Product based companies and service based companies

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Public Date :- 09 Dec 2023

Product based companies and service based companies

Product-based businesses and service-based businesses are two distinct types of business models, each with its own characteristics and strategies.

Both types of businesses need a long term vision and investment. Basic rule of any business is patience. Work hard to achieve goal and have patience, you will win the race without any doubt.

There are number of problems that we face while starting up a new business. Weather you're thinking to start right now or struggling in the first few years of operations, you need to strategize your goals and objectives. With very less survival rate in the industry it gets essential for a person to understand the nature and the market. Being new to the startup world it might be confusing to consider how and where to invest and implement the unique ideas.

First of all you need to keep in mind the industry you want to enter. If you're looking to enter a commercial world and provide goods and services in an expert manner than all you need to know is the idea behind it's functioning.

So there are two ways through which the work is performed in this sector, they are:


Let's make this concept clear

  • Product based business

Product based business involves manufacturing and selling products in the market. Generally these businesses sells actual physical products. For example: clothes, Machines, boxes, tools etc. It requires a lot of hard work and dedication for starting up a product based business

  • Service based business

Service based business is a type of business that offers services in the market without selling tangible products. For example: Consulting, Training, insurance, taxes etc. Such kind off businesses does not involve direct selling of product in the market rather providing services for their better functioning.

To understand the concept comprehensively let's study the difference between the two

  1. Classification.

The best way to understand the concept of the service business vs Product business to classify them under two different categories. Under a service based business a customer directly purchases the services from the owner or the service provider. Such kind of business prioritizes the relationship between the client and the service provider, it's essential for the customer to experience the owner's services and help them to maintain a Goodwill in the market.

On the other hand, Product based business directly delivers physical-tangible goods in the market, the relationship between the owner and the buyer is been prioritized here. Traditionally both the businesses are selling Product, the distinction between the two is that Product business sells the physical-tangible Product whereas service business sells the intangible one.

2. Target Audience

Both the type of businesses need to Target Audience according to their requirements in the market. In general, when customers are looking for a solution, they try to distinguish the difference between the products business vs service business.

If a person is looking for a physical product then he should directly connect with Product based business, on the other hand if a person is looking for a service then he should connect to a service based business.

Let me illustrate with the help of an example: Company A selling machines to a big corporate client, in this case the target audience should be the company in need of the tangible Products, whereas company B is providing services to run the machine is an example of service business. The target market in this case should be the users in need of these services. Business should emphasize on selling goods and services to the target market only.

3. Scope of marketing

The marketing scope and strategy of product vs service businesses varies.

Usually under Product based business the scope of marketing and sales is much more than that in service based business. Marketing under Product based business can be global and seeks to attract customers extensively. The fact that it facilitates the transportation of tangible goods from one side of the world to another increases the sales. Consumers located anywhere in the global market can purchase the product, this can be via internet, newspapers, magazine or a spread of word.

Under service based business the focus is on customer experiences and client's satisfaction. However services can only be provided within a local target market. The fact that these services cannot be provided all across the globe initially may reduce the sales.

4. Relationship with clients

Both the type of businesses comes with their own set of pros and cons. One big difference between the products based business Vs service based business is their relationship with the clients.

Under Product based business the company has to establish and maintain brand reputation more than developing and improving their relationship with the customers. It focuses on increasing the market position of the tangible good so as to increase the sales. The task is to strengthen sales strategy globally since the market is far wide than service based business.

However on the other hand, service based business need to focus on establishment of personal relationship with the clients. See the market is not very big in this case, if a client is not happy with the services then he may switch over to some other company in the local market. To increase sales the company has to improve credibility and personal relationship with the clients. Service provider should deliver quality services to survive in the Market.

5. Business Risk

The term business Risk refers to factors that threatens a business's ability to meet its Target or achieve financial goals. Now these risk may come from variety of resources and sometimes may lower profits or lead it to fail.

Under Product based business requirements are drafted by the owner and not the customer, thought a customer may play a very important goal for setting up a type of good but the key decision lies in the hand of the owner. Perhaps with Products there is no guarantee that the company will sell enough units to justify initial investment.

On the other hand, under service based business the service provider have a customer commitment to pay before they even start working, thus the initial risk to establish credibility in the market may increase the risk.


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