Brands are increasingly building a service wrapper around their core products to unlock new revenue streams and grow or protect profit margins. Accelerated by the pressures of Covid-19 and enabled by digital, brands are trying to respond to the ongoing challenge of commoditisation by moving from transactional to long-term value driven relationships with customers.
Service brands – whose primary offer is an intangible outcome rather than a physical product – are naturally better positioned to excel in this new reality, sometimes even redefining the categories in which they operate.
The unique strengths of service brands
Being a service brand doesn’t automatically inoculate your business from commoditisation. Rather, service brands tend to possess a more customer-centric organisational mindset, a more robust technology infrastructure, and greater operational flexibility due to the inherent nature of delivering outcomes rather than physical products. In effect, service brands tend to have the raw materials to become experience-driven businesses.
Together, these traits affect the relationship service brands have with customers, i.e. the length, breadth and depth. Consider a robo-investment brand like Betterment – the customer journey stretches over years (length), spans numerous touchpoints (breadth) and deepens over time as more customer data is generated (depth). If customer experience is a canvas, service brands tend to have a bigger one, with more opportunities to provide value, delight, educate and entertain. It’s no surprise that service brands tend to have been early adopters of CX principles like personalisation and seamlessness.
Such relationships also necessitate a robust digital ecosystem. From communication, to content, to transactions. Forrester notes organisations that use technology to make a meaningful difference to people’s lives grow 4x faster than their competitors. All brands should consider their tech architecture as the foundation for value-adding CX.
Look to category-defining leaders like Wise, Domino’s and Peloton
Wise is a service brand that originated in a highly commoditised category; Domino’s is a product brand in a fairly commoditised category; and Peloton is a premium brand which straddles both products and services. All three have expertly used customer experience design, branding and technology to deepen the relationship they have with customers and win market share.
With 10 million customers, a reported 70% growth in revenue, doubling profits YoY from March 2020, and a recent valuation of $5 billion, Wise (formerly TransferWise) is a fintech unicorn truly deserving of the title. Wise combines frictionless customer experience with category-beating low fees and speed for international money transfers. But the brand’s mission statement, “Money without borders”, has acted as a powerful North Star for its recent expansion into new services.
The statement describes an outcome, and the company’s newest services—like banking accounts designed for people who live, work and travel all around the world—tightly align to that outcome. Brands looking to strategically expand their services should start with a clear mission; what is the outcome you want to deliver for your customers and the world?
The 2000’s were a rough decade for Domino’s. But a bold move to re-invent their entire offer from ingredients to delivery has since paid off. Besides making the pizza more edible, Domino’s focused on a core need: their customers want to get pizza with as little effort as possible. They pioneered the real time pizza progress tracker, allowing customers to worry less about when it might arrive. Their AnyWare platform allows customers to order from an ever-expanding list of channels with as little as a click of the ‘Easy Order’ button. Designing an effortless, user-centric delivery experience has helped Domino’s revenue grow from $1.6B in 2010 to $4.1B in 2020, (Papa John’s revenue grew from $1.1B to $1.8B in the same period). Brands should ask themselves, ‘how could we make the experience around our core offer meaningfully better for customers?’
Peloton was never just a stationary exercise bike. But now it’s fair to say they’ve created a fitness ecosystem to rival the likes of Nike. The expansiveness of their offer makes them difficult to categorise. It’s digitally enabled exercise equipment, it’s a virtual fitness coach, it’s a streaming service for fitness content, it’s a social platform…
Motley Fool contributor Neil Patel sums it up, “Peloton sells hardware that is differentiated by software.” The ecosystem combines data, content and community interaction to make the customer experience feel empowering and addictive. Brands that want to expand their offer should think strategically about their digital ecosystem; is your tech stack fit to deliver truly category-defining experiences?
How to design meaningful experiences that add value to your offer
- Take inspiration from your brand purpose and identity. What outcomes do your brand ultimately hope to deliver for your customers and what tends to get in the way? Brainstorm service experiences that deliver on your promise. Even small changes, like using less jargon in website copy, can make a significant difference.
- Co-create to ensure the experience delivers on core-customer needs. Co-creation workshops are hugely valuable because they bring the perspective of end users into the design process at the conceptual stage. This invariably uncovers new ideas for features and functionality, but just as importantly, it exposes misconceptions early in the process. It’s likely that at least some of your initial hypotheses about what customers need, or how they’ll interact with an experience will need rethinking.
- Ensure your tech stack is future-fit. Designing a future-proofed technical architecture can require significant investment. Prototyping and testing can help ensure new experiences and services will actually deliver the return on investment needed to justify their cost. Flexibility is key; at Rufus Leonard we frequently recommend the MACH approach (Microservices, APIs, Cloud Native and Headless CMS) because it allows you to choose the best of breed technologies, add elements independently to enable rapid innovation and carry out upgrades/maintenance more efficiently and cheaply.
All brands have the opportunity to think like a service brand by putting customer experience and outcomes at the heart of their growth strategy. Purpose, empathy, and tech infrastructure are the keys to creating differentiated and meaningful experiences that can come to define a category.