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Product Based VS Service Based Business

What Are the Differences Between Product-based Businesses and Service-based Businesses?

Product vs Service Business. ... In actuality, both sell a product. The distinction between the two is that the product business sells a physical, tangible product, while the service business owner sells his skills as the primary product.

Niche companies often focus on personalized experiences for a narrow market. Small-business owners are faced with many challenges, such as planning sales and marketing strategies for their companies. Your business plan will vary depending on your type of business, but one main difference to take into account is whether your business is product-based or service-based. As the names imply, a product-based business sells actual physical things, such as clothing or boxes, while a service-based business sells a service that consumers need, such as plumbing or consulting. 

The Product Both product- and service-based businesses sell a product. The ultimate difference between the two is that the product business actually sells a physical, tangible product, while the service business owner sells his skills as the main product. In the service-based business, potential clients invest in the salesperson or owner, which makes the client relationship even more valuable and important than in the product-based business. Service businesses rely on people and the client experience, which can be risky. Product-based businesses, on the other hand, can be assured that their product is going to be the same from customer to customer, making the customer experience fairly predictable. 

Target Market Product- and service-based businesses have different target markets, in general. Product businesses can sell, as well as advertise, to the global market. With some rare exceptions, such as an international consultant, most service businesses target their local market. For example, while a computer store can ship computers all over the world, a hairstylist wouldn't travel too far from her home or business. It simply wouldn't be worth her time. 

Marketing Message The marketing messages and strategies tend to be very different between product- and service-oriented businesses. Usually, product-based businesses invest in branding efforts to build customer awareness of the product, as well as differentiate the company product from other similar products. Marketing can, and often is, global. On the other side, rather than wasting precious advertising dollars on mass marketing efforts, service-based companies tend to fare better when they focus on direct marketing to prospective ZIP codes or homeowners in a particular area. This type of business tends to use individualized marketing messages and focus on the customer experience, such as client satisfaction. For example, most small plumbing companies compete with other companies that offer the same services in the same neighborhoods. In this case, the plumber typically advertises faster turnaround times or guaranteed services to differentiate himself from other plumbers in the area. 

Business and Sales Strategy In terms of a business plan, product businesses tend to focus on building their brand reputation, improving their market position and making sales, while service businesses tend to place their main focus on increasing revenue, rather than market share. The actual sales process also varies between the two types of businesses. Product businesses typically have quick turnaround times, as the customer tends to make purchase decisions quickly. Service businesses often require negotiations and customer contracts, which can make the sales process last longer.

(Bonus Read) Brick And Mortar Business Detailed.

(also brick and mortar or B&M) refers to a physical presence of an organization or business in a building or other structure. The term brick-and-mortar business is often used to refer to a company that possesses or leases retail stores, factory production facilities, or warehouses for its operations. More specifically, in the jargon of e-commerce businesses in the 2000s, brick-and-mortar businesses are companies that have a physical presence (e.g., a retail shop in a building) and offer face-to-face customer experiences.

This term is usually used to contrast with a transitory business or an Internet-only presence, such as fully online shops, which have no physical presence for shoppers to visit, talk with staff in person, touch and handle products and buy from the firm in person. However, such online businesses normally have non-public physical facilities from which they either run business operations (e.g., the company headquarters and back office facilities), and/or warehouses for storing and distributing products. 

Concerns such as foot traffic, storefront visibility, and appealing interior design apply to brick-and-mortar businesses rather than online ones. An online-only business needs to have an attractive, well-designed website, a reliable e-commerce system for payment, a good delivery or shipping service and effective online marketing tactics to drive web traffic to the site. 

Governments are also adopting e-government approaches, which is the use of online services for citizens to enable them to fill in government forms, pay tax bills and register for government programs online; these services aim to cut bricks and mortar costs (building leasing/purchase and staff costs) and improve services to citizens (by offering 24/7 access to information and services).

The divergence between brick-and-mortar businesses and online businesses has expanded in the 2000s as more and more entrepreneurs and established organizations create profitable products known as web "apps" (software applications) and mobile apps. Many web and mobile apps are digitally distributed to customers online and offer value without delivering a physical product or direct service, thereby eliminating the need for manufacturing products, warehousing them, and distributing them using shipping and delivery services and/or physical retail outlets. As well, due to the shift to digital media in audio and video, stores are able to sell digital audio files of songs or digital movies or TV shows over the Internet, either by selling the file to the customer or allowing, for a subscription fee, the consumer to "stream" the songs, movies or TV shows to their digital device. Furthermore, the advent of reliable, affordable remote business collaboration tools such as teleconference phone systems and videoconferencing systems (e.g., Skype) diminishes the need for physical business buildings and offices for many Web and mobile product businesses.

Some stores have both a strong bricks and mortar presence and extensive online shopping services. Examples include Best Buy, Walmart, and Target. While these stores are primarily known as brick-and-mortar businesses, they also have major online shopping websites. In the 2010s, the presence of online stores is adversely affecting some bricks and mortar-only businesses, as some customers are engaging in "showrooming". Customers who are "showrooming" go to a local bricks and mortar store's showroom to test and try out products, and then note the brand and model number, and leave the brick and mortar store and then buy the product from an online store, often for a lower price. 

Some bricks and mortar stores state that this trend is decreasing their sales.

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