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The two types of products are goods and services. We may use the two interchangeably. But, in business, marketers differentiate between the two.
- Goods represent tangible products such as clothing, laptops, smartphones, bicycles, cars, food, and beverages. They are physical objects, which we can see or touch. They may be end-use goods such as consumer goods, as I have already mentioned. Or, they are capital goods to support production processes such as machinery and equipment. Others are raw materials and intermediate goods for further processing into the final output.
- Services represent intangible products, such as consulting, finance, transportation, and insurance services. They represent activities related to doing something or providing solutions to other parties. We cannot see or touch them; we can only feel their benefits. They can be business services or consumer services.
What is the difference between the two types of products?
We can distinguish between goods and services on the following four aspects:
Intangibility. Goods have physical substance. We can see and touch them. For this reason, the visual element becomes an alluring factor for consumers.
- On the other hand, services have non-physical properties, so it is difficult to judge their benefits using any real evidence. We can only feel the benefits but cannot see or touch them.
- For example, when you board a plane, you may sit in a comfortable seat. However, it is not a service. It is the facility by which services are delivered to you. In this case, the service is getting you to your destination.
Inseparability. Services are produced when they are consumed. Both took place at the same time. For example, when we buy airline tickets, flight services are produced and consumed when we board the plane.
- On the other hand, we can consume goods sometime after they are produced. For example, for food products to reach consumers, they take days. They have to go through processes such as transportation, warehousing, and placing on retail shelves. Consumers then buy it and may not consume it right away, but at home.
Heterogeneity. Service is unique and different for each time it is delivered. For this reason, it is difficult for businesses to ensure consistency. The same person can have different experiences when using a service at different times. Therefore, due to such a unique customer experience, the company must provide the best for every service delivered.
- On the other hand, producing homogeneous goods is easy. Manufacturers can tune machines and equipment in the factory to get the desired standard output. Through quality management, they can also ensure consistency.
Perishability. We cannot store, transport, or transfer services. We also cannot use or resell it at a later date. Services we receive when interacting with providers, either directly or indirectly.
For example, we receive bank services when we visit a bank office or use an application on our smartphone. Likewise, retail services we receive when visiting stores.
Another example is barber services. You cannot hand over the service you receive to someone else.
- Instead, we can save goods for our later use. We can also send them elsewhere or hand them over to others for use.
