Cloud Topics

What Is Productization?

By Nicole Lim / March 17, 2020

What is Productization

As more businesses make the shift toward remote work and digital commerce platforms, productization can be a valuable process for any retail or service-based business. Productizing can refer to developing a new product or service for the market, or it can refer to the packaging and marketing of a service to make it easier to discover, understand, compare, and ultimately purchase. An example of productization would be an internet of things (IoT) company taking the data they receive internally from the sensors in their network, and converting that data into an informational report, or even a series of reports that subscribers can pay for access to. The productization process is also particularly effective as a subscriber model, as things like data information are liable to change rapidly, meaning subscribers will constantly need access. Both e-commerce and subscription commerce businesses can benefit from productization.

Why Is Productization Important?

Productization can influence several important assets of your business’s go-to-market strategy. These benefits can include:

  • Non-linear growth — Productization services can be less resource-dependent than other tangible product models, especially in the subscription commerce model. This decreased dependency allows for a higher potential of non-linear, or rapid, growth, as many products can be sold that require minimal production or customization efforts.
  • Better profit margins — Due to the lower amount of resources it can take to distribute productized services to consumers, there can be higher profit margins for these services when compared to physical goods.
  • Supports scalability — Productized services can be highly standardized, such that many subscribers are paying for access to the same core products. Without the need for physical product development or fulfillment services, growing the subscriber base can be much less resource-intensive.
  • Standardization of creation, production, and distribution — This is particularly applicable for Software as a Service (SaaS) applications. When dealing with SaaS, the ability to standardize creation, production, and distribution of services is much easier. Cloud marketplaces make these applications manageable from anywhere for both clients and service providers.
  • Subscriber retention — Because productized services can involve things that change rapidly, or that satisfy a constant pain point in consumers’ lives — such as billing management — you may see a higher rate of subscriber retention. This can also be influenced by the standardized production and distribution of SaaS services.

How To Grow and Improve a Service-Based Subscription Model

Service-based subscription models, including SaaS productizations, have gained more popularity, especially as e-commerce has grown over the last few years. If you’re looking to productize one of your internal services, or you’re looking to scale your current model, here are some ways that you can grow and improve your service-based subscription model.

Set up Focus Groups

A focus group can be a great asset in the initial phase of a project. Focus groups can provide valuable feedback about important elements such as user experience, design, accessibility, and more. As the service provider, focus groups are beneficial because you can brainstorm within these groups to innovate your product for the actual needs of the people it is targeted for.

Engage with Prospects/Subscribers

If you’re unable to set up a focus group, or if you’re looking for real-time feedback, it’s important to engage with your prospects. This can be through social media, which is becoming a more and more effective marketing tool, or through other portals such as newsletters and surveys. Having an area to engage with consumers can help you keep on top of potential problem areas and foster trust, which is an important factor in retaining subscribers.

Establish Strategic Partnerships

Support from other companies that align with your service goals is a great way to expand your audience and improve your offerings. When creating this partnership, you want to aim for companies that complement — not compete — with your service.

Keep Track of the Competition

Due to the popularity of subscription services, if your business is offering service-subscriptions then it’s important to stay competitive. This can include having competitive pricing, offering a unique service, and staying up-to-date with things like software patches and bug fixes. Partnerships, focus groups, engaging with subscribers, and things like design innovations, can all help your service maintain a competitive edge.

Design a Product Roadmap

A product roadmap is essentially a plan of action for the future of your business. It is a visual map that highlights where your company is currently, future goals, and strategies to achieve those goals. This is a helpful tool for all types of business models, including service-subscriptions. There are several benefits to using a product roadmap, including:

  • Coordinating activities across teams;
  • Creating internal and external transparency;
  • Tracking progress toward goals;
  • Prioritizing tasks;
  • Introducing new initiatives.

When building a product roadmap, there are two points to be particularly aware of; the product ladder and the three-prong strategy. The product ladder is designed to make starting your service or building your audience easy. By building trust at the foundational level, you can make it easier and more rewarding for consumers to either purchase more products or renew their subscription. The three-prong strategy is about expanding the market you’re addressing — this is often where productization comes in. If you add a service-subscription into your portfolio of products, then you’re expanding the needs your business can fill, and generating new perspectives.

Examples of Productization

There are many ways that businesses can productize services.

  • An independent photographer may offer a la carte video or photo editing services. This photographer would likely already edit client photos they took themselves, but by productizing that service independently, their market opens up to people who might already have photos and videos, and want them professionally polished.
  • A productized service-subscription sample may be a cybersecurity company that offers a virtual private network (VPN) for your devices at a monthly rate.

By productizing your business’s internal services, you can expand your current market, profit margins, and scalability.