Better to sell services or products? Tips for a new business
Knowing precisely what you want and can offer to your customers is one of the fundamental prerequisites for starting a startup capable of generating a profit. Some companies sell both products and services, but it is important that you know that, when you launch into a new business, it is preferable to focus on one or the other, perhaps leaving the door open to the possibility of broadening the horizon in the future.
To choose whether to sell services or sell products, you have to consider a series of parameters, starting with the costs and the time it takes to get to profit from your business. The list of factors to consider, however, certainly does not end with these two items. Indeed, it is very long. As an ancient saying goes, however, even a long journey begins with a step and, in this case, the first step in the journey that will lead you to decide whether to sell services or products is suggested by Walt Disney:
“Do something better than it has ever been done before and you will become rich.”
Never forget this advice now that we will explore together, in more detail, how to sell a product or provide a service.
Difference between product or service
Before deciding between selling products and selling services, it is essential to understand what are the main differences between these two types of goods.
The most obvious distinction between a product and a service is that the former is a physical good, which can be observed and touched, while the latter refers to skills and competences, that is, to something materially intangible. More specifically, this means that, for a customer, using a service translates into living an experience or achieving a result.
To be even clearer, the sale of a service inevitably requires interaction and this experience is always different. A product, on the other hand, is generally something that can be replicated (and scaled).
Analyzing the individual differences between selling products and providing services, however, can turn out to be an operation for its own sake if you do not take into consideration the advantages and disadvantages that these differences entail.
Products or Services? What is more convenient?
Defining in advance what is more convenient between selling products or providing services is a difficult undertaking. The differences listed above, however, can help you choose. The fact that it is a physical asset, visible and tangible to the customer, for example, could suggest that selling a product is easier. Be careful, though, because that’s not always the case.
Selling a service, precisely because it requires an interaction between you and the customer, gives you the opportunity to highlight your added value. The “secret” is to focus your attention on all those aspects that make you different from another provider of the same service. However, the buyer is not always able to perceive this value immediately: the main challenge for those who decide to opt for the sale of a service lies precisely in making that service a “product”, in order to facilitate its understanding by the buyer.
On the opposite side, the main advice on how to sell a product can only be to combine the concrete and tangible good with services, so as to make your differentiating element from the competition and the added value you offer even more evident.
The choice between selling products and providing services also presupposes that you take into account your starting point: you must know that, generally, selling products requires much more money at the beginning. Scalability, however, as we will see later, allows you to recover over the long haul.
Also reflect on your strengths: how do you manage a team? Doing this in a company that provides services is more complicated (as well as more expensive) because, in the sale of a product, a large part of your work ends when you have a system to manufacture the product itself.
You don’t have to decide between products and services now; there are, in fact, still several things you need to know.
Selling services: what to know
As already pointed out, services are something intangible, which cannot be seen or even touched by hand. The sale of them, therefore, is based on a trust mechanism, which is placed by the customer in the seller.
In this regard, a small alarm bell should be set off: remember that it may happen that a dissatisfied customer refuses to pay for the service received. Even in the case of payment, this does not always happen immediately as it happens for products: the sale of some services, in fact, requires the issuance of an invoice that could postpone payment for several weeks.
Maintaining a good reputation among customers is essential in any case, but it is even more so for those who sell services: competition, in fact, in this particular area is often very fierce, also because there are very few truly unique services.
Selling services has other specific peculiarities: in principle, if the supplier is you, as already mentioned, you can offer your service practically immediately and with activation costs reduced to a minimum. However, remember that, in the event that specific equipment or a particular training were to be needed, also in this case the times would be longer (and costs would increase).
The aforementioned salesperson training does not end at the beginning of the business: several services, in fact, require continuous (or at least periodic) training and may also require specific certification. You must also take this into account if you decide to sell services with your startup.
Selling products: what to know
The alternative to selling services, as you will be clear by now, is to sell products. It is very important to understand what it really means: the fact that, as mentioned, in the sale of products the payment almost always occurs immediately should not mislead you because buy or make tangible goods, subject them to the necessary tests and then sell them in a quantity it takes time to cover expenses and make a profit.
Keep in mind that stock replenishment involves costs that are, by the very nature of this process, ongoing. Not only that: the failure to sell perishable goods constitutes another important loss. Even storing unsold products in a warehouse has a cost that you shouldn’t neglect at all.
Do not be scared: the products, as mentioned, are very tangible and the ability to see and touch the goods with your own hands is an aspect that, in principle, pushes the customer to purchase. Products are generally more scalable than services. We will explore this aspect in a little while.
It is important to understand the concept of scalability: this term refers to the ability of a business to increase its sales without, in parallel, a proportional increase in costs. This is a factor that, as mentioned above, affects the choice between selling services and products, as the scenarios are very different.
Specifically, some products are, by their nature, very scalable: think of an app or online software that, once created, can be sold almost unlimitedly with a minimum increase in costs.
To sell services, on the other hand, it takes time and, in some cases, it may be necessary to increase the staff, with all that this entails in terms of increased costs. Services, therefore, are generally less scalable than products. Even in this case, however, wait to draw too hasty conclusions: if you sell a service, you can always offer additional options to the good you propose, in order to create further growth margins for your business.
Services or products: useful tips
In light of what has been said so far, the difference between selling products and selling services should be clearer to you, and therefore, it should also be easier for you to choose the best solution for your business. If not, the next few lines may be of more help to you, as they contain other useful tips.
Remember that both products and services certainly do not sell themselves: no matter what your choice will be, therefore, dedicate enough time to structure your business so that you can distribute and sell your goods effectively.
Other operations that you will need to perform periodically are the verification of compliance with the standards of your products or services and the comparison of the prices you propose with those decided by competing companies.
One last tip on how to sell a product, but also useful if you decide to sell services: running out of stocks or not being able to make your service available can generate a lot of frustration in your customers and push them towards the competition. Make sure that doesn’t happen.