Peer Insight is a services innovation firm. Why services, you ask? Because we love the complexity of human touchpoints, the challenge of the design – and, frankly, the market shows us they’re more sustainable than products. Eventually, every product-centric firm will find its profit margins eroding. Some, like IBM, see the writing on the wall and others, like Kodak, don’t.
In 2005, Pfizer saw that sales for Nicorette, their nicotine replacement product, had been in decline and that consumers were not achieving successful outcomes with it. They were at a crossroads:
Kill the product or explore the possibility of turning it into a service.
Pfizer decided to stick with the brand and began to explore Nicorette as a service, nicknaming the project, “Pavlov”. The Pavlov project team chose the younger smoker, aged 25-35 years old as the target user for potential service offering. Research revealed that, on average, the typical smoker made more than five separate attempts to quit smoking over the course of a decade. Paradoxically, these same smokers said they did not have a chemical addiction; instead, their smoking habit reflected “a lifestyle choice.” The team also found that many younger smokers were having great success using support services, such as hypnosis, support groups, and especially one-on-one counseling, to help them quit.
Through further research, Pfizer identified five major components that might be needed to complete the smoking cessation service: counseling, an online sales channel, social support, data analytics and behavior change best practices. They determined which of the five components they had the internal capacity to provide, and engaged partners for the remainder, in order to design and execute an in-market experiment.
With the insights derived from the 18-month in-market experiment, Pfizer developed and launched ActiveStop, a smoking cessation service that was supported by phone-based counseling (through a third party) and the original Nicorette product. Consumer outcomes improved by over 200% and it quickly became profitable. This was Pfizer’s first service, and first direct-to-consumer offering.
There's nothing that a 400-word blog can’t make sound simple, right? But the Pavlov team had strong leadership, used all the principles of design thinking, and had an aptitude to design and run in-market experiments.
You can make the move too, but as Pfizer, IBM and others who have done it before know, it won’t be easy. If you’re curious about Peer Insight's point of view on navigating the move from products to services, click here.
Can you think of other examples of companies that succesfully transtioned from products to services? Let me know.
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