In case some of you are not fully aware, products and services are different. They can be tightly integrated. They can be mutually dependent. But they are entirely different. This can cause businesses that provide and sell both products and services significant issues.
Customers usually like to have a single point of contact with their vendors and suppliers. If the customer is large enough, this point might actually be a coordination point for the vendor’s sales team, as opposed to a single sales point. This creates an issue for the vendors in that more and more in the age of increased specialization, they are they are driven by customers, and hence driving their sales teams to try and sell both products and services.
I’ll start with the easy one first: Products. Just about everyone knows what a product is. Now believe it or not, a quick Googling of the word “product” has delivered two entirely different definitions:
product; plural noun: products
1. an article or substance that is manufactured or refined for sale.
2. a quantity obtained by multiplying quantities together, or from an analogous algebraic operation. https://www.google.com/search?source=hp&ei=c7loWtCWIYT5_AaP04-ICg&q=product&oq=product&gs_l=psy-ab.3..0i131k1j0j0i131k1l3j0l5.553.1679.0.3220.127.116.11.0.0.0.178.623.0j4.4.0….0…1.1.64.psy-ab..3.4.621….0.Jn1vc8zzN28
All the math nerds out there need to settle down. We are going to concern ourselves with the first definition of a product.
For purposes of this discussion I am going to look at products as a tangible item of substance manufactured for sale. (In an increasingly software driven world this idea can be stretched to software in as much as software is now also generally recognized as a manufactured or refined product as well.) A product is something that is made. People can usually touch it. It physically exists. Because it is a tangible good, a value can more easily be assigned to it. If a value can be assigned to it, it can be sold.
This is one of the main reasons that products are generally viewed as being easier to sell than services. There is a physical, tangible good associated in the exchange for money. A customer gives the vendor money and in return the vendor provides the customer with a tangible good or asset that they can point to when anyone questions them about the exchange.
A good example of a product for money exchange would be the purchase of a car. You know the car you want, and you know the amount you are willing to pay. If the vendor can meet those requirements, you will make the deal. You can look at the various attributes and features associated with the car and ascribe incremental (or decremental) value to them.
Things like leather seats and nice stereo systems are quantifiable attributes to that car. Dents and scratches are detraction’s from the value of that car.
The car is a tangible good that can be examined, with its value understood and hopefully agreed on.
Now look let’s look at services.
Another quick Googling of “services” takes us to Wikipedia, another source of simple and basic definitions. Wikipedia states:
In economics, a service is a transaction in which no physical goods are transferred from the seller to the buyer. The benefits of such a service are held to be demonstrated by the buyer’s willingness to make the exchange. https://en.wikipedia.org/wiki/Service_(economics)
A service transaction is one where no physical goods are exchanged. There is nothing tangible that is being bought or sold.
Now I am sure there are many that are going to jump up (and subsequently down) and say that is not true. There are people, and time, and labor and all sorts of things that are being bought when a service is purchased.
I think you are wrong.
Do not confuse what the delivery of a service is, with what the actual purchase of the service is.
I think that the best way to illustrate what a service purchase is, is to begin with a definition of what is actually being purchased in a service purchase transaction. I would submit that a service purchase is actually:
The purchase of the expectation of an end-state situation.
(This is actually one of my own, and hence doesn’t have a citation for locating it on the web. That doesn’t mean that it doesn’t exist there. It just means that I thought it up. I guess someone else could have thought it up as well.)
I’ll use the car example to further this idea.
Suppose you are going to take your newly purchased car to a car wash. Are you actually purchasing the labor and use of the machinery that goes into washing and cleaning your car?
I don’t really think so. I think you are purchasing the end state expectation of a clean and shiny car to drive off in. You are not overly concerned as to whether it takes ten people to wash your car quickly by hand, or whether it can be run through an automatic car washing machine as long as the same end state expectation is met.
I think this is a key point, and adds to the complexity of a service sale. Selling a service is actually trying to sell an end state solution, or position, instead of a tangible good.
Two of the biggest issues associated with the service sales model for intangible goods are, the loss of control, and the matching and the meeting of expectations of the service purchaser.
When I was younger, I was pretty protective of my car. It was one of the biggest assets I owned. I was concerned about relinquishing control of my car to someone else, even to clean it. I went to self-wash car washes, or I did it myself in my drive way. I got a great deal of pride from cleaning it. I was of the opinion that few if any could clean my car as well as I could. I was not a good candidate to be a car wash service customer.
I don’t suspect I was too different from many others with their first cars – with the possible exception of my teenage son. His car is, and remains, filthy.
I also didn’t have as much disposable income at that time, which meant that I had other priorities than paying for a car wash. Times change but the analogy continues. Some people don’t want to purchase the service associated with a car wash. They would rather do it themselves.
The second issue associated with purchasing the service associated with a car wash is the matching and meeting of expectations.
What happens if you buy the car wash, and it comes back obviously washed, but with dirt and streaks? What about hand prints on the windows? Maybe they didn’t vacuum the inside.
They have provided the service you purchased, but they did not meet your end state expectations. The service did not become tangible (in the form of a not entirely cleaned car) until after it had been delivered. Their interpretation of what a clean car was did not match your expectation of what a clean car was.
This potential for mismatched expectations is why there are contracts and lawyers. I’ll save that discussion for another day.
In the age of increased specialization, sales teams are increasingly being asked to sell tangible goods (products) which have a pre-defined end state capability, along with intangible services based on meeting the end state expectations of the customer. No one will truly know what the end state is, or if the expectations have been met until after the service has been delivered.
When viewed from this point of view it can be seen that services can be perceived by the sales team as a higher risk proposition. Products have defined specifications and features. Their functionality is usually well defined. Customers also know this. If the product operates to these specifications, there should be no question regarding customer satisfaction.
They in effect know that they will get what they pay for, before they pay for it.
This is not the case for services. Customers can get contracts. They can get vendor assurances. They can get all kinds of management commitments. But they will not know if they got what they wanted, and expected, and paid for until after the service has been delivered.
The selling of the tangible and intangible seem to require different approaches and techniques. The tangible can be compared and relatively valued versus both the current capabilities as well as the competitively offered ones. The creativity associated with the tangible application can be a differentiator.
The intangible is a little more difficult. It requires the defining of a future end state that doesn’t currently exist. Promised savings or improved efficiencies associated with a service cannot be realized until the service has already been implemented. And the fear then is that if the expectations are not met, it is already too late.
Defining and then codifying a viable end state solution will be the key to a successful services sale. How shiny is the washed car supposed to be? Are all the windows to be washed? Are best efforts to remove stains from the carpet good enough, or are you actually committing to replacing the carpets if you cannot in fact clean them appropriately.
Being able to identify the steps and milestones required to reach that end state will be required if customer expectations are going to be met, and a successful services transaction is to be completed.
And selling that kind of intangible is pretty different than selling a product.