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Product Strategy

How To Turn A Product Into A Successful Service

Amit Ashwini
December 18, 2017

Milking out profits merely from products isn’t how it used to be. Today, consumers have access to enough choices, thanks to the Internet and global distribution. Good for them, but not so great for the rest of us, selling those products. Companies are beginning to see that products only get us so far, whereas services are the future. The most innovative companies have begun to understand that even while selling a product, what they’re doing is selling the function it provides. Now, you might understand this, but it’s quite another thing to use that knowledge to reinvent into a real service-based business model.

The rise of the service industry left many product-based companies struggling, which had trouble breaking into the service sector. The Internet of Things evened the playing field. Today, thanks to smart technologies, it’s easy to see how a kitchen appliance, a pair of boots, or even a cricket bat can provide a service. Now, the moneymaker is no longer the product, the microwave or bat itself, it’s the service behind the product. Companies are actually selling the service or use that the product was purchased for. This way the product starts to turn into an ancillary means to an end. You ask your customer how many times a month they want their lawn mowed, not what kind of lawn mower they are looking for. The giants in manufacturing are moving in this direction. Companies that operate off this service model won't have to keep re-selling a product to users. This doesn’t just lighten the sales load. It also means recurring revenue streams, better IoT product development, and stronger customer relationships.

Today’s Consumer

Data through the fiber is soon becoming as crucial as electricity through copper. Whether you're into tractors or fitness wearables, companies are going to have to talk to their products. Now, IoT isn’t merely about letting companies go further than static products. IoT is enabling companies to deliver on the needs of today’s changing consumer.  

Today, consumers are more demanding and informed than they were a decade ago. They want unique experiences and ongoing value. Products alone won't make the cut anymore. Other than pasting on a monogram and choosing a color, stand-alone products can’t be personalized beyond an extent. Products aren't capable of learning your behavior and preferences. They have to be upgraded constantly. Even then, they don't get better, and soon, they become obsolete. Consumers are increasingly viewing having to own anything as just watching and waiting as they try to control the decline of their physical asset. In this market, to stay agile in the IoT space, you’ll have to embrace a recurring revenue model.

The Subscription Experience

To meet the expectations of today’s consumer, companies must create services which learn and adapt based on behavior. Services that autonomously improve themselves, services that can be truly customized and eventually make a move from a product experience to the subscription experience.

Of course, an actual physical object might always be involved, but the question shouldn't be “What can a device that is Internet-enabled do?” but rather “What do users want, and how can I deliver that, not as a stand-alone product, but as an intuitive service?”

Use technology to transition to a service model

The journey usually starts with smartphones and software-as-a-service technologies. However, often, marketers don’t think beyond having an app advertising what they’re selling. That’s a poor use of resources. Why would your users want to download an app that links to your ad sheet or website, much less pay for it? What they're looking for is a product with value, something which provides a service. Merely embracing different technologies might briefly drive sales, but in and of themselves they won't win long-term customers. But, the moment you provide users with a service related to the product, you’re no longer just a marketer. You’re a partner.

Steps to create service-based products

The first step in connecting your devices must be about efficiency. But, the next is about the possibility. How about reducing the price of our machinery, and choosing to sell small laboratories subscriptions to amazing analytic platforms? What if we could give the same technological capabilities as in a developed nation to a physician in a developing country? The products themselves begin to fade from the bigger picture. Knowing your customers and market is always a good place to start, but below are a few additional points to consider:

  • Work on a subscription model. Transform your existing products in ways that shift the financial model away from selling a "good" to selling a service. For this, shift the financial model away from selling a "good" to selling "time." As in, uptime, the speed of delivery, time savings, or anything else which taps into the value of time to build something new and compelling for your customers. This will help you predict your revenue as well.
  • Build new services complementing what you’re already doing successfully. This way you can extend the value you're providing. Ask yourself, what else can you do that adds to what you're selling? And try elevating the experience. Add educational or other interactive experiences which reinforce the core business while further addressing customer needs. Piece together a more holistic set of services and products using a broader view of the users’ needs, including how you price and finance the offering.
  • Rapidly prototype to test your service. Don’t jump into a service-based product before you understand whether users will actually buy it. The key to prototyping is to build the product’s main features and then let customers tweak it. Their reactions will form the basis of your decision about whether to move forward with the idea, allowing you to build what they want rather than what you believe they need. When it comes to service-based models, you’ll probably have to test different hardware packages, service tiers, and user interfaces. Embrace the prototyping path to learn up front what users would expect from your service and how much they’d be willing to pay for it.
  • Build an audience. Author a blog. With a direct line to thousands of daily readers, you can use the blog as a primary marketing vehicle to sell subscriptions. Or even running a conference will help build a natural audience for you.
  • Don't give yourself an out. Clients always take precedence in a service business, so it becomes difficult to find the time to work on your product offering. This should serve as an organic motivation: either risk losing clients or develop the product faster. And remember, once you get a couple of subscribers, you'll start making enough money to finance the drop in consulting revenue.
  • People don’t want to be sold to. More so now, than ever before, customers want to engage on a personal level with brands. The service-based model makes this a possibility. You are no longer asking users to dig into their wallets every time you build a new product: You’re asking how you can make businesses more productive and their lives easier. Adobe’s Creative Cloud has been such a success thanks to the “partner” mentality. Customers want a long-term relationship, not a sales pitch each time a company debuts a new product.

The coming months will see a massive consumer shift towards connected devices, from homes to automobiles to wearables. To be a part of this wave companies will need to make a clean break from their old product-based business models. This switch isn’t a "coming about" or marked by a slow stalling progress of edging towards a half-hearted subscription model. It requires one to cleanly and efficiently make the shift by spearheading all divisions of the company, not just in parts. This shift requires a strong stomach. Things are bound to get tough, but you must remain focused and continue to veer the company toward the other side until you're safely there. But if you can make the switch, the reward on the other side is the sense that you own a business you control.


As companies reinvent themselves into subscription-based platforms, there will be as many failures as successes. Here at CognitiveClouds, we’re excited to be right in the middle of it. We’re having talks with some of the biggest and best companies in the world. End of the day, IoT is not just about broadening a product’s capabilities. It’s about creating a different space where a product transforms into a service. Your company doesn’t have to make this journey alone. Give us a call to learn how a SaaS development company can help you take your product to the next level, the service level.

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Amit Ashwini