Become successful with the service business model!
The service business model is almost unimaginable: from Google to Netflix. But what exactly is it and how can you deploy it?
A revenue model that is gaining popularity these days is the service business model. The service business model is one of the somewhat complicated models out there. What is the service business model? What are the advantages and disadvantages of it? Are there other options as well? And what about the canvas? These are all questions that we are going to answer for you.
What is a service business model?
The idea behind the service business model is that the model is composed of a different number of services that together perform the total business activity.
What does that mean exactly? Simple, a service business model is nothing other than an organization that provides its target group with its needs through business activities. This is mapped out using the service business model canvas that will be discussed later in this blog. The canvas can be compared to the Business Model Canvas.
The service model canvas assumes that the company creates, delivers and retains its value through service.
Examples the service business model
Examples of the service business model include airlines, banks, ICT services, different types of agencies, law firms, handyman companies, movie theaters, and management consulting firms. There are still countless ways, as long as you provide the consumer with a service. There is actually not much to it!
Online service business model
Another option is the online service business model. This model is almost the same as the service business model, only now you are moving your business to the Internet. You can use the online service as business-to-consumer (B2C), but also as business-to-business (B2B). Recently, consumer-to-consumer (C2C) has also been added.
Some popular online service business models are:
- Google services (docs, Calendar, Translate, Gmail, Maps and YouTube)
Service business model canvas
The service model canvas asks you a number of questions. It is a tool designed to help you develop and document your business models. It is a useful method for exploring potential or existing services. It helps you think about service design.
The service business model canvas consists of 12 different building blocks:
Who are or will be using the service? Who are our key users?
- Service proposition
Why would someone use this service? What is the value of the service?
Which channels are most suitable? And which are the most used?
- Key activities
What key activities are required to perform the service? What are the key activities?
What are the current challenges? What challenges will you face in the future?
Who is involved in providing the service? Who are the core partners, suppliers and stakeholders?
How do and will users use the service?
What similar services are out there? Who are the competitors? What other options do users have?
- Key resources
What core resources are there to deliver the service with? (For example, technology, people, etc).
What costs are involved in delivering the service? What is the most cost effective way to deliver the service?
How does the service deliver a return on investment on all investments made?
What KPIs will and can be used to measure the performance of the service? What are the most important KPIs?
Read more about the service business model canvas on the website of UXM.
Pros and cons of the service business model
- Service and maintenance
Revenue runs entirely on service and maintenance, but service is also needed in a revenue model such as goods sales or subscription model. Service always comes back in whatever form it takes. With this model you are already service-oriented and actually specialized in that area. Often consumers also come back for any maintenance: another opportunity to show that you like to provide service and do so in a professional way.
- Stable income
There is a continuous flow of income so you know what kind of revenue you can expect. You may also earn structurally through periodic maintenance.
- Personal and customer loyalty
Providing a service is more personal than selling a good because now you are actually going to perform tasks to provide the consumers with his/her needs. As a result, not only is it personal and you get to deal with a lot of customer contact, it’s also an effective way to build customer loyalty with your business. If you know how to use your service in an attractive and interesting way people will come back to you more easily because of your good service.
- Time and energy
If you offer a service, you need to devote a lot of time and energy to it. The service needs continuous development and support. This also applies to the customer relationships you are going to have. The service must remain interesting, be able to offer something new all the time and, of course, it must meet the customer’s needs.
- A problem can drive the customer away
If there is a problem with the service, you cannot solve it as quickly as with a tangible product. You can’t just have a service replaced or repaired either. Problems happen and this is not exactly avoidable. Therefore, your Customer Relationship Management and customer service must be able to deal with them appropriately. If this does not happen, you have lost your customer.
- The threshold for attracting the customer is high
The customer must be convinced to actually take the service. For many organizations, this is often the most difficult phase in the sales process. So know how to convince your target audience of the service and possibly use the unique features, such as the USP.