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Designing subscriptions: selling a service instead of a product

What is service design?


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Dina Zuko

3 years ago | 6 min read

If someone had told me back in 2000 that in 20 years I would not own a single CD, not even a CD-player, I would not have believed them of course. But here I am in 2021 and looking back it is hard to wrap my head around everything that has changed during the last 20 years. I own less stuff, but still, I have more. And I guess so do you.

There is a trend in consumer demand away from ownership towards experience and utility, and many industries have transformed their business from product to service. Customers want to get from point A to B, they do not necessarily need to own a car.

They want to watch a movie but not stack DVDs that they will not watch more than once. They want to have a hole in the wall but not have an expensive drill in the toolbox (the average drill is used about 13 minutes during its lifetime according to Reason and Løvlie, the authors of “Service Design: From Insight to Implementation”).

With services, customers have better access to experience and utility while saving money on wasted ownership.

From the companies point of view selling services instead of products has many advantages. One is that the same product can be resold without additional manufacturing costs. Another, but probably more important, is that products can easily be copied, but service experiences are rooted in company culture and are much harder to replicate.

Based on that I believe that regardless if you are a product, UI, UX och graphical designer you will benefit from learning about service design and using service design methods in your daily work. A few months back I wrote the article “Why designers should learn service design” and you can find more information there.

What is service design?

Service design is about improving service quality and the interaction between the service provider and its customers. It is about joining the silos in an organization together from a customer perspective to create a service.

Understanding people is at the heart of service design. We need to understand customers’ needs, behaviors, motivations, and relationships to the service. But not just the users or customers, also the agents interacting with customers, the backstage processes, and your client.

For service designers, the objects of design are experiences over time in the right context, and when services are consistent across touchpoints and time, they deliver great experiences.

Unlike a product, which customers purchase once and may use over time, services are usually the process of a time-based experience. But to the answer to why so many services are poorly designed lies in the lack of attention paid to the invisible elements of time and context.

Services require us to design systems that adapt well to constantly changing parts. Using service design as an approach highlights all the moving parts that needed to work together. That way you can build resilience into the design, services will adapt better to change and perform longer for the user.

As a service designer, you have a dual role, you represent both the end-user and the service provider, and you need to design a service that is beneficial for both. The service needs to have a business case like an unmet need, a gap in the market, or an underdeveloped marker.

The key to making the business case for service design is to focus on how you want the work to change customer behavior, and then estimate the potential impact on the business in numbers.

If you want more information on service, two great articles describe service design in-depth, “What’s Service Design? And Why Does it Matter?” and “So, like, what is service design?”.

Free — Product — Service

Purchasing a service instead of a product is a major shift. Even though consumers have accepted Spotify and Netflix it could take some convincing to give up a car, an own wardrobe, or something else that has personal value.

Organizations, on the other hand, need to shift their offers to orientate around providing access and convenience rather than products alone.

When companies are offering a service they usually complement the service with tangible products and something for free. Giving the user/customer a choice. This way the customers can get familiar with the service and make the journey from unpaying to paying customers.

The free part could be a free trial period. For example, Spotify or Netflix will let you try their service for free before deciding to become a paying customer. This is a great way to get new customers because as humans it is more difficult for us to let go of something we have, then something we could potentially own.

This bias is called prospect theory and was developed by Daniel Kahneman. In his book “Thinking, fast and slow” he writes that since individuals dislike losses more than equivalent gains, they are more willing to take risks to avoid a loss. So, we want to keep what we already have.

This is why the car salesman wants you to test-drive the car, making it more difficult for you not to buy it.

The product could be buying a specific song or movie using Spotify or Netflix. I know that they do not offer that but other actors do.

The service Netflix and Spotify are offering is a monthly subscription, and all of you are probably familiar with it. The customer is paying a monthly fee and can access unlimited films and TV programs/music.

Let’s make art — An example

Now, I want to share with you an example of how you can move from selling products to selling a service. We going to look at art supplies. There are many stores and on-stores that sell paper, pencils, paint, and other art supplies. But you don’t really go there to buy supplies, you want to make art, create, paint, and you only go there to get the tools you need to do that.

So, what the company Let’s make art did is cool and truly amazing. Instead of only selling art supplies like other art supplies store, they offer a subscription, a monthly art box designed to encourage, support, and enhance your experience making art.

When subscribing you get a monthly box with all the supplies you’ll need to start creating, instructions, and every project is also supported by a free video tutorial with nice and fun teachers.

So let’s say you want to paint with watercolor. You have three options.

  • Free. You watch the tutorials for free and paint using the supplies you have. Watching the videos you will notice that the art teacher is talking to the subscribers, saying things like “Use the special sponge you got in your latest kit”. And you feel a bit like an outsider, wanting to join the friendly community.
  • Product. You order the supplies you need or one-time-kits with all the supplies you need to paint a specific project.
  • Service. Each month you get an art box with four art projects. You get paint, watercolor paper, and step-by-step instructions. Each week a new tutorial is released on Youtube and you can paint your projects together with the art teacher.

Let’s take a look at their subscription offer. First of all the monthly subscription is the default option. According to Kahneman, people have a status quo bias meaning that they are more likely to stick with the default option rather than changing it. Our brain interprets the default option as the right option.

Also, changing from the default requires that our brain snaps from System 1 to System 2 and that requires effort. More on System 1 and System 2 in the article The unconscious, emotions, and our decision-making process.

You get a discount when subscribing. This encourages us further to subscribe instead of buying a one-time kit. We may experience a sense of urgency when we see the discount. Is it a temporary discount? Prospect theory is valid here as well. We may experience a fear of loss if we don’t sign up.

Also, when ordering your art box, you are presented with information about the four projects included in the upcoming box and the dates when the free tutorials are released.

The presentation is beautiful, inviting and if you like painting regularly there is not really a reason why you should not buy a monthly subscription. I mean, you still need to buy you supplies somewhere, why not subscribe?

Designing services instead of products gives us designers the freedom to figure out what the users and customers truly want.

What are their motivations and desires? Do they want paintbrushes or do they want to make art? As designers, we can use our creativity and user insight to create new amazing services that our users can’t live without.

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