Custom vs. Productized services: Pros & Cons for agencies

Written by: Karl Sakas

Agency owners often ask me whether to focus on custom services, productized services, or a combination of both.

The answer? It depends on your unique Values, Goals, and Resources (VGR)… but your decision is easier when you know the pros & cons of each option.

Are you currently thinking about changing from custom to productized, from productized to custom, or to a combo of both? Be careful—your choice impacts almost everything about your agency. That includes marketing and sales; project management and delivery; and even how fast you get paid.

Today, I’ll review the pros & cons of each approach (custom vs. productized vs. both). I’ll also share behind-the-scenes from my own experience offering both kinds of services as an agency consultant.

In a future article, I’ll share my step-by-step process for deciding which approach is right for your agency. Be sure you’re getting my email newsletter for agency leaders, so you don’t miss any updates.

The Pros & Cons of Custom Services

In their early days, most agencies are delivering custom services—a unique strategy and/or “build” for each client. The work tends to be complex—but it’s profitable if you do it right. But that’s often a big “if.”

Pros: Custom Services

Higher fees: Custom services help you justify charging higher fees. For instance, a non-custom website is would typically be $10-20K… but a custom website could easily be $100K+, depending on the client.

More-sophisticated clients: With the higher price point—and higher need for customization—your clients will tend to be more sophisticated. Many agencies prefer working with professional marketers, versus clients who are juggling a million tasks as a small business owner.

Pride in your work: When you succeed in “shipping” a complex project or a challenging month in a retainer, you and your team can take pride in a job well done. You worked hard, and it paid off. Boost your project success with our crowdfunding campaign fulfillment services.

Get paid for everything you do: Because you’re regularly negotiating the scope of your work (whether via Milestone pricing or something more flexible), it’s easier to get paid for extras because clients tend to assume that you’re building much of their custom work from scratch.

Time-saving via “semi-custom” services: You can automate back-end processes (via templates, standard modules, software libraries, and more) to give clients a nearly-custom experience… without needing to build everything from scratch. This can be a win-win; clients get the customization they need, and your team can work faster.

Cons: Custom Services

Slower sales process: It takes time to scope-out the complex custom work, especially if you’re working using Milestone pricing. It’s all the more painful when you create a custom scope for a client who doesn’t move forward. Doing a Paid Discovery process can reduce your cost-of-sale, but it doesn’t eliminate future scoping entirely.

Higher client expectations: Clients expect a lot from agencies doing custom work, including extra tweaks to get things “just right.” This can lead to scope creep, with seemingly endless out-of-scope negotiation. Sometimes clients don’t understand why something seemingly simple would be so expensive.

Complex project management and fulfillment processes: Plan on investing more in account management (AM) and project management (PM) to handle your custom-oriented enterprise clients. Your PMs need to be more than “work babysitters.” And the “know just enough” baseline for your AMs will be higher than on productized services.

Expensive labor: When you do custom services, everyone’s more expensive. That includes subject matter experts (SMEs), project managers, account managers, and salespeople. For instance, you need the $100K+ salesperson or lead developer, not the salesperson working on a $60K base or an entry-level developer straight from a coding bootcamp. You’re also more likely to need additional senior people to mentor and oversee the junior people.

Slower payments, if clients dispute the scope: I worked with an agency where an unhappy client withheld payment… which nearly put the agency of business. (One solution: Structure the scope to put revisions at the beginning of the next milestone, not at the end of the current milestone.)

The Pros & Cons of Productized Services

After tiring of “custom each time” services, many agencies consider delivering a productized service—that is, clients get a limited range of options rather than anything they want. You might charge less, but productized work can be profitable… if you get the cost structure right.

Pros: Productized Services

Marketing is easier: Since you aren’t trying to sell anything to anyone, you can narrow your marketing. As “productized” implies, you’re selling a service that’s closer to an off-the-shelf product rather than a custom service. You might compare your marketing to a SaaS firm, rather than a consulting firm.

The sales process is easier: It’s easier to build a “fast fail” sales process, because a high percentage of prospects will “fail out” early. It helps that your marketing is straightforward; many prospects will skip reaching out altogether. And scoping is easier, since you’re typically pulling “standard” prices from a library of estimates.

Standardized delivery process: Your team is likely to work more smoothly on productized services, because they’re repeating the same basic process over and over again. This can translate to economies of scale and other automation opportunities. The delivery “flowchart” is simpler than for a custom service.

SMEs may be able to self-manage: When the work is less complex, you may not need dedicated project managers—or at least may not need as many PMs.

Theoretically cheaper labor: You get what you pay for, but you can likely staff a more-junior team than a fully custom shop. (You’ll still need some senior people to provide mentorship and oversight.)

Easier to profitably deliver recurring-revenue services: When it’s (roughly) the same thing each month, your team can “wash, rinse, and repeat.” This is easier in productized services, versus “bespoke each month” custom services.

Easier to get paid faster: Because productized clients tend to have a clearer picture of the deliverables they’ll get, there tend to be fewer “done vs. ‘almost done‘” disputes. The definition of “done” tends to be less ambiguous, which means you can get paid faster.

Cons: Productized Services

Must be vigilant for “too custom” out-of-scope requests: Your client-facing team needs to be ready push back on client requests that go beyond the productized scope.

Harder to retain fast-growing clients: If a client expands beyond your productized services, they may need custom services. If you don’t offer those services, you’ll lose the client.

Team may get bored: If your team prefers creative variety, you may run into problems with employee morale and retention—because they’re doing a version of the same thing over and over again. Of course, the value of “variety” is relative.

Less pride-in-ownership: You may eventually feel like you’re running a factory rather than a unique marketing, creative, and/or development agency. For some agency owners, this doesn’t matter (especially if things are running smoothly and profitably); for others, it bothers them.

Lower price points often mean lower profit margins: Less revenue per “unit” sold means you have less room to pay your team. This means you can’t afford to over-pay your productized services team.

The Pros & Cons of Doing Both at Once: Custom AND Productized Services

Some agencies try pursuing both business models at once—some customized services, some productized services. This can work in theory, but there are lots of obstacles to overcome.

Pros: Offering Custom AND Productized Services at the Same Time

Better margins on incoming leads: You’re able to fulfill a higher percentage of incoming sales opportunities, since you can do the work internally rather than referring it out. This works especially well when you specialize in a client industry, since your thought leadership marketing likely attracts a range of client types in that industry.

More variety for your team: This can help employee retention, since people aren’t doing the same thing every day… but also aren’t solving impossible problems 24/7.

Easier to retain clients in a single industry vertical: You can start smaller clients in a productized service, and transition them to custom services as they grow—instead of needing to refer them to another agency.

Cons: Offering Custom AND Productized Services at the Same Time

Client-facing employees have trouble keeping up: It’s hard for account managers and project managers to switch between “high service” and “low service.” Across your agency, the risk is that productized clients get too much attention (relative to what they’re paying you), while custom clients don’t get enough attention.

It’s hard to balance team utilization: If you use separate teams to fulfill custom vs. productized work, you’ll find it’s hard to keep both at a reasonable utilization level. If one team is overloaded, you often can’t shift excess work to the other team because they’re not cross-trained in the overflow work. And if you use the same delivery team to do everything, they have trouble keeping up, too.

Salespeople tend to be either underskilled or overpaid: If they’re competent enough to do consultative sales on a custom service, you’re wasting their skills on selling a productized service. (And they won’t be as happy with the lower commissions on cheaper productized services.) Yet a salesperson for productized services likely won’t be competent at selling custom services—they won’t understand enough about what they’re selling to persuade your clients. Or if they do, they’ll inadvertently over-promise what you can do for the custom price.

Learning from My Consulting Story: Custom to Productized… and Back

Wondering how I approach this myself? Here’s a behind-the-scenes window into my own Custom vs. Productized services decisions!

I offer both Custom and Productized services at Sakas & Company… but that mix has evolved several times, especially when it comes to my consulting services.

Executive Coaching: Always Productized

My retainer-based Executive Coaching services have always been productized, since I started in 2013. The scope has evolved over time (from weekly calls to a longer monthly call; adding email support and emergency phone support; expanding accountability and adding access to the Agency Profitability Toolkit™). But the core concept—a fixed scope for a fixed price—has remained the same.

As a result, I publish agency coaching prices on my website. And the Executive Coaching sales process tends to be pretty straightforward—prospective clients complete my pre-intake questionnaire, schedule an Exploratory Call, and make a yes/no decision during (or soon after) the call.

I have some “what to expect” sales-support docs, but there’s no proposal—because I just spoke with the person who’s both the decisionmaker and user of the coaching service.

From a sales and delivery perspective, it helps that Executive Coaching is both structured and flexible. For instance, I don’t know what I’ll discuss in the Month 7 call… but I know the call will follow a certain format, with no surprises on scope.

Consulting: Custom to Productized to Semi-Custom… to a Mix

Consulting has been a less direct “path” than coaching, in terms of my evolving what clients need (and want).

2013-2015: Custom Consulting (Hourly, to Milestone)

When I started in 2013, my consulting engagements were 100% custom, based on an Hourly Pricing model. This made sense at the time, as I refined my offering and honed my consulting delivery process.

I knew I wanted to shift from Hourly to Milestone pricing (especially after making a recommendation worth $50K after pricing the work at less than $500), but initially hit some hiccups around defining the scope. A particular project in early 2015 was Scope Change City, as the agency owner kept changing her mind about what she wanted. I got tired of doing scope changes nearly every week, and missed the flexibility of an hourly budget.

2015-2018: Semi-Custom Consulting (Hourly)

Realizing in late 2015 that the market wanted flexibility and customization, I raised my hourly rates and focused on semi-custom consulting. That is, the projects were custom, but I mixed-and-matched certain modules. Rather than fully capture (and charge for) the increased value, I opted to use this to “stretch” each client’s budget as I customized prior tools to their project.

By 2016, I saw an increase in demand for comprehensive strategy advice—delivered via what became my Agency Roadmap™ strategy consulting projects. The core deliverable within Agency Roadmap™ was (and still is) a customized “Strategy & Implementation Plan” (SIP). The SIP combines strategic and prioritized tactical advice, showing agencies where to focus in the coming 1-2 years to hit their 5-year goals.

Until 2018, I was doing Agency Roadmap™ projects on a semi-custom basis, including another rate increase. Clients benefited from my efficiency, now at a higher hourly rate, but I wasn’t formally productized.

Over the years, I’ve explored smaller-scope productized services (at a lower budget point, while taking care to avoid cannibalizing the higher-end projects), but they never really caught on.

2018-2020: Productized Consulting (Milestone)

In 2018, I refined the strategy consulting offering and updated the landing page to reflect a fully-productized Agency Roadmap™ service.

Yet even as I sold the productized service to new clients, I continued doing custom work for existing clients, typically because I’d previously delivered the comprehensive help already.

In 2019, I noticed prospective clients liked the concept of the Agency Roadmap™ service… but individual prospects didn’t always want everything in the productized offering. Often, they needed a portion of the Strategy & Implementation Plan, plus a deeper-dive in one or more areas; that didn’t fit cleanly into the productized approach. I was feeling a pull toward custom (or semi-custom) again.

2020-present: Semi-Custom Consulting

In sales conversations and other aspects of my sales intake process, I focus on understanding each agency’s challenges—I don’t lead with a specific service recommendation, because I need to understand what’s suitable to their situation first.

When it’s time to discuss how I might help, I lead by describing productized Agency Roadmap™ consulting and Executive Coaching services, but frequently find myself recommending a custom project based on semi-custom inputs. For instance, I can re-use my proprietary tools—like intake questionnaires, the core Culture Survey, and other intellectual property—to help us start faster.

Unless a consulting client opts for the productized Agency Roadmap™ offering, I’m currently doing primarily semi-custom consulting work. I like the concept of 100% productized—but that’s not what 100% of the market needs (or wants). And I’ll admit I enjoy the challenge of solving an entirely new problem.

The Future: Who Knows?

Will my primary approach change again? Probably! It’s already changed too many times in seven years to think otherwise, and I plan to be advising agencies for another ~30 years or so.

The shifts have sometimes felt like trial-and-error… but the ongoing changes have helped me stay aligned with market needs. “What do your clients need?” is always a good question to answer.

Coming Up: How to Decide Between Custom vs. Productized Services vs. Both

From what I’ve shared on the pros and cons, you likely have an idea of which approach is right for you. (And a clearer picture of the strengths and weaknesses of your current business strategy.)

But if you’re still not sure, stay tuned for a future article on my step-by-step process on how to choose. Don’t miss it—sign up for my email newsletter to be the first to hear when it’s available.

Question: How do you lean on offering custom vs. productized services at your agency?

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