To Standardize or Customize

Through the process of writing his latest book, Blair's thinking has evolved on whether or not firms should resist the urge to productize their services as they work to creatively meet the unique needs of each client.

Transcript

David C. Baker: All right, Blair, it's been, uff, months since we've actually recorded an episode because we've both been doing things. You were traveling. Now we're recording again. I had to go look for my mic, dust it off, and all this stuff, but I like the way 2025 is starting because this is a mea culpa where you've just made this long list of places you've been wrong. We're just going to work through them,-

Blair: The list of one.

David: -hopefully we'll get through them in this year.

[laughter]

Blair Enns: We'll devote the year 2025 to fixing Blair's mistakes.

David: Yes. The topic, I guess we'll just call this, "To standardize or customize." In the past, you've been a proponent of customizing wherever possible. You've rethought that just a little bit. Tell us more about this.

Blair: Yes.

David: Ignore all of my unnecessary context setting right there.

Blair: [laughs] I always do, but thank you for the invitation to do that. I'm going to frame this through my thought processes or what I saw as true while I was writing different books. While I was writing the recent book The Four Conversations: A New Model for Expertise, I knew I had to revisit this topic that I addressed in my previous book from 2018, which was Pricing Creativity: A Guide to Profit Beyond the Billable Hour. In Pricing Creativity, I was pretty adamant that as a creative firm, your services or your delivery model should be customized.

What I mean by that is, when you look at your client situations, you should see every client as unique, therefore every proposal should be unique. You didn't see yourself as doing the same things to different clients. You would harness your creative superpower, and again, creativity, as I see it, and this comes from Mihaly Csikszentmihalyi, creativity is the ability to see, the ability to bring a novel perspective to a problem. I believe that the superpower of a creative person and a creative firm is the ability to think about the problem differently. I still believe this, I'm just less rigid.

I thought, as a creative firm, you should resist the urge to productize your services for that reason that you shouldn't impair that superpower, which is your ability to think differently about the problem. You and I both know Jack Skeels, and I've referenced his thinking on this before on multiple episodes. I've said I was really struck by the first time or one of the first times I heard him speak.

He was talking about the differences between agencies and consulting firms, and he pointed out that consulting firms have this convergent thinking model where they converge on the single solution for whatever the common problem is, and then they apply that single solution, obviously with some variation, across all of their clients in a sector. They converge on the solution, whereas creative firms are really businesses of divergent thinking, of you get different thoughts, different thinking styles, different ways of viewing and thinking about the problem, and you recognize the uniqueness in every situation.

I've always been a fan of the customization of your services where you see every client is a blank slate. You bring that superpower to bear. My experience when I saw my clients first start to productize was that they made similar mistakes on the pricing dimension. They would start to price the product, not the client, which led them away from value-based pricing. When I wrote Pricing Creativity, and I was all in on value-based pricing, and I still feel very high on it, but I would say short of all in on it. It was my point of view that all creative firms should be fully customized in the way they deliver their solutions and the way they price those solutions.

David: Yes, and that was sort of the larger context, right? Because the reason it came up so logically when you're thinking about pricing is because if you productize something, there's the potential that, one, maybe you're not listening carefully in those conversations, which is also something you talk about, if you just automatically jump to the same solution every time. You also are potentially leaving money on the table because you're not delivering what this particular client needs. I've noticed something when I talk with my clients or I'm at an event or something, and this topic of productization comes up, the objections to productizing services often come from kind of two areas, sometimes both or just one or the other.

One is they don't understand how that would even be possible because they're thinking of it from the perspective of an undifferentiated firm. In those cases, every one of the situations is different because the clients that they're faced with are different every time, and so it's hard for them to picture that. Then the other is that they're sort of in the mindset of not so much leading the client.

A client of mine wrote a book about account management called Tell Your Clients Where to Go! I thought that was just such a great topic. They're more in the order-taking mode. In that mode, you can't, you know, you're not imposing a productized service because you're simply doing whatever the client wants. This is one of those topics that just keeps coming up over the last few decades. I always enjoy thinking about it. Maybe to make this a little bit easier, can you walk us through this two-by-two model of this? We'll put this in the show notes as well.

Blair: Sure. I think, of all the sections I wrote in the book, the largest piece that was left on the cutting room floor that didn't make the book was this big, long diatribe on customization versus standardization. In the end, I think I looked at it, I thought, "Oh, this whole section has to go." It was pages and pages because it was me thinking through the problem. We've talked about this before. I think through my fingers. I have to write to fully understand and arrive at some sort of cohesive point of view on it. In the end, I wrote and wrote and wrote and wrote around in circles. Then what made it to the book is a simple two by two with only a couple of pages of explanation.

The two by two is customization or standardization on one axis, and delivery model and pricing model on the other axis. Making the point that you simply have to make the decision, "Are you going to customize or standardize your delivery model?" We'll get into this, and "Are you going to customize or standardize your pricing?" Basically, these are the four options. There are four quadrants in a two by two, and those are really only your four options. I look at the four options and I could make a case for being in any of those quadrants.

I never studied economics in depth, but I feel like I turned into more of an economist as I get older where what I mean by that is I just see less right and wrong and more trade-offs. It's just trade-offs. What are their trade-offs of customizing your delivery model, how you deliver your services versus standardizing your delivery model? It's really as simple as that. There are trade-offs, and everybody would kind of prioritize their trade-offs and is going to do what they feel is best for them and their business. What's best for them and their business is often very much kind of a personal story of what makes the most sense for them as a person.

David: Yes.

Blair: Do you want me to walk through the model?

David: Yes, walk through the model for us.

Blair: Okay. I've got customized and standardized on the vertical axis, and delivery and pricing on the horizontal axis. If we start with delivery models, customized delivery model means that you sell an infinite number of bespoke solutions. Like I said earlier, my previous firmly held point of view that all creative firms should think about it this way is that every client is a unique slate of possibility, therefore every solution, every proposal should be unique. I won't talk about pricing here, but everything is a blank slate.

When you first fall in love with value-based pricing and the value conversation, you realize the value conversation, client comes to you self-diagnosed, self-prescribed, and they're just looking for sometimes a highly specified solution. Then you have a value conversation with them and you essentially transcend if not the problem as they've defined it, certainly the solution as they've defined it. You open up this field of infinite possibilities, that you might do anything for them. Now, obviously you're limited by your capabilities, but you can go higher or acquire to increase your capabilities.

Theoretically, there are infinite solutions that you might bring to bear on a client's problem when you customize your delivery. You think of it as you want to buy a suit, you go to a tailor, the tailor is going to make a suit for you, and it's all about you, it's a perfect fit to you, and you're going to pay a premium for that, by the way.

David: And it's going to take a while. Sometimes that's exactly what you want, but other times, you don't at all. It's like, "No, let's not take this long. I don't want to spend that kind of money." Anyway, yes.

Blair: "The wedding is tomorrow." Yes. Right.

[laughter]

Blair: Yes. That's customized delivery. The other end of that spectrum is the standardized delivery where you have a small number, sometimes as small as one. We have this one program, a unified program, a small number of solutions that you have packaged up into products or productized solutions. That's what I mean by standardizing your delivery model. There are only a certain small number of things that your clients can buy from you. These things are packaged up into products, they have names, et cetera. That's basically two ends of the spectrum, infinite customization, or finite, not just finite, but small number of neatly packaged products or productized services.

Now, in the pricing dimension, when we move over, so let's move back up to customized. A customized delivery is infinite bespoke solutions. Customized pricing is essentially value-based pricing. It's where you are pricing the client. I'm a big fan of pricing the client. Now, I can also see examples where it doesn't make sense to price the client. We largely don't price the client because we're a training company, although we could do that, and there are ways to do that in almost a hybrid way that we can talk about.

You might recall, David, that when I started to go down the pricing rabbit hole, I talked to you about your business, and I said, "Man, you should just start doing some form of value-based pricing," and you don't really do that. You kind of dabbled with it a little bit where you could use the size of the firm as a surrogate for the value being created, and you could have different thresholds where clients have a certain size. You have a set number of standard products. It might be three or four. Is that right? You've got two main ones?

David: Two main ones and three other small ones, yes. I actually experimented in building after that conversation. I built a program for that, and actually, three clients bought it. I was paid a little bit less at the beginning and then I got some nice bonus based on actual results at the firm a year later. The problem was that the firm that wasn't doing much better, was doing worse actually, was sucking all of my time, and then the two firms that were doing much better didn't have me come back a year later because they didn't want to pay me that extra bonus.

Blair: [laughs] It's not the answer to every profit question, is it?

David: That's when I quit listening to you years ago.

Blair: [laughs]

David: No, I actually think there's a lot of value in pricing the client. I don't have the patience to do it, honestly. I think it takes somebody with more patience and more willingness to dive in. Anyway, I don't want to take us off track, but yes.

Blair: No, that's a great digression or going a little bit deeper into the topic with an example. That's customized pricing, value based, where you price the client. Standardized pricing is where you price the service. If you've got a standardized product, you have this product, that service, you put a price on that. I think that's what you do with the TBR or the new business audit, correct?

David: Right. Yes, it's a base price of $25,000 for 20 people. Then if the firm has more than that, then there's an upcharge of, I think it's $250 per person.

Blair: Yes. That's an example of a hybrid that I want to talk about. There is some value base built in, or maybe you're looking at it from a cost point of view and saying, "Well, there's more work for me to do, therefore I'm going to charge you more."

David: More surveys to read, more profiles, and those cost us money. Yes. Right. There's more at stake. It's more complication. There's more people to figure out who's in the right role and all that stuff.

Blair: Yes. I consider that a bit of a hybrid, and we'll come back to hybrids. It's standardized pricing where you're pricing the service or in an agency world where you're pricing the time. If you think of a typical agency, ad agency would be infinite bespoke solutions, we'll do whatever the client needs. That's customized delivery in this parlance, but standardized pricing, whatever you need, it's $200 an hour.

David: Right.

Blair: Now, if we stick with standardized pricing and we move the delivery from customized to standardized, like in your business, now we're pricing the product.

David: That's the opposite of pricing the client, right?

Blair: Yes.

David: Okay, so it's either pricing the product or pricing the client.

Blair: I forget where I got this. I think maybe it was from Greg Alexander, either his book The Boutique or some of the content that he puts out into the world. It's great content that he creates from Collective 54. I think this came from him, and maybe it was somebody else, but let's give Greg some credit. The most lucrative model for a professional firm is this combination of standardized delivery, so productizing your services, and customized pricing where you price the client, it's value-based pricing. That seems to be, and I can't cite the source, so take it with a bit of grain of salt, but intuitively, this feels right to me. It seems to be the most lucrative business model.

David: Productized service offerings sold in a customized pricing environment?

Blair: Productize your services, but don't put prices on those services. Instead have a range of prices, don't necessarily publish those ranges. You could publish those ranges. You could have kind of a bit of a rate card, but instead reserve the right to change the price or charge a price that's based on the value of these services to the client rather than the market value of those services, in air quote, or the value of your inputs of time and materials.

David: Or even a consideration that takes the particular client into account. Like maybe they need more hand-holding. Maybe they want you to show up at certain meetings to explain this to other bosses or whatever. I've read Greg's book as well. I don't remember if he said that in there or not, but that does resonate with me, tying those two things together.

I'll tell you, if you don't mind, some other reasons why I like productization in some cases, you mentioned a big one that we'll talk about in a few minutes about how it's easier to sell. You can describe it so much easier. For me, it's also easier to train your team about this is what happens and then this happens, and then here are the things you can read. It also helps control scope creep a little bit because somebody signs up for something, right?

Blair: Yes.

David: The big objection to productization, this is just through my filter, this might not be the big one, but just through my filters, you're leaving money on the table, but I feel like one thing you can do is just charge more for the same thing. Anyway, let's keep going here. Can we back up just a minute? What is it specifically that got you thinking a little bit differently? Was it when you were writing the Four Conversations book about this?

Blair: Well, I've been writing that book for years, so it coincided with writing the book. I'm not sure if it was the impetus for it or not, but I became aware in the last few years that one of the things that I was guilty of, and we may have talked about this in an episode on rethinking some of our mistakes, or maybe we never released that one. I don't remember. I realized that for too many years I operated under the assumption that there was one agency business model. Then I woke up one day and I realized, "Oh, it's really, there are just multiple models." The landscape has really fragmented.

I'll give you an example. When Alex Hormozi wrote his first book, $100M Offers, I read that book and thought, "Wow, this is a really good book, but it doesn't really apply to agencies." I still took a lot from the book because the business that he owned, his primary business at the time, was he had a marketing business that helped--, he had a very specific niche audience, owner-operated single-location gyms. He helped those owner-operators to achieve top-line and bottom-line growth. He converged on a solution, like the consulting company world, created one standardized product in the form of a program, and he sold that at massive scale, and he value-priced it.

I don't think he value-priced it initially. Maybe he didn't value-price it. I might be misremembering that, but my first pass at it was, "Oh, this is a really good book. It's not really something for me to recommend to my agency clients, unless they're really interested in the subject of pricing because his isn't an agency." Then sometime later I realized, "What am I doing? Of course, this is an agency--" Like you and I did an episode on the idea of should we even use the word agency anymore?

David: Yes.

Blair: I think we both came down on the no. There's so much baggage. It's been a long time since any of these businesses were agents of anybody, let alone the daily newspapers. That's the origin of the term. If we drop agency and think marketing firm, this productized into one standard program applied to a niche at scale, that is a very lucrative business model.

He made tens of millions of dollars and probably still continues to do so from that model. I realized, "Well, that's got to go be within the pantheon, within my collective set of agency models." I have to quit always coming down on the side of customized services, because there are these really lucrative businesses out there that are standardized, and standardized down to just one program for a very niche audience.

David: Yes, there has to be room for this. That's an example of a productized service that's being sold under a value pricing rubric. It's true, right? You hold this model, you and I both have perspectives on lots of things, and then something pops up, and it's like, "Oh, wait, I need to adjust this. I need to figure out why at first I didn't warm to this idea." Can you talk just for a second, maybe just give me your initial reaction to this thought, but when our audience, our normal audience, like creatives, people, creatives doing lots of different things.

Blair: Freak audience, accountants, consultants, financial planners.

David: When they hear the idea of productization, they have a visceral reaction against it because their whole life is about seeing things differently. There is this innate reaction about productization that seems like it's not creative. I think it's false, but people do have that reaction when they think about this. Like no, the idea that we're going to package this up. No, we see things differently every time.

Blair: Yes. My recency bias is I'm thinking to the most recent call I had right before we recorded. I had a sales conversation with a highly creative individual, owner of a successful creative firm, and he just fits the standard mold of the really creative person who was a planner at an agency, launched his own agency. As soon as they show up on Zoom and the conversation begins, you realize the pattern, "Oh, these people are what I love about this business, is just so highly creative," but it's like they're all over the place. They're big thinkers. They're highly curious. They're fascinating. They're all over the place.

My job is really to rein them in a little bit and to harness some of that frenetic energy and channel it to business outcomes. We didn't talk about productization in the call, but I would imagine that a person like that resists the idea of productization because they're really interested in doing the thing they haven't done before. The idea of selling and delivering the same product, it's intellectual torture. Now, that's not the reality, but that's the idea at the time. It's like they just can't. To them, it feels like death.

David: Yes. What I love about somebody who can get past that barrier is they don't spend as much mental energy reinventing the wheel every time. Now they have a mind that is free to observe so many more things as they go deeper and deeper and deeper underneath that productization. It's just a beautiful-- they start to see about research possibilities and so on. Your new position is that you're more flexible.

There are times when you prefer customized pricing, customized service offerings, but there's room for productized. Can you walk us through the arguments for these just sort of like in bullet point fashion so that people can hear them and say, "Ah, yes, yes." Then, of course, they can go back to the notes to look at them, but the arguments for standardized delivery first or productization.

Blair: Yes, sure. There are so many arguments to standardize your delivery. Most of them are about efficiency and scale. The first is, you've already touched on it, it's just easier and therefore faster to sell products. It's easier and faster for the client to buy products or productized services. It's easier to communicate what they get, what they don't get. It's easier for them to grok that.

It's easier for everybody to make a decision on it. Now, the flip side of this and one of the reasons why I was not a fan of productization for so long is something else that you already alluded to is, and that I noticed, as soon as a salesperson has something to sell, they quit listening. In a sales model, that's about conversations, and conversations are not about presentations. They're about actually being attentive to the client. Having a framework for questions, being legitimately interested in the answers and the conversation that happens, that is impaired. You listen just long enough to figure out which product this person needs, and now you're selling a product.

David: The second call is unnecessary and frustrating. It's like, "We already know you need this. Just you're going to buy it or not."

Blair: Yes, yes, yes. It's also easier to bring consistency to scoping, right? You're not reinventing the scoping wheel. Most agencies, once they get to a certain size, whether they acknowledge this or not, there's this force within the agency, usually starts with the finance person. That's really about the pursuit of efficiency. We've talked about this, and it bumps up against creativity and innovation, but most creative firms can be a whole lot more efficient than they are, and productization allows that, it just takes you less.

If you do the same thing, if you're taking the service, putting it in a box and delivering the same service multiple times, after the 4th, 5th, 15th, 50th time you do it, you do it way quicker. It becomes a lot more profitable.

David: Yes.

Blair: Not necessarily as profitable as customized, but it becomes profitable. Then you can add the second thing, which is scale. You can do it quicker. Now the price isn't higher to the client, but the margin is there because you can do it quicker, and then you can do more of them. Scale comes from repetition, the ability to replicate something. It's easier to replicate a standardized product than it is, "Oh, well, let's just figure it--, go out there and create a bespoke solution." Just by their nature, they're not going to be replicated, therefore you're not benefiting from efficiencies that way.

David: You said something during your recital of these points that probably ought to be on a bumper sticker. It was something like creative firms could be more efficient. It's like, "No shit."

[laughter]

David: The arguments for standardized delivery, productization, those are those. Now, next, the arguments for customized delivery on the other side of this, and you're advocating that you ought to be open to both and there probably ought to be a mix of these things in your firm.

Blair: No, I don't necessarily say there should be a mix of them. I'm going to assume that almost everybody listening is in the customized delivery model quadrant as opposed to productized, but even those who are at productized started at customized. That's not going to be true, but that's my assumption. I think you start there and you start to see the appeal of productization. It would be nice if these engagements had end dates. It would be less messy if there was a nice neat box around what it is that we're going to do for the client. It'd be nice to know where the finish line is. It would be nice to know where out of scope is, right?

These are the reasons you start to fall in love with the idea of productization, but customization, there's less pricing pressure because what you're doing is unique. If you truly are customized and you're not just going through the motions of customization, you're really thinking uniquely about your client's situation, about how you can create value, and you're constructing unique bespoke proposals for solutions, it's difficult for the client to go shop that around, find something to compare it against.

David: You know what? Isn't an RFP sort of the client's attempt to productize your customized services?

Blair: Oh, that's a great insight. I've never thought of it that way. When you put it that way, it's so logical. It'd be like, all right, all you cat herders out there, all you crazy, freaky creative people, I'm going to define for you what it is that we need, and then you're going to come in with solutions that match my very narrow definition, and we're going to forget all this childish running around, "Ooh, we can do this. Imagine we did this." This is the most sympathy I have ever had for a client in their RFP process. It makes sense from that point of view. Duh.

David: Yes, we're going to knock down your childish glee about making money from us, and all the things you want to experiment on, and no, this is what we need. I'd never thought of it that way either.

Blair: My next book, I was wrong about RFPs. You should reply to RFPs. I think I've had too much time off.

David: Yes. Arguments for customized delivery, less pricing pressure, because, and you're saying that these solutions are different, so you can't just go here and say, "Hey, what would you charge if you were going to solve this problem," right?

Blair: Right.

David: What else? What other ones on this list?

Blair: I was making the point that productized services are easier to sell, but I'm pretty confident that customized solutions are easier to sell against a productized service.

David: Yes, if the client wants that, right?

Blair: Well,-- and the reason for this is, and I've talked about this book multiple times, The End of Average, this idea that a productized service or a product, they're built to a mental construct. They're built to an average of a segment. In this book, The End of Average, the author, whose name escapes me, makes the point multiple times, multiple ways, that in almost any cohort, the number of individuals who are exactly like the average is zero.

David: Right.

Blair: If you just take that on board for a minute and recognize that your standardized delivery, your productized services are going to be good for a lot of clients and perfect for none. That's one of the reasons why it's cheaper than customized. Think of suits again. How much more are you going to pay for a fully bespoke tailored suit as opposed to a suit off the rack? You're going to pay multiples of the price because it's perfect for you. Now, if that's important to you, if you value that.

David: Right.

Blair: Therefore, customized services tend to be higher priced, higher margin, more valuable.

David: This is under the context of it's easier to sell against a productized service. I mentioned that's true if the client wants it. If the prospective client has already had a conversation with one of your competitors, and they feel like they're just getting thrown a productized service and they don't feel heard, whatever, then you come in with a customized, more value-pricing approach to that sales conversation, you will blow that other firm out of the water because in this case the client wanted something different.

Blair: One caveat, this is true only at the higher end of the market, right? You think of it.

David: Ah, yes. Yes, I'm thinking, I just pictured somebody who's a time suck at the lower end, doesn't want to pay for.

Blair: Yes. "I'm not paying $5,000 for a suit."

David: Yes.

Blair: "I can get it for $500" or whatever people pay for suits these days.

David: I haven't bought one in a long time.

Blair: At the high end of the market, it's easier to sell customized services, and clients with money who are willing to spend that money would rather have customized services.

David: Okay. The arguments for standardized pricing, there's some overlap here.

Blair: Yes. Also easier to sell and buy. From a salesperson's point of view, just like what's the price? It's part of the Four Conversations. One of the conversations is the value conversation where you endeavor to determine how much value your services might help to create and therefore what the price should be. It's the last step in the four-step framework of the value conversation. We did an episode on it years ago now. That last step of setting pricing guidance, it's really stressful for some people.

It's like, "Well, would I just pick these numbers out of the air?" Yes, you get the inputs of the value, economic value, non-economic forms of value. Then you start saying, "Would you pay this much?" "No." "How about this much?" "How about this much?" Some people would rather just not have that conversation. I've sold both. It's far easier to say the price of a private workshop is $45,000. Then people try to negotiate. You can negotiate or you can laugh at their lame attempts at negotiating, but when it's a bespoke solution, you're opening yourself up to negotiating.

David: Yes, and you have to be willing to do it. The client has to want that as well. One of the objections I hear when I'm selling a productized service is like, "Well, how customized is this to me?"

Blair: Yes.

David: My typical answer to that, and I really do mean this. This is not just some flippant thing. I really do mean this, is that I've seen most-- everything. Every once in a while, I'll see something I haven't seen before, but what's different in every situation is the way you have uniquely screwed things up. I've seen all the ways to screw things up, but I haven't seen this particular combination, so we're going to have to think really hard together about that. I'm bringing the same tools to this engagement.

I'm not going to use all the tools, and I'm not going to use them in the same order, but we've got what we need to fix this. It's going to be customized, as we think through it, but this is just easier. Like I've done this enough, this is what it costs, this is how long it takes. It'll vary, but not that much.

Blair: Yes, and if the listener is identifying with this situation, you can create a, I'll call it a product, that is called customization. If somebody says, "Well, how customized is this to me?" The answer might be, "Well, it's not very customized." Obviously, you're in the target market of the businesses that we do business with and that we're best aligned to help, so there's a lot of patterns.

We're making assumptions based on the patterns. There's a small amount of input information that we take that forms the engagement moving forward. Other than that, it's not very customized. "If you want it to be more customized than that, we can add this feature, and it costs X. Here's what customization looks like." We go in and do more analysis, change these things.

David: You're productizing.

Blair: You're productizing customization, yes.

David: I never thought of it that way. That's great. You're saying that it's not strict, there's room for both. Do you have any example of a hybrid model from our listeners, like a firm you know of that's kind of customized?

Blair: We, interestingly enough, have ended up doing a lot of work with financial planning firms. Financial planning firms tend to productize their services. They do once we're done with them, if they're not already, but it's another example, at the high end of the market, really high net-worth individuals, they don't want to buy a productized service. They want something that's bespoke to them. That's an example of a market where you really should have a customized offering. You should reserve the right to put forward a customized bespoke solution at a customized bespoke price at the high end of the market, but for most of the market, it should be standardized delivery and probably standardized pricing.

David: Yes. As you say that, this is kind of how I would wrap up my thoughts. The problem we get into in this industry is that people are customizing things but only getting low-productized prices for them.

Blair: Yes.

David: They have to do their best. They have to do work that their peers are going to love, that their employees will love, and forget about making money. They're doing it for the lower end of the market. It's okay to do that for the higher end of the market, but you can't take the worst of each side and combine them in that two-by-two little chart that we put together.

?Blair: It's a great way to think about it.

David: Yes. Thank you, Blair.

Blair: Thanks, David.