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09/27/2006 - 6:49pm

Products vs. Services


The perception of products vs. services is pretty clear to most people. If a company is offering a product for sale, then they're providing a physical thing. For service-based companies, the company is doing something for you. Some companies provide both. But isn't a product just a service anyway?

Think of this. If a company sells you a computer, what they're actually selling is the service of assembling that computer from it's bare components and providing a warranty. This is something that, with the right research and education, most people could do on their own. So then the companies providing the bare components are the ones selling the products, right? Well let's look at the motherboard, one of the major components of a computer. It's made of yet more parts, so the motherboard manufacturer is providing the service of assembling this semiconductor components into a motherboard, another thing that people could ultimately do themselves with the right know-how. Are the semiconductor manufacturers selling a product, or simply the service of building semiconductors?

Eventually, you get all the way down to raw materials. These raw materials include things such as various metals mined from the earth. The suppliers of raw materials aren't just selling the service of mining these materials from the earth, because you couldn't simply mine these yourself, and for one very good reason - They own the land. The owner of the land is selling you various contents from his land, not simply the service of removing them from his land.

From this perspective, it is land-owners that are the only true providers of products, and the rest of the world is providing a service. Looking at wanting to succeed in business from that point of view, an entrepreneur can understand that he must provide better service than his competitors to survive. And not in the context of "if you change tires, you need to be better than the tire changer on the other side of the street", but on a more global scale. If you're a service-provider, that is, not a land-owner selling pieces of his land, then you're competing with everyone for your clients' money.

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