Product Based vs Service Based Companies: Difference and Comparison

Key Takeaways

1. Product-based companies focus on creating and selling physical or digital products, while service-based companies specialize in providing intangible services to clients.
2. Product-based companies generate revenue primarily by selling products, whereas service-based companies earn revenue by offering their expertise, skills, or labor to customers.
3. Product-based companies have transactional relationships with customers, while service-based companies tend to foster long-term relationships due to the ongoing nature of their services.

What is a Product-Based Company?

Companies that produce products to satisfy a certain niche of customers are known as product-based companies. These companies manufacture products in different versions and ranges.

To sustain in the market, these companies upgrade their products. They also try to provide other products in a similar range. For example, a company that sells mobile phones initially also starts selling earphones and speakers once they set their place in the market.

Many product-based companies also offer services suitable for their products. For instance, a machine-producing company also provides and offers repair services.

Some companies produce and make their products from raw materials, while others buy products from manufacturers. Companies that make their products bring innovation and novelty to them.

They choose marketing strategies, and an introduction is made for their products. A certain selling price is decided too. The product-based companies ensure that they meet the customers’ needs and bring out high market value.

The main job is to identify the gap between the requirement of the product that is produced and the available products in the market. To sell their products to most people, they perform research and launch a different range of products.

What is a Service-Based Company?

Companies that offer a service to their customer in exchange for a price are known as service-based companies. These services include amenities, advice, expertise, schemes, scholarships, subscription plans, etc.

Some service-based companies work for other organizations or work independently to provide various services to their consumers. Some companies sell their employees’ time to their clients.

Many service-based companies are the clients of various product-based companies. Their primary goal is to provide the best service to their customers.

Service-based companies provide intangible services. Some of the types of service-based companies are software services companies, event planning services companies, construction services companies, training services companies, legal services companies like law firms, waste management services like hygiene and maintenance agencies, etc.

The services provided by these companies are exclusive and tailored to the customers’ needs. The important factors to be considered are timing, identifying or targeting markets, and uniqueness.

These companies face cut-throat competition as their market is extremely cluttered and saturated, so they must choose their timing and niche. For instance, a company that started during a pandemic may face losses once the pandemic ends.

Difference Between Product-Based and Service-Based Company

1. The products provided by product-based companies are tangible; on the other hand, the services provided by service-based companies are intangible.
2. Product quality is important in product-based companies; however, timing, uniqueness, and delivery are important in service-based companies.
3. In product-based companies, the quantity and quality of the product are pre-determined and fixed; on the other hand, in service-based companies, the quality and quantity of the services keep fluctuating.
4. In product-based companies, the quality of the product decides the endurance as to when the product will last in the market; on the other hand, in service-based companies, customer feedback is the decider.
5. The possibility of recurring revenue is much higher in product-based companies; conversely, the possibility of recurring revenue in service-based companies is relatively lesser.

Comparison Between Product-Based and Service-Based Companies

Parameters Of Comparison	Product-Based Company	Service-Based Company
Marketing requirement	More	Less
Quality	Predetermined	Fluctuating
Quantity	Predetermined	Fluctuating
Product	Tangible	Intangible
Examples	Apple, Myntra, Boat etc.	TCS, Infosys, Uber etc.

References

1. https://www.emerald.com/insight/content/doi/10.1108/02656711111097553/full/html
2. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1745-493X.2002.tb00125.x

Last Updated : 13 July, 2023