What Are Products and Services?
Basically, a product is a thing you can physically hold, utilize and own. Think phones, shoes, or books. On the other hand, a service is almost invisible, since it is something done for you. Services such as getting a haircut, washing your car or getting legal advice are examples of routine business activities.
Why Understanding the Difference Matters
Business students aren’t alone in learning the difference between a product and a service. It helps companies advertise what they offer, guides how we determine value and impacts our daily decisions to buy.
Defining a Product
Characteristics of a Product
- Tangibility: Products are physical. You can touch, see, and in many cases, even smell or hear them.
- Standardization: Most products are built in bulk and in very similar ways. For all practical purposes, your iPhone is no different from your friend’s until you give yours a special case.
- Storability: Products can be stored and used later. You don’t need to consume them instantly.
Examples of Products
- Smartphones
- Cars
- Bottled water
- Furniture
- Laptops
Defining a Service
Characteristics of a Service
- Intangibility: Services cannot be physically touched. You can’t “hold” a massage.
- Inseparability: The provider and the service are often linked. You can’t separate the doctor from the consultation.
- Variability: Services can differ each time based on who delivers them and how.
- Perishability: Services can’t be stored. A missed hotel night? That revenue is gone forever.
Examples of Services
- Haircuts
- Legal advice
- Gym memberships
- Taxi rides
- Online streaming subscriptions
- Key Differences Between Product and Service
Tangibility:
- Products: Tangible – These are physical goods you can interact with directly. They can be stored, transported, and even resold after purchase. Examples include a smartphone, a pair of shoes, or a loaf of bread.
- Services: Intangible – These are experiences or actions performed for the customer’s benefit. You cannot hold a service in your hand, and its value comes from the act of delivering it. Examples include a haircut, a tax consultation, or a house cleaning.
Ownership:
- Products: When you purchase a product, you gain ownership of it. You can use it, resell it, or dispose of it as you see fit. This ownership can be easily transferred to another person.
- Services: With services, you don’t acquire ownership; instead, you’re paying for the benefit or experience derived from the service being performed. You cannot resell a haircut or return a concert performance.
Production and Consumption:
- Products: Production of a product typically happens before consumption. A car is manufactured on an assembly line before being sold to a customer. The customer then uses the car at their convenience.
- Services: Production and consumption of a service often occur simultaneously. For instance, when you receive a massage, the service is being produced and delivered at the same time.
Consistency:
- Products: Mass-produced products tend to be more consistent in quality. A box of nails from the hardware store will have the same features and functionality as any other box of the same brand and size.
- Services: The quality of a service can be more variable. A haircut from one stylist may be vastly different from another, even if they’re following the same instructions. The quality of service can also be influenced by factors like the service provider’s mood or experience level.
Other Considerations:
- Perishability: Products are generally more durable and can be stored for long periods. Services, on the other hand, are often perishable. An unused airline seat or a hotel room for an unoccupied night cannot be recaptured or resold.
- Customization: Products can be offered with varying degrees of customization. You can choose the color and features of a car, for example. Services are often more tailor-made to the specific needs of the customer. A financial advisor will personalize their service based on your financial goals and risk tolerance.
Blurring the Lines:
The distinction between products and services can sometimes become blurred. For instance:
- Digital Products: Software as a Service (SaaS) is a product with a service element. Instead of buying the software outright, you pay a subscription fee to access it online.
- Services with Tangible Elements: A restaurant meal combines a service (food preparation and table service) with a tangible product (the food itself).
Hybrid Offerings: When Products Meet Services
Examples of Product-Service Combos
Consider purchasing a car (product) and making sure you get it serviced over time (service). Alternatively, some people prefer to buy both a technical product and get technical support included.
Importance in Modern Business
Now, companies are mixing the benefits of each to add value. As well as iPhones, Apple also sells AppleCare, support and iCloud, giving customers a mix of valuable products and help.
Marketing Products vs. Services
- Product Marketing Strategies: Focus is on features, price, and packaging. Visual appeal and branding are crucial.
- Service Marketing Strategies: It’s about trust, reviews, customer satisfaction, and experience. People don’t buy the service — they buy the promise.
Pricing Strategies
- Pricing a Product: Costs are based on materials, manufacturing, and demand. There’s a tangible cost.
- Pricing a Service: Pricing considers time, expertise, and market rate. The value is often subjective.
Customer Expectations
- How Expectations Differ: With products, customers expect functionality. With services, they expect experience and outcome.
- Managing Customer Satisfaction: For services, managing human interaction is key. A rude waiter can ruin a five-star meal. For products, quality and reliability matter most.
Business Models
- Product-Based Business Models: Examples: Retail, manufacturing, e-commerce. These businesses rely on inventory and logistics.
- Service-Based Business Models: Examples: Consulting, hospitality, education. These revolve around people and processes.
Technology’s Role in Bridging the Gap
- E-commerce and Digital Services: Netflix, Spotify, and even digital design templates blur the lines — are they products or services?
- Productization of Services: Think subscription boxes or online courses. Services are being packaged like products to reach broader audiences.
Legal Considerations
- Warranty and Guarantee Differences: Products often come with warranties. Services may offer satisfaction guarantees instead.
- Return and Refund Policies: Returning a product is common. You can’t return a haircut, but you can ask for a refund or redo.
Challenges in Delivery
- Product Distribution Challenges: Managing inventory, shipping, and quality control is key.
- Service Delivery Challenges: Staff training, customer interaction, and consistency are critical.
Case Studies
- A Product-Based Company Example: Samsung: Samsung manufactures and sells electronics globally. Their focus is on innovation, manufacturing scale, and retail partnerships.
- A Service-Based Company Example: Uber: Uber doesn’t sell a car. It offers a ride. The value lies in convenience, driver behavior, and time saved.
Conclusion
Products and services form the backbone of our economy — and our daily lives. Whether you’re buying a coffee mug or booking a massage, understanding the difference helps you make smarter choices and appreciate the value each brings. Businesses, too, benefit when they grasp how to market and deliver each effectively. At the end of the day, it’s not just about what you buy — it’s about the experience that comes with it.
FAQs
1. What is the main difference between a product and a service?
A product is something you can keep, but a service is something you use and enjoy.
2. Can a company sell both products and services?
Absolutely! Many companies offer both. For instance, Apple sells iPhones (products) and AppleCare (service).
3. How does customer service affect product-based businesses?
Customer service can enhance or ruin a customer’s experience, even if the product is excellent. It’s a crucial part of brand perception.
4. Why are services harder to standardize than products?
Since human interaction plays a role in services, the outcome can vary. The experiences people have change over time and so do the results.
5. Are digital goods considered products or services?
According to some, ebooks and software are types of digital goods we should view as products. Should there be continuous support or streaming available, these businesses can be considered service-based.