Differences between products and services

What are some of the main differences between products and services? And when are they relevant?

Tangibility vs. Intangibility

Products are tangible. You can buy pork as a tangible product. You buy it, you ship it and you sell it. The same way you buy stamps, cigarettes and cars.

Financial services companies, however, make it possible to trade pork belly futures on the Chicago Mercantile Exchange (CME). A future is (not the simplest example of) a service with which you can hedge your risk. In the latter case, most people who trade on CME will never see or smell pork bellies.

The ownership between products and services is different. A stock could be called a financial product that you own. You may place an order for stock that could result in a transaction later. Your bank offers a deposit fee to save you a lot of work. You cannot own a service.

Where the product is much more standardized, the service is made to measure. Firms differ in the offering of products and services, but variations between similar products from different producers are less prominent than variations between services.

You can count products the same way you can count your money (or have your bank provide you with this information). A service is not countable, but it is “leveled”; better than the best service is not possible. There is a limit to what a service can offer.

A product is produced by a manufacturing process. A service is offered by the utility element of companies; You subscribe to a service in the same way that you subscribe to your gas and electricity provider.

And this brings us to the essence of these differences; Switching from one (product focus) to another (service offering) is very complex, due to the last-mentioned differences. Not only the process is different, but also the style change you need to support this change… Good luck.

© 2006 Hans Bool

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