What's the Difference Between a Service and Goods?

By Indeed Editorial Team

Published June 17, 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.

High-quality goods and customer-focused services are essential factors contributing to an economy's growth. Companies use them to provide utility and satisfy their customer's basic needs and wants. Understanding the difference between goods and services can help you design marketing strategies to help a company increase its sales. In this article, we answer, "What are service and goods?", explain their types, and highlight their common differences.

What are the differences between a service and goods?

Service and goods typically depend on whether a product is tangible or intangible. Here's a definition for each of these economic concepts:

Goods

Goods are material and physical items you can purchase. You can touch, feel, and see these products before purchasing. They also have physical characteristics, such as colour, weight, shape, and size. Businesses may manufacture, store, and transport goods before selling them to the final consumer. There's often a time gap in the production, distribution, and consumption of goods.

When a buyer purchases a good, ownership passes from the seller to the buyer. If a customer doesn't like a good or finds a defect, they can return or exchange it for a better one. The market demand and supply of goods largely determine their price. Examples of goods include books, cars, food, jewellery, and electronic devices. Here are the two classifications of goods based on their durability:

  • Durable goods: These are goods that don't wear out frequently and can last for many years. They include household appliances, cars, office furnishings, and electronics.

  • Non-durable goods: They're goods that require consumers to use them within a short period. They include food, dish soap, laundry detergent, clothing, and light bulbs.

Related: What Is a Normal Good? (Definition and List of Examples)

Services

Services are the non-physical and intangible activities in the economy that you can't touch, see, or smell. They're often the output of other individuals. For example, a lawyer or an accountant may give individual service. Services are perishable, so customers can only use them for a short time. This economic concept lacks physical identity because you cannot distinguish them from the service provider.

The point of sale is the basis for the consumption of services. This means there's no time gap between production and consumption of services. Customers cannot own services but only use them. For example, if you buy a ticket to watch a movie at the theatre, it doesn't mean you bought the theatre, but you paid the price for availing services. Examples of services include movie tickets, banking, transport, and communication.

Differences between goods and services

Here are the common differences between goods and services:

Nature

Goods are tangible and homogenous. This means that customers can readily purchase them for a fixed price. Their tangible existence typically gives them a physical identity. Companies can also replicate goods identically. Services are intangible and heterogeneous. Different service providers who offer similar services may charge dissimilar amounts. This may result from the method in which they provide their services. The demand and supply in an economy don't fix the price of services.

Ownership

When buying a good, transfer of ownership can vary at hand. A seller can retain ownership of goods by refusing to sell to a customer. If a customer pays the total price for a good, they become the owner. For example, if you buy a mobile phone from a retail store, you become the owner, and the seller cannot reclaim it. Conversely, you cannot transfer ownership by purchasing a service. This means ownership usually remains with the individual who has the skill to provide the service.

Inventory

Businesses that provide goods have an inventory of products to meet their customer's future needs. They typically keep these goods in a warehouse or store until a customer makes a purchase. The customer can also store them at their home or place of work. The production and consumption of services occur simultaneously. This doesn't mean that the raw material isn't available to provide the service.

For example, you can only get a meal in a restaurant after placing an order. The chef and the raw material may be present, but the production doesn't start until there's a customer to consume the service.

Related: What Is Production Possibilities Frontier Curve?

Quality

Evaluation of quality is more straightforward with goods. Customers can quickly assess, measure, and compare similar products before purchasing. Doing this can enable them to estimate its value. This means that customers may be willing to buy high-quality goods at an expensive price. Conversely, services involve manual labour, which often varies the quality. Customers cannot determine the quality of service they pay for until they consume it. For example, the quality of accommodation at a hotel may vary on different occasions.

Time management

Time is essential in delivering services because its production and consumption occur simultaneously. Service is time-bound. This means it's necessary for a service provider to deliver quickly. For example, a cab may arrive immediately, and restaurants can prepare meals for customers on time. A company can delay providing goods due to the time it may require them to produce and deliver the product to the customer.

Customer participation

Customers don't participate in the production of goods. They can only make purchasing decisions about the goods they want to own. In services, customers can participate in the production process. For example, a vending machine provides a service to customers who purchase food or drinks at a restaurant. The vending machine offers services to the customer, but it's necessary that the customer interacts with the device to get what they need. The customer ultimately decides the food or drink they want and interacts with the machine to receive it.

Related: Understanding Aggregate Supply (Definition and Formulas)

Types of goods

There are various types of goods, and they vary with how customers can enjoy them. They include:

Public goods

Public goods refer to products that are beneficial to every individual. Customers can get them from nature. These goods don't have a price or a cost of production. There's a finite supply of them, and businesses cannot specify their value. Examples of public goods include:

  • Freshwater

  • Nature to visit

  • Fresh air

  • Wildlife to view

  • Public beaches

Private goods

These goods are excludable, which means that customers can only purchase them before use. They have a price and a production cost. They're also rival goods, meaning that only one person can consume them during one particular moment. This often reduces their availability to other individuals in the market. For example, if an individual buys a mobile phone, they've reduced the number of mobile phones available to other consumers, resulting in scarcity. Private goods include:

  • Shirts

  • Cars

  • Makeup

  • Television

  • Coffee

Club goods

You can refer to club goods as scarce or artificially scarce goods. They're non-rivalrous, which means several individuals can consume them at once. Club goods are also excludable, meaning that consumers cannot use them without paying. If you're paying for access to use a particular product, you're paying for a club good. Club goods may seem like services, but you're paying for the product and not an action in this situation, which makes them a good. Club goods include:

  • Country clubs

  • Private parks

  • Private beaches

  • Insurance coverage

  • Gym memberships

Related: What Is PPV in Accounting? (How to Record It in Your Books)

Common goods

Common goods are non-excludable and rivalrous. This means that everyone can have access to the goods, but an individual's use of the good reduces its availability to others. You can also call them common property resources. They include:

  • Fish from fishing

  • Timber from trees

  • Coal

  • Wildlife to hunt

Types of services

Here are several types of services based on the sector that provides them:

Social service

Social services are activities a provider may perform to achieve and promote social well-being. These services benefit every individual, and customers often pay for them through taxes. Non-profit organizations may also fund these services. Social services include:

  • Education

  • Animal welfare

  • Health

  • Police

  • Fire service

  • Family welfare

Business service

These are the services that companies use to conduct their activities smoothly. These activities assist a business in operating efficiently, yet they don't deliver a tangible commodity. Companies often rely on these services for production, transport, marketing, safety, and convenience purposes. They include:

  • Information technology

  • Insurance

  • Marketing

  • Banking

  • Manufacturing

  • Transportation

  • Legal representation

Personal service

Personal services are activities a company or individual performs for a commission or fee. Customers often pay for these services and experience them differently. Individuals that offer personal service often sell their skill or expertise in performing a job. They include:

  • Housekeeping

  • Dry cleaning

  • Grocery shopping

  • Private car service

  • Mobile beautician

  • Event planning


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