Intangible services and tangible products

Intangible services and tangible products

When applying a true PSS there is typically some existing business already running. That business an be service oriented or product oriented. If these are to be translated into a new model of Product-Service-Systems, there usually is simultaneous servitization and productization project ahead.

The intangible service side of 

the offering must be packaged into an easy understandable format. 

This is to be done throughout, the intangible service should be easy to communicate and sell, easy to use and for most easy to buy. The buyer must know what he will get when making the purchase order. This increases the role of communication but it is not just communication – it is the total user experience. Some companies talk about the service design (https://www.kreapal.fi/) and sell their expertise to help other businesses to gain more business. The offering must be easy to understand and buy - the fear or inconvenience feelings related to purchase decision are probably one of the worst enemies of salesmen. Equally when the tangible products are servitized, the same basics are on the background – how to make the purchase easy and less inconvenient, how to communicate the value in effective understandable way and how to package everything.

Both productization and servitization are part of the process towards PSS. If a company decides to change their strategy from traditional model to PSS type of a business, it is critical to make sure that there is enough training and information in place because the effects internally are great as well. In Figure 1 the cornerstones of the productization (or servitization) are presented. This figure gives an idea of what are the main points to remember internally when going into a project aiming to PSS offering.

Figure 1 Cornerstones of the productization

The PSS offering is demanding but rewarding. Everything is dependent on customer success which again is dependent on your ability and capability to deliver. Thus these cornerstones must be in place and well documented – throughout the whole personnel.

Very often in PSS models the contract is 

based on some act or a product availability. 

To maximize the points declared in the contract you should have the offering well packaged. That helps in sales like discussed previously. All parts of your offering but also production should be well documented. That is to give your customer an easy to understand picture of what are you going to deliver but to also for your staff simple guidelines how to act in all situations. The documentation is also part of your safety net – people tend to change their jobs relatively easily and you do not want too much knowledge to transfer with them.

As the contracts often have some time related points, the processes internally should be well known, understood and in use. In some industries the response time for customer claim is short. The processes of how the cases are handled should be well in place when going into these contracts with some service level agreements etc. The details should be defined in contracts to gain mutual understanding of what is the meaning of reaction time. This is to avoid conflicts with customers but also for internal use so that everyone knows your way and processes on how to handle different cases. But when binding into these kinds of deals with possible sanctions, you must have modularity in your offering. If there is no preplanned modules in your offering you easily end up selling tailor made solutions and then it is difficult for your crew members to handle cases when every case has a different contract as backbone. Couple of different modules will keep your cards in order.

As a conclusion, for both tangible and intangible products, there must be a clear understanding of how the products look and feel like. Also, the process of making the product or producing the intangible service is clear and has no holes. That is, the basics are the same, message for the customer is clear and simple enough to understand very quickly. This reflects also to the sales as a process which will be discussed in later posts more in detail.

Productization

Productization is one part of the Product Service Systems. Traditionally productization has been thought as a method or process to improve the repetitiveness of products in production and in sales. This means basically that the product could be sold as close the same as for previous customer – minimizing the changes yet still keeping the possibility to customize. In this approach there is an issue because it all starts from the product and producing the product. Thus the starting point is already misleading, looking things from internal perspective, but the total larger content from the customer point of view is left out. Often there are services related, especially if we think about the industrial investment type of products – these are often given very little space in the productization discussion.

Figure 1 Corner stones of traditional productization

Productization focuses on packaging the product or service into a similar box, always. Documentation and production processes are tuned to be the same. In terms of cost estimation this is of course good. The cost is known and relatively easy to forecast. But what if the main thing that you sell is service and not any tangible product at all. What does productization then mean? Taking the look into corner stones, it means that the processes are well tuned and the service is always the same. Products, service and processes are well documented and clear to communicate. Everyone involved knows exactly how the things are moved forward when producing the service. In investment products, this is the way to take customer view in count as well. It may mean for example the annual service for some machine. It can be some other company than the one originally manufactured the equipment. Sometimes the service and the product are so tightly bonded together that those can´t be separated. Machines and other investment products have usually room for some customization, those are modular. Restaurants are perfect examples of those in the field of the productization. Furthermore, they are usually very well productized and service is in good level. Several items on the list, probably ordered into same table expected to be served at the same time, warm food for the whole table. And they make it happen mostly without major mistakes in process. Differential value is a key thing in productization. In the productization process one task is to find out the key differential value for the product or service and make sure that it is communicated in external communications well and repeatedly.

I think restaurants should be thought as Product Service Systems rather than productized products. There are both tangible and intangible elements so tightly included. Also, the good ones start the service and offering planning from the customer experience, not from the menu. Yet the pricing of the restaurant is still usually product based and I believe cost based. Customer value is relatively difficult to estimate in restaurant. In industrial context, it is often much easier but still the pricing is based on costs. Highly productized products, tuned processes, good documentation and repeatability etc. may still be priced according to cost of production. The main difference between well productized product and true Product Service System is the fundamental starting point: true PSS is produced on to real need and priced according to the value for customer and sold as service invoiced per use or time of use.

Productization is a part of true PSS. When starting the PSS development, it has to start from customer need and giving monetized value for that need. After that process the productized product and service with servitized business models come into play.

Keywords: productization, PSS, customer value