There’s a bit of confusion in many circles about the differences between products, goods and services. Trust me there is a difference and that difference is more important than most people would think. Which one you’re handling will determine a lot about the approach to your customers and your general terms of business. So let’s have a little discussion on the differences between goods, services and products.
Let’s start with the one that is easy to understand. Goods are physical objects and they are very easy to distinguish because they are easy to spot. If I make a piece of furniture that is a good. This is probably the way most of us understand business first, through goods businesses. To add to that goods tend to be homogenous or generic, meaning a loaf of bread for example is a loaf of bread. I could sell it to you or your neighbour, it makes little difference. So goods are transferrable. Of course, within goods, we can then break down between luxury, budget and Giffen goods.
Services on the other hand are a little more complicated but we can still make sense of them. A service is work or act performed for a customer by a service provider. So when you ask someone to cut your grass that is a service. Simple enough. Services are also distinguishable by not being transferrable. So to use the earlier example your grass is not your neighbour’s grass and I may charge differently for the two services based on the size of the property, length of grass, possibility of encountering snakes or any other factor. So services are heterogeneous and cannot be separated from the person the service is being provided to.
So far it’s been simple but now it’s time to get to the confusing part. What are products? Many people hold products and goods as being synonymous using the words interchangeably. A product is an item that can be offered for sale whether it is a good or service. So it is correct to call all goods products while also inaccurate to exclude services from products. In simpler terms products are what we offer to the market. So product can be looked at as a collective term for goods and services.
Blurring the lines
There are cases throughout history where the lines have been crossed or at least blurred. Where products that we would otherwise think of as goods have been packaged to include or completely as services. Newspaper delivery is a good example of this. I recall my father paying for a monthly subscription to the daily newspaper. Things we can currently relate to are software as a service (SaaS) or music as a service. Software companies like Microsoft are moving away from selling legacy licences for software and instead offering their software on a subscription basis. When it comes to music you only need to look at Spotify, Apple Music, Tidal, Deezer and many others. Remember when we use to buy (legally or otherwise) music? Streaming now provides access to a library of music for a subscription.
Why it matters
Many resellers think they are in the goods business but they are in fact in the services businesses. If you have no responsibility for the quality of the goods then you are likely in the service business. Your real product is the provision of goods, call back to the Music as a service examples to see how what we ordinarily thought of as goods businesses may be service business. One of the best examples of this is the supermarket. Sure they sell you goods but their job is the service of bringing the goods to you. Those businesses invest heavily in ambience and moving volumes to make their profit. Customers may not ordinarily separate the goods from the supermarket but when there is an incident and the manufacturer is liable you will very quickly see the separation.