It is not Product vs. Service - it is a spectrum

You do not have to wait to have a product to start selling

This Substack is kindly supported by Clay, a mega-tool for data enrichment for outbound used by over 100,000 go-to-market teams, including Intercom, Notion, Reddit and ActiveCampaign, as well as B2B marketing and sales agencies. You can build high-quality contact lists for outreach in minutes. Take it for a spin yourself and learn more aboututbound as one of the undervalued go-to-market motions in my interview with Bruno Estrella, head of growth at Clay (previously director of marketing at Webflow).  

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Dear GTM Strategist! 

Some of my favorite and most successful teams I mentor come from the service sector and have gradually evolved the products after repeatedly solving problems for a client. In June, I will onboard three such teams: 

• ⚡ One excelled at making smart grids as a service for the Scandinavian market, and now, they want to productize them to cater to other markets. This is smart because the electricity companies are hyper-local and, therefore, not competitive. Potentially, we could build an investable product. 

• 🏦 I also mentored a software development company that produced solutions for banking and insurance and is now successfully dominating the regional market through partnerships with associations. 

• 📹 One of my biggest success stories in Q2 is an original video production company that makes AR (augmented reality) solutions for production companies.   

What do these companies have in common? They are all service-born companies that go to market with: 

• Verified problem-solution fit (they have solved this problem before) 

• Proof of monetization (clients paid to have it solved)

• Established references and case studies (it is not a cold start) 

• Blueprints and teams that have solved the problem before (experience). 

That is some sweet competitive advantage, and one could easily expect that they will parade to the market at unseen speed, but that is not always the case. 

In this Substack, we will: 

• Explore the Product-Service Spectrum

• I will share a case of how I scaled my consulting business with the product 

• Review the concept of the value ladder, which will help you develop offers to increase customer LTV and convert more clients.

• Think about how could we algorithmize our brains 

• Unmask a couple of pitfalls to avoid if you are transitioning from service to product to set you up for a good start.    

Sounds good?
Let’s scale services and products this time! 

Product-Service Spectrum 

I have a confession to make. For my GTM Strategist book, I was in a dilemma how to define a product? Most go-to-market principles that I described in the book apply to service businesses, not just products in its narrower meaning. This is why I developed this definition: 

Product is a medium of value delivery. We have a target market on one side and a company on the other. “Product” captures the value, and delivers it to the customer, which pays the company for the value at a price, which is a value exchange.  

Is productization really the holy grail of service business development, and should we all gravitate towards products as the ultimate form of value delivery? 

It is true that Guillaume Moubeche launched Lemlist after doing cold-emailing services for years, which led to $150MM validation of Lempire, but it it would be unwise to assume that services should naturally gravitate towards products. It is not an evolution. It is a spectrum. 

This image of my colleague Jason Knight, product leader and podcast host at One Knight in Product, made me think very hard. Here is a Product-Service Spectrum, a mental model that I love using at my mentorship session whenever we launch a truly innovative technology product that needs a little training and insights before we can happily announce that a large group of users can self-onboard to the system. 

When we go to market, we often have to engage in non-scalable or semi-scalable forms before we can develop the final version of the product. Sometimes, this is because of learnings, and other times, it's because of funding (we need 50K to invest in product development, and let’s invite customers to cover a part of this investment). For easier interpretation, I present an example from an email marketing service—from ghost-writing emails to full-fetched products with a life of their own. 

Looks good on paper, right? 

But in practice Scaling service businesses is definitely not linear and easy.
There are ups and downs - let me walk you through my own journey. 

My Service Scaling journey: From $20/h outsourcing to $100K digital products  

I started my full-time freelancing career over a decade ago (do not calculate how old I am 🙈). First, I did some European tenders and public writing services for tech companies by subcontracting to an agency. Later, I transitioned to marketing gigs, which I loved. 

With one of the partners, we launched a successful Kickstarter campaign, which attracted the attention of best-selling Udemy instructor Davis Jones, with whom I later co-authored one of the best-selling growth hacking courses. 

I was still working full-time when the FOMO of getting inbound leads became too much to handle. My first full-time client was a beauty brand from the US—oh look, a pivot to e-commerce. I did a little bit of everything marketing and growth-related for clients in the service industry, SaaS, apps, enterprise—you name it—I did it 😃. 

While that gave me a wonderful “range” of knowledge, I was the jack of all trades but not a “world-class go-to” at anything. In each vertical, there were people who devoted themselves fully to the area. Those people devoted themselves fully to something. I was still searching for the right professional obsession. 

Sadly, I was also constrained by the number of hours I could “sell” on a weekly basis and was severely running out of time and energy to work on my business strategy. I reached 100,000K a year with services, but I was overworked and snappy on stressful days. 

How about if the unit of input would not linearly result in output? For years, I secretly admired people who “made money when they sleep”—no shade, Neil Patel fans. The fact that I was solely dependent on my ability to work and attract business scared me (what about if I fall ill, have a family situation, want a vacation, need a break...). My earnings would be 0. 

I started to think more and more about creating assets for my business so that I could no longer be dependent on my ability to have “Zoom calls,” but I would have predictable revenue streams that I could rely on even when I could not work or did not feel like it. 

I started with online courses (that was easy for me because I love to teach others). First, I started offering them on the Udemy marketplace to “outsource” the student acquisition problem, but Udemy limited my ability to manage upsells. My earnings were determined by the number of units sold, which is cool if I wanted to specialize only in promoting online courses, but that is not my path. 

I prefer to work on real cases and then share my learnings through educational products and content. So I started building communities and partnerships to have a sizable audience for my own launches. One of the biggest mistakes that I see with online course creators is “build it, and they will come.” In order to have a successful organic launch, you need a sizable warm-up audience eagerly expecting the product. That takes months (and years) of committed value delivery. 

To make sense of the situation, I learned the golden rule of selling edu products: 

It is OK if the frontend is merely break-even. 

You make the most money in the backend and with the high ticket. 

Luckily I realized that before my book launch because “selling a piece of paper” is really not that exciting as a business. For my Go-to-Market Strategist Business unit, the value ladder currently looks like this: 

Here is how it is structured. 

• First you get value for free ($0) or a fraction of the cost. In my business, these are social media posts, Miroverse templates, this Substack and free online events intended to attract and add people to your ecosystem. 80-90% of the audience will only get that far and this is fine. Often times they will recommend you to others and you have an opportunity to help them. 

• Frontend is my Go-To-Market Strategist book ($9.99 Kindle, $27.99 physical copy via Amazon, and $47 Go-to-Market Strategist bundle with more templates and an online course) - it is very affordable and widely distributed. This is a DIY - do it yourself way how you can benefit from the product. The conversion rates for my frontend are 10-15% based on the data that I have (I do not get page visit data from Amazon). 

• Middle-end or an order bump is being under construction at the moment. There will be a new product launching at $79-$99 soon. Obviously, I have no idea what the conversion rates will be, but I am excited. 

• Backend offer that I developed is Go-to-Market Bootcamp (valued $199 for recordings to $997 ticket per seat when we do it live). In addition to this, I also offer a $400 consulting call to discuss your GTM strategy. These products are “Done with you”- we elaborate on them together. 

• High ticket is my consulting business, advisories, and interim roles. It starts at $3000-7000/a month for strategic guidance, and mentorship to a team, accountability checks and hands-on help (networking, research, tactics). Due to time constraints, and the importance of focusing on higher delivery, I prefer to stay in the range of 3-5 such clients a quarter. 

For me, a high ticket is a hybrid between done for you and done with you. I develop really original solutions with the teams that I reflect on and systematize later for further concept development. So, it is a loop. I need all parts of the value ladder to continuously create and capture value. 

Long story short - following the user journey and product-led growth principles, customers need confidence (evidence of delivering value) before they engage in higher-value deals. You need to deliver value gradually and consistently. 

It is definitely not a linear journey. Not every prospect travels to the top of the value ladder. But the ones who do, get prime and most valuable insight and guidance, as well as ongoing support and guidance. Whenever I plan offers, I return to Alex Hormozi's formula for an Irresistible offer. It just works.

While I was very happy with my productization at the moment, something started itching … 

AI or how to algorithmize our brain: The final frontier of service scaling?

My first medium was my voice (online and in-person services). 

Many have asked me: “Maja, why don’t you hire more people?”

Short answer: I never want to build an agency. 

No shade, but it is just not for me. 

I have coached many agencies (development, design, marketing/growth), and they all face the problem of scalability and diminishing returns at one point.  

The second was on-demand video. 

Later on, I invested in physical and digital products. 

I never developed software myself, but I mentored hundreds of SaaS companies on going to market. Most build 50K MRR in less than 6 months. Well, that would be difficult to do as a service solopreneur.  It made me think really hard how to get to the top of service scaling spectrum. 

While boomers happily share Midjourney art on Facebook.

How cute and useless 😍

I grew to believe that the final frontier of human creativity in consulting is whether we can create “AI digital twins.” How we algorithm our brains seems to be the flavor of the season. What is better is that those “digital twins” could interact with each other and learn exponentially more than we do. I plan to do v01 by the end of this year. 

Not to be too abstract, here is a visual of different productization options when transitioning from service to product. 

6 Pitfalls or transitioning from Service to Product  

A: For Solo Businesses and Small teams

Looking back to where I started, there are multiple things I would do VERY differently today, so allow me to share some lessons that I believe to be mission-critical for service businesses that are transitioning to products: 

1. Do not build your business solely around recommendations. An average service business gets 70-80% of clients through recommendations. People trust people. But recommendations are not really scalable, aren’t they? It is difficult to open new markets if you are “stuck” with winning new businesses. This is why we develop multiple assets (offers) to welcome prospects at different stages of their buyer journey and test new channels. 

2. Never charge per hour. An hour is an input metric. It has little to do with the value that you can provide. I can spend an hour replying to emails or planning to launch a $1mio business. You can also outprice yourself with an hourly fee. Yes, some can charge $5000 an hour, but for most people, this is ridiculous. With some exceptions, it is better to charge per day or project. Just avoid setting “hourly rates if you are not a lawyer or a personal trainer. 

3. Choose one niche and stick to it. Jacks of all trades might sell well locally on small and oblivious markets. If your goal is to be “world class” at something, you have to niche down. Select a narrow segment with a burning painpoint that you can build a 10X solution for and stick to it. Become a go-to for something before you move forward. 

4. The real money is in increasing LTV - stop chasing “gigs”- building a sustainable business means setting up repeatable processes to attract, deliver value and upsell the customers. The idea of chasing new clients to “pay the bills” every month is a clear no. The real money is made in the backend and extending LTV. When I started my consulting journey, one of my early mentors, a seasoned consultant herself, advised me: “The company has to have some fat to survive the drain periods. Sell retainers immediately”. I am grateful for this advice. 

5. Not every service has to be rocket science. Standardization is the name of the game. You need to prove that you can deliver value repeatedly. If you are like me, an intellectually curious soul who loves to tackle unstructured challenges, you might be more drawn to solving the next “big problem” - builder mode, than making more money with solutions that you already have - business mode. It is fine if you are supremely well paid or happy inventing “a-la-carte solutions”, but true scalability lies in operational excellence and optimized processes, which only occur when you have done the “drill” of repeating the work again and again.

6. Productize as soon as possible just to get better at it. If your vision is to provide only services, that is fine, but if you get a bit anxious every time you see someone making 1mio ARR a year and more with their SaaS solutions or a digital product, then you have an appetite for productization, my friend. Early attempts of productization can be super simple. You can sell a template, process, or video recordings of your onboarding processes. Productisation is a new competence to develop. Most likely, it is going to take multiple trials and errors to find the right fit. Start experimenting and learning as soon as possible to get closer to your Product-Market fit. 

Cool. If this batch of advice was more for consulting and agencies, let’s nudge it up a notch and share a couple of pitfalls to avoid when transitioning from service to product in a larger team. 

B: For larger teams (mostly dedicated to software development agencies)

Transitioning from services to products is not a piece of cake. Despite good odds of success, many service companies face the following issues with their productization attempts: 

• Opportunity cost. Many struggle to devote enough resources to product development because “client money” smells nicer than investing potential billable hours in building their own products. In other words, secure money now is better than “unsecured money in the future”, right? But to conquer the next frontier of your business growth, GTM strategy doctor prescribed risk-taking.  

• No real buy-in and incompetence to build products. Some people are just comfortable doing their jobs. They have very little appetite for tackling the unknown. If the team does not buy into the productization vision, they will concisely or subconsciously sabotage the product with “nay culture.” In my experience, many people in the service industry just don’t get the product. Instead of “venture building” with existing clients, it would make a much better impact if you recruit experienced product managers and builders and spin off a new venture with a life and lifeline of its own. You need new knowledge and processes to build products. 

• No critical mass. “Internal incubators” become sandboxes with poor product ownership and hybrid teams that are not really into it. It is highly unlikely to build something great if the team is slacking on the project and trains juniors on their own products. You should empower the product team with the best people for the job and resources instead of letting them “play part-time” for a quarter or so and see what happens. 

• Optimizing for profit. If the team develops a decent product against all the previously mentioned odds, they often get trapped in their established modus operandi. Their business models are made to optimize for the profitability of services as if products would only be “lead magnets” to attract new customers and extend their LTV (lifetime value) with no clear scaling agenda. 

• Process superiority complex. Many service companies developed their internal tools and SOPs (Standard operating procedures) that work for them. They try to scale the internal tools that work for them with little to no research and adaptation to what the potential clients actually need. You cannot scale something that was developed in isolation on the sample of one unless you are a rockstar crushing it business-wise and you have a hoard of raving fans who “want to be just like you”. 

• Turning into an internal agency for a client. Co-creation with customers sounds like a great validation method. The idea that someone else would share the development cost with the customers sounds great, right? Co-creating the product with customers can bring important feedback loops and insights for your work. But be careful there—you need to stay true to your product vision, not snowball all the client requirements into a product. This is an important feedback loop for my product work. 

One could come up with more reasons why service companies fail to transition to product, but since they are closer to the product market, fit most “product visions,” and successful productization could skyrocket their service businesses and make them grow much faster, be more investible and easier to exit.  

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Check out my other most-loved Substack posts:

• Before there is Ideal, there is Early (Customer Profile)

• How to win the LinkedIn game fair and square?

• Every growth is founder-led first