Product vs. Service: Differences and Characteristics

By Indeed Editorial Team

Published 20 June 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Learning about the differences between products and services can influence the way you market and advertise them to your target audience. While there are some similarities between the two categories, there are also several differences. Understanding the difference between a product vs. service may help you make better business decisions in areas such as production and marketing. In this article, we examine the definition of a product and a service, review the characteristics that may help you understand their differences and provide a few examples.

Product vs. service

To understand the differences between a product vs. service, it's important to be familiar with their definitions. Here are some examples of common products and services available in the market:

What is a product?

A product typically refers to a tangible item that a business sells to its customers. It's usually a physical item, which allows customers to interact with it using their five senses. A shirt is an example of a product that a business could sell. A customer who wants to purchase the shirt may visit the business's premises to try it on to see if it fits. If they're happy with the quality of the shirt, they may pay the pre-determined price to have it.

There are also intangible goods such as digital products or software that don't physically exist but still count as products. Because of their intangibility, some people may mistake them for services.

The following are examples of products that a business may sell:

  • clothes

  • foodstuffs

  • home appliances

  • toys and games

  • electronic devices

Related: 15 Top Business Skills and How to Develop Them for Your Career

What is a service?

A service typically refers to an intangible item that a business provides to a customer for a fee. A customer who pays usually enjoys the benefits of the service the business provides. For example, a service could be the provision of a nail and beauty treatment. When a customer purchases this service, they expect to have a great manicure and an effective facial. During this type of sales transaction, there's no exchange of physical items between the business and the customer.

The following are examples of services that a business may offer:

  • car repairs

  • nail and beauty treatments

  • medical consultations and treatments

  • financial advice

  • education and enrichment programmes

Related: What Does a Product Manager Do? Steps to Become One

Characteristics of products and services

There are several key characteristics that may help you differentiate a product from a service. Below are the key characteristics that differentiate products from services:

Tangibility

Tangibility is one of the key characteristics that distinguish a product from a service. Products are generally tangible whereas services typically aren't. Yet, there are some exceptions, such as in the case of digital products and software. Products and services often work closely together, especially from a sales and marketing perspective.

Perishability

Perishability is another characteristic that may help you determine whether something is a product or a service. Perishability refers to things that can spoil or cease to be useful after a certain time. Due to their nature, products generally tend to be perishable, which isn't the case for services. For example, food products often spoil after their expiration dates and are typically perishable. In contrast, a financial advisory service, for example, may remain functional or fit for use over time and is non-perishable.

It's important to note that there are some products that may have long shelf lives. For example, electronic devices such as mobile phones and computers may last for several years if they remain in their unopened packaging. Yet, they may still cease to work after a sufficiently long period of time and are thus perishable.

Availability

Unless a product has patent protection, it's likely that many versions of it exist. For example, consumers have plenty of choices when they want to buy a shirt or a pair of shoes. Physical products come in numerous different forms, whereas services usually only provide a limited range of options.

Ownership

Ownership is another defining characteristic that determines whether something is a product or a service. An individual can usually own a product but not a service. When a customer buys a product, the business transfers its ownership to the customer in exchange for payment. In contrast, when a customer buys a service, they only benefit from the service the company is offering. The customer doesn't become its owner as it's often intangible and difficult to quantify.

Related: Product Owner vs Product Manager: What's the Difference?

Marketing products vs. services

When marketing and advertising products or services to members of your target audience, your approach may differ depending on what you sell. Marketing a service often requires a strong relationship between the client and the business. In contrast, when marketing a product, the only requirement is for it to appeal to the consumer's need at a particular moment in time. Below are some of the differences between marketing a product and marketing a service:

  • Tangibility: When marketing products, you may use design elements that indicate tangibility. In contrast, service-based marketing requires the creation of tangible elements that can connect the consumer to the brand or company offering the service.

  • Quality: The quality of a product may be measurable at the time of purchase, and it may be easier to demonstrate its quality to the customers through a marketing campaign. The quality of a service is not as easy to prove, so the effective methods for demonstrating it may include client reviews and testimonials.

  • Returns: Returning a product is easier than returning a service because once a business has provided a service, it's difficult to retract it. Some service providers offer a satisfaction guarantee, but if that isn't an option and the consumer isn't happy with the result, they may not have any recourse.

  • Urgency: Services may have a higher sense of urgency than products. For example, if a company offers a carpet cleaning service to customers and some of the time slots on a given day are empty, a client cannot reserve one of those empty time slots at a later date.

Related: What Does a Product Marketing Manager Do? (And Their Salary)

Production decisions

Understanding the relationship between products and services can also help to guide your production decisions. For example, if you're aware that there's a complementary relationship between a product and a service, you may choose to offer both options to customers. Below are two examples of products and services that you may choose to offer together:

Cars and a car maintenance service

Cars and a car maintenance service are a product and a service that complement each other and may sell well together. For example, when a customer purchases a new car, they usually require a car maintenance service for the upkeep of their vehicle. Thus, a car dealership or workshop can offer the customer a servicing and maintenance package when they purchase a new vehicle from them. Combining products and services is a sales and production strategy that may allow a business to expand and increase its revenue and profitability.

Related: What Does a Product Developer Do? (Definitions and Examples)

Medication and medical consultation service

Another common category of products and services that are complementary are medication and medical consultations. Many general practitioner clinics provide medical consultations and also sell the medication the doctors prescribe. Providing these products and services together in the same location may allow a clinic to maximise its income by providing multiple sources of revenue. In addition, this may be convenient for the doctors' patients as the pharmacy visits are no longer necessary. This arrangement may also improve customer satisfaction and increase brand loyalty.

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