Goods, Services, and Products

There are few things quite as annoying as being interrupted in the course of conversation by a persnickety individual, particularly when they interrupt a sentence to point out a "fact" that is completely wrong.   In particular, I abandoned a conversation with a tedious individual who felt compelled to interject "or services" whenever anyone mentioned the word "products" - as exasperating as the experience was, it has caused me to reflect on the terms and reconsider some basic definitions.

The main problem with this individual, aside of making a nuisance of himself, was that his notion of "products or services" is entirely wrong.  "Goods or services" is the distinction between whether a product is a physical object or an action performed by a provider, and both goods and services are comprised within the concept of "products."  

It's a matter of vocabulary, really, and culture does seem to have shifted in the past few decades to be tolerant (and even supportive) of people who are use the wrong words rather than insisting that they learn to speak their own language properly ... but reflecting on this distinction a bit further, the entire notion of classifying a product as a good or a service seems to misdirect attention from the value of products.

Goods

A "good" is a physical artifact like a coat or a car or a can of beans.   The problem is that focusing on the physical object is a superficial consideration of the value that goods provide to their consumers.  With few exceptions, the purpose of buying a coat is not to possess a coat, but to be protected from the cold or to be fashionable - which is to say that ownership of a good is a means to satisfy survival and social needs.  Seen in that way, a good is merely a physical artifact whose importance derives from the benefit derived from using it.

While this seems obvious, it is very often forgotten by producers who obsess over the qualities and features of the goods they produce.  They compare their products to other products, ignoring the needs of consumers, and provide features and functions that increase the cost but do not offer benefits related to consumers needs.   In reality, the physical properties of the product are far less important then their ability to serve needs, which savvy consumers recognize instantly and unintelligent ones learn eventually.

There is some validity to the notion that customers desire seemingly qualities in the products they purchase that serve no functional purpose - some consumers do obsess over the qualities and features of the goods they own.  These people are nerds, plain and simple.  But even the desire for nerd superiority is generally not derived from the self-satisfaction of product ownership, but the social need to feel superior to anyone who does not own a good that has the same qualities and features, which is a defect of consumerism and likely of psychology.

Services

With services, the connection between the product and the benefit is more closely connected, such that there is a decreased tendency to become distracted by its intrinsic qualities.   A barber is paid to cut hair because the customer wishes to be fashionable and a doctor is paid to treat a condition because the customer wishes to be healthy, such that the need a service addresses is fairly obvious.   There is in most instances little argument that the customer is paying someone to go through the motions for their amusement (though hiring a performing artist is an obvious instance in which that is the entire point).

This is not always the case, especially when considering a luxury service.  There are many aspects of a beauty salon that cause the experience of getting a haircut to render pleasure to the customer, aside of the final result.  The entire leisure industry is built around providing services that are intrinsically pleasant to the consumer, even if there is no final result except a brief lingering sense of relaxation and pleasant memories.  And in those instances there is the tendency to become distracted by the qualities of the service provided.

But in an economic sense, the line between good and service becomes blurred.   When a person purchases a chair, they are paying for the service of the carpenter to build it (and the service of a woodsman to harvest the wood, a metal-worker to make the nails, a miner to harvest the ore, etc.)   On the income statement of virtually every business, the cost of labor far exceeds the cost of materials - so it could rightly be suggested that any "good" we purchase is in fact a bundle of services that are performed in a remote location and previous time, the value of which are evident in a physical artifact, and the cost of the performance of action is greater than that of the physical materials on which services were performed.

Products

The concept of a "product" relates to benefits rendered by whatever is provided, be it a good or a service.    When the ultimate end is considered, the means by which a service is rendered seem entirely incidental: a customer who has a need to be served is largely indifferent to the mechanisms so long as the need is satisfied.

That is to say that a customer looking to satisfy the need of hunger can address it by purchasing groceries (goods) or visiting a restaurant (service), or a person with a wound can address his need by purchasing a bandage (good) or visiting a clinic (service).   The distinction between good or service pertains to the means by which a need is satisfied - but the satisfaction of the need relates to a product that could be either good or service.

Thus considered, producers of products would be well advised to consider the need for which their product is purchased rather than the qualities and features of the product itself, which are largely incidental and may in some instances be completely irrelevant to the customer's motivation.

This also speaks to the need to broaden the horizons of the competitive arena, and to recognize that the producers of goods must compete with the producers of services, and vice versa, because their products are interchangeable for a customer in search of a solution to a need.