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Do you wish to learn how the mindset of businesses shifted from selling products to selling services? If yes, this blog is specifically for you!
Business is changing. More than ever, people want to know what value you bring to the table and how it relates to them.
Businesses of all types are moving from product-centric to service-centric models. Some companies may have products as their anchor – the cornerstone they get built around – but they also wrap additional services around it. These include related but assorted products.
In most B2B organizations, product sales are the norm. It is because selling a product is relatively straightforward: You find out what your customer needs, offer them a solution that meets their requirements, and buy it. It is possible to overgrow by focusing on this model.
But it also has its limitations:
Selling products is an easy, comfortable way to make money. You can spend your time and energy on what you know best – making products.
After which it gives you an opportunity to sell it per se.
But to build a lasting business, you must shift from selling products to selling services.
Selling services means helping people with their problems and needs. It means understanding the market’s problems and how your product or service solves them. It is a more challenging approach but offers more rewards than just selling products.
The transition from selling products to selling services is a big one. It can be difficult and daunting, but it can also be advantageous.
Here are the five steps to shifting your business model from selling products to selling services:
Before you can move from selling products to selling services, you need to understand why you should make this change in the first place – and why now. Your customers make purchasing decisions based on what matters most to them. Before offering them a service that aligns with their needs and interests, you must know those factors.
Figure out precisely what you want to sell and why it matters. What problem does it solve? Who benefits from getting that solution? What makes this solution unique and valuable?
Now that you know what kind of service you want to sell consider how you can deliver those services to make customers happy and keep them coming back for more. If gaps exist in your offering or opportunities for improvement, you must address those issues before taking on clients.
A service-based model requires a distinct set of skills than selling products. You need people who can understand customers’ needs and offer solutions rather than selling products.
Create an environment where everyone understands how they fit into the bigger picture and their role. It also means changing some of your internal processes to work with delivering services instead of products.
Service-based business models are a popular choice for many small businesses, but they can also be smart for some large companies. The benefits of service-based business models include the following:
A service-based business model allows you to adapt quickly to changing market conditions and customer needs. You can easily vary your offerings and pricing depending on market demand. With a product-based model, changing your product mix may be more challenging without losing your customers or turning them to another competitor.
Service-based businesses often require fewer employees than product-based businesses because they do not need managers who oversee manufacturing processes and inventory management. It can result in significant cost savings for both startup and operating costs over time, as well as lower taxes due to fewer employees being required by law to provide Social Security taxes in lieu of their employees.
The main benefit of service-based business models is the high-profit margins. You do not have to worry about inventory or shipping costs, which means more money in your pocket at the end of the day. If you are smart about it, you can use this extra profit to pay yourself something extra each month!
As mentioned above, not having inventory management or shipping costs is one of the most significant advantages of running a service-based business. You do not need any inventory because you are selling your time and expertise rather than physical goods. You also do not need to worry about shipping costs since your client will come to see you in person (or over Skype) instead of waiting for their product in the mail after ordering online like they would with an e-commerce store!
Because customers depend on services rather than physical goods, they are more likely to remain loyal to their providers. Customers will often stick with the same provider even when prices rise because they do not want to go through the trouble of switching to another company. This loyalty can translate into increased customer retention rates, reduced marketing costs over time, and higher revenue per customer at any given time.
The biggest advantage of a service-based business model is the ability to scale fast. All you need is money, time, and people. You can hire freelancers or contract employees for specific tasks, find partners, and launch an app. The most important thing is to stay focused on what is important: providing value for customers!
As an entrepreneur, you may have already discovered that the path to success is not always a straight line. You might have built your business on a product that generates revenue — and it might still be — but as your company grows and matures, you will need to consider other ways to monetize your business.
For example, if you sell software as a service (SaaS), then instead of thinking about how the software functions, you should think about how it helps your customers achieve their goals.
You can also transition from product-based revenue by offering customers a combination of products and services. It is particularly effective with B2B businesses that have complex products or a wide range of offerings.
For example, offering enterprise-level software might provide additional support services to help your clients install and use the software successfully.
The traditional transaction model assumes that customers will repeatedly return to buy more of the same thing. It is a model that does not work well in the digital age when customers easily make purchases online and switch brands.
Subscription models are much more effective because they create relationships between companies and customers. Subscriptions make it easier for businesses to build recurring revenue streams, making them more predictable and scalable than one-off sales.
For example, The SaaS model is built on a subscription model that charges customers monthly, quarterly, or yearly. It is a transactional relationship between the customer and the provider where you pay for what you use. The most common example of this is Adobe’s Creative Cloud which allows customers to pay a monthly fee for access to all of Adobe’s creative software tools.
This model works well for SaaS companies because it allows them to scale up their customer base with minimal overhead costs. Once they have made a sale, they do not have to worry about inventory or shipping costs — they need to keep up with maintenance and support requests from their customers. That makes it easier for them to grow quickly than traditional businesses with fixed costs associated with each sale they make.
It is not easy for businesses to make this shift because it requires them to offer new products or services that keep customers coming back month after month — even if they do not need anything further. And because subscription models tend to generate fewer transactions per customer than transactional ones (like gym memberships), companies may have trouble scaling their business fast enough to meet investors’ expectations for growth rates.33
The benefits of selling services include working with customers and building lasting relationships. This approach has challenges, including forgoing overhead costs associated with selling products. Ultimately, your decision will come down to your perspective on business. If you see yourself as an entrepreneur whose business is built on relationships and customer satisfaction, selling services is worth considering.
Surojit has over 15 years of experience in quality and implementations. He is a promoter of an extremely light and efficient Agile process to fit business needs. In his prior role as product owner, he built a robust product in a very short span of time.
Published September 02, 2022, Updated September 02, 2022
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