Selling a Product Vs. Selling a Service

The biggest difference between selling a product and selling a service is that prospective buyers can see, touch and feel products, while services are intangible. Companies that sell both products and services must create separate marketing plans for each segment. The plans should focus on finding ideal target markets as well as uncovering competitive advantages to increase sales and make the company profitable in both categories.

Pricing for services is primarily based on the amount of time it takes to complete a project, while pricing for products is based on a formula that includes the cost of manufacturing and distributing the product. Service businesses get more flexibility in setting their prices, with the rate typically based on the project or an hourly fee. Product companies must develop pricing that’s competitive with other companies selling similar merchandise, unless they’re selling luxury goods or have no competition.

Companies that sell services must create marketing messages that focus on the benefits of their offerings. Much of their knowledge of what customers want comes from talking with them extensively about their likes and dislikes, the challenges they face and the types of solutions they need to succeed. But if you sell products, you need to provide a healthy mix of both benefits and the product’s features to be effective. Product companies often conduct surveys and trials to find out what customers like about their product, eventually making changes when the market demands it.

Service companies use marketing strategies that include building personal relationships with decision-makers through networking and sales calls that require them to listen to the customer’s problems and concerns. This type of marketing allows service companies to more carefully tailor solutions that meet the customer’s needs. Product companies, however, usually rely on advertising, promotional campaigns and direct mail to encourage people to give their offerings a try. High-end products are customizable to a certain degree, but smaller products are usually created to meet the greatest number of customer’s needs, with variations only for features such as colors and sizes.

Visuals come in handy for both product and services companies, but service companies must rely on imagery that depicts happy customers or their staff rather an actual product. Architects, contractors and graphic design companies can use photos that show how their service contributed to a final product. Product companies, however, primarily use graphics to explain the features of their product so people get enthused about its capabilities or beauty. Product companies may also want to include photos on their website or marketing materials that depict satisfied customers using or holding their products to build credibility.