I’ve been running productized service businesses in one form or another for several years now. Consultants and clients alike have taken to this concept they’ve found this model is truly easier to sell and easier to buy.
But there’s one point of friction that I occasionally run into—both from clients and sometimes from members of my team. It’s the notion that we are an “agency” and we should be expected to act like one.
Many may use the terms “Productized Service” (a.k.a. “Productized Consulting”) and “Agency” interchangeably.
In fact, almost every thread of how our productized service business works is the exact opposite of how an agency works.
Today, I’ll share the ways in which a productized service is not an agency. I found these patterns to be true in my current business, Audience Ops, in my previous business, and from the accounts of many productized service owners that I talk to.
First a quick refresher: Here’s how I define a productized service:
It’s a done-for-you service business that is highly focused on solving one problem for one type of customer, and doing it in a systematic way. This leads to a more compelling value proposition that is easier for the business to sell and easier for customers to buy. Plus, by focusing on systems and a standard way of delivering the work, the productized service business can scale and grow easily.
Here are a few articles I wrote over the years that go deeper:
Years ago, I began my career working in several digital agencies. These were tremendous learning experiences for me. But looking back, they also opened my eyes to the challenges of running (and working in) an agency. That was one of the factors that helped the concept of productized services click into place for me as an alternate way to grow a service business.
Here are five specific ways they differ, and why I prefer the productized service model, given my goals for my business.
I’m not saying that agencies don’t form deep, valuable relationships with their clients. They certainly do and it’s that relationship that often drives success in the agency model.
But for most agencies, one client is very different from the next. They often serve clients with wildly varying goals, problems, aspirations, requirements, industries, size, you name it. An agency adapts to the needs of many different clients. So the strength of the agency is their adaptability. But that can come at the cost of lacking a deep understanding of one type of client and the optimization that can come from that.
A productized service knows who their best customer is. They know what type of business they run. They know the common challenges they face. One challenge in particular is the one they have a deep familiarity with, and they’ve built their solution to target that problem head on. They know where to find their best customer. They know how to speak to them. They know how to listen to them (because they hear them express the same challenge the same way again and again). That connection and deep understanding is what makes the productized service’s value proposition so compelling.
We know you, we know your problem, and so we’ve built our solution just for you.
Why does this work? Because there are many of “you” out there.
I once worked as a freelance contractor for a large web agency who only served two very large clients, both globally recognized brands. One of those clients was bigger than the other, and if I had to guess, accounted for 70% of the agency’s revenue.
About three months into my contract there, I learned that the bigger client decided to cut back their engagement with the agency. The agency laid off 40% of their employees and told me that my freelance rate would be cut by 30%. That’s when I decided to move on and stop working for agencies.
In my productized service business, every client is worth the same to us. They all pay the same amount and receive the same level of service. Of course we value each and every one of our clients immensely and our service shows it. But we don’t give any one client special treatment, more or less attention, or assign our “A team” or “B team”. We don’t have an “A” and “B” team.
If a client decides to cancel their engagement with us, it hurts. But it doesn’t devastate the business. We have enough happy clients on our roster, and plenty of incoming leads to keep this thing growing every month.
When a client makes a special request to their agency, the agency complies. There might be a discussion about scope and price, or perhaps some “push back” (which, often results in a compromised solution), but the request will be honored one way or another. Again, it’s the agency’s adaptability that the client really values. That’s fine for an agency, but not for a productized service.
When a client makes a special request for something that is outside the scope of what we do, or different in some way, we handle it with extreme care. We don’t say “no” necessarily! But we do stop and step back to assess how we should deal with this request in a smart way.
The decision goes something like this:
By treating special requests with care, we’re ensuring that our service remains highly standardized and free of “bloat”, which makes our teammate’s jobs easier and stress-free, and our system running smoothly. In the end, that’s what benefits the client the most.
In a typical agency, many people wear many different hats. The fact that they adapt to the needs of their clients and provide highly customized solutions requires a team who can function with a high level of uncertainty from day-to-day and week-to-week. Successful agencies are great at this. But building and maintaining this type of team is costly and resource-heavy, which makes it very difficult to maintain healthy margins.
A productized service also relies on very talented people. But their roles are highly specialized and focused around the particular part of the process they’re hired to do. by removing all of the “fires”, “rush jobs”, and messy project management, our teammates are free to focus on what they do best—their craft.
Many agencies attempt to create their own product in hopes of someday escaping the hourly billing hustle. Very few succeed. Their client’s “fires” take priority and pull resources away from their pet projects. As time goes on, the agency naturally lands larger and larger clients, and this becomes their only path to growth. More custom work for more money with more people doing more things.
The real reason why internal product development takes a backseat at most agencies comes back to that first thing I mentioned: Knowing your customer. You see, since agencies don’t have a specific customer that they’re focused on serving, they struggle to identify key pain points they may have. When it comes to marketing a new product, they don’t have a foothold within any specific market, because they’ve been so generalized.
A productized service on the other hand can leverage their byproducts to form new products. For example, going into 2017, after 2 years of growing our productized content service at Audience Ops, we’re launching Audience Ops Calendar, a content calendar tool with our systems and automation baked, and Content Marketing Playbook, our training product. These were specifically built based on learnings from serving our clients. And since Audience Ops has established itself as a content marketing company, growing our line of content marketing products just makes sense, both for our customers, and for the business.
Do you want to run an agency or a productized service? Which one do you run right now?