In the past week, two TPSA members asked the same question:
“Are more PS organizations assigning SKUs to their PS offerings?”
This question is related to the concept of packaging PS offerings, which is one of the most popular blog topics I have posted to date. SKUs are “stock keeping unit numbers.” Wikipedia provides this overview of SKUs:
A SKU is a unique identifier for each distinct product and service that can be ordered from a supplier. Usage of the SKU system is rooted in data management, enabling the merchant to systematically track their inventory, such as in warehouses and retail outlets.
SKUs are often assigned and serialized at the merchant level. Each SKU is attached to an item, variant, product line, bundle, service, fee, or attachment. For example, an item may be a can of soft drink with an item identifier number of 1234. If that item is held in stock in the warehouse and two retail stores, it is said that there is one item and three SKUs to be maintained. An item in two different bin locations in the same geographical location is not seen as two SKUs as they are managed as a single unit.
SKUs are not always associated with actual physical items, but are more appropriately billable entities. Extended warranties, delivery fees, and installation fees are not physical, but have SKUs because they are billable. All merchants using the SKU method will have their own approach to assigning the numbers based on regional or national corporate data storage and retrieval strategies. SKU tracking varies from other product tracking methods which are controlled by a wider body of regulations stemming from manufacturers or possibly third-party regulations.
At first blush, there are two clear reasons a PS organization may want to assign a SKU to specific service offerings:
1. Make it easier for sales representatives to attach service offerings to a product sale.
2. Make it easier to track and analyze information regarding the sales of specific service offerings.
However, there are potential challenges with assigning SKUs to a PS offering. First of all, the offering could be complex with variable deliverables and pricing that varies from customer to customer. This complexity may make SKU assignment irrelevant. Also, the cost to create and maintain individual SKUs for each service offering may outweigh any potential benefits. This leads us to our image for this entry. I would say there is a natural strike zone for the types of PS offerings that lend themselves to be being SKUed:
Now, we do know that applying a SKU to a PS offering is an existing practice in the industry. We don’t know, at this point in time, how prevalent the practice is. We also don’t know if the practice is driving real business benefits for PS organizations when it is used. To help provide some insight there, I will craft two polls and post them later this week.