Goods and services are the lifeblood of an economy. Goods are tangible assets or items that can be seen, touched, and used while services are intangible actions or activities which provide a benefit for the consumer. While goods often require a physical presence to exist, services occur simultaneously with their availability. Some good examples of goods are food items, furniture, clothing, books, electronics, etc. While different service providers can be legal services, educational services, medical services, consultancy services, social services, etc.
Goods are basically objects or products which have to be manufactured, stored, transported, marketed, and sold. Goods are tangible items or commodities that satisfy human needs. Lays Chips, BMW, and Adidas are some companies manufacturing durable goods. Services on the other hand are the output of individuals and they can be a collective or individualistic action or performance by an individual. For example, a barber or a chartered accountant is giving personal services. Airlines on the other hand have airplanes which is a product but travelling by airplane is a service (airlines are one of the most competitive service sectors today).
The primary difference between goods and services is the physical identity or presence of goods and the absence of it in services. The purchase of goods usually involves the transfer of ownership by purchasing a durable item. Services are mainly availed through a service provider who provides expertise for market demand. The purchase of these intangible assets (services) is often limited to only the description, as there is no physical asset transferred.
Table of Contents
Difference between goods & services
1) Ownership is not transferred
When buying a service, the service ownership is not transferred to the end customer. If you buy a car then the car is yours. But if you buy a ticket for an airline, then the airline is definitely not yours.
How do you measure service? In a restaurant, the dish can be measured, but the effort gone into making the same dish by two different chefs cannot be measured from the customer’s end. The same goes for large service corporates like Accenture and Infosys. The time and effort gone for giving service to the customer is intangible. Both ownership and intangibility are old-school differences between goods and services.
3) Involvement of customer
When comparing the difference between goods and services we have to look at the involvement of customers as well. In services involvement of customers is much more than in products. For example – ATMs are services wherein the customer has to use the machine. The same goes for vending machines as well as for self-service restaurants. Today ice cream chains like Hokey pokey and food chains like Subway have more than 50% involvement of customers where the customer gets to decide the ingredients they want in their ice cream / Subway sandwich.
In the case of products, mass manufacturing is common. And mass manufacturing means uniformity. However, services involve a lot of manual labor due to which the quality may vary each time. Uniformity in services is a factor that each service owner tries for. For example – The major challenge of food chains like Subway, Pizza Hut, and dominos is to give the same quality over and over again, whereas in local restaurants the quality of food may vary from time to time from the same restaurant.
5) Evaluation of services is tougher
As quality varies from time to time and the involvement of customers is maximum, evaluation of different services becomes tougher. For example – HDFC has more ATMs than SBI. Thus we can evaluate that HDFC service is better because they have more reach to the end customer. But how do we evaluate how a barber cuts your hair?
6) Inventories are absent
Production and consumption of services happen at the same time. This does not mean that the raw material is not present to provide the service. For example in a restaurant, a dish is made only after you order it. The raw material and the chef might be present. But the production does not begin unless and until there is a customer to consume the service.
7) Time is very important in services
Because inventories are absent in services, and because production and consumption are at the same time, time is a very important difference between goods and services. The keyword here is “delay”. There should be no delay in providing the service. Thus the cab should arrive on time, the food should be prepared on time and the trains should run on time. Because time is important.
Thus the difference between goods and services is based on many different factors. These factors have become more and more acute as the services sector rises in demand. Let’s now understand these key differences through a comparison chart –
Comparison Chart For Goods and Services Details
|Meaning||Goods are tangible items that can be physically touched. They are objects or products that you can buy, use and even resell.||Services, on the other hand, are intangible activities performed by people or a business to fulfill someone else’s needs.|
|Transfer of Ownership||Goods have a clear transfer of ownership, from the seller to the buyer. Once you buy something, it’s legally yours.||With services, there is no transfer of ownership as such but rather a transfer of responsibility or liability.|
|Production and Consumption||Goods are produced first and then consumed, so there will be a lag between production and consumption of goods.||Services are produced and consumed at the same time. The production of a service is simultaneous to its consumption by the customer; for example, a restaurant meal or a haircut.|
|Price||The price of goods is usually determined by factors like labor cost, raw materials, rent, etc.||Price of service is determined by factors like the skill and expertise required to deliver it.|
|Storage||Goods can be stored for future use or sale.||Services cannot be stored|
|Return||Goods can be returned after purchase if the buyer is not satisfied with it.||Services cannot be returned once consumed.|
|Evaluation||Goods can be evaluated based on their physical characteristics.||Services can be evaluated based on customer satisfaction.|
In A Conclusion!
Goods and services are different from each other in many aspects. Goods have a physical existence whereas services don’t, and consumer goods are products that are purchased and used by buyers directly from a retail store.
Services, on the other hand, involve availing services from a service provider and involves a production process. In other words, goods are products that consumers purchase whereas services are those that the consumer receives.
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