Is a Service a Product? (With Definitions and Explanations)

By Indeed Editorial Team

Published July 24, 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.

Products and services have a great deal in common, both functioning as a form of inventory a company can sell. Asking, "Is a service a product?" requires an understanding of each term's definition and how it applies in a time of increasing digitization. If you plan on a career in commerce, finance, or accounting, learning to differentiate products and services is an essential skill. In this article, we explain the meaning of products and services, discuss the differences between the two, and explore situations where services are products.

Is a service a product?

When asking, "Is a service a product?" it's important to understand the definition of each. Both services and products have a retail value that businesses sell for a profit. A service is an inventory item with explicit value, but it isn't always a product. Companies sell products as services often, using a Product-as-a-Service (PaaS) model. In this situation, the product is digital and offers an experiential service that isn't a tangible product. Conversely, the service itself remains under that title because it is the predicate to the product.

Read more: Goods vs. Services (Differences, Types, and Examples)

Product vs. service

There are some key differences between products and services, including:

Tangibility

Tangible goods refer to anything that you can see and physically interact with. These products stock store shelves and exist as a clear example of an inventory item for sale. The end-user product is in the physical plane, meaning it requires things such as transportation, installation, and manufacturing. Some examples of tangible products that are independent of services include blankets, computers, food items, and furniture.

Intangible goods still confer value and trade in the free market. The difference is that some inventory items have no physical presence. Some examples of services include physiotherapy, counselling and therapy, oil changes, and online subscription services. In this case, the service retains its title. If you purchase a healing ointment from the physiotherapist, that's a product separate from the service. Intangibility is a useful metric when differentiating products and services.

Read more: What Are Intangible Assets? (With Definitions and Examples)

Supply chain

Products typically exist within a physical supply chain, meaning there are intermediaries between the producer and the end user. Consider a food product such as flour, where the farmer passes the grain to the producer, then to the packager, the shipper, and finally the store where a baker purchases the ingredient. Several components included services, such as the transportation. Despite this, the flour the baker purchase remains a product. If an inventory item interacts with a supply chain, it's likely a product.

Services are not always participatory in a supply chain. There are no tactile goods for the exchange, rather the service itself is the value in consideration. Many things exist online, such as internet subscriptions. They have incredible value, though they lack physical presence for the end user. A service is a non-material activity that confers a change for a purchaser or seller.

Read more: A Complete Guide to Managed Services (With Service Types)

Digital compatibility

Products are inherently less likely to have digital compatibility. The root of products is in production, meaning to generate. A clear lack of a digital approach, other than shipping products, is indicative of a product model rather than a service-focused approach. For example, a product takes up physical space rather than virtual space.

Services rely heavily on virtual property. Most of the value in a service is its unique value, such as a content provider with high-quality shows. A significant number of online sales relate to services online, including music streaming and digital counselling. In this case, the streaming is the service, and the song is the product. With digital counselling, the platform is the service, as is the counselling.

Read more: What Is Virtualization and How Does it Work? (With Types)

How service is a product

Despite the differences between products and services, there are many situations where a service is a product in and of itself. Retailers refer to this approach as Service as a Product (SaaP). Here, the product is usually the platform where customers interact with the service to access a product, whether digital or physical. When the two concepts become intrinsically related, in that one cannot exist without the other, the service effectively becomes a product. There are several common categories where a service is a product. Among these are:

Intellectual property licensing

If a company has a copyright to an idea or non-fungible asset, then any consumer looking to rent or replicate that image or set of text uses a service to make the purchase. The end result is digital possession whether through lease or purchase, of that intellectual property is a product. NFTs have value where the market assigns it, and because the transaction relies on a service and the token is the product, the service affects the value of that item, becoming a product itself.

Read more: What Are the Types of Patents and Why Are They Important?

Online marketplaces

As the digital marketplace grew in prevalence, so did many online retailers. This includes drop-shipping companies that store items for third-party stores and fulfill orders. It also applies to websites that host independent marketplaces on a central server. The service enables the producer to reach an audience. Consider a company that makes scarves. From the perspective of the purchaser, the scarf is the product. Contrastingly, the perspective of the seller is that it purchases the software access as a product.

Read more: Marketing Tips for Beginners (A Comprehensive List)

Freelancer websites

There are several online services that exchange only virtual assets, functioning exclusively as a service, operating as a virtual marketplace for buyers and sellers to connect. The sellers offer services, such as virtual design. Purchasers use the service to suggest projects, similar to job postings. In this situation, the product for a buyer or employer is access to the service. For the seller, the skilled service they retail is their product, such as digital art. The platform is the product they use to market it. In this situation, the service becomes a product through their interrelation.

Read more: Freelance Ideas to Help You Start Your Career (With Tips)

Scheduling services

There are many digital platforms that maintain calendars for individuals and companies. For example, consider a company that automates the scheduling process, reducing administrative expenses. The business that purchases the scheduling software is buying the digital product. There's no physical exchange, though there is a clear value from the service. In this sense, it's a product that the company sells.

Read more: SaaS Marketing (Definition, Advantages, and Key Elements)

Third-party delivery

With increasing access to digital services and busy schedules, many companies created services to connect retailers and consumers with transportation and delivery. When someone calls for a taxi, it's not the vehicle that's a product, it's the trip. In this sense, the transportation service is the product that the passenger purchases. This applies to companies that provide food delivery and any outsourced delivery option. Delivery is a service, but when a company uses it as an inventory item for purchase, it becomes a product.

Financial software

There are various forms of accounting software that consumers can access either digitally or in stores. For example, if a company decides to visit the local office supply store and purchase the box for tax filing technology, it's a product bought at the counter. Inside that box is a code that directs the purchaser to a software download using an online website. Had the purchaser opted to go to the website, it would require digital payment and result in a code that leads to the same download. The tax software provides a service, but it's also a product.

Read more: What Is an Independent Software Vendor (ISV)? (With List)

Gaming currency

Within different online gaming communities, there are monetary exchanges for currency that only holds value within the game. This is similar to obtaining chips when entering a casino or an arcade. Those chips are the product and the games are the services. There is a clear difference between the product and service in physical form of a gaming enterprise, it maintains validity online.

The product is the digital purchase, such as an avatar upgrade or coins to help win games. These confer value, but since a service is an active interaction that causes a change, those digital avatar changes are also products. Services and products can be mutually inclusive or mutually exclusive, and in an online gaming situation, the inventory is both product and service.

Read more: How to Become a Professional Gamer in 10 Simple Steps

Entertainment services

Within the current century, individuals and businesses purchased DVDs or CDs with content for entertainment. These products provided entertainment that is now largely replaced by streaming services for music, television, and movies. While the consumer doesn't hold a disc physically, they can purchase a streaming service. This replaces the DVD product, making the service a product itself. As technology advances, new options for services as products enable improvements in various business aspects, including cost savings and increases in efficiency.

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