Goods, Services and the Differences Between Them (With Examples)

By Indeed Editorial Team

Updated December 8, 2021 | Published March 1, 2021

Updated December 8, 2021

Published March 1, 2021

Economic activity depends on the production and consumption of food and services. Many companies provide both goods and services to customers, although they may focus on one over the other or determine that one part of the business is more lucrative than the next. The ultimate goal of most businesses is to provide a good or service that satisfies the customer and gives them what they're looking for and need. In this article, we define goods and services and provide a list of the differences between the two.

What are goods?

Goods are items, articles, products or commodities that companies sell, and in turn, consumers purchase these goods to fill a want or need. They are tangible items with physical attributes that you can touch, feel and see—like color, size, shape and weight.

Some examples of goods include:

  • Computer

  • Book

  • Notepad

  • Laptop bag

  • Water bottle

  • Car

  • Jacket

  • Cell phone

  • Desk

  • Lamp

Goods are things that individuals can use in some way, whether that's single-use, used repeatedly or even shared with someone else. When a consumer purchases goods and pays the assigned price, they secure ownership of the product; and then possession of the good moves from the seller to the buyer.

The process of delivering goods from the seller to the buyer may involve manufacturing, warehouse storage, marketing and logistics, and it's because of this process that there is general uniformity between goods. The exception to this may be in a much smaller operation where a company produces small batches of a product or customizes items according to unique specifications.

Related: What Is E-Commerce Business? With Definitions and Examples

What are services?

Services are intangible activities, amenities, benefits or assistance that one person or business performs or provides to another. The receiver of the service usually pays for the service because the provider of the service possesses a skill or the required experience to fill a need based on customer demand.

Some examples of services include:

  • Computer repair

  • Meal delivery

  • Air conditioning installation

  • Tutoring

  • Waste collection

  • Transportation

  • Events management

  • Internet access

  • Massage

  • Dry cleaning

In some businesses and industries, service output can come from an individual, as in a person who cuts your hair, or from a group of people, like if a team of doctors work together to perform surgery on a patient. While the consumer of the service can utilize it, they won't own the service they receive. Instead, the service provider owns the service.

In some instances, a consumer purchases an item to receive a service. For example, an individual who purchases a movie ticket is able to enter the movie theater and enjoy the movie they've selected. However, the movie is a service and the ticket purchase is the means by which the consumer can take advantage of the movie viewing. Purchasing a movie ticket simply gives you the ability to see the movie, but you won't own part of the movie theater because the theater is providing a service.

Related: 10 Careers in Commerce

Differences between services and goods

Here are some differences between services and goods to further your understanding:

Tangibility

Goods are tangible objects that you can touch and then take home after purchase, whereas the time and effort that goes into providing services are not. While what a service person provides may result in a tangible object, the service itself isn't tangible. Consider the work of a meal delivery service. The meals you receive are tangible goods, but you paid for the service of the meal delivery. The service is intangible, and the goods you get as part of the service are the company's products.

Read more: Tangible vs. Intangible Assets: Definitions and Differences

Presence of inventory

Companies that provide goods to consumers likely have an inventory of those products available to fulfill consumer orders. There are some exceptions to this like if a small company specializes in custom-made soaps. In this case, the business owner may only have an inventory of the supplies they need to create the custom soap, but might not have pre-made soaps ready to sell yet.

Service-based businesses usually don't have an inventory for a consumer to purchase. There may be some that mostly provide services, but attempt to sell additional products to customers to support the service they received. For example, an auto repair shop provides a service to keep customers' cars operating as they should, but they may also have a small stand inside where customers can buy car cleaning equipment or air fresheners.

Related: Calculating and Using an Inventory Turnover Rate

Ownership

When you buy a good, you take ownership of the item from the seller. For example, if you buy a computer from a retail store, you now own the computer outright. When you purchase a service, you don't retain ownership of the service. Instead, the provider of the service continues to own that service after they've completed the work. Ownership of a service never transfers from the service provider to the buyer.

Consider the service of purchasing a ticket to a marketing conference. The conference is providing a service by offering sessions and educational discussions about various topics in marketing, but your ticket purchase does not mean you own part of the conference or the location where it's held. You can only use your ticket to enter the conference hall and attend the event.

Returnability

Because goods are tangible items, you may be able to return or exchange them, depending on the policies of the business you've purchased from. However, you cannot return services you've purchased. Once the service provider provides the service, it's not something they can take back. In a situation where you are unhappy with a service or want to sign up for a more detailed service, a provider may correct a problem, issue a refund or schedule an amended service, but they cannot process a return on the time a provider spent performing the service.

Time management

You may experience a delay in receiving a good, but there shouldn't be a delay in receiving a service. Although service delays do occur, such as when you have to wait a long time for your food order at a restaurant, a delay after ordering a good is more common because of the delay between when a company produces the good and when the buyer purchases it.

For services, the service person provides the service at the same time as the buyer consumes it. Even though this is the case, the items a provider needs to fulfill the service request may still exist in inventory or a raw state, but the service provider won't use them until there's a customer to consume the service. For example, a training manager may have all their worksheets in a storage room, but they can't provide the service of giving training to employees unless there are individuals who have signed up for their training class.

Quality measurement

Measuring the quality of a good is usually easier and less complicated than doing the same with a service you've purchased or signed up for. Consider the case of electronics stores that sell a specific flash drive that businesses may need to maximize their storage capacity. If one chain of stores has more locations, you may view them as being better than their competitor because they're more available.

Service-based businesses can be more difficult to evaluate because it's often subjective. For instance, a barber's work may differ from one client to the next, each haircut may be different and the client's expectations can vary from one person to the other too. While businesses may use surveys and other methods to measure customer satisfaction, a subjective measurement for the quality of a service can't be determined as easily as the physical quality or appearance of a product purchased by a consumer.

Read more: What Is Quality Assurance? (And How To Improve Your Process)

Customer interaction

There is usually more customer interaction in securing services than in obtaining goods. While consumers make purchasing decisions about the goods they want to own, the customers of services must interact more with many services and make decisions there too.

For example, an automated teller machine (ATM) provides a service to bank customers who need to deposit or withdraw money or check their account balances. The ATM is providing a service to customers, but the customer must interact with the machine to get what they need. The customer ultimately makes the decision of what they need and how to interact with the machine to get it.

Related: 9 Tips for Improving Your Customer Service Skills

Variability

There is more variability with services over goods. In many cases, except for smaller businesses and small batch operations, the goods that a company produces are identical. Consider a business the mass produces notepads. It's likely that this business has a certain operation in place, including quality control, to make sure that it manufactures the same product line of notepads every time to meet customer expectations and the specifications they have for their products. This leads to a product's uniformity.

In contrast, services are more diversified. For example, a restaurant that employs 10 people as part of its waitstaff can expect that each person differs from the other in how they cater to guests, take orders, deliver food and answer menu questions. One employee may struggle one day, while another may have a great day that they share with their guest. Not only can each service provider differ, but how the consumer perceives the quality of the service they receive can differ too.

Although a service provider may aim for and train employees to provide the same service each time, there are a lot of variables involved in carrying out a service.

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