Why Your Service Business Needs Physical Products Now

While many of our clients are strictly Amazon sellers, we also work with a whole other group of entrepreneurs – service business owners.

Service businesses come in a variety of stripes and colors: family therapists, tattoo shop owners, spa owners, music rehearsal space owners, restaurant/breweries, life coaches, personal trainers, fitness clubs, and more. Each of these kinds of service businesses is different, but the basic premise is the same – they trade time, their time, for money. Unfortunately for scaling such a business, a person only has so much time during the day, so typically the only ways to grow are to rent more space, hire more people and hope they do as well as you do with the service, or to charge more per hour.

So how do you scale your income and build out your capabilities as a service owner without adding more people, space, or charging more?

Simple! You add products to your business!

Products can come in a few forms – some service businesses offer courses or trainings, and those are certainly products. But our discussion today will center around physical products – individual items that your clients can buy or that you can get people entirely unconnected to your service business to buy from you.

Let’s look at the situation of a hypothetical spa owner.

Here’s a fascinating tidbit about how retail products help increase customer retention in a service business:

“2007 Spa Industry research study results: Retail Purchase Effect on Retention

  • 0 spa products bought = 40% customer return rate
  • 1 spa product bought = 70% customer return rate
  • 2 spa products bought = 80% customer return rate”

This is huge! If you’re a service business owner trying to build and retain customer or client loyalty, the fact that retention is so high with a service business by adding physical products could be a game changer for your business.

So how does this work with a loyalty program?

One way to implement a physical product in your service business is as part of a customer loyalty program. There are various ways to implement customer loyalty programs (check out this article for some great tips), but the primary concept is that customers or clients who do a certain number of services get a freebie of some sort, or they are offered a birthday gift of some sort as part of the loyalty program. At a spa, this freebie could be a spa private label rejuvenating mask, a cream or lotion, or loofa or bathtub pillow.

If you have say a consistent three to four thousand customers in a year, you can develop a custom item to gift to your clients after their session, with a special freebie for their birthday. This allows you a great reason to request their email address and physical address to mail their gift. While many people get spam at their physical address, getting a birthday card and free gift for a birthday will increase the likelihood of them thinking of you and your business positively and build a solid relationship with your customers or clients.

Businesses that want to build long-term relationships need to think beyond money to what types of products can help them build loyalty.

Beyond Loyalty Programs

One of the best loyalty programs out there is Starbucks. But Starbucks goes well beyond loyalty programs and has one of the best product programs out there, completely in line with their brand story and customer retention and loyalty goals. While it might seem like Starbucks is a product business, they are in fact a service business, preparing coffee and food or snacks for patrons – again, trading time for money. Alongside the line to order, Starbucks developed custom lines of mugs, insulated cups, even French presses, along with packaged coffees.

But what was really clever about their approach was making the mugs seasonal and local in nature, so I can buy the Fall 2017 version of the Singapore mug while I’m traveling for work, and bring it home for myself or as a gift.

When a customer or client is traveling or at a retreat, one of the best ways to help them remember the excitement of their visit is a specialty gift they can buy as a souvenir that has your brand on it, and preferably something like a mug, that is presumably used regularly and constantly reminds them of the positive feelings and associations with your brand.

So what are some ideas?

Every service business is different, and therefore our recommendations on what you should develop for your loyalty program or retail sales section of your store will be different. Here are a few recent project concepts that we’ve pitched to clients:

  • For a grief counselor, a “children’s grief therapy box” which is a unique kit with decorative elements inside, a journal, and specialized compartments for treasures. Many children dealing with trauma and grief need a place to feel safe and special, and decorating their own special box, where they can hoard treasures and write down or draw their feelings in safety is a great way to supplement the work done in the therapy setting.
  • For a spa owner, a “birthday celebration set” with bath salts, body cream, a bath bomb, and a cooling eye mask to send as a special thank you gift to the customer before their special day, along with a handwritten thank you note for being a loyal customer and a 20% off coupon for a birthday “celebration” massage and facial. The products all have the spa’s brand on it, and the eye mask can be reused, keeping the spa’s brand in the customer’s mind every time they use it.
  • For a personal trainer specializing in high school and college athletes, we pitched customized training gear to go along with the trainer’s YouTube videos. This training gear was intended to help the athletes who are elite in their sport, and the primary benefit was a membership to work with the trainer as part of a club/membership program, where the physical product was a side benefit to the athlete. But again, the branded item was with the athlete every day, reminding them of their online coach and helping to maintain the loyalty in the relationship.

The sky is the limit

The best part is that sometimes, products that start as loyalty programs or brand awareness projects turn into solid and valuable streams of income on their own.

In 2009, Starbucks made $6.24Bn in beverage sales, and that rose to $12.38Bn in 2016 – roughly double. Not too bad!

The food portion of Starbucks business in that time period grew at a roughly similar rate, from $1.68Bn to $3.49Bn.

However, in 2009, Starbucks achieved 1.86Bn in its products businesses (prepackaged snacks and coffee along with consumer goods), and in 2016, this had grown to $5.44Bn – almost 3X growth.

By aligning their products business with their loyalty programs and their core service business, Starbucks increased customer retention and loyalty while growing new lines of business at even higher rates of growth than the traditional beverage portion of the business.

As a service business owner, you have a variety of ways to scale your business. Some of these include more time for you, paying others to do work for you, or expanding the size of your physical location.

But beyond expanding your core services, I recommend a judicious move into a products business to help you increase your customer or client loyalty, while potentially helping you to follow in Starbucks footsteps, and grow your products business to a steady and reliable source of income.

I want to learn more about how I can develop my own custom products for my service business:
About the Author
Rachel Johnson Greer is a global business strategist who specializes in helping entrepreneurs increase their internet product sales, curate their brand image online and avoid catastrophic legal threats. After getting her MBA in international business at Seattle University, she spent nearly a decade at Amazon working in product development. Since then, Rachel has founded companies that reached both multi-six figure and multi-seven figure growth in under three years.

As a business coach, she supports clients in everything from international product expansion to 4x-ing their sales through online retailers. Rachel is frequently sought out by the media and has appeared on the Today Show, CNBC, Business Insider, The Wall Street Journal and Bloomberg. When she’s not working with clients, she’s scaring friends at parties with stories about the most problematic online products she’s found in their homes. She lives in Seattle, Washington.

Leave a Comment

Sign up for our Newsletter!

Get updates, new blog posts, special offers, and upcoming show information in your inbox.