Productized Services & Paid Communities
The Rookie VC #1
Hiya, Ulysse here. Rookie VC is a newsletter to share my thoughts about companies and trends I love as I learn about them. Tech and investing will be the primary focus, but nothing’s forbidden. For now, issues go out on Thursday mornings.
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Today, I wanted to discuss how the bustling landscape of productized services is changing, and how they tie with membership communities as a key enabler of the much-discussed Passion Economy.
In this short essay, I will try to unpack the transition from standalone productized services, from the emergence of the gig economy to the passion economy, and explain how paid communities could enable a new golden age of solopreneurship.
Let’s dive right in !
Productized services are services that are packaged just like products (duh). Whenever you buy a product, you know what you are getting. The price is set, features correspond to clear benefits, you know when and where it will be delivered.
Most importantly, all the delivery steps are explained to the client upfront. Expectations around a productized service are well-set, and improvements in delivery compounds to generate scale (more revenue for less time and resource input from the provider).
Productized services gained early momentum with the advent of the gig economy. Any service activity with a high standardization potential was first: rides with Uber, rooms with Airbnb, food delivery with Grubhub and Deliveroo, and the list goes on. Then followed the creative work marketplaces, Fiiverr, Upwork, 99 Designs, Toptal, and Behance.
The “Uber for X” era did not deliver on the seminal “be your own boss” promise that attracted workers in droves. Instead, it created homogeneity between providers, to prioritize efficiency and growth over individuality and talent.
It probably was a good idea for a lot of activities outside of creative work. After all, there’s only so much margin for creativity for an Uber driver, beyond having candy and water bottles in the back.
Creative work marketplaces, though, are ill-fitted for niche creators with weird interests and talents. Don’t get me wrong, Upwork and Fiver serve designers and builders looking to get in front of new work quickly and efficiently well.
But they don’t value individuality. When someone coins a weird, niche idea and builds upon it, they need freedom in discovering and acquiring their first clients. Even more important, is the ability to freely figure out what will unlock the full potential of their community.
When you read through my mini case-studies in the end, you’ll quickly understand how some of these creators couldn’t have marketed their creative work on a classic marketplace.
Before that, I wanted to dive into some core principles I’ve observed in successful productized service businesses.
The idea of individual level scale through productization has been actively promoted among freelancers and solopreneurs in France, through initiatives such as Koudetat or Anyone Can Scale, both spin-offs of The Family’s talks on service entrepreneurship over the years.
I’ll stop you right here. There is no magic recipe to turning a gruesome, painstaking service job into an efficient business where the owner is in control and more aligned with clients.
Also, methods create situations where people go fishing with a massive amount of tools but miss critical aspects of their service business. They forget the fishing hook (acquisition) or simply don’t know what type of fish they want to catch (customer discovery).
With that said, I think working with these steps in mind can help:
Step 1: To start, inventory all services you are offering. That usually includes your recurring value proposition and offer, then the add-ons and extras you deliver from time to time
Step 2: Survey clients to identify the delivery pain-points. If the delivery steps would be better off in the hands of a client (filling a form, drafting a brief by answering standardized questions) then it’s best outsourced to them
Step 3: Build a service ladder. In simpler words, build a stack of services that you can slice in simple pricing tiers
Step 4: Promote. The key to promoting a specific service is to create content pointing out to a problem, then letting people access an on-shelf solution to the problem in the simplest way possible
There is a lot of resources out there for creators to turn to when looking at productizing their services. I’m truly admirative of Brian Casel’s work to help people understand that process. I will describe later how I think he gives a clear vision and path to get there.
Paid community is slowly becoming a natural extension and value enabler for anything and everything you can productize. Solo ventures such as paying newsletters, creative agency work are obvious examples because the “proof of work” is easy to showcase, notably in using peripheral content to generate initial interest.
Scale can hurt social networking, especially professional networking. The era of mass influence and advertising on open social networks is far from dead. But we’re seeing a nascent paradigm shift, which you can partially explain with “reverse network effects”.
The idea of Reverse network effects was coined by Wired as early as 2014. It’s a simple paradox: increased usage may be beneficial to the health the company running an open social network, but may reduce user utility - Best described in this article.
Today, it’s quite obvious to everybody that scale hurts the quality of your LinkedIn feed.
Private, paid communities have taken a counterapproach. They are gathering individualities around extremely niche topics, such as the intersection of first principle thinking and business concepts, tools and tech-stack sharing (Airparty, formerly known as Stackast), beauty and self-help (Hidden Club), etc. They help anyone in honing their obsessions and finding a culty community that will understand and support them.
For creators launching these initiatives, it is a lot of advantages:
Well-ran private communities drive awesome retention. No inspirational contentcan be as good as the degree interaction and the sense belonging that communities bring. It also drives the perceived value of any service outcome and process through the roof. Builders are beginning to use retention tactics such as gamification, event planning, aggressive group identity building to hedge against churn. While community leaders tend to share subscription and product sales revenue easily to generate interest, churn isn’t discussed by most creators
Paid communities allow creators to get to launch and recurring revenue fast and start a virtuous flywheel. Recurring revenue creates peace of mind and frees up time to ship better products and content. Better products and content further consolidate the perceived value and drive retention and give members reasons to advertise the value they perceive in the community. And on it goes.
Paid communities dramatically shorten feedback loops and customer discovery. While it is true that any product with an engaged community generates great quality feedback, membership communities generate even shorter feedback loops due to their naturally higher engagement (everyone is inside the same Slack workspace)
High paywalls and a sense of exclusivity drive retention. It forces people to interact in the community, so that the perceived value of their investment matches the (sometimes hefty) price point they’re buying memberships at
Softer, but cheaper mid-funnel conversion. Community interactions can also drive service sales and convert skeptical customers that would not pay for a productized service right away. It gives them time to be constantly reminded of the value you can deliver, and slowly slip towards converting.
The rise of this portion of the Passion Economy has sparked a wave of new tools, built to support this bustling ecosystem of communities. Simple membership tools and comprehensive platforms enable monetization and paywall guarding, and simplify monetization for creators.
Among my favorites:
Mighty Networks. It is not perfect (yet), but I love how this product encapsulates all types of community content while also favoring rich interactions between members. It’s a turnkey, yet fully customizable site that you can bend to your own design and graphic charts to ensure minimum identity and signal loss for members
Gumroad. It is the Shopify for all digital and knowledge-based products, and enables creators to charge multiple ways (subscription, one-time payment, complex add-on structures, pre-order schemes, etc.) and provides readable and actionable analytics that help community entrepreneurs to refine their strategies and keep their swords sharp. On a completely different note, Gumroad is a particularly transparent company that holds “Open Board Meetings” on YouTube, shares pretty detailed category (e.g. category volume breakdowns) and unit (e.g. price point averages) metrics.
Productize and Scale & ProcessKit . Productize and scale is unique, in that it’s at the perfect intersection between a digital product (with its project management SaaS Processkit) and a productized service and community (detailed, no-bullshit how-tos to productize and scale a service business and a community). Also, founder Brian Casel can definitely tell a good story and has walked the talk multiple times (sold multiple productized businesses in the past).
European creators:
I wanted to talk and give a nice shoutout to the very first Europe-based creators experimenting these models as full time or side projects. This has been particularly fun and exciting to watch given the amount of creativity they pour into building products and communities.
Alexandre Durand-Chabert – Airparty. Alexandre has spent 10+ years working in the French Tech scene, building communities at several incubators. Last year, he started a podcast where tech leaders describe their personal stack of tools called Stackast. As he grew interested in the paid community model, he pivoted Stackast to Airparty, which will launch sometime in late May. Airparty aims to be a paid community to share tips and tools about… Well, building paid communities! I really hope that this initiative succeeds and thrives in the long run, for that it will be a signal that this kind of social networking is here to stay
Yoann Lopez - Snowball. By day, Yoann is the CMO of tech freelancing marketplace Comet. But at night, he turns into a beast that churns multiple side projects. His journey started with a “Behind the Scenes” newsletter about Comet’s company building best practices. He then started to share to his network various personal finance and saving tools and tips, until he started Snowball, an investing and personal finance newsletter. What’s really interesting is that he racked his brains to find an innovative model to align readers. He design a complex tiered system to try and give readers “stock” in Snowball – Only conceptually, in reality readers just put their trust in him to distribute 20% of his subscription revenue and investing proceeds in “dividends”. Also included in the subscription and membership also a quarterly case study and guide about how to start a side project.
Jeddi Mees – L’incerto. A growth hacking and product specialist by trade, Jeddi helped The Family fellows thrive and started multiple ventures of his own. After folding his personal finance company Flouz in light of the pandemic situation, he quickly turned around to build an audience for l’Incerto. The publication and community is built around the idea that uncertain times such as the crisis we’re going through at the moment are an occasion to learn to financially weather uncertainty. In his paying community which includes his publication, Jeddi shares tips on how to diversify income and invest it. The community is a balanced mix of more seasoned investors and newbies.
Ophélie Duvillard - Hidden Club. Ophélie is a model and social media expert and founded an influencer marketplace called Way2Up in 2017. She then created a lifestyle and entrepreneurship-oriented podcast called Game Changer earlier in 2019, which laid the foundations for Hidden Club, her private community. What I like about Hidden Club is that it aims to reinvent inspirational lifestyle content by lodging it into an exclusive community aimed at empowering its members. Many lifestyle influencers tailor their content to appeal to a massive audience because of ad revenue, and I found this counterapproach to be innovative, in light of the social media fatigue we all experience.
US creators:
Jack Butcher - Visualize Value. An experienced graphic and branding professional, Jack was running an agency business and got tired of the repetitiveness. Visualize Value started off as social media posts translating philosophy and business complex in simple visual representations. Jack was inspired by Naval Ravikant’s deep tweet storms and began to publish visual translations. As he realized that his taste and sense for minimalist designs could help individuals and businesses visually learn about value and discover their own, he productized Visualize Value and started to gather a paid community going around him. Jack also offers one-on-one consulting services to select clients on top of the content available to the community. What makes Visualize Value unique is that it found a sweet spot between written and visual first principle thinking.
Charlie Ward - Weekend Club. Weekend Club started out as an IRL accountability meetup for independent hackers working on separate projects. The idea is to tackle the effects of loneliness on people shipping products and services alone. Then COVID19 lockdowns came and the community had to adapt and go online, which will in my opinion be a game-changer for this idea due to the scale that it offers. Community perks include accountability buddies renewed daily, morning and evening standup meetings to share and reflect on goals and things the community shipped. Never have people been keener to engage in side projects or simply start a solo business. I’m constantly tempted as well, but find it sometimes difficult to force myself to accountability without promising to share and submit my work for others to review. For technically heavier products and projects, membership-enabled help is a considerable opportunity to look at. Virtually infinite in terms of interest niches and verticals. I’m still waiting for someone to start a fellowship focused on online writing in France (Yes Valentin, I’m looking at you 😉)
Ressource List:
📰 LinkedIn, Twitter and Reverse Network Effects, Inside Highered
📰 Reverse Network Effects: Why Today’s Social Networks Can Fail As They Grow Larger, Wired
📰 The Power of Productized Services, Neville Chamberlain
📰 Community is the New Moat, Astasia Myers
🐦Dru RIley’s excellent and concise Twitter thread on the topic