Service Typologies, or the business models used in the service industry, are core sources of reference for Service Designers. Picking a suitable Service Typology is essential for a project’s success, and picking the wrong typology can ground a project before it gets the chance to try.
But how do we do that? This article will discuss the different typologies and help you decide which would be the most suitable for your product.
Why do we need to know service typologies as Service Designers?
Well, consider a mountain bike. It’s reliable, robust, and perfectly designed to navigate rough and stony terrain. However, if you switch environments to a city center, the mountain bike will be quickly outpaced by a road bike, which is simply better suited to the territory. Service typologies are the same. Each approach will thrive when applied well but underperform in the wrong conditions. To provide the best service experience to customers, we must consider each specific business’s needs, environment and foundations.
What are the business models used in the service industry?
1. The Ticketing Model
The Ticketing model is a classic, simple business model that relies on service users buying a one-off pass to enjoy the resource. By purchasing a ticket, the customer gains access to a specific service or experience. Examples of businesses that use this model include concerts, trains, airlines, and all-you-can-eat restaurants.
For service designers considering using a ticketing service model, it’s important to consider whether the service will be perceived as a unique, stand-alone experience. Users search out low-effort methods of acquiring service and will find daily, repetitive purchases of a single ticket frustrating. For example, a commuter will prefer buying a season ticket to buying a return ticket five times a week.
2. The Subscription Model
A popular, relatively recent service typology is the subscription model. This type is commonly used by companies selling services banking on repeated use or visits and enjoying the luxury of having reliable, repeated payments. Subscription business models are used by online gaming services, gyms, and video streaming companies.
If considering a subscription model, it’s important to ensure subscription-based services have frequent updates. If users think the system is constantly improving, they will feel satisfied with their investment and maintain their subscriptions. On the other hand, if nothing changes, users will grow bored and most likely cancel. If you are offering a fixed experience, the ticketing model may be more appropriate.
3. Ads Model
When the service makes its main revenue through advertisements to users, the service type will be considered an Ads model. The goal is to increase user traffic through a system, mine data, and offer users the most suitable advertisements. The most profitable group here are not the people using the free service but the companies paying for advertising space.
Experienced service designers in search engines, radio shows, and newspapers all recognize this and consider both the advertiser and the service user when designing the ideal product. In 2021, Google made approximately 209.49 billion U.S. dollars (over 117 billion pounds) in ad revenue. However, be wary of oversubscribing advertisements. If the user feels like the inconvenience of the adverts outweighs the benefits of the service, they will look to a competitor.
4. Platform Model
Services like app stores, auction sites, and department stores all make revenue through commissions from the sellers they host. Successful platform businesses choose one high-value benefit they offer over competitors, whether it be price, quality, or customer service.
Building a profitable platform model can be challenging, as it requires service designers to consider equality, quality, and quantity when selecting sellers. If any one factor is unbalanced, the business will suffer.
5. The Franchise Model
Who can hear the word franchise without thinking of fast food? This association proves the power a well-developed franchise model can have, but it’s not just burgers. Coffee shops, pizza parlors, and pubs are all examples of services that make successful franchises.
When designing a franchise, service designers must consider growth and scale. This includes defining the company’s ‘blueprints,’ which will let new branches replicate themselves while staying true to the brand voice.
6. The Hybrid Model
Some business models are challenging to fit into a single one of the models above. Look at companies that offer both free and paid versions of a service, like Spotify. Would this company fit into the Ads Model or the Subscription Model? It actually fits into both.
These hybrid business models are found in all Big Tech companies and are very successful if done well. They are complex and require a lot of market experience and research to make, but if successful, they are staggeringly lucrative.
How to design a winning business model
So, you’re prepared; you’ve chosen the best business model for the service; what else do you need to consider? Aside from company-specific needs, there are a number of other factors whose influence service designers must consider:
- Interaction with other businesses: includes competitors, suppliers, and buyers. It’s unlikely that your product will be the only one on the market.
- Adapt and learn: Business is dynamic, and there will be opportunities to improve, so don’t think you are designing a static product.
- Know your strengths: Recognise your business model’s advantages, and work on strengthening them. This will be what attracts and retains users.
To Conclude
No one business model is better than another; they are only more suitable. Recognizing the strengths and weaknesses in all Service Typologies will help identify areas for improvement and drive service designers towards the ultimate goal – making users happy.
Want more guidance on service typologies? Don’t be afraid to reach out; our service designers are always happy to help.
