Productized Vs Customized Services and Monthly Recurring Revenue

Motivations

Recurring revenue models are often seen as a solution for predictable income, but David Baker and Blair Enns argue that this perception can be misleading. Many agencies are drawn to these models, inspired by the apparent ease of SaaS businesses where money seems to "just show up every month" 1. However, this approach may not suit all businesses, especially those in the service industry, where the work is customized and not easily scalable. Blair notes that digital marketing firms often mimic SaaS models without considering the unique demands of their services 2.

Human beings are neophiles. We fall in love with what's new.

--- Blair Enns

The allure of new revenue models can distract from the core strengths of a business, leading to strategic missteps.

   

Value Conflict

The intersection of recurring revenue models and value-based pricing presents significant challenges. David Baker highlights the conflict between these models, particularly when services are productized, leading to a focus on the service rather than the client's needs 3. This shift can undermine the principles of value-based pricing, where the focus should be on the client's value rather than the service offered. Blair suggests that while some services, like SEO, can be productized, the scale and margins often fall short of expectations 4.

As soon as you have a thing to sell, you quit focusing on the client.

--- Blair Enns

This misalignment can lead to inefficiencies and a loss of client-centric focus, which are crucial for successful value-based pricing.