December 16, 2016
Where do productized services fit into your product ladder?
In case you haven’t heard me use the term “product ladder” previously, here’s my definition of the term:
A series of offerings priced in a graduated “order of magnitude” fashion. The idea of the product ladder is to make it easy to turn prospects into customers regardless of the level of trust you have engendered with them. In other words, people who have just heard of you will most likely enter at the bottom rung of your ladder (e.g., $10). Assuming that they benefit from that purchase, they will have increased trust and be more likely to move up the ladder.
Here’s what a typical product ladder might look like for a software developer:
- $XXXXX - Custom Project (top of ladder)
- $XXXX - Roadmap
- $XXX - Course
- $XX - Book
- $X - Cheat sheet (bottom of ladder)
Here it is again with some typical prices:
- $55,000 - Custom Project
- $1,295 - Roadmap
- $399 - Course
- $49 - Book
- $9 - Cheat sheet
Of course, this is just one possible product ladder; the specifics of yours will depend greatly on what your target market values and your area of expertise.
Where do productized service fit in the ladder?
Most software devs I work with have only one rung on their product ladder - a custom project. It looks like this:
- $XXXXX - Custom Project
Projects are great for revenue but they are not usually very profitable. That is to say, they are:
- relatively hard to sell
- labor intensive
These factors are all costs to you and must be subtracted from your sale price to determine your profit.
Wouldn’t it be nice to see the future?
With only one product in your ladder, it is almost impossible to have any meaningful visibility into the future of your business (i.e., your pipeline of work).
Adding a productized service to your ladder makes it much easier for your ideal clients to engage with you (i.e., more clarity, less risk, lower price, etc). Assuming that all goes well, folks who buy your productized service will be more likely to move up a rung and buy a custom project.
Over time, you can add more rungs to the lower end of your ladder. Doing this will increase the number of paying clients you have. Each one will be a potential prospect for a higher tier offering. This gives you visibility into your pipeline of future work, and levers to pull when you have available capacity.
Escape from the pit
The Product Ladder concept is the key to escaping the feast/famine cycle, which I shall refer to henceforth as:
The Consulting Pit Of Despair™ 😉
In other words, if you are slammed with client work one month and struggling to pay your bills the next, you can escape by building a product ladder.