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When a Service Business Should Create Products
While your gym business has suffered in the economic consequences of COVID-19, you can bet your online competitor’s home fitness products have been flying off the virtual shelves.
If you’re a service business, and you rely on upsells and being the best service provider in your field, then this pandemic is hitting you hardest. Consumer habits have undergone a critical shift. They’re avoiding face-to-face business transactions to avoid human contact as well as to save money. What we are seeing instead is a trend in products - especially products that solve a specific problem.
Faced with having to set up our home offices, many of us have taken out a subscription to Zoom or Slack in order to facilitate teleconferencing or instant message with our teams. And instead of going out to enjoy good customer service at our favourite restaurants, we’re turning to our local bottle shops instead. At the end of March in Australia, alcohol sales were up 86% over the same period last year. This was right before the government imposed limits on quantities.
Italy was one of the first countries to be hit hard with the virus and government restrictions were imposed early in an effort to curb the spread of the virus. This dramatic disruption to daily life was mirrored right down to the products they bought on Amazon. A week after quarantine, the sale of home exercise equipment was up 236%.
So what do you do if you’re a service business struggling to adapt?
Service providers are pivoting to product-based business models
Many business owners are reworking their business offerings to include tangible products that consumers can enjoy in the comforts of their own home.
Arguably one of the hardest-hit sectors has been bars and restaurants. But it’s not all doom and gloom. Restaurant owners are finding new and creative ways to innovate during the pandemic. Mark Jenson of Sydney’s high end Red Lantern restaurant knew no one would pay the $25 price point for takeaway from their normal menu. And rather than make concessions on quality, Jenson instead flipped the switch and created an entire new takeout menu at $15 a pop. This included a restructuring of resources in the restaurant, as well as setting up an e-commerce site to handle online orders.
Ridge Films is a video marketing company who knew early on that many business owners after video content would need to be doing it at home. They created a DIY Desktop Studio which they’ll come in and set up for you. While this service business still technically requires installation, they’ve been able to successfully revamp their business model into a take home product. People can produce quality video content from the luxury of their own homes.
When service-based marketing agency, Social Ocean had to shut down their venue, they were uncertain whether the agency should remain open. Instead, they’ve been socially connecting micro-business owners in their area through virtual workshops via Zoom.
As a service provider, you can follow these 8 steps in order to pivot your business to products.
8 Steps to Introduce Products into Your Service Business
Step 1: Solidify your niche
The first step in any successful business pivot is to narrow down your focus and identify who exactly your customer is. While it may seem counter-intuitive to be slashing customers when you desperately need cash flow, this honed in approach will help you develop a sought-after product. In your niche market.
Remember, your service could be adapted to a wide customer base quite easily, your product, however, needs to hit home to your select audience.
Once you pick your niche it’s time to tap into the community and understand what your potential customers want. Channels like Facebook Groups are an easy way to get in front of a hyper-targeted audience. When doing market research, consider:
- Demographics (age, gender, income)
- Firmographics (company size, industry)
- Life stage (just married, retired)
- Company life stage (start-up, mature, etc.)
We can learn from small businesses who have taken their niche and niched down some more until they’ve become so valuable to their target group that they’ve successfully staved off financial hardship. Look at wedding makeup artist, Sophie Lau for inspiration. Usually booked 12-18 months in advance, with no weddings on the horizon, she lost all of her bookings instantly. Now, she’s focusing on adding a niche angle to her normally service-based business: Video tutorials for a specific demographic of Asian-Australians hoping to enter the makeup market. Lau is one of many small businesses and sole traders who have adapted quickly and efficiently to keep income flowing.
Step 2: Assess Ideas based on TVR
TVR stands for Teachable to employees and Valuable to your customers, who have a Recurring need for it. Essentially, you should ask yourself, will your new product be easy for your employees to learn, and will your customers want it again and again?
At Exit Advisory Group, we call this finding your “TVR.” To begin:
- Grab a blank sheet of paper and list out all of the services you could possibly offer to your niche market you identified in Step 1.
- Score each service from 1-10 on how easy it would be to train employees in, how valuable the service would be to your niche, and how often they would need to buy it.
- Then pick the service that scores the highest and move on to Step 3. If you’d like to offer multiple products, you can repeat this step.
Step 3: Understand what your product is going to fix
To best market to your chosen demographic, you need to wholly understand what problem your product solves. For example, The DIY Desktop Studio makes creating videos super easy, and professionally from your own home and The Red Lantern creating a new, affordable takeout menu and the infrastructure to support it. What does your product do?
Step 4: Brand your product
Unlike a service, where you hire a person, with products you’re selling a thing. There are no names associated with your product, but rather brands. The key to a good brand is it must be trustworthy, memorable, and flexible. Just like Australian unicorn Canva, who has been evolving its COVID-19 product offerings since the beginning. We love Ucidity's guide on how to brand a business.
Step 5: Let people in on the secret recipe
Instead of Ken’s Magic Lawn Maintenance. It’s Ken’s Magic Lawn Fertiliser that you can spread over your grass yourself. There are no such things as unique proposals in product marketing. Instead, it’s time to be transparent (trustworthy, remember) about what is in your product. Customers want to know exactly what they’re getting in a neat and itemised list.
Step 6: Do extensive internal product testing
Rather than a constant source of valuable customer communication you get in a service business, when you sell a product, you lose the face-to-face interaction and thus the luxury of hearing objections, criticism and feedback first hand.
Instead, take a step backward before you go to market. Consider anything and everything a customer might object to about your product and pre-empt them. Some things to keep in mind:
- Will you offer a money-back guarantee?
- If your product is for a home or a car, do you offer damage insurance
- How well do your employees need to be trained? Is there a digital certification they can do?
- How much does your product impact the environment? Do you have green policies or a statement to prove your product isn’t damaging?
Step 7: How much are you going to sell it for?
You’re used to quoting by the hour, day, or project, yet with a product, you’ll need to be upfront with how much it costs from the get-go. Make sure you take into consideration what your production costs are, as well as staff wages. Don’t forget to analyse competitor pricing models before you decide on a price.
Step 8: Manufacture Scarcity
In a service business you can rely on sales leverage because you’re in demand. Since there aren’t unlimited hours in the day, a customer knows they need you between these hours, or else they risk not getting the service.
Time is money, right? (Of course this can be an advantage and disadvantage)
Yet with a product, you need to persuade people they need your product now rather than later. How many times do you get to the checkout of an online retailer just to abandon your cart?
You can imagine this is frustrating for businesses that came so close to a sale. To give people a reason to act, you need to rely on Marketing 101: Customer behaviour.
Create an environment of urgency through limited time offers, limited access to products, or flash sales that only last 24 hours.
Yes, service providers have taken a beating during COVID-19, but we’ve seen many SMEs rise from the ashes stronger, and more flexible than before. If you take your service business and pivot it to look and feel more like a product, you might be able to harness the consumer tidal wave of in-demand products during these uncertain times.
5 Surprising Ways to Boost the Value of Your Business
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Discover the 5 factors that boosted the value of her business, and how you can implement them too.
At Exit Advisory Group we help entrepreneurs maximise company value and exit at the top of their game.
We do this by giving business owners the tools and strategies to design more profitable, efficient and enjoyable businesses to own - that are also less dependent on them. When they choose to exit, they are in the best position to unlock the wealth in their business and be rewarded for their hard work.
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