Is Productized Consulting *Really* a Good Fit for Your Business?

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A discussion came up this week in a freelancer forum I help run. The original poster shared the book, One-Trick Ponies Get Shot.

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In the book, the author describes how service companies (which is what most freelancers are) can avoid being labeled and treated like vendor by their clients (contrast a vendor with an expert practitioner—like a physician).

We’ve spent a lot of years selling tactics, because it’s easier. We’ve shut down the relationship economy to ‘productize’ our services because it seemed more scalable: Turn services into little, neat packages and you can sell more. That means more money.

Except it hasn’t. Instead, it’s clobbered our industries.

The only industries with a lower 5-year survival rate than services? Mining and manufacturing (I wish I could remember where I read this. But I’m not making it up, I promise).

We’ve marginalized every services industry, and it has to change.

Alas, we’ve done a really great job training clients to buy services as products. They have no reason to change. In fact, they’ve built their business processes and personal budgets around treating us as vendors.

So yes, it’ll take some time tie those tactics to true strategy. But there’s a huge upside for us and them. The first companies that start providing strategic as well as tactical value will get fired less. They’ll make more money. And they’ll provide more value to clients.

I think this is such a good quote. I know a lot of freelancers who are attracted to the idea of taking the most effective, easiest parts of the work they do for their clients, and turning that into a one-off product.

I see so many problems with this line of thinking, though.

Even the best sales page isn’t going to help scale a high-touch service offering

First, productized consulting opens itself up to competition in a way that’s much more dangerous than a well-positioning consultancy.

Productized services do almost all their selling online. Consultants do almost all their selling offline.

Even the best sales page isn't going to help scale a high-touch service offering Share

Consultants only share their proposals after carefully vetting their leads and discussing options. They also don’t leave any case studies, processes or other proprietary information lying around after the sale.

Once this information is presented, it’s then taken away (this finite sales decision time obviously helps customers choose quicker, as well).

You have to protect your proprietary processes and intellectual property

Consultants protect their systems because they’re inherently valuable. Productized services, on the other hand, leave all their systems, benefits, offers and their pricing—online for the world to see (and steal).

To me, with productized services, you’re attempting to cast a wider net, and hoping not to have to build relationships and customize offers for each customers.

The big tradeoff is that (a), like any product, once you’re in the public, it’s only a matter of time before someone reverse engineers you, and starts eating into your profit margin.

And (b), because you’re not customizing offers to match customer’s ROI, you’re likely leaving (a lot) of money on the table. You’re also not having a proper closer conversation to make sure the buyer makes a decision.

If you take your time, build relationships, and give sales its own budget, you can dominate a market much longer, and keep your profit margins for yourself.

But what about services that have successfully productized?

The other forum master disagreed with me. He mentioned one of our more successful peers, Nick Disabato, as a counter-argument.

Nick Disabato doesn’t worry that people are going to siphon off prospective clients because he publishes what he does and what he charges on the Draft Revise website (Draft Revise is a monthly A/B testing service).

A good productized service is just as backed by reputation as traditional consulting—it would be suicide to point an ad campaign at a productized service offering page.

I’m curious what happens to all productized service sales numbers in two years after their buzz wears off, and competitors take root.

I’m also curious if it’s even possible to profitably run a productized offering without first having a very thorough and lengthy content marketing campaign that supports it.

Besides that, I question whether Draft Revise is a good example of a productized offering. If it was such a hit, the growth curve of that operation would still be trending upward—either by adding capacity, or at least charging more each month. One way or another, we would see increased focus on this business.

Instead, I’ve seen Nick launching several different offers—each one requiring more personal involvement, more selling, and more expertise to fulfill (kudos to Nick for being very open with his results).

I’d say that none of his new services include him trying to do more one-on-one monthly A/B tests, because:

(a): How many A/B tests does one SMB need? Churn rate has to be an issue (I get into churn more below).

(b): It’s no fun for a creative to keep executing the same service month after month.

(c): Even if you loved A/B tests, you’d still need to offer your customers something upstream to keep their expectations and trust in line. Plateauing results are not a recipe for retention.

(d): Grandfathered rates suck (at least for the agency).

(e): Even if A/B testing was a permanent need, if you didn’t evolve your offerings, your clients would eventually replace you with a cheaper A/B test vendor or take testing in-house…

Is Draft Revise really a productized service?

If Revise couldn’t be spun off tomorrow, and run profitably without Nick’s involvement, does it even count as a product?

After thinking about it, maybe Revise is instead, a relatively easily-explained, initial offering meant to bring new customers into the Draft ecosystem.

If that’s the case, I don’t think it should be held up as an example of a true product, or a business model that can be emulated without dozens of months of first building an audience.

Does it churn?

Brian Casel was also mentioned a productized consulting success story. Brian’s service, AudienceOps, is content marketing as a service (Brian also sells a product that teaches consultants how to productize their offerings, not coincidentally).

For AudienceOps, though, I’d like to know he’s keeping his churn rate under control—something difficult for any writer.

I would think doubly so for a scaled service that doesn’t do much customer vetting (because the sales process is so short), and because AO publishes posts and emails at a clip that most writers couldn’t keep up with.

AudienceOps basically charges $250 for every 1,000 words of content marketing. So how can Brian keep charging that rate without tying the writing directly to improved business results?

And if AO can show causation, how does it show that published 30 outsourced articles is 3x more valuable than publishing 10? If it couldn’t do that, I could see there being a really hard churn point in the customer lifecycle.

And if there’s a major churn inflection point, how much money goes into replacing these customers and/or reducing that churn rate or at least, pushing it further down the road?

(See? These are the kinds of things non-productized consulting seeks to address…Like, where do we next lead the client?)

1000 True Fans

Honestly, I’m just suspicious of any business that costs so much, but doesn’t need sales to power it. Is it an anomaly—a bubble—or does it really defy everything we know about business economics?

But…if you’re willing to do the marketing—the writing and audience building—it probably doesn’t matter. If you have 1,000 true fans, the cost of creating and selling products goes way down, and even your non-traditional service offerings can be profitable.

That said, if you don’t have this kind of fanbase today, I recommend you (a) focus on one-to-one outbound lead gen, and (b) start writing for a small audience.

In this way, I’m not disagreeing with the other forum poster; he mentioned productized consulting as a possible #5 in a long and complex service offering funnel (while suggesting writing occupying #1-3).

Build it and they *won’t* come

Neither of those strategies include tossing up sales pages and waiting for customers to come, though.

Productized consulting might be a good stepping stone—either to, or from, bigger engagements—but in order to get to the place you can even start thinking about client packages, you have to first do the work.

The danger, I think, is that this new model looks like a shortcut, but it’s really better…as a holding pattern for an already successful consultancy.

Reapplication is one of your least valuable offers, and sadly, that’s the definition of productized services. I would never recommend it to consultants who are just starting out.

Services aren’t failures

I also think that somehow, we learned to associate products with success, but services with failure (Rich Dad, Poor Dad maybe?).

I do think that doing rote tasks isn’t a good use of time, but I also don’t think there’s any shame in making money as a consultant.

If you maintain control throughout the sales process, you can get paid extraordinary amounts of money just to apply proprietary knowledge to help solve people’s problems (of course, you still have to spend money to find clients with those problems).

No one says you even have to apply the solution yourself (although clients sure do prefer one neck to wring when things go wrong 😉 ).

Conclusion

I know productized services are sexy and they seem to occupy the sweet spot between consulting and SaaS.

I’m not saying they can’t work, but I think that to do so, they either need a built-in audience, or a substantial sales and marketing budget.

For consultants that aren’t very good at telling clients “no”, or ones who have no experience doing paid marketing or sales for even their own agency, I see productized consulting as a huge time suck that could be better spent contacting new clients or building expertise through thought leadership.

It’s fun to think of a future when we get to make money without having to work too hard, but that’s probably just a fantasy. Even product people work their butts off marketing.

The successful consultants, though, are the ones who put in the hard work day in and day out—the ones that build a calendar of marketing activities and stick to them.

Working for yourself is a constant exercise in discipline and focus. I think that when it’s time for you to start productizing your services, your customers will let you know. Until then, I recommend keeping your head down and putting in the work.

I also recommend you resist the temptation to put your rates and services online; it’s really a trap that allows clients to compare you to other similar service providers (and whether accurate or not).

I think distancing yourself from any and all from competition was what One-Trick Ponies Get Shot was tying to encourage, as well.

3 Comments

  1. Kurt Elster on February 12, 2016 at 2:45 pm

    From the outside looking in, it’s easy to make assumptions about Nick’s decision-making. The reality is that he doesn’t want to build a staff to scale split testing engagements, so instead he’s building a ladder of complimentary products & services based on what Nick likes to do. He’s building a business for the life he wants, and succeeding at it marvelously. We really don’t have to wonder how successful he is or isn’t, Nick publishes his year in review and reveals his finances. Given how much time he takes off, the guy’s effective hourly rate is enviable.

    • Jason Pelker on February 12, 2016 at 11:44 pm

      But does that mean that other freelancers or agencies should follow his lead, abandon their daily tasks, and jump into building a product?

      No. Instead of building the product, I’m recommending that they do all the hard work that Nick did before Draft Revise—the writing, the outreach, etc.

      My point is that there are no shortcuts in this business, and anything that looks like one is probably a distraction.

  2. Marilyn on March 23, 2016 at 6:26 pm

    Interesting perspective on this topic. What if the mindset of this beginner freelancer isn’t to be lazy but to provide the best solution to the client? Hard to say.

    Your reminder to first do the work is a good wake up call for those thinking a change in price model will make one a millionaire overnight.

    But, in the first place, if anyone has the mindset of only earning big bucks without working, then even taking on the traditional route wouldn’t work too. I’m sure you’ve seen too many occasions that some people just never succeed in whatever they do (whatever success means to them deep down). Business and pricing model will affect as long as the right mindset is in place.

    You are right that it’s good to get the experience first as a consultant (I did 10 years of it myself). But in my honest opinion, any beginner can productize anything as long as there’s empathy involved to understand the situation and work his or her face off to provide that solution. So this beginner may do client work to achieve that, in that case as what you said, be a consultant first. This beginner may also do other things first like just roll out the sales page as if the business is in place, work hard to market it and find out from there.

    Yes, we all need to do year long marketing plans, so this is like compulsory towards success. But how anyone works shouldn’t be streamed or should I say segmentized. The freedom is in one’s own circumstance.

    Granted we shouldn’t expect to smell success tomorrow when we just started an hour ago. But while there are people who took 20 years, we cannot discount those who can do the same in 2 years or less. It’s about not reinventing the wheel yet doing things for a purpose.

    That said, I agree with you that some people do give the impression that productizing is an “easier way out” to not suffering from “clients from hell”. Definitely no shortcuts, Brian Casel had to slog for days and nights to work on Restaurant Engine, Dan Norris of WPCurve had to do everything on his own at the beginning before hiring. Somehow we cannot control what others put out there.

    On the flipside, if beginners have the mindset of no shortcuts, they will always be the hamster running non-stop in the wheel. A balance would be good I would say, to be able to take new challenges yet dare to fail by trying different methods to see what’s best.

    So if a beginner gets distracted by the “shortcuts” messages, and they move along thinking they will say succeed tomorrow, they learn from those failures and move on.

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