It used to be easy to draw a clear distinction between products and services. Products were physical, manufactured “goods” that were purchased and owned by a customer. The value of a product was derived from its use or consumption over time – which lasted until it was used up or worn out. Services were intangible – nothing physical passed to the consumer, but they enjoyed a benefit in the form of some kind of convenience or task that the consumer couldn’t (or preferred not to) complete themselves. The distinction is well illustrated by the comparison between buying ingredients (products) at a grocery store to cook for yourself vs. eating at a restaurant where the meal is cooked and served to you (a service).
These days, the traditional line between products and services is blurring as relationship building and real-time personalization are being embedded into products. Product companies are expanding their understanding of what they provide to customers to include every step of the journey – from becoming aware of the product to being a loyal advocate of it. Activities like “unboxing” are seen as a key point in the product lifecycle when companies expand their view in this way. Existing product companies are adding services to their customer offerings and new companies are using a service mindset to deliver products and simultaneously develop customer connections. Of course, technology has played a big role in merging the concepts of products and services. As physical products are getting “smart” and increasingly able to connect with their owners, and with other devices, they can be available and useful to consumers in an entirely new set of ways.
Traditional services companies are also evolving. Successful companies leverage technology (based on keen customer understanding) to initiate and maintain connections with consumers that are so intimate that they are able to offer services on a real-time basis – and in very personal contexts – that would not have been possible in the past.
The “servitisation” trend should be a welcome one for most businesses as services typically offer higher margins than products do. More importantly, as discussed above, services also offer opportunities to engage with customers more deeply – both in the design of the service offering and in the ongoing delivery of it. This engagement, if effectively managed, will build loyalty that leads to more stable revenue streams a longer customer relationships.
What’s especially exciting is the ways that traditional product manufacturers (or, more often, disruptors of traditional product categories) are developing innovative ways to supplement their product revenue streams, or replace them entirely, with related service offerings. Here are a few of the many examples of hybrid product / service offerings:
Blue Apron: This new dinner delivery service combines pre-portioned fresh ingredients with recipe choices and clear cooking instructions.
Nespresso: In addition to selling coffee machines, Nespresso offers clubs and mobile applications to ensure that customers are never without a coffee capsule.
Harry’s: Harry’s sells razors and shaving products online, including “Shave Plans” that automatically send the required products according to a preset shave schedule.
Fresh Direct: This NY-based grocery delivery service offers customers the option of configuring “standing orders” that reorder necessary products whenever you need them.
Trunk Club: Personal stylists select clothing items based on a style profile and ship them to you to try on. Keep and purchase what you like and return the rest.
A New Kind of Customer Understanding
The servitisation trend means that some companies will need to view their offerings and their customers in entirely new ways – and use new tools and techniques to develop this understanding. Effective service delivery requires that you understand your customer in many dimensions – including the dimension of time, over which their understanding and use of your product may evolve. This understanding needs to go beyond features and functions, beyond competitive advantage and towards a nuanced understanding of how your service delivers value, solves problems, and meshes with your customers’ daily lives. Ask ten product leaders to name their most pressing business challenges and customer understanding is likely to be at or near the top of the lists. In fact, just 12% of companies in a recent survey characterized their understanding of their customers’ journey as “advanced.”
Ask the same leaders who they turn to for help learning more about their customers and how to serve their needs and you might get ten different answers. Increasingly, however, businesses are engaging with user experience designers to confront this challenge. The discipline of user experience design is a unique blend of research, strategy, and design activities aimed at identifying and understanding key customer insights and responding to these insights with design solutions. User experience designers deeply engage with stakeholders and end users alike to develop a detailed understanding of customer archetypes and journeys. These customer journeys are especially effective for identifying opportunities to inject new value for customers at strategic points in the conversation. This value sometimes comes in the form of new digital interactions (mobile apps, new features or functions, etc.), but we also often discover opportunities for entirely new services or product extensions that will meet customer needs in new ways.
The insights gained through a user experience design process can provide businesses with value well beyond the design of digital interfaces. This is especially true in the new world of servitisation. Most products and services involve multiple platforms and touchpoints and require a broad understanding of and inquiry into the various dimensions of the customers’ experience. Questions of branding, messaging, design, usability – and many other issues – are crucial to identify and design the elements of a successful service. Because it is an approach that is deeply concerned with the complete context of a customer’s interactions, user experience design is the best tool to derive this understanding and make decisions on the basis of these insights.
In today’s economy, a keen understanding of customers – which is regularly refreshed with new information and insights – is a prerequisite for business success. Technology has added a proliferation of digital touchpoints and new dimension to this problem. Since customer understanding is the principal objective of user experience design, and since the discipline grew out of the domain of digital interactions, the practice of UX design can help product and service companies innovate their existing offerings, and discover new points of value for their customers.