Highly trained technicians (who are background-checked)
- Environmentally friendly services
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 hit hard this year, 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.