Nowadays, services are sold like products and products seem to provide services — they almost seem interchangeable. So what actually is the difference?
Although there are significant overlaps, there’s a clear distinction between the two: co-creation of value and ownership. Services are performances that co-create value between a provider and customer, while products are value exchanges that transfer ownership of a thing**.**
Think of it like this: if you can physically grab it and throw it into a river, then it’s a product, not a service. Services are intangible experiences that only manifest through co-creation, while products can exist by themselves.
For most of our lives, services have always been provided by humans. However, that has vastly changed as AI has been brought into the equation.
Everywhere you look now, you see videos or billboards relentlessly advertising their services, hoping to hook you in as their next customer. There seems to be a service for everything now, and anyone can provide one — from professional services like financial consulting to niche ones like hiring a Strava mule to run your miles, services dominate our economies.
But it wasn’t always like this, only several decades ago, the economy was built on commodities and goods. Massive manufacturing companies like US Steel or Ford firmly stood at the top of this food chain. So what changed?
People started valuing intangible goods: experiences. This gave away to the experience economy where people began valuing experiences just as much, if not more, as their daily commodities.
Trend of products to services by employee count
Just like how products are carefully crafted, the service experience is meticulously designed —right down to the moment when you first walk through the doors.
But when the direct provider is no longer human, how services co-create value between the provider and consumers changes.
The Jellycat Diner offers customers the experience of placing an order for a diner-themed plush and having it “served” to them through a elaborate performance.
According to Frances Frei, the Professor of Technology and Operations Management at Harvard Business School, there are 4 essential principles in a service business: