Commercializing Productized Offerings: Key Strategies for B2B Services

The Importance of Commercialization Strategy

When transitioning from a services-based model to offering productized solutions, having a solid commercialization strategy is critical for success. Many B2B professional services firms struggle with effectively bringing their new productized offerings to market. A well-thought-out approach to commercialization can make the difference between a successful product launch and a failed initiative.

Key Elements of a Commercialization Strategy

An effective commercialization strategy for productized offerings should include:

• Clear understanding of target market segments and their needs
• Monetization approach, including pricing and packaging
• Marketing plan to generate leads and communicate value
• Sales strategy and processes optimized for product sales
• Plan for product renewability and account growth

Developing these elements requires research, planning, and often new capabilities that may not exist in a traditional services organization. Let's explore each of these areas in more depth.

Understanding Your Target Market

One of the first steps in commercializing a productized offering is gaining a deep understanding of your target market. This goes beyond just identifying potential customers - it requires segmenting the market and understanding the specific needs, pain points, and buying behaviors of each segment.

For B2B services firms transitioning to products, the most effective approach is often to start by targeting existing clients. These customers already know and trust your brand, making them more receptive to new offerings. Bundling products with services can be an effective way to introduce productized solutions.

However, it's important to validate that your existing clients actually have a need for the product you're developing. Don't just assume they'll buy it because they buy your services. Take the time to conduct customer interviews and surveys to understand their challenges and how your product could potentially solve them.

When expanding beyond your current client base, be cautious about immediately trying to go downmarket with a cheaper, standardized offering. This can be challenging as you likely don't have brand recognition or sales channels optimized for that segment. Moving upmarket or to adjacent segments more similar to your existing clients is often easier.

Monetization: Pricing and Packaging

Developing the right pricing and packaging strategy is crucial but often challenging for services firms new to productization. Many default to a cost-plus model or base pricing on their services rates, which can lead to prices that are too high or too low.

Packaging Considerations

Packaging is actually more important than pricing initially. Effective packaging should:

• Be designed around customer needs, not arbitrary tiers
• Target different market segments with distinct needs
• Have a clear upgrade path as customer needs grow
• Bundle products and services effectively

Avoid simply creating "small, medium, large" tiers without tying them to specific customer segments and use cases. Each package should solve a distinct set of problems for a particular type of customer.

Pricing Research and Iteration

To develop initial pricing, conduct research on:

• Pricing of competitive solutions
• Customer willingness to pay
• Your costs and desired margins

This research doesn't need to be extensive - even a week or two of surveys and competitive analysis can provide a good starting point. The key is to recognize that your initial pricing will likely not be perfect. Build in flexibility to adjust pricing over time as you learn from the market.

Position early pricing as "beta" or "charter" pricing. Write contracts that allow for future price changes. Set the expectation internally that pricing will evolve through testing and iteration.

Marketing Strategy

Marketing productized offerings requires different skills and approaches compared to marketing professional services. Key elements of an effective product marketing strategy include:

• Developing compelling messaging and value propositions
• Creating content that educates prospects on the problem and solution
• Leveraging digital marketing channels to generate leads at scale
• Building thought leadership to establish credibility in a new space

Many services firms lack strong product marketing capabilities in-house. Consider bringing in experienced product marketers or agencies to help develop these new competencies.

Sales Strategy and Processes

Selling products is very different from selling services engagements. Some key differences to consider:

• Products often have a lower price point but higher volume
• Sales cycles tend to be shorter
• Buyers may be different (e.g. end users vs. executives)
• Value proposition and ROI calculations differ

Attempting to sell products through an existing services sales team rarely works well. Their skills, compensation plans, and relationships are optimized for large, custom engagements. Consider creating a dedicated product sales team or channel.

Sales compensation plans need to be adjusted to incentivize product sales. This may mean lower commission rates but higher volume targets. Focus on customer lifetime value rather than just initial deal size.

Renewability and Customer Success

For subscription-based product offerings, renewals and expansions are critical to long-term success. This requires a shift in mindset from one-off projects to ongoing customer relationships.

Key elements to drive renewability include:

• Designing products with ongoing value delivery
• Tracking and improving product adoption/usage
• Proactively engaging customers to ensure success
• Upselling and cross-selling additional products/services

Consider creating a dedicated customer success function to drive renewals and expansions. This team should work closely with product management to identify opportunities to increase stickiness and expand product value over time.

Building New Capabilities

Successfully commercializing productized offerings often requires new skills and capabilities that don't exist in a traditional services organization. Some key roles to consider adding include:

• Product managers
• Product marketers
• Customer success managers
• Inside sales reps

Attempting to have existing staff take on these new responsibilities in addition to their current roles rarely works well. Budget for and hire dedicated resources with product experience.

When hiring product leaders, look for those with experience in similar transformations from services to products. Pure product/tech natives may struggle in a services-oriented culture.

Overcoming Organizational Resistance

Transitioning to productized offerings can face significant internal resistance, especially from those invested in the traditional services model. Some common objections include:

• Concerns about product quality vs. custom services
• Fear of cannibalizing services revenue
• Reluctance to change sales approaches and compensation
• Skepticism about achieving adequate product margins

Overcoming this resistance requires strong executive sponsorship and change management. Clearly communicate the strategic rationale and long-term vision. Provide training and support to help staff develop new skills. Consider creating separate teams/P&Ls for product and services to reduce internal competition.

Leveraging Technology

Technology plays a crucial role in successfully commercializing productized offerings. Some key areas to consider:

• Product development platforms and tools
• Marketing automation and CRM systems
• Customer success and product analytics tools
• E-commerce and self-service capabilities

Invest in the right technology stack to support scalable product operations. This may require significant upgrades from systems designed for services delivery.

Measuring Success

Tracking the right metrics is crucial to guide your productization journey. Some key metrics to consider:

• Customer acquisition cost (CAC)
• Customer lifetime value (LTV)
• Net revenue retention
• Product adoption and usage rates
• Net promoter score (NPS)

Focus on leading indicators that can help you course correct quickly. Be patient - it may take several quarters or even years to see the full financial impact of the transition to products.

Case Studies

Let's look at a few examples of B2B services firms that have successfully commercialized productized offerings:

Mercer's SkillsEdge

Mercer, a global HR consulting firm, developed SkillsEdge as a productized offering combining advisory services with data and technology. SkillsEdge helps clients transition to a skills-based approach for compensation, benefits, and talent development.

Key success factors:

• Bundled product with existing services
• Targeted existing enterprise clients
• Leveraged Mercer's brand and relationships

Prevision's Economic Forecasting Software

Prevision, an economic forecasting company, productized their internal forecasting tools into software that clients could use directly. This allowed them to expand into a new upmarket segment of clients with in-house economists.

Key success factors:

• Identified new market segment opportunity
• Persevered through initial internal resistance
• Transitioned from high-touch services to scalable software

Common Pitfalls to Avoid

Based on research and experience with many B2B services firms, here are some common pitfalls to watch out for when commercializing productized offerings:

• Underinvesting in go-to-market capabilities
• Trying to use existing services sales team to sell products
• Neglecting to adjust compensation models
• Assuming existing clients will automatically buy the product
• Pricing based solely on costs without market research
• Lack of executive sponsorship and change management
• Insufficient focus on renewals and customer success
• Attempting to boil the ocean instead of starting focused

Getting Started

If you're just beginning your productization journey, here are some steps to get started with commercialization:

1. Conduct market research to validate product-market fit
2. Develop initial pricing and packaging strategy
3. Create a basic go-to-market plan
4. Identify required new capabilities and begin hiring
5. Set up systems to track key metrics
6. Run small pilots to test and iterate
7. Secure executive buy-in for larger rollout

Remember that commercialization should be considered from the very beginning of product development. Don't wait until after you've built the product to think about how you'll sell it.

Conclusion

Successfully commercializing productized offerings requires significant changes to how B2B services firms go to market. It demands new capabilities, mindsets, and often cultural shifts. However, the potential rewards in terms of scalability and predictable recurring revenue make it a worthy undertaking for many organizations.

Key takeaways:

• Start with a clear commercialization strategy
• Invest in new product-oriented capabilities
• Adjust incentives and metrics to drive desired behaviors
• Be prepared to iterate on pricing and packaging
• Focus on customer success and renewals

With careful planning and execution, B2B services firms can successfully make the leap to scalable product businesses. The journey may be challenging, but the destination can unlock significant new growth opportunities.

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