Let’s say you love a good party (who doesn’t) and want to turn your passion into a business. But you’re unsure whether to offer party planning services, sell themed supplies, or a mix of both. This crucial decision will shape your approach. By understanding the differences between products and services, you can structure your business to your liking.
What are products?
Products are digital or tangible items businesses manufacture, store, and sell to fulfill customer needs or desires. They range from necessities like toothpaste and groceries to nonessential items like designer handbags and ebooks.
What are services?
Services are intangible offerings, often activities or processes. Unlike products, services are fleeting; you typically pay for a service more than once to continue enjoying it. For example, you have to pay for another haircut or another month of Netflix.
Service offerings include medical care, car washes, and spa treatments. A service’s value lies in the experience and outcome it provides the customer.
Product-focused vs. service-focused vs. hybrid businesses
You can classify companies based on their primary focus. Understanding the differences between these business types can help you develop effective sales and marketing strategies.
Product-focused business
Product-focused businesses sell digital and tangible goods. Examples of product-focused industries include consumer electronics, fashion and apparel, and household goods.
Product-focused businesses often invest in research and development, intellectual property protection, and supply chain optimization to maintain a competitive edge.
In 2015, Gloria Hang started Thousand, a bike helmet company. To create a helmet that combined safety and style, she focused intently on design principles that would make the product stand out. This meant countless iterations to get things right.
“In terms of those little features, my perspective is that you really need to advocate for them. That’s what differentiates your products,” Gloria says on an episode of the Shopify Masters podcast. “We’ll sample 10 versions of a similar color to settle on the final one we want. Long term, products stick around because people love them. It’s about that high-quality attention to detail. The customer, I believe, does notice.”
Examples of product-focused businesses include:
- Allbirds. This sustainable footwear company uses materials like merino wool and sugarcane to create comfortable and eco-friendly shoes.
- Gymshark. This fitness apparel brand designs and sells high-quality workout clothing for men and women.
- Anker. This consumer electronics company produces a wide range of charging accessories, power banks, and audio devices.
Service-focused business
A service-focused business provides intangible offerings and an experience. Service-focused industries include health care, education, finance, hospitality, transportation, and professional services like consulting, legal, and accounting.
The service sector relies on skilled professionals, effective communication, and continuous improvement to maintain a strong brand reputation and attract loyal customers.
Here are a few examples of businesses offering services:
- Ritz-Carlton. A luxury hotel chain with exceptional customer service and attention to detail.
- JPMorgan Chase. One of the largest banks in the United States, Chase offers personal banking, investment, and wealth management.
- Concierge shopping. Concierge services handle tasks for you. In this case, a skilled professional sources the clothing items you want to buy.
Hybrid business
A hybrid business mixes consumer goods and intangible services to create a complete solution for customers. These end-to-end offerings address complex customer needs, often by combining technology, innovation, and intellectual property.
Hybrid industries include software programs with training and support, telecommunications providers offering hardware and connectivity services, and the automotive industry providing both vehicles and maintenance or subscription-based services.
By seamlessly integrating goods with personalized services, a product-service model lets you create a more comprehensive and sticky customer experience, leading to increased customer loyalty and lifetime value.
A few examples of hybrid businesses are:
- Peloton. This fitness company sells high-tech stationary bikes and treadmills and also offers a subscription-based app for live and on-demand workout classes.
- Ring. This tech company sells home security systems and doorbells and has services like a virtual security guard and installation.
- Milk Bar. This bakery chain sells unique desserts and baked goods, and offers online cooking classes for customers to recreate their favorite treats at home.
Tips for selling both products and services
- Develop a cohesive brand strategy
- Market your brand accordingly
- Leverage cross-selling and upselling opportunities
- Invest in customer education and support
- Optimize pricing and packaging strategies
Here are strategies you can implement to sell both products and services:
Develop a cohesive brand strategy
A strong brand identity is crucial for businesses. For example, a company selling eco-friendly cleaning products might emphasize sustainability and environmental responsibility. Meanwhile, a wellness coaching company might focus on personal growth, health, and empowerment in its brand messaging strategy.
Define how you want to position your business to consistently create on-brand content, ads, and other forward-facing material.
Market your brand accordingly
Marketing helps you reach potential customers, but your approach differs depending on several factors, like location, scope, and nature of your target audience.
A local bakery, for instance, might rely on community events, local partnerships, and word-of-mouth marketing, while a global ecommerce store or virtual consulting service may focus on digital marketing strategies like search engine optimization (SEO), social media advertising, and influencer marketing collaborations to reach a wider audience.
Leverage cross-selling and upselling opportunities
Cross-selling and upselling can boost revenue and customer lifetime value. A product-based business might suggest complementary items that enhance the functionality or enjoyment of its main product. For example, a smartphone retailer can recommend protective cases, screen protectors, or wireless earbuds during the checkout process.
Service-based businesses can also upsell by offering premium or additional services that add value. A hair salon might suggest a deep conditioning treatment to a regular haircut service. Upselling services can also involve recommending more frequent service visits or longer-term packages, like a monthly massage subscription or an annual car maintenance plan.
Invest in customer education and support
Investing in customer education and support is essential for businesses selling products, services, or a combination of both.
Product-based businesses can provide comprehensive product information, user manuals, and how-to guides to help customers make informed purchasing decisions and effectively use their products.
Service-based businesses can also benefit from educating customers about the value of their offerings. A financial planning firm, for example, might provide free educational resources, sales literature, and marketing materials like blog posts, whitepapers, or podcasts explaining key financial concepts and strategies.
Optimize pricing and packaging strategies
Pricing and packaging strategies are crucial for businesses selling products and services.
Product-based businesses should conduct thorough market research to determine competitive pricing and identify opportunities for value-based pricing. For example, an organic skin care company might justify a higher price point by emphasizing the quality of ingredients, sustainable sourcing, and the effectiveness of its formulations compared to conventional alternatives.
Service-based businesses can benefit from offering tiered pricing options that cater to different needs and budgets. A boutique marketing agency might provide a basic package with essential services like social media management and email marketing, while also offering more comprehensive packages that include content creation, SEO, and paid advertising.
A range of pricing options can attract a wider customer base and let clients choose their preferred level of service.
Products and services FAQ
What is an example of a product and service?
A smartphone is an example of a product, while a haircut at a salon is an example of a service.
Can a business offer both products and services?
Yes, a business can offer both products and services, such as an electronics store that sells laptops and provides repair services.
Are products or services easier to sell?
The ease of selling products or services depends on various factors, including the target market, competition, and the nature of the offering.
