Philip: Hey everybody and welcome to the Freelancers’ Show. This is episode 234. I’m your host, Philip Morgan and Jonathan Stark is in the panel.
Philip: For this episode, Jonathan suggested and I agreed that we could talk about productized services. I’m just going to hand it off to you, Jonathan to take it away.
Jonathan: Productized services I was just saying at pre show to Philip that I’ve rolled out a number of productized services over the last year or two and it’s had a dramatic impact of positive impact to my business in this six figure range. It seems like something that is creeping into people’s consciousness more and more. Perhaps that’s just blue car syndrome. You buy a blue car and then you see him everywhere. Maybe I’m just seeing them everywhere.
I think productized services are really good way for freelancers and consultants to start thinking about ways to increase their profitability and income using this. It’s sort of a technique, I guess. We jumped in by defining what productized services are, give some examples of productized services that either we offer or friends that we have who offer them and then maybe talk about some pros and cons and that sort of thing. Sound cool?
Philip: Sound good. Let’s do it.
Jonathan: Correct me if yours is different but my definition of a productized services is that, it’s a relatively fixed scope, high touched service that you publish on your website or on your marketing materials at a specific price. It’s almost like a custom project or a custom proposal that you’d publish. If you imagine normally what happens is, a prospect contacts you and says, “Hey, we’d like you to do some things for us. Could you put together a proposal?” Then you do that proposal and you give it to them and that proposal has a price on it of course.
It describes what you’re going to do and what the outcomes are going to be, perhaps some options that they can choose from and there are prices at the end. If you imagine just taking one of those proposals and anonymizing and putting on your website with the price, it give you a dramatically different way to market and sell something that you already do.
Philip: Can I jump in with some thoughts already? It’s like half of a senate in your definition. But forces are really big change when you start to stop being reactive to what your clients are telling you they need. What I mean by that is, if you think of yourself as, “I’m a developer, I’m a writer, I’m a designer.” You’re thinking about your skills that you apply as inputs to a project. When you’re thinking of those terms, you have half of the ingredients necessary to bake a value proposition. It’s like you want to make pancakes. You got flour but you don’t have the other things, the client has those things.
In this analogy, those things are what’s the problem that those skills are being applied to or what’s the business need that those skills are being applied to. I’m thinking back to my early days as a freelancer. I just went around with not all of the ingredients I needed to construct the value proposition. I was like “I’m a writer. That’s what I do. That’s the magic I apply.” But that doesn’t create any value when it’s lacking the other stuff which is, what’s the particular situation or the particular problem that my writing skill was going to be applied to? When I had those two ingredients, then I had the essence of a value proposition.
One of the things that I think about immediately when you give that definition Jonathan is that, in productized services, you’re taking control of the whole thing. You’re saying, “Here’s the skill but also here’s the problem. Here’s the business situation in which this skill will produce value.” You can’t really have a productized service without both of those parts. What do you think about that?
Jonathan: Yeah, 100% agree. It gets thinking about the outcomes. Let’s use your example of being a writer. Most people in freelance writers say, “Hey, anybody needs a writer?” I don’t know anybody who needs a writer but I know a lot of people who need things that a writer might be able to provide to them. If you can’t articulate the value that you provide to clients, it’s really hard for them to imagine it, to connect the dots. If you’re like, “Hey, anybody need a writer?” The only people who are going to say yes are people who know they need a writer. Those people, not only is it the small pool but it’s difficult to find those people anyway. It’s difficult to find people who know they need a writer. It’s not like an hourly apparent quality that maybe I would recognize in some of my friends.
More importantly, it’s not a high value. People who know they need a writer, they’re thinking of what you can do for them in a way that’s low value. Like I just need somebody to write some stuff for me. I need this stuff written, it’s a stuff on my to-do list. I know I know I need to write this stuff. I don’t have time to do it. I just need someone to do it for me. I’d rather do it myself, I just don’t have time. If you turn that around, what’s an outcome that a writer might be able to provide for a client like a productized service for writing?
Philip: One would be to support a product launch. Let’s say that somebody like Microsoft and you’re going to be launching a new product or maybe a better example that might be on that small medium sized business scale is you’re entering a new market and you need to equip your salespeople with what they need to sell into this new market, that’s an outcome.
Jonathan: That’s a great one. Once you have something like that or if a student came to me with that, just said exactly what you just said, the sales page for productized service starts to write itself because you can outwardly identify qualities of your target market. You’re trying to expand into a new area, you have an outside sales force, you’ve got a new product for a new market, and so on and so forth. Then you can say, “Oh, well.”
Imagine if you could speak the language of your new customers. Imagine if knew what your customers thought were the best feature of your new product. Imagine all these things. Wouldn’t it be great if you had them? That becomes the valuable outcome and then you can explain in your sales page how you would do these things. You could say, oh, you know once you pay for 30 days to product launch ink, whatever the product is called, productized service is called, here are the things that will happen. First we’ll have a kick off meeting with all the stakeholders then I’ll have an individual interviews with these different people then you’ll give me the names of 75 existing clients or 75 people on the target market, I’ll do use [00:07:55] with them. I’ll interview them. I’ll record everything for posterity.
It starts to write itself because you’re thinking of the goal that would be attractive to the client. What’s really important here to look back to the definition is that, regardless of the size of the client, maybe it’s Microsoft, maybe it’s some startup in Silicon Valley, maybe it’s somebody in their garage but the scope of what you will do for them, the time that will take you to do and other resources that will from you, they’re relatively the same.
Whether you’re doing it for a Mom and Pop Pizza place or Papa Gino’s, it’s not going to take you about five hours across two weeks, something like that. Your cost remains very fix regardless of how big your customers are or your clients are. That’s what allows you to publish it at a price on your site because you can pick a number where you’re not going to get killed and that is good value for certain slice of your target audience.
They can make a very clear value decision based on your marketing materials without talking to you at all. Either they can see your price and be like, “Is this guy crazy? I would never pay $5000 for that.” But other people who have a bigger budget may be a bigger opportunity. I’m going to look at that $5000 and think, “Oh, it’s a no brainer. Even if this guy totally stinks, it’s worth it just to try it because we’ve got a $5 million opportunity here to drop $5000 to perhaps to reduce some of the risk or increase our chances of success as a no brainer.”
Philip: You mentioned the copy righting itself. I can assure people that it’s the idea of writing a web page or a website or describing a service has been intimidating to you. There’s a couple very likely culprits one is that you don’t have a clear enough picture why somebody would hire you or what they would do with your service or you’re attention is on the input of some complex thing and this is particularly true with larger enterprise type projects.
You’re focused on your little slice of this pie. You don’t really have the context, the larger context about what is this do for the business? Why are they spending $3 million on this new ERP system? Yeah, you generally understand why, it’s because they want to, they decided to and somebody approves the money but, specifically, why?
Looping back to what I was saying earlier, the copyrighting becomes a lot easier when you understand the problem that your services solve and the value that it creates. As someone who’s looked at a lot of websites and thrown up in my mouth a little bit at how focused the copy tends to be on mi, mi, mi, s, s, s which I’ve done my share of that myself earlier on in my freelancing.
The challenge about website copywriting seemed to be how can I describe myself in a way that suppose to accurate and make people salivate with desire to pick up the phone and hire me. Paradoxically, the answer is not by talking about yourself but by talking about their problems, their needs. When you design a good productized service, you have to answer that question of what’s the need, what’s the problem?
I feel like I’m saying the same thing but it’s through this land of writing the copy becomes so much easier when you have a clear idea of what’s the problem you’re solving. If you just start with that like if you just write a paragraph or two about that, then the rest kind of naturally unfold and then you’re like, “Okay. I guess I’ve described the problem. What’s next?” How you solve it is next. What’s next after that? Maybe it’s a price or maybe it’s a little bit more detail about why your approach is a good one. That’s objection handling. All of the sudden you just find yourself almost naturally writing a sales letter.
Jonathan: I totally agree. Not only is it easier to write the sales page but it’s easier to price because I might focus just pricing and when people have a hard time, when they’re trying to switch from hourly dealing to value pricing or really any other fix pricing, their estimates of what they should put down is a number just very widely for the same project so people will contact me and say, “You know, I was going to do this by the hour. I estimated it.” Let’s just say $50,000. Should I fix price it at 50,000 or 500,000? They have no clue.
The reason they have no clue about what the price there is because they have absolutely no clue why someone would hire them to do this thing. They only know that the client wants them, there is express to them that they want them to do a list of tasks but they have done no research or no diagnosis really to find out why they want that list of tasks done. You give absolutely nothing to base a price on.
If you’re having a hard time writing anything on your website, you’re just staring at the page like I don’t know what to put here and you end up with this jumbled generic, it’s like whistle words about yourself and quality and passion, basically you’re talking about nothing or you just have no concepts of what to price to your services at other than just estimate how long it would take to complete some tasks.
The problem is, you need to find out from your customers why they hire you and what they value most about the things that you do for them. Tons of ways to do this, I’m not sure if we need to go down that path here or if that’s off topic but that’s the thing. Once you have the answer to that, it becomes much easier to price, it becomes much easier to write your sales copy and it becomes much easier create productized services.
Philip: As you were talking I was thinking that it’s possible to develop a productized service and use it as a way to test something. You can use it to test pricing or you could also use it to test basically a value proposition. Maybe you’re thinking, I’m a journalist web developer now. I would really like to focus on building micro sites because those can be real profitable because they generate leads or they have some other virtue that is really valuable to the business you work with. If you’re thinking about changing your market position, it’s a way to test that without going all in. I think that’s another wonderful aspect of productized services.
Jonathan: To just rephrase that in case it was not 100% clear. Let’s say you’re drinking Philip’s cool aid and you have an idea for positioning statement. If you’re trying to position your entire business, it feels very, very scary but if you just pick one thing to create a positioning statement for one service or one product, it feels a lot less threatening because if it fails, it means probably no one saw it or it’s just wrong. It just feels a lot less risky. We started to talk about examples. Let’s give a few examples of classic productized services for the typical freelancer and just instantiate a little bit so that it doesn’t feel as vague as it might.
Philip: One of the [00:16:20] examples is Nick Disabato’s Draft Revise service. His company is called Draft and revise is one of several productized services that he offers. It was the one he started it out with originally. Just a brief description, I hope I’m not doing a disservice because it changed over the years. When it started out, it was basically I’ll run AB test for you on a money making web property for x dollars a month, that make it sound like it’s $9 a month, but x thousand dollars a month. We will incrementally, iteratively improve this money making web property so that it makes more money and ideally more than you’ve invested in the service. That’s one. Why don’t we just take turns, Jonathan?
Jonathan: Sure. Also, another classic one is Kurt Elster’s Website Rescues which you could find at ethercycle.com/pricing, Ethercycle is the agency that he runs. It was his original productized service actually. Just to give you the idea, it says on the site rather than from scratch and then your website will make dozens of small fixes to your existing Shopify theme, they focus on Shopify. [00:17:40] changes major, all of these changes combine and make a big impact on your conversion and they’ve got that price right now at $3995.
You can imagine someone here, “Okay, I’ve got to shop by site and I know how much money it makes and if I have the sense that my conversion rate is low, it’s very clear to me that if I can improve my conversion rate, it’s going to be a direct multiplier on my bottom line. If that direct multiplier, even a one percent change in my conversion rate, if that equals $50,000 or $500,000 and all the other things and all the other trusts indicate room place are about Kurt. I trust that he is good at what he does and he understands Shopify, all those normal things.
I can sit here and look at this page and make a decision almost immediately about if roughly $4,000 is worth the investment without even talking to him. I have a whole list of examples. These are two specific examples that you can check out. You can go to draft.nu or you can go to ethercycle.com. But there are other things that I often recommend to freelancers like a website tear down where someone for whatever reason, they know their site stings but they don’t know what to do.
Philip: That’s something that Kurt offers also along with, I think Kai Davis team up on that service.
Jonathan: Absolutely. I don’t know if this is how they do it but the concept is that someone knows their website stinks, they want to make it better so they pay you some amount of money to review the website. You’re probably some sort of web design expert, a usability expert and you would maybe make a video of yourself running through the site and deconstructing and say, “Okay, here are ten things that I would do immediately to change this.” Just based on best practices, odds are very high that you’re going to have increased whatever you want. Conversion are increased, decreased [00:19:44] or whatever.
I actually do something similar to this that I called mobile user builder or sometimes I call it mobile on-boarding. Lately it’s been focused on onboarding where people are like, “Jeez, we’re having just a horrible success with increasing sales or memberships on our mobile sites. We spent all these money to have a mobile site built and it’s doing nothing for us.” My value proposition is like, “Oh, did you spend a few hundred thousand dollars on a mobile website that’s doing nothing for you?”
You can imagine someone in that situation who’s going to be like, “Yes.” And then I can say, “Imagine if it was totally kicking butt for you, imagine if it did all the things you were hoping it was going to do, imagine if you were attracting more millennials or you were making more sales or whatever, whatever the thing is.” Within in a couple of hours, I can just collect the information that I need to go through on their, not all but go through a sampling of their email marketing, the landing pages, the site itself, the sign up, check out all these things. I can just run through it pretty quickly, record the whole thing out loud on to video, write a report after the fact and create a really, really valuable piece of diagnosis around what their problems are, perhaps I could include some prescriptive analysis like here are the 10 things that I think you should do. It’s like on the one hand I can say, “Okay, here are all the points of friction, here are the problems that you’re having.” Maybe a more expensive version says here 10 things you can have your web team do about it and maybe a more expensive version is, “Oh I can put you in touch with the team, they can do these things for you.”
But there are tons of things like these, security audits, database performance audits, application architecture plans, disaster recovery plans, that’s a good one and no one wants to do themselves, cloud migration, technology remaps, marketing calendars, there’s a million things you can do that occupy what I would see as the earlier stages of an engagement. I got this from Blair Enns at Win Without Pitching. He defined the four phases of an engagement which I think are very eye opening, really amazing. Those four phases are diagnosis of the problem, prescription of a therapy, application of therapy and reapplication of therapy.
Most freelancers operate solely in phase three, they’re just always applying a therapy, most often of therapy that was prescribed by the client themselves. But often times, you’ll have some communication in the early stages of a project where you help them with some diagnosis and prescription and then apply the therapy. But usually, folks give that away for free thinking like, “Oh I’ll make a lot money on the implementation.”
I would argue that those earlier phases, diagnosis and prescription are the most profitable to the provider and they’re extremely valuable to the client because getting the wrong means spending a ton of money going on the wrong path. In my business, I just completely stopped doing the application part, the implementation, phase three and focus solely on the diagnosis and prescription stages.
Philip: Do you miss it? Do you feel like unsatisfied that you don’t get to build and now you’re just planning? It’s mostly what you sell.
Jonathan: I mostly do. I mostly do planning. Honestly, to me, that was always the most fun part. The most fun part was doing that strategic planning stuff where you sit back and like, “Okay, what are we going to do? What goals are you trying to achieve? How can we do it? How can we solve these big problems?” I think for me, from really honest, when I look back, my favorite parts were going through the planning phases and a lot of times there were also be a proof of concept involved where I would be coding something to prove that there was a way to develop a mobile web app that has offline support and passwords or something like that or there is a way to offline videos without overloading the iPhone storage.
I might do a proof of concept but after that, I think anybody that’s done a software project that’ s listening to this knows that there’s this torturous force march to help the end up most projects that there’s all these little teeny weeny bugs and detail. I don’t miss any of that at all. I miss some of the early phases at times but really, I get my jolliest code in my own stuff now. I love coding still but at the beginning of 2016, I vowed not take another client that want me to code for money. I don’t take money for code anymore. It’s a great decision. For me, it was a great decision.
Philip: What I think is entrusting case study that I think I can share from someone who’s in my mentoring program. He and his wife work together, they have a lot of expertise in the e-learning space. They, six months ago embarked on this project of taking a very close look at what they sold clients which was monolithic large projects, custom projects that involved exactly, I think those first three phases that you identified, the diagnosis, the prescription and the application of that.
When they looked at that, they saw probably a dozen things that they could unbundle, take out and sell as productized services. Just to go one more layer specific, the shortlist is planning like, “Okay we’ll sit down and identify what you’re trying to do and make recommendations about how to do that without failing or at the lowest risk possible.” They have a particular expertise when it comes to interviewing subject matter experts and finding out, taking that raw material of what a subject matter expert knows and translating that into effective e-learning. That was another thing that they identified as a thing they could sell stand alone.
They have a bunch of what you might call sodas like templates lying around from previous projects that they could clean up and turn into a saleable product that’s almost a zero touch product. I think they sell the same thing but they’ll customize it for you. They’re starting from a template, they’re using that internally to accelerate the process and what they’re selling is customizing that but not just anybody customizing it, an expert who really understands the field. I could go on and on but this is give you an example that, that’s a really example from a real business about how you start to gradually, it’s not like a wholesale overnight move, you just start to gradually see these opportunities like, “Oh, this has value and I don’t have to struggle to sell it because the value is self evident to people.” That’s probably where you start with your thinking about developing a productized service is something where you rarely have to sell it, you just have to explain it adequately and people are ready to buy it.
Jonathan: For freelancers who are just starting out, this is going to be pretty tricky because it is based on experience of working with clients but while you’re working with them, finding out why it want to work which I think is just something that people need to exercise that muscle. I don’t know if it’s tied directly to billing by the hour, I think it is. I believe that these two things are related. Hourly billing allows you to start working for client without either one of you knowing why. That’s very scary to me and I think it risks very low customer satisfaction levels at the end because even if you do exactly what they say, it might turn out that no needle has been moved for them and they spent all these money with you, they’re not going to be happy even though even though they might not blame you for their unhappiness. I think it’s better for everyone, never mind I think, I’m positive that it’s better for everyone, buyer and seller, for the seller, you, the freelancer to always be exercising that muscle of uncovering the why with the client either on your way into a project, ideally on your way into a project but even during a project or even after a project.
It probably feels the safest to do it after the project where you’re done in that risking the sale. You say, how did that affect your business, that website that I did for you last year, those marketing pages that I did for you last year. How did that affect your business? You’re going to hope it’s positive but maybe it’s not. But, if it’s positive, they’ll say, “Oh, you know that, that was a game changer for us. That’s my favorite, it was a game changer for us.” Oh really? Why? What did it changed? That information becomes the value proposition that Philip was describing at the beginning. You can take their words and just put them on a web page, whatever your marketing materials are and say, “Hey, would you like this kind of an outcome that my past clients enjoyed? Great, I know exactly how to do that.”
Philip: One of the things that is scary about productized services is they serve as a filter. If you’re putting a very clearly defined service offering, if you’re saying this is what I believe the value of this is, this is a problem that I believe, this is ideal for and this is the price and no, I don’t change the price [00:31:17] the same price, then you’ve created a filter. Again, thinking back to early days of freelancing for me, that would’ve frighten me back then because where I was coming from at that point was I’m like water and the client project is sort of the container that I’m going to be poured into and the shape of what I do depends on what the client needs.
The idea of saying, “Well, no, there’s this one aperture that you come through and it shaped like this. If you don’t fit through that, that’s okay but we’re not going to work together on this service. That would’ve really been a very intimidating idea to me.” I see people on those side of this, I see people who rejoice in having a filter because they know what it does, they know that if the filter is designed well, it screens out crappy clients.
But, there’s a stage at which you don’t want to screen out any client because you need them all. You don’t have your own source of leads coming in, you’re not marketing yourself effectively or you’re going through it a dry spell or whatever it is. I understand both camps there. I just want to say for listeners that if you find yourself frightened by the idea of a filter, maybe a, don’t bet your business on a productized service the way I did a year or two ago. I can talk about that if we want to and b, just know that at some point it feels great to have a filter because it saves you from getting on the phone with clients who just never going to be a good fit because they, just whatever the reason. There’s a tons of potential reasons.
Jonathan: I’ve got a couple of follow ups on this because I think it’s a great spread. First, it doesn’t have to be either or, you can just add a productized service to your site and continue to offer ad hoc custom consulting services. You don’t have to just offer productized service. You could offer a roadmapping type of product and use it to lead to an implementation in ad hoc service that you do create a custom quote for.
Kurt Elster who we mentioned earlier with the website rescues, he told me a story publicly so I know it’s okay to share this. Ethercycle was just a generalist web development shop web agency. They created this website rescuers which was specifically for Shopify stores and long story short, it was so successful that it ended up becoming the base of an entire new business. It became the business and the custom work fell off which was super fascinating and he’s been extremely successful in a completely predictable way if you’re familiar with the Philip’s work I’m positioning where they’d became well known in the Shopify space, perhaps the most well known in the Shopify space.
They’re kind of a go-to shop for anyone who is running a Shopify site. Clients come to them which really just a question of whether or not they’re available and if they can afford their services and they can simply go to the pricing page and see what the options are. It’s like a Chinese manual over there. He’s got about 12 different things with prices posted right on the site. It’s kind of like you have a filtered pipe and an unfiltered pipe of leads. The filtered one ended up letting through enough high quality clients that they looked to the unfiltered pipe and they’re like, “Why are we drinking out of that?”
Philip: That’s a great analogy.
Jonathan: I’m sure people as well. That’s just one example and that’s just an anecdote, Kurt’s superhuman or whatever. But it works and it doesn’t have to be risky, you don’t have to bet the farm on it which is one my favorite approaches for people who are new to this because it allows you to exercise your positioning muscles without feeling like you’re threatening your entire business. It allows you to play with fix pricing and value pricing without betting your whole business on it.
If you’ve got what it takes, obviously, not everyone’s cut out to be consultant of course. But, if you can do this safe little cycle, do the definition, creation, marketing, sales, delivery and follow up for this thing on the side, you could even have it on a completely different website. Have a like a vanity domain just for this thing.
Philip: He did, that’s how he started out. I think it’s still is, websiterescue.com.
Jonathan: It’s a great way to test the waters with all of these stuff we talk about which I think is super, super cool and it’s the way that I advocate for folks in my coaching program who are on the newer side, younger folks who are newer to freelancing or newer to consulting. This is what I say to everybody. Start off with the productized service, you can spin it up relatively quickly, you can feel each of those points, you can get familiar with each of those points that I talked about.
Man, what a difference it is when it comes to marketing in sales because probably most people listen to this don’t like the idea of doing marketing and sales. They just want to do what they do and they feel like it should sell itself. Well, you’ll find that productized services sell themselves much better than your regular, general ad hoc consulting because your price is published. People looking at it can make a value decision without ever talking to you. When they contact you, they’re ready to go, they might have a couple of questions about this or that but it doesn’t need to be this big exploration like tell me about your mother. It doesn’t turn into this giant butt sniffing exercise to use the dog analogy.
Philip: This is sort of a hunch. You said they sell themselves. I also feel like it would be very easy to me to overstate this and say they market themselves. They don’t really but there’s a difference if you’re just a complete generalist, if you think about how word of mouth helps you out, what the pattern that I’ve seen, I don’t have a ton of data to back this up just to be clear but, the pattern that I see is people talk about your personality, oh, they’re so great to work with, they don’t talk down to you.
They don’t really talk about your skills or the results you can create other than, well, they can do just about anything if you need a website, they can do that or if you need some custom software written for some reason, they can do that. But the emphasis is on like how likable you are as a person. Some of us are great at what we do, we’re just not likable. That’s a great thing to hind your business on nor should it be. You make for some people but I think it’s not a very strong differentiator in an increasingly crowded market that’s full of nice people.
What I find with productized services is that you have an edge when it comes to word of mouth spreading because someone can look at it and say, “Well, it’s not right for me but I know somebody who is right for.” Because every detail who it’s right for is right there on the page. It’s probably in some kind of headline on the page, it’s made very explicit. I think in what I’ve seen, because I know a lot of people who do productized services. I did them myself for a while. I still do them actually with my mentoring program that’s very much a productized service.
I think you get an advantage because people will want to spread the word for you because it’s not like they’re handing somebody a handful of water and saying, “Here, hold this.” It has a definite shape. Somebody can actually grasp it and say, “Yes, I understand what this is and so I know who to tell about it.” You get a little more help, I think. Again, I don’t want to overemphasize that point. Have you seen something similar, Jonathan?
Jonathan: I’ve had more than one person telling me that the results, really the piece that we’re talking about here are positioning exercise. But we’re talking about in the context of positioning a productized service. I’ve had more than one student telling me that the results are magic, they used the word magic. Once they create a defined thing, like you said, it’s like something they can hold on to mentally, it’s like the referrals just start pouring in. Everyone you talk to knows somebody who needs this. It seems like everyone you talked to knows someone that needs the thing you just described. It’s magic.
Before I got comfort with all these stuff, which is a couple of years ago, I remember not really engaging in any kind of marketing and sales because I just didn’t believe it will work for consulting. If you would ask me two years ago or three years ago why I don’t do direct outreach or advertise or anything like that, I would say it doesn’t work for consultants, that’s what I would’ve said. I would’ve said people hire consultants based on trust. The best way to establish trust is for them to see you and meet you in person so I used to do tons and tons of speaking gigs which is true that does work but it’s really hard on you and it doesn’t scale that well.
Fast forward, a couple of years, back then, I was well known for a particular thing and a particular pond but that pond got much, much bigger overtime. The pond was mobile and in 2010 it was actually still pretty small. There weren’t a lot of people who do but I did. Now, every huge corporation that you can think of has like an entire internal team and Deloitte and IBM and everybody else has entire branches of their service SAP you name it. Everybody’s got a big mobile contingent or service or something.
I got lucky because what I did back then, it was accidentally focused but it turned blurred overtime and I saw that as the market expanded and my fish that was in that pond is still the same size, I became a smaller fish, I used to be a big fish in a small pond and now I’m the same size fish in the huge pond. Leads started to really fall off and I was like, “What am I going to do about this?” Positioning is the answer. It just makes everything work. It answers the so what question. I always imagine, I review all these sales pages that people rate for their productized services. I’m like, you got to answer the so what question for me. They’ll say, “Oh, we’re a passionate firm that hires more people and works on tough problems or we create elegant solutions to tricky problems.” I say, okay, imagine someone reading that headline and saying, “So what?” And then answer that question so what you’re passionate? What you do I care?
Imagine the skeptical reader who does have desperate needs that you could serve but you’re not connecting the dots for them. Once you start to do that, it’s like magic. Like I said, it’s just amazing. Not only do you get better word of mouth but it creates something that you could actually advertise, imagine advertising. I bet you on not a lot of freelancers advertise. But if you could say, “Hey, got this problem? I solve it. Click here to solve this particular problem, to take this problem out of your way for you to capture this opportunity that’s slipping through your fingers.” People will click on it.
Philip: Not to mention how it opens up more effective advertising are opportunities like sponsoring a niche focused website or newsletter or advertising in a niche publication or writing for a niche publication and getting advertising for free. All that stuff just opens up when you narrow down who what you do things for is, write for, that was terribly said. Anyway, like you we’re saying earlier, you don’t have to do it for your entire business, it could just be for a particular service to start with. If you’re nervous that it’s going to sell your amazing online reputation, you can set it up for a temporary brand name like Kurt did with website rescues.
Jonathan: It’s like I do with expensive problem. My main website is jonathanstark.com and I started this different thing expensiveproblem.com.
Philip: Which really seems like it’s trying hard to take over your business.
Jonathan: It was nearly half of my income this year which is unbelievable.
Philip: Here’s another thing we should talk about, I think. I think it does happen sometimes, maybe it doesn’t happen every time but you get better at certain things with repetition, you get more efficient at delivery or your cost goes down to deliver the same thing when you get more practice doing it. I know off the record you’ve shared a story about that, Jonathan, with one of your productized services. Maybe you want to talk about that, maybe you don’t but just in general, I’d love to talk about that idea that you can become more profitable with the productized service.
Jonathan: Yeah, that’s a perfect segway. There are couple of downsides to productized services. I think the biggest one, for me, being a pricing guy is that there is big potential to be leaving money on the table. Let’s talk about that for a second. To use the analogy from earlier where I was saying you create this productized service, maybe it’s $5,000, if Mom and Pop Pizza down the street from here thinks that’s crazy but Papa Gino’s might think that that’s totally reasonable or drop in the bucket.
The problem is Papa Gino’s hires you to do this productized service for $5,000 when they would’ve paid $50,000 then you’ve left a lot of money on the table. In that case, the price should be higher because Papa Gino’s is getting a way, way, way more value out of it than you’re charging. The other side of the price equation is your cost. It might be that $5,000 is almost to your walk away price, it might be a hard thing to deliver, maybe it takes you a hundred hours and you feel like, “Man, I almost would’ve rather not either done this for the money they’re paying me. At the price of $5,000 I feel like I’m kind of losing money or getting ripped off or I would’ve rather not even done it.” You get your cost on the one end and you’ve got your price hopefully in the middle but not necessarily and then you’ve got the value on the other end for the client. When you first start off, if you have no clue what it’s worth, probably, the easiest thing for you to do is to start off pricing it right around or a little bit over what you feel is your break-even point of the productized service. Let’s say you’ve got this thing and you feel like, “I guess I’d take 5,000 to do this fixed scope of work that I’m describing on my sales page. I guess $5,000 will be roughly worth it, I wouldn’t be bombed but I’m not getting rich either.”
If you have no clue what to price your productized service, that’s a good place to start because you’ll feel comfortable, you’ll be able to say the price to somebody with a straight face, you’ll feel not ballad or vindicated but you feel like you can make a case for that price. It wouldn’t be like you said, oh, that’ll be $5 million and you wouldn’t be able to do it with a straight face. You’ll feel like you can make a case for that price. It wouldn’t be like you said that would be $5 million dollars and you wouldn’t be able to do it with a straight face. It’s a safe place to start. It’s certainly on the low end.
But what happens is, to Philip’s point, as you start to deliver, you get some sales, you do the delivery. Let’s say you’ve done three or four of them and you’re like, you know, the clients are rating about this, I think I can get even bigger clients than I’m getting. I could probably raise the price on the one hand because you get the sense or they are literally telling you that they would’ve paid more. You can get that information after delivering a few tons and you’re like, “You know, I could probably raise the price and it would still be so valuable to my target market that they would continue to buy it.”
On the other end of the spectrum, you can get better and better at doing the thing. Whether it’s that you created some code libraries for yourself or maybe you have some templates or boilerplate that you’ve put together over the course of delivering it or maybe there are some particular pieces that are huge pain for you, that you could deliver on a different way or the clients don’t seem to really value any ways, you just remove it.
What I’m saying is, over time, as you deliver it repeatedly, you’ll find that, hopefully you’ll find that the value is a higher than you expected and that clients recognize that and you’ll be able to optimize it and automate some things on the cost end so you can start to raise the price and decrease your cost which makes it, I guess exponentially is an exaggeration but it makes it a nonlinear, I guess that’s exponential, a nonlinear increase in the profit that you’re making off of that particular thing. I think, Philip you’re referring to my road mapping service?
Jonathan: When I first started offering it, I purposely offered it in a very low price because I wanted to get feedback from people. I sold four in one day. It was like 300 or something ridiculously low like 300. I was like, I need something at the $300 price point on my product ladder, I’m just going to go ahead and do roadmapping things. I know I can do with zero preparation, I can just do one. That was way too low, obviously because I sold four of them in one day. I was like, okay, let me double that. I think I’m raised to 700 and I sold a bunch more feels like it’s still too low. Whatever reputation I had was creating enough value with people who I didn’t even know that they were willing to get up off of 700, maybe it was $800, I can’t remember, go ahead and do it. Over time I found that people valued it more and more. It was funny because I remembered chatting with Philip and say, “Man, I hate doing these road maps.” It turns out I didn’t hate doing the road maps, I just felt I was making out money off of them I felt like it will blow my walk away price.
I’ve raised the price now it’s like around $1,300. Once I got the price up to about $1,300 and I had decreased all of the really annoying pieces of the delivery and optimized all of that stuff, it started to feel more fair to me, it felt equitable, people are still getting lots of value out of it. But it took six months, maybe for me to go through that process. It’s the exact process I’m suggesting for people. From a pricing standpoint of the productized service, when you first come out with it, you’ll probably going to feel like it’s barely worth doing and you probably going to feel like you’re leaving money on the table like the client got a really good deal. Nothing says you have to live at that price forever. You could just say, “Every time I sell one, I’m going to increase the price by 50% till it stops selling and then I’ll back off a little bit or I’ll increase the value on the sales page or whatever.”
Philip: I want to jump in and say, you listener will probably not know anything about volume to expect. I always wonder whether I’m an optimist or a pessimist but I think I’m an optimist because whenever I launch something, I just have these visions like, “Oh my gosh, what if this takes off? What if this just sells way beyond expectations?” To be honest that almost never happens. I think it’s a whole separate thing but I think that’s one of the core skills of an entrepreneur is dealing with disappointment, views of your own expectations and what actually happens and being willing to say, “Okay, let’s watch it again or let’s optimize that a little and try again.” Anyway, you just won’t know about volume and I think there are a couple things that relate to pricing.
When you think about selling for let’s say $500, that may not get you excited. A lot of people wouldn’t get out of bed in the morning to make $500 because they know that they can do this big custom projects that have a big price tag associated with them. But, if you knew that you could sell something that took you an hour work to deliver and you could sell three of them a week for $500, I think lot more of people would be interested in that. I think volume place into the whole idea of pricing. You just won’t know.
I think what Jonathan is suggesting is right on. Start with something small, don’t try to turn custom software development into a productized service. I think that’s one thing we can say as a best practice, that’s probably not going to work for you. I’ve seen people do that try to say, “We’d like to have for productized service where we’ll develop a mobile app MVP for $5,000.” I could see somebody making that work but there are so many variables that you have to turn into fixed quantities so that they’re not variables, so you don’t get killed on scope. It’s hard to sell something like that. I wouldn’t say don’t ever try it but just know what you’re getting into.
Jonathan: There’s a way to do it but it’s not super realistic which is to price it astronomically high. It is too hard, in my opinion. You could say custom websites $1 million and have a little stand in front of your house where you sit out. I think a better approach is, like you’re saying, to start small.
Philip: Maybe what I’m actually saying is don’t start with implementation, start with something that’s planning or analysis or report because those are going to be easier for you to constrain the scope. Even something like I’ll write you a landing page for a thousand dollars, what does that mean? The landing page, I have landing pages for my own business that are about 50 words and an opt-in box. Other landing pages I’ve seen are thousands of words. It get a little bit of wrap but a whole lot brought up. I just was saying that you won’t really know about the volume like how many people are going to buy it and tell you do it. Start small and conserve an experiment. I’m just saying what Jonathan said, just trying to make that point more explicit about volume.
Jonathan: The thing that you’re talking about with the scope is the level of collaboration. You need to pick something as an extremely low level of collaboration. A software project like an implementation has high levels of collaboration. It’s an ongoing collaboration between you, the client, and probably some third parties. The scope is almost unknowable, it’s really hard. It’s certainly way too hard to publish a generic sales page with a price. It’s going to be different with case to case that’s why you price them under an individual basis.
Philip: I have one entry case, I don’t know if it’s unfair like my positioning accelerator program. There’s a fair bit of collaboration but I’ve had enough experience to understand what the bracket is and I can price that make sense, I think for me and my clients there. But maybe I’m just picking on that one little edge case. In general, I think collaboration plus implementation is probably where the danger zone lies with productized services.
Jonathan: You’re totally right because you’re collaborating. It’s a high touch, you can still have a high touch but they can’t be collaborative about the output. You’re not changing your course every time you collaborate with someone.
Philip: Exactly. I don’t do implementation as a part of that. I’m providing advice and guidance and feedback. Maybe that’s the key distinction.
Jonathan: There are deliverables, I tell people not to focus on deliverables but they exist. If they’re changing every single time then you get no benefit of having a productized service, it’s just a custom service. When I say collaboration, I do mean exactly what you said which is the combination where they’re collaborating on the end product instead of necessarily just application of the materials to their life. That’s a different kind of collaboration in my mind.
Philip: I don’t think I’ve ever really been able to put my finger on what that is like what makes for a bad productized service collaboration plus implementation might be as close as I’ve come to defining what that is.
Jonathan: It gives people something to stay away from. What I usually tell people to do is just write an internal document for yourself when you’re creating a new productized service that describes to you or perhaps a mentor what the timeline for the delivery will be. Customer says go, here’s my money, do it. You have a timeline of what you need from them, when you need it, how much input you’re going to need from them and those pieces should be small. In my opinion, I feel like those things should be small if you’re used to doing custom website development work or illustrations or custom photography or something.
The input about how you should be doing your job should be very low. Any of the input that you get from the client is going to be things like access to employees or other resources that you need, access to inside of the organization and understanding perhaps what their business goals are, how their customers think or access to their customers. But there should be no collaboration or whatsoever around how you should do your job.
If you go through the whole timeline of the delivery and you describe that to yourself, the ones that I see as the most successful are the ones that take under 10 hours and are delivered over the course of like two or three weeks at the most or maybe four weeks at the most. They shouldn’t be this giant undertaking, in my opinion. Best case scenario for someone starting out is that you start with something that if it’s a complete failure, you only lost a few hours. I guess that’s what I’m getting at.
Minimize your risk by starting out with a relatively small thing that you can do in a few hours across a course of a couple of weeks, the minimum of customer engagement, a minimum of customer collaboration. It’s just a risk thing like just when you’re starting out you don’t want to take this huge risk and say, “My productized service is going to be mobile app prototypes that take you six months.”
Philip: Well said. That was probably one of the fatal flaws in my productized service. My Content Sherpa, there was maybe too much of a collaborative aspect to it and there are some other things. One last point I want to bring up, you used the plural when you talked about price, you said prices and I know that was not an accident. When you’re pricing a productized service, it’s a choice of yeses just like with custom work. Giving multiple price options instead of making it a do I need this sir? Do I not? It’s how much could I spend to get what I want out of this. It shifts the conversation. Do you go with two or three price points? How do you do it?
Jonathan: Yes. It depends. I’m a huge fan of giving people options and whenever I do a custom proposal I always do exactly three options because I know that the custom proposal is the only way that the customers consider working with me. I only do custom proposals for my mobile business and I have a very low emphasis on productized services right now on that website. It’s mostly all routine or engagements. That’s a different story.
With expensive problem and the pricing and coaching work I do there, the options I give are really what I refer to as my product ladder but they all really drive toward the same outcome. I don’t have any individual productized services any more than I have multiple levels. I had three levels of coaching at one time but I broke those into three different products. I’m still offering options to people but they’re not within individual products. I pick the price for each product and that’s that.
Right now those products are a book, a one on one coaching call, a road map or monthly coaching. Five different options, may range in price from $50 to $500, $1,300 and $3,000. If they want to really accelerate their process and they’ve got more money than time, they can jump straight to the top of the ladder and pay me $3,000 a month to help them personally. If they’re not so sure about me, maybe I’m a [01:02:19] salesman and they just want to dip their toe into this first, they can spend $49 and get my book and start theirs.
I think it’s important to offer people options so if you’re first starting out, I’m feeling that this is the safest way to go if you do something like web development is to just continue offering general web development but create some productized service like a website tear down or a performance audit or a mobile usability study, something like that, that would give clients or prospects of relatively low risk way to work with you with a financial relationship in place so that at the end they can be like, “Man, that was great, that was awesome, we love what you suggested, we don’t really have time to do it, can we hire you to do the implementation?” Then you go through your normal process.
There, you got two options where they can either buy this preliminary road mapping service or whatever it is exactly or they can engage with you on a custom project. I’m a little bit nervous to counsel people who are just starting out to get too tied up in pricing tears. I feel like for someone who’s trying to get to JFS a new product that offering tears almost creates a decision paralysis type of scenario. It’s a good thing to do but don’t let it hold you back if you can’t figure it out.
Philip: I’m inclined to agree because I feel like you need to know your market better than someone who’s just starting out with this is likely to know their market. I’m inclined to agree.
Jonathan: It’s a refinement.
Philip: If in doubt, just price it at your break-even walk away price and just start there. If you can’t sell it there, some people are getting point to be inclined to say, “Well, that was just a bad idea.” I would say don’t do that or don’t assume the prices too high, assume that the value is too low and you need to work on that.
Jonathan: Your clients are not price shoppers, they’re just value conscious. If they don’t see the value in what you are delivering at a particular price or you’re offering to deliver a particular price, you’ve got two options, lower the price or increase the perception of value. Increasing the perception of value is a better way to go because your costs are probably going to say the same.
Philip: It get into a tactical thing of like one of the questions I had early on with this whole idea that I was selling my services fixed scope, fixed price is do I put a buy button on the site? I think that would unpack a whole another can of worms. I would say in general, do something that gives you a chance to talk to prospects so that you can get feedback. It’s tempting to want to take this idea like all the way which means having a buy button on the site. But I think if you do that, you’ll miss out on valuable intel like information on your market that you could obtain by just talking to somebody. Again, that would probably be a whole another 30 minute conversation to really impact that. But that’s what I think about that issue.
Jonathan: Yeah, I agree 100%. You’ll get there, you will get there. You will eventually put a buy now button there but don’t start out that way. The easiest call the action to implement and most useful when you’re first starting out is just email for more information. Just have a regular plain old email link. It’s just takes no effort for you to put together, it allows you to engage in a conversation with someone.
If you’re getting a million emails and you to structure it, maybe put a form there, a contact form there instead or maybe make them click down a link to schedule an appointment in your calendar, if you’re getting drowned in bad leads. But to just ship a thing, get it out there, just put your email out there, it’s not a big deal and you’re not going to be drowning in leads.
Like Philip said, you can engage in a conversation. Once you engage in enough conversations through either sales of the product or delivery of the product, you’re going to be able to read their minds, you’re going to be able to read the minds of people you haven’t even met yet and then you could put a buy now button there. But before that, you’re missing out.
Philip: I think there’s more to talk about and I’ll be honest, I’m sort of clicking this idea in the back of my mind that we could maybe put something out to our email and see if we can get somebody on the show next week who would be someone who’s pondering this and maybe want some advice on their specific situation. Do a live coaching thing.
Jonathan: Certainly. Sending in questions is great thing to do. That’s for sure.
Philip: We should probably pick some picks.
Philip: Why don’t you go first?
Jonathan: Alright. I will first send people to an online resource, it’s a [01:07:30] article on my site called Building the Perfect Sales Page which is something that you all probably need some help with the first time through. It’s a step by step guide to the information you need to put, in the order that you need to put it in nine sections of a sales page. It gives you the description of each section and it gives you an example of a completed sales page that follows that template.
If you’re new to writing sales pages and your new to the concept of selling something like a productized service or a product even. In my humble opinion, it’s a great place to start. Holding information from Brennan Dunn, Amy Hoy, Sean D’Souza and sort synthesize it all into a format that I find works for me and works for a lot of students. A real no brainer while you’re getting used to writing your own sales pages, you can learn the groundwork that sort of guidelines and eventually you can start to break the rules. It’s a great place to start if you’re completely new to it. That’s probably it for this week.
Philip: Nice. I think I’ll put a couple links to some fairly mature productized services in the show notes. What I would like to do though as my pick for this week is encourage people to anytime they see something online where they’re like, “That’s amazing. I want to do that.” I had my fair share of that. I want to encourage you to go to the Internet Archive Wayback Machine and look at previous versions of that thing that you find so inspiring, that productized service that you want to emulate or that sales page that you think is amazing or just that person or group of people who have a company that you think is fantastic.
Looking at their previous attempts at getting it where they are today. I think it’s just so awesome because it just kind of shows you that it was a journey for them too. It wasn’t like it came out fully formed. It wasn’t a stroke of genius on the first. Pretty much anybody that you admire doing something online will have some kind of less impressive version of that thing a year or two years back, maybe even not that far back.
I don’t know exactly who runs the Wayback Machine but I just think it’s one of the great assets of the internet because of how you can use it to just understand where people came from and the fact that virtually nobody starts at amazing. We all start at humble and flawed and basic and get there over time. Just check the show notes for some links to notable productized services and then look at the back story on those on the Wayback Machine. I think you’ll be as fascinated as I am by that. That’s our show for this week. I hope to see you next time, I hope to see you register at the download number next time or hope to more importantly get questions and feedback from you next time.