The United States is undoubtedly a service economy. In terms of total employment, manufacturing took the cake in 36 states in 1990; it dominates just seven state economies today. Unfortunately, that leaves struggling many product-based companies, which have had trouble breaking into the service sector. But the Internet of Things has changed the game. Now, thanks to smart technologies, it’s easy to see how a refrigerator, pair of shoes, or even a football helmet can provide a service.
Today, the moneymaker is no longer the product — the fridge or helmet itself — it’s the service behind the product. Microsoft, for instance, recently gave away Windows 10 for free, hoping to generate a customer base for its “universal” apps designed to function across Windows 10, Windows mobile, Xbox, and its upcoming HoloLens. Why does service make sense? Companies that operate off the service model — such as Microsoft and many IoT product creators — don’t have to constantly resell a product to users. But that doesn’t just lighten companies’ sales loads: It also means better product development, recurring revenue streams, and stronger customer relationships.
Use Technology to Transition to a Service Model
Of course, knowing that you should develop a service-based model and knowing how to do it are two different things. The road to committed customer relationships starts with mobile and software-as-a-service technologies, but too often, marketers don’t think past having an app that advertises what they’re selling. Frankly, that’s a poor use of resources. These technologies might briefly drive sales, but in and of themselves they can’t win long-term customers. However, if you can provide users with a service related to the product, you’re no longer just a marketer: You’re a partner.
How do you develop a service that resonates with buyers, drives product demand, and creates valuable, recurring customers? Just look to Adobe. In 2013, the software company “service-ized” its Creative Suite. Before the switch, users could purchase perpetual licenses for Adobe’s products. But the costs of reselling the product — not to mention updating each edition — made Adobe take a hard look at its product development. Now, Adobe Creative Cloud customers use the product through a monthly subscription. Obviously, this benefited Adobe: It provides the recurring revenue and loyal customers we’ve talked about. But it also benefited customers: They can stay up-to-date with the latest releases, get great customer support, and don’t have to purchase new software every time it’s released.
3 Steps to Create Service-Based Products
So how can you follow in Adobe’s footsteps and evolve your product into a successful service? Knowing your customers and market will always be a good start, but here are three further steps to consider:
1. Think “service,” not “brochure".
When you’re creating a technology product, there must be a reason for the consumer to buy and use it. They don’t want to stick an app on their phones that links to your website or ad sheet, much less pay for it. What they want is a product with value — something that provides a service.
For example, we recently helped EKM Metering set up a web interface — known as Encompass — for its smart meters. The platform doesn’t push EKM products to users: It gives customers real-time data about their electricity and water consumption, and it provides value by recommending savings strategies. How can you know what your customers want in a service-based product? Try empathy mapping, an important precursor to product design at Yeti. The exercise uncovers ideas that wouldn’t have surfaced otherwise, so get inside customers’ heads before building out your service.
2. Rapidly prototype to test your service.
Don’t charge into a service-based product before you know whether users will actually buy it. To challenge your user assumptions, use the design sprint process. Each sprint ends with the creation of a prototype that gets your service-based idea in front of real users.
The key to prototyping is to build the product’s main features and then let customers play with it. Their reactions will shape your decision about whether to move forward with the idea, allowing you to build what they need instead of what you think they need. In the case of service-based models, you’ll likely need to test different service tiers, hardware packages, and user interfaces. Take the prototyping path to learn up front what users would expect from your service and how much they’d be willing to pay for it.
3. Be your customers’ partner.
People don’t want to be sold to. More so than ever before, customers want to engage on a personal level with brands. The service-based model makes that possible. You aren’t asking customers to open their pocketbooks each time you build a new product: You’re asking how you can make their lives easier and businesses more productive.
The “partner” mentality is why Adobe’s Creative Cloud has been such a success. Initially attacked as “greedy," the software company’s service has already brought in more than 7 million new customers. That’s impressive growth, considering that Adobe spent a decade building a base of 12.8 million customers prior to Creative Cloud’s launch. It shows customers want a long-term relationship with Adobe, not a sales pitch each time the company debuts a new product. But while service-based products are the present — and the future — of the economy, that doesn’t mean your company needs to make the journey alone. Give us a call to learn how Yeti can help you take your product to the next level — the service level.
Tony Scherba is a President | Founding Partner at Yeti. Tony has been developing software since high school and has worked on digital products for global brands such as Google, MIT, Qualcomm, Hershey’s, Britney Spears and Harmon/Kardon. Tony’s writing about innovation and technology has been featured in Forbes, Huffington Post and Inc. At Yeti, Tony works on strategy, product design and day to day operations, hopping in and working with the development teams when needed. Follow Tony on Twitter.