Updated: Oct 26
In the dynamic landscape of Software-as-a-Service (SaaS) companies, the transformation of service offerings into well-defined, productized packages is gaining remarkable traction. This strategic shift brings forth numerous advantages that not only enhance the company's bottom line but also provide customers with tangible value.
In this blog, we'll explore why SaaS companies are increasingly embracing the concept of productized services and how this approach benefits both the business and its customers.
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What is Productization?
When it comes to professional services, we can define productization as the process of turning a service into something that can be bought and sold exactly like a product. This has become the go-to business model for organizations that are beginning to see that the billable hours model for client services might not be the most efficient method.
The shift to productized services is driven by the desire to create scalable, efficient, and consistent revenue streams. Traditionally, services within SaaS companies often rely on custom solutions, leading to resource-intensive operations and unpredictable revenue.
Productizing services streamlines processes, enabling companies to focus on standardized solutions that can be efficiently delivered to a broader customer base. Professional Services and other services (technical, education, support) are often bundled, packaged and sold as services products.
Prefer watching to reading? Watch our helpful video on productising your services below.
Why You Should Consider Productizing Your Services
Customers benefit from productized services because they provide clarity and transparency in what customers can expect, offering a clear outline of deliverables, timelines, and outcomes. This promotes trust and reduces the uncertainty often associated with bespoke services.
Furthermore, packaged offerings should be delivered at a lower cost, making quality services accessible to a wider range of clients.
The financial benefits of productized services are compelling. By offering predefined packages, SaaS companies can achieve cost savings through optimized resource allocation and reduced customization efforts.
Additionally, the predictability of revenue streams enhances financial forecasting and planning, leading to improved stability and better operational efficiency with higher gross margins.
Why You Should Be Productizing Your Services
Retention & expansion
Service products can help retain and grow the customer base, positively impacting both Gross Revenue Retention (GRR) and Net Revenue Retention (NRR). This is crucial for sustaining and increasing revenue streams.
By productizing services, SaaS companies can efficiently scale their capabilities. This is achieved by leveraging repeatable processes and standardized ways of working, enabling the company to handle a larger volume of customers or projects.
Productized services can generate consistent, predictable, and ideally recurring revenue. This enhances financial stability for the company, boosting its enterprise value. This is especially important for the long-term sustainability and growth of the business.
Streamlining operations and utilizing resources efficiently is a key benefit. This leads to better margins and a clearer path to profitability or increased profits for the Professional Services organization.
With customers increasingly demanding quicker deployments of software, having clear deliverables and the ability to deliver outcomes more rapidly enhances customer satisfaction. This means that the company is delivering on the promises made during the sales process, which builds trust and loyalty.
Let’s put ourselves in the shoes of a customer for a moment. Imagine you’re looking to hire a content writing agency to develop some blog posts for your company’s website.You find two potential agencies you want to work with. The first one has a dedicated landing page, clearly listing each service they provide, how many words the piece will be, and a fixed price. The second agency specifies that content pieces are created on a case-by-case basis, and you must contact them to find out more.
Increasingly customers are looking to vendors to provide this packaged service which is easier to evaluate and purchase.
Examples of Productized Services
Productized services can be found in almost every service industry including embedded services in SaaS, consulting and marketing agencies.
Here are some of examples of productized services:
Onboarding packages are comprehensive offerings designed to guide customers through the setup and implementation of the SaaS product. They encompass services like data migration, configuration, and personalized training to ensure a seamless transition.
Consulting services offer expert advice and guidance on how to maximize the value of the SaaS solution. This involves customizing the software, optimizing workflows, and addressing any gaps in product functionality.
Education & Training
Education and training services focus on equipping customers with the knowledge and skills needed to use the software effectively. This can include in-person or virtual training sessions, workshops, documentation, and access to educational resources.
Integration offerings provide predefined solutions to connect the SaaS product with other systems used by the customer. These integrations meet common customer requirements, enhancing the compatibility of the SaaS solution with their existing tech stack.
Subscription services involve offering customers an annual package that includes a range of services. The goal is to bundle various ad-hoc services (like onboarding, consulting, training, etc.) into a comprehensive subscription model. This provides customers with a predictable cost structure and encourages long-term commitment.
These service products are designed to deliver value to customers, enhance the customer experience, and contribute to the financial stability and growth of the software company. When well-executed, they play a crucial role in establishing a competitive edge in the SaaS industry.
This Precursive guide to productizing services has introduced to you what it is, why you need to start adopting it, and where you can begin doing so. Want to know how to productize your service offerings? Our new playbook, How To Productize Services Delivery, is the free, detailed guide to what you need to do.
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Visit our Precursive Products page to discover how we can help you deliver a great productized service to your customers. Alternatively, book a demo today to see it in action for yourself.