Why You Need a Services, Rather Than Product, Strategy

Why You Need a Services, Rather Than Product, Strategy

Why do we need services thinking, and why is it different than product thinking anyway?

Service design. It’s a growing, but still nascent field. Yet it has the potential to pack a big punch for a large number of companies around the globe.

Recent figures from The World Bank put services at around 78% of US GDP. Yet all the talking when it comes to design seems to be focused around great products, or at the very least great technology. But great products and great technology do not inevitably make for a great services company.

Design Thinking that Goes Beyond Digital

Many of the major global consulting firms that have recently acquired design consultants over the last 5-7 years tout their new design thinking capabilities, yet few have expanded their design team’s capabilities beyond “tech” or “digital” strategy. Meanwhile, the average client for a global consulting firm, I’d gander to say, is a services company, not a product one. And I would venture further to say that many companies who are being sold design services are too often told they need great products and great tech, but what they might really need is an end-to-end services strategy.

But why do we need services thinking, and why is it different than product thinking anyway? For starters, let’s compare the essential elements of what make for a great product versus what makes for a great service.

What’s Different About Services Thinking Anyhow?

When it comes to product, most of the emphasis is on the thing itself. Perhaps as it should be. McCarthy’s 4 P’s of Marketing emphasize four key elements that drive, I would argue, a product-focused company: product, price, promotion, place. At the end of the day it is a lot about “the thing” itself, and how “the thing” is positioned in the market as its own entity and in comparison to competitors. It’s why companies like Counter Culture and Apple can continue to sustain high revenues by focusing acutely on great, smartly-branded and competitively priced offerings.

In services companies, by contrast, the “product” is not and should not be the focus.

In services companies, by contrast, the “product” is not and should not be the focus. To illustrate, let’s take the Counter Culture coffee example and move it forward. Counter Culture provides coffee to a number of coffee shops located throughout the Southeast. They emphasize quality, both in the bags of coffee they sell and in the training they provide to the spots that brew their coffee. While a great, beautiful branded, and well-promoted bag of Counter Culture coffee stands above the competition; an aromatic, freshly-brewed cup of Counter Culture Coffee does not make for a great coffee house. In order to succeed in the coffee house industry, shops have to do more than brew great coffee. Customers come to them expecting friendly, fast service; responsiveness related to questions and or errors; a nice, warm atmosphere that makes them want to linger or tweet a photo; clean restrooms; courteous fellow customers; and sometimes even deep product knowledge from the staff. My city alone has dozens of coffee shops that serve Counter Culture coffee, and some of them are excelling while others are floundering. But why?

Because it’s not about the coffee. Coffee shops are not coffee businesses. They’re service businesses. Ultimately what they’re selling to customers is not a product but an experience, and it’s one that must be designed and managed thoughtfully end-to-end to be deemed successful.

So what is it that makes for a great services business if it’s not the 4 Ps? When I work with service industry clients, I typically focus on five core elements: service concept, strategic platform, service delivery system, service brand and marketing, and users. Some scholars who work in services marketing define 7 Ps: product, pricing, place, promotion, people, process, and physical evidence. By both the scholars’ framework, and my own, services require more work.

The Human Factor

Great services organizations must keenly consider the human factor: staff engagement with customers, staff morale, customer interactions with staff and one another, tone of voice, and even the ergonomics of the service environment. They must also consider the flow and overall efficiency of their process; I call this the service delivery system. Great services have well-defined systems for delivering consistent, efficient and high-quality touchpoints each time customers visit. They also have well-defined systems for handling errors and managing the “backstage elements” that customers don’t see. If they don’t, they will never deliver at-scale. Finally, services companies must consider physical evidence. There is a whole discipline to this last point and it’s one well-worth mentioning.

Great services organizations must keenly consider the human factor.

Some services are highly tangible, like beauty and hair services; while others are highly intangible, like psychological therapy. Yet, both types of service providers must strive to make their offerings “feel” tangible in some way through what is known as “service evidence.” The evidence is the physical proof that a transaction occurred. In many service environments, this takes the form of a receipt. Other service companies, like hoteliers, take this notion much further, and to great success, with custom-designed treats left bedside or a 411 card for concierge calls. Service evidence is important for a number of reasons, but increasingly one of the most powerful is the fact that it helps to make a brand “top of mind” for a consumer and make the service encounter visible to the consumer’s social network. The physical proof that service providers often give to customers frequently serves as the fodder for tweets, text messages, and Instagram posts that can help take a great service viral. In a world where “likeliness to recommend” is one of the largest drivers of new business, that is a big deal.

Service evidence is important for a number of reasons, but increasingly one of the most powerful is the fact that it helps to make a brand “top of mind” for a consumer and make the service encounter visible to the consumer’s social network.

There is  more I could say on this topic, but perhaps one of the most important points I can make is this: experience, not marketing, must be the focus in a services company if it wants to succeed long-term. Why spend $100 earning new customers when you can spend $100 delighting your existing ones so much that they tell all their friends?. It’s an interesting notion, and one that might merit quite a bit more exploration.

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