Posted by Shivali Anand
December 17, 2021 | 4-minute read (759 words)
A service-based business faces distinctive problems, as it must continue to attract users to remain scalable, which costs time and money. Selling a complementary or separate product line and transforming your business into one that sells items, or at least a combination of products and services, might be a wise way to remediate the issue.
There have been several successful organizations that began as modest service enterprises and developed into product conglomerates. For example, before creating Dell Technologies, Michael Dell manufactured computers for his pals out of his dorm room. And 3M began as a mining firm, then transitioned to selling sandpaper, and now offers a variety of items such as Scotch tape and Post-it notes.
The critical distinction is that a service-based business provides value through skills, time, and experience, whereas a product-based corporation sells actual, tangible items. When selling services vs. items, however, marketing expenses and approaches differ.
Selling based on services vs. selling based on products
When marketing a service, it's critical to discuss what makes the service personal and unique and how it may suit clients' demands. To sell a service, a business owner must often establish trusted connections with its customers and adapt its services as needed, including lower rates or add-ons to the regular service.
When selling a product, on the other hand, it's critical to showcase the item in-store or online for buyers to see and emphasize essential qualities. Customers frequently want to touch or try out a product before buying it, or they may prefer to see it being used in a demonstration by salespeople or through internet videos.
Furthermore, while products are often created to fulfill customers' wants, customization is impossible. On the other hand, customers can easily replace or return a product if they are unhappy with it. When it comes to items, it's much easier for a client to determine their worth.
Service-based businesses are typically less expensive to run than product-based businesses, owing to the lack of inventory — and the actual location of the firm is sometimes unimportant (however, this varies based on the type of service offered). On the other hand, pricing for service-based enterprises might vary depending on factors such as the industry, the experience of individuals operating the firm, and the length of time it takes to provide the service.
Keeping up with product demand is a specific problem that product-based firms face. If they run out of inventory, it may lead to discontent and negative customer feedback; consequently, it's critical to maintain track of the production process, the number of things in stock, and what consumers are buying to ensure there's always enough.
It would not be easy to obtain approval ratings for a service-based organization since a service may take some time to take impact or be completed. On the other hand, a product may be appraised and employed practically instantly.
Furthermore, a negative service review may make or ruin a company. Because a service cannot be swapped or returned like a commodity, businesses must examine and review the services they provide regularly. As a result, responding to consumer concerns and questions as soon as possible is critical.
How to make a transition
Consider the following four suggestions to assist you successfully shifting from a service-based to a product-based business:
Tip 1 – Stick to your core: Once you've figured out how to offer a service, there are many different ways to productize it. However, it is preferable to stick to what you are familiar with and capable of.
Tip 2 – Pay attention to your customers: Customers know a lot about their markets, and as Bill Gates discovered, new product ideas frequently arise from issues that need to be solved. IBM approached Gates for an operating system for a "new" device called a personal computer back when Microsoft was still developing programming languages for clients. Because Gates did not want to offer them the source code, he forced IBM to pay a per-unit license price instead.
Tip 3 – Seek ideas complementary to your own: Maintaining your service company to fund product development is the least risky way. In this manner, you'll be able to market complementary items and services. Michael Dell is a case in point.
Tip 4 – Find a partner: To transition from services to goods, it may be helpful to bring on a partner who brings an essential skill set to the table.
While there are many differences between selling a service and selling a product, one significant similarity is that success is determined by how well your customers are satisfied.