"Products", and "goods" and "services"

Although it is generally accepted that products are items of economic exchange that comprise a mix of (tangible) goods and (intangible) services, there is considerable confusion in the use of the terms, depending on the field of business in which the term is used, and how precisely the term is used. The good news is that when people say goods, they usually mean goods and therefore not services. When they say services, however, they can mean either services and therefore not goods, or service-dominant products that include goods needed to provide the services. When they say products, they can mean items of economic exchange irrespective of whether these comprise goods or services, or both, or they can mean goods-dominant products that include services needed to support the goods.

This might be all you need to know but, if you are a bit of a nerd, I have explored the use within various areas of business below. Not perfect but hopefully illustrative. The final paragraph deserves further exploration, so maybe another article.

Economics

Economists tend to use product as the overarching term for goods and services as forms of economic exchange, where goods are tangible things, and services are intangible activities. Goods can be subdivided into categories such as consumer goods and capital goods. Economists also make the distinction between final goods that are ready for sale, and intermediate goods that are used in the production of other goods. The equivalent applies to (final and intermediate) services.

Sometimes, they interchange products and goods, leading to semantic confusion. They also talk about output and gross domestic product (GDP) as ways of valuing goods and services.

GDP = C+I+G+(X?M) where:

• C: Household consumption (sales to households)
• I: Investment (business spending on capital goods and inventory)
• G: Government spending (sales to government)
• X: Exports (sales to the rest of the world)
• M: Imports (deducted because they are not part of domestic production)

An interesting evolution in economic thinking is embodied in Pine and Gilmore's concept of the Experience Economy, which proposes experiences as a distinct category of economic offering, beyond traditional goods and services. In their view, the progression of economic value goes from commodities to goods to services to experiences (and ultimately to transformations). In traditional economics, experiences are typically categorized under services. In practice, the line between services and experiences can be blurry. Many service providers are incorporating experiential elements into their offerings. It helps to distinguish between service-enabled experiences and experience-enhanced services. With service-enabled experiences, the primary value proposition is the experience itself, where the service elements are means to an end (the experience). Example: At Disney theme parks, the specific services (rides, shows, etc.) are interchangeable as long as they contribute to the desired emotional impact. With experience-enhanced services, the core value is still in the service itself, where experiential elements are added to differentiate or improve the service. Example: An IT department that prides itself on superior user experience cannot replace an ERP system by a CRM system.

Marketing

Marketing approaches the concepts of products, goods, and services with its own set of terminologies and frameworks, often with a focus on customer value and differentiation. Marketers often focus on communicating the unique value proposition of a product or service, which may include both tangible and intangible elements. In marketing, the concept of a brand often transcends the product, encompassing intangible elements like reputation, customer perception, and emotional connections.

In marketing, product is often used as an umbrella term that includes both goods and services. The American Marketing Association defines a product as a bundle of attributes (features, functions, benefits, and uses) capable of exchange or use. Marketers often discuss a company's product mix or product portfolio, which includes all the product lines a company offers. While marketing recognizes the distinction between goods and services, there's an increasing focus on the service aspects of all offerings. The concept of servitization describes the trend of manufacturing companies adding services to their product offerings, further blurring the distinction between goods and services. Service-Dominant Logic, a perspective proposed by Vargo and Lusch, suggests that all marketing is essentially service marketing, with goods serving as distribution mechanisms for service provision. Building on Pine and Gilmore's work, many marketers now focus on creating memorable experiences for customers, blurring the lines between goods and services.

Accounting/finance

This field often uses product to refer specifically to tangible goods that a company sells, and product line to refer to a group of related goods or services. They typically refer to tangible items held as inventory or fixed assets, often categorized as finished goods, work-in-progress, or raw materials. There are also specific categories of intangible assets, for example goodwill and patents. Service refers to intangible offerings.

Goods production

In this field, products refers to the final output of the production process and is often used interchangeably with goods. Products includes both tangible goods and associated services, for example warranties. Goods refers to physical, tangible items, typically categorized as: raw materials, work-in-progress and finished goods. In goods production, services are often ancillary and include installation, after-sales service, warranty, maintenance.

Service delivery

This field often uses product to describe the entire service offering, that may include both core services (main benefit) and supplementary services (supporting elements). Goods usually refers to the tangible elements supporting service delivery. Within services, a distinction can be made between affordances and performances. An affordance provides the recipient with the right and ability to use the provider's goods, while a performance is how the provider applies their goods and other resources for the benefit of the recipient.

Information technology

The field of information technology (IT) uses the terminology differently, partially depending on the specific IT discipline. In IT, the main tangible items are applications, the platforms on which applications are developed and run, and the basic infrastructure (devices, networks, and system software) on which the platforms are built. Together, these form information systems that are resources that support users’ work by processing data.

Services is used for the provision of software, platforms and infrastructure as-a-service (SaaS, PaaS, IaaS), and IT services refers to support regarding their use. Products, particularly when used by the software development discipline, refers to their applications. The IT service management discipline uses products to refer to the information systems to which their services afford access. It refers to the parts of information systems (such as applications) as service components.

Internal services

These terms are not only used for ("final") external economic exchange but also for ("intermediate") internal use within the organization. This is similar, in particular for services, to how many support functions within an organization (for example, HR, finance, legal, and facilities) organize the collaboration with the primary functions that they support.

In this case, services are not about economic exchange. Rather, it is a way of managing work as an alternative to issuing top-down directives to teams, or giving teams autonomy to decide for themselves what to do. From a managerial viewpoint, "service" is an effective method for coordinating activities between organizational functions. It operates on an autonomy spectrum with three key points:

1. High control: management directs functions on specific activities and interactions.
2. High autonomy: functions decide independently whether and how to collaborate.
3. Service-based coordination: management defines required outputs, while providers determine service delivery methods within set parameters.

This service-based approach balances managerial oversight with functional autonomy, promoting efficiency and innovation. It allows management to focus on desired outcomes while empowering functions to leverage their expertise in service delivery.

Internal IT services are usually formalised in more detail than other internal services. Factors that play a role are (1) the users’ high dependency on IT systems and services; (2) the lack of mutual trust in (a) the users’ ability to articulate requirements and (b) the provider’s ability to develop, deliver and support IT systems; and (3) both parties’ concerns about financial consequences of misunderstandings and poor performance. The desire to formalise is also influenced by managers' instinct to apply more control, and to measure whatever can be measured.