Is a Service a Product? Everything You Need to Know
There is something called Product-as-a-Service (PaaS), which combines physical products, companion software, and software to monitor the process.3 min read
2. Services, Ideas, and Solutions
3. Tangible and Intangible Products
4. Product-as-a-Service Examples
5. Advantages of Product-as-a-Service
Is a service a product? There is something called Product-as-a-Service (PaaS), which combines physical products, companion software, and software to monitor the process. This allows for new offerings when a buyer does not own anything in the physical sense. The product is delivered as a virtual experience or service. Customers subscribe to the product and pay a monthly or annual fee, rather than a one-time purchase.
Products are services and/or goods that are offered to the public and satisfy a need or want. The word product derives from the verb “produce,” and a product is generally defined as something produced by effort or labor, or the end result of a process or act. The thing to remember with products is these are physical items that can be delivered to a buyer and involve an ownership transfer between the seller and buyer.
In the retail industry, a product is merchandise. In the manufacturing industry, they purchase products like raw materials to create a final product that is offered for sale. Raw materials like agricultural products and metals are called commodities. In a project management setting, a product is derived from the project deliverables that make up the project objectives.
Products shouldn't be dated or stagnant. They are designed to meet the needs of a consumer, and buyers don't want to buy something stagnant or outdated. Often, a product can be a complex component or sophisticated software.
Services, Ideas, and Solutions
Services are non-material actions that provide a measurable change of state for the buyer, which is caused by the seller or provider. A service is something that is done for you, which can be paid once for a limited period, or you can continue to pay through subscriptions. Services aren't necessarily designed to quickly fix a problem, so marketing efforts should be geared towards establishing a relationship with the consumer.
You also have intellectual property ideas, that are creations with commercial value, but they are sold as an idea only rather than a finished product or service. This includes copyrighted works and items like business methods, industrial processes, patents, etc.
A solution can combine both products and services, and can even have specific packaging for customers and other businesses that offer solutions to whatever problems consumers have. An example might be retaining a public relations firm for a business solution. PR firms often bundle a variety of services including marketing, product design, copywriting, and more.
Tangible and Intangible Products
You can further classify a product based on whether it's tangible or intangible. Tangible goods are physical objects that can be touched. These include an electronic gadget, a building, or vehicle. Most products are tangible.
Intangible products are indirectly perceived, like a health insurance policy or software subscription. They can be classified as virtual digital goods, or VDG, that are located virtually on a computer's operating system and accessed through various file types like JPG. A VDG requires additional processing or needs to be transformed by a programmer. Their use may be restricted by license or digital transfer. There are also real digital goods, RDG, which can exist within a data program, but they are presentational elements that are separate from conventional file type.
One of the most common examples of a Product-as-a-Service is vehicle leasing. This is an option offered by many car manufacturers wherein someone purchases the use of the vehicle, and maintenance work is included during the course of the lease. A similar version is the Zipcar model, where Zipcar purchases and maintains a vehicle, and people can drive it on a per-use basis. Uber is another example as it fuses the car and driver together to provide a service — the ride.
Advantages of Product-as-a-Service
There are several advantages of a Product-as-a-Service:
- Allows producers to create recurring revenue
- Builds long-term relationships with purchasers
- Sellers can bundle both internal and external services — an example is a seller adding roadside assistance or a maintenance plan on a vehicle lease
- Can increase the market size for sellers
Product-as-a-Service results in sellers seeing decreased initial sales, which can result in short-term revenue losses. However, statistical reports indicate that in most cases, sellers who move from physical sales to recurring services see more profitable, stable, and larger revenue streams over a one-time purchase.
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