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Differences Between Goods and Services
This question will be answered in three distinct sections. In the first section the major differences in the evaluation of goods and services will be outlined and in the second section the reasons behind these differences will be examined further. In the third and final section it will be important to concentrate upon the impact that the differences between goods and services will have upon concept evaluation techniques and/or methods. Throughout this investigation we will refer to the case of the Concept Development Corporation and consider this case study in order to further elucidate upon this investigation.
It is important to begin this investigation by answering the first question, namely what are the major differences between the evaluation of tangible goods (like toys) and services? The vast majority of money in an economy is spent on either goods or services and therefore it is important to be aware of the differences between the two concepts. Firstly of all, goods are an entity that can be consumed by the customer. An example of a good is a book or food. In the case of a book, the customer can consume the product on many occasions, in the case of food only once. However, both books and food are united in the sense that they are tangible goods that a customer can use. It is the tangible nature of goods that is often used in order to define goods and as Adil points out, “goods are real things that people can touch and use” (Adil 2006: pp.4). Services, on the other hand are defined as something that a person does for another, for example, fixing another person’s car or completing some handiwork in the house would be classed a service. In contrast to goods, services tend to be defined by their intangible nature, because the product one receives is not something one can physically grasp, but rather it is the provision of something that one needs by another person. As Berry points out, “whereas goods are first produced, then sold and then consumed, services are first sold, then produced and consumed simultaneously” (Berry 1985: pp.34). It is clear that there are important conceptual and practical differences between goods and services. Kerr also focuses upon the intangibility of services as their defining feature and argues that as the ubiquitous haircut example illustrates, services tend to have an intangible quality and often (though not always) require the physical presence of both client and service provider” (Kerr 2008: pp.151). However, the difference between tangible good and intangible services are not the only theoretical and practical differences between the two concepts. Firstly, services are often an input into the production process, as the examples of telephone services or accounting illustrate. Due to the fact that such input services can be vital to the development of certain parts of the economy, one could argue that without adequate input service provision certain parts of the economy may never grow at all. “Countries with inefficient service provision, thus tend to have lower productivity in the manufacturing, agriculture and government sectors” (Kerr 2008: pp.151). Adequate service provision can, therefore, at times be vital in developing an economy in a manner that goods cannot be. Another important difference between goods and services is that “services tend to be differentiated products, whereas some goods are homogenous in nature and other goods are differentiated” (Kerr 2008: pp.151). As one can see, therefore, there are a number of important differences between the evaluation of goods and services.
It is important now to move on to discuss why these differences between goods and services exist in the first place. As has already been noted above, the major difference between goods and services is the fact that goods are tangible products whereas services tend to be intangible in nature. The differences between the two concepts is clearly illustrated by the example of the Concept Development Corporation. Crawford and Di Benedetto ask the reader to imagine a scenario in which a group of talented and creative friends decide to embark upon a business venture in which they can put their skills to effective use. “So, they quit their jobs, pooled their savings, rented a small, three-room office, hired a couple of people, coined the name Concept Development Corporation and started serious work” (Crawford & Di Benedetto 2006: pp.189). They quickly realised that they were far more effective at creating ideas than evaluating them and they came up with two product ideas that exemplify the differences between goods and services outlined above. The first area in which they had a creative idea was regarding a product that can be defined as a good and their idea was to create toys for children, particularly toys that contained some education value for the children that played with them. “Their strategy was to develop unique toys that required little up-front expenditures. Most toys would have some game or competitive aspect, be it educational, and involve paper, colour, numbers and the like” (Crawford & Di Benedetto 2006: pp.190). The second area in which the group of friends had a business idea was in the field of writing and this product is best defined as a service. “These services primarily involved designing and writing instruction sheets for area firms (training manuals, copy for package inserts, instruction signs – anywhere words were used to instruct people in doing things)” (Crawford & Di Benedetto 2006: pp.190). It is clear, therefore, from examining the two types of products developed by the Concept Development Corporation that one product is best defined as a good and the other as a service and that a number of important differences exist between the two products.
In the final section it is important to consider the consequences of the differences between the two products of the Concept Development Corporation on concept evaluation techniques and/or methods. It is clear, that, due to the fact that goods and services are different in nature, different techniques must be employed in order to evaluate the two concepts. For example, in order for a customer to evaluate the extent to which a good is soundly constructed, they may want to stress-test the product to ensure that it can withstand external pressure inflicted upon it. This type of test would not be applicable to a service. Therefore, due to the fact that goods a re tangible in nature and services tend be intangible, it is far easier to test the toys that the Development Corporation will produce than to test the writing service of the Corporation. As Berry states, “most services contain few search properties and are high in experience and credence properties, making their quality more difficult to evaluate than quality of goods”
(Berry 1985: pp.40). On the other hand, another study has found that customers use different criteria in order to judge the quality of goods and services. Whereas customers are more likely to trust their own judgment or those of sales people when it comes to products, one study found that “buyers relied heavily agreed or strongly agreed with the statement that there is upon personal sources of information in evaluating services, a difference in the purchasing of goods and services” (Jackson 1995: pp.103). It seems, therefore, that the evidence suggests strongly that goods are more readily evaluated than services and Hartman argues that this is the only effective criteria that can used to distinguish in the evaluation of goods and services. He states that “goods were distinguished from services only on the ease of evaluation dimension” (Hartman 1993: pp.10).
In conclusion, it has become evident during this study that a number of fundamental differences exist between goods and services. Goods are tangible in nature and can be consumed once or multiple times by the customer whereas services tend be intangible in nature. This fundamental difference between the two products has been clearly reflected in the experiences of the Concept Development Corporation, which created toys for children as well as a writing enterprise. The toys for children were a clear example of a good whereas the writing enterprise was a clear example of a service. It is likely that the Concept Development Corporation would have far more success in evaluating the toys as a product, because the studies cited in this investigation suggest that evaluating goods is a simpler task than evaluating services. The Concept Development Corporation will have to bear the differences between goods and services in mind when developing their products further.
- Adil, J., 2006. Goods and services. Minnesota: Capstone Press
- Berry, L., 1985. Problems and Strategies in Services Marketing. The Journal of Marketing, 49 (2), pp.33-46
- Crawford, M., Di Benedetto, 2006. New Products Management. London: McGraw-Hill Publishing
- Hartman, D., 1993. Consumer Evaluations of goods and services: implications for services marketing. Journal of Services Marketing, 7 (2), pp.4-15
- Jackson, R., 1995. An Empirical investigation of the differences in goods and services as perceived by organisational buyers. Industrial Marketing Management, 24 (2), pp.99-108
- Kerr, W., 2008. Handbook on International Trade Policy. Cheltenham: Edward Elgar Publishing