Think of all the electronic items or skincare products that you have in your house, the companies that produced those products are all product-based companies. Look it another way, think of the broadband service, electricity service or gas service that you avail at your home, the companies that render those services are all service-based companies.
So, we could say that the companies that sell any tangible item to their clients are Product-Based Companies. On the other hand, Service-Based Companies are those that offer services which are not tangible.
For a service-based company, customer needs are their topmost priority. This is because they offer services and solutions as per the needs of the customers. But, innovative ideas that can ease the work of different customers are the priority of a product-based company.
Content: Product-Based Vs Service-Based Company
- Comparison Chart
- What is a Product-Based Company?
- What is a Service-Based Company?
- Key Differences
- Conclusion
Comparison Chart
| Basis for Comparison | Product-Based Company | Service-Based Company |
|---|---|---|
| Meaning | A Product-Based Company is one that has its own product to sell to consumers through the market. | A Service-Based Company is an enterprise, that offers services to its clients. |
| King | Quality | Client |
| Tangibility | The client pays for the physical or digital exchange of the stuff. This is because one can see or touch the product. | The client pays for the experience. This is because one can only experience it. |
| Quality and Quantity | Every time the quality and quantity of the product remain the same. | The quality and quantity of service can be different at different times. |
| Hiring | They hire only a limited number of candidates from top colleges around the world. | They recruit a large number of candidates during campus placements. |
| Recurring Revenue | Not Possible | Possible |
| Learning Curve | Good | Average |
| Office Timing | Flexible | Fixed |
| Job Security | High | Less |
| Marketing | It invests a huge amount in advertising and marketing. | It invests a very little amount in marketing and contacting clients directly. |
What is a Product-Based Company?
A product-based company is one that deals with the innovation and introduction of its own products. The products are generally the ones with high market value. Also, these products have the potential to meet the needs of the customer. They aim to produce top-quality products. Also, it strives for improving the products by adding new features. They do so using state-of-the-art technology.
Such companies create a valuable product that is capable of solving crucial business problems.
For Instance,
- A company offering an e-book, course material or dresses can be a product-based company.
These companies are easy to establish. Also, it is easy to differentiate your product from that of the competitors particularly when you are the only firm offering that product.
Such companies provide a better culture for employees when it comes to personal satisfaction regarding perks, salary, etc.
Points to Remember
- Product Based Companies identify the gap between the product requirement and available products. Then it develops a product which provides a solution for that particular requirement to the customers.
- The products they develop are not for a specific customer. This means that they design products for a particular class or specific group in general. For this purpose, they perform research and introduce a range of products that fulfil the demands of the majority of people. So, they sell their products to as many people as possible.
- In IT Sector, product-based companies are those that work on technology for their own customers. These companies own one or more digital products.
Example
| Company Name | Product Name |
|---|---|
| Adobe Inc. | Acrobat Pro, Photoshop, Illustrator, Spark, InCopy, etc |
| Amazon | Amazon Prime, Amazon Web Services, AmazonFresh, Alexa, Echo, Kindle, Fire tablets, Fire TV, Appstore, Amazon Drive, etc |
| CISCO | Switches, Routers, Wireless, SecureX platform, Secure Firewall, etc. |
| Facebook, Instagram, Messenger, WhatsApp, etc. | |
| Google Docs, Gmail, Google Drive, Google Translate, YouTube, Chrome, etc. | |
| Microsoft | Microsoft office suite, Microsoft Windows, Edge web browsers, etc. |
Also Read: Difference Between Product Marketing and Service Marketing
What is a Service-Based Company
Service-Based Companies are those that offer solutions to the customers and clients. These are amenities, skills, and expertise, depending on the needs of the clients.
These companies work for other organizations. Because they don’t have their own product, they actually sell the time of their employees to their clients.
For Instance
- A web-hosting company comes under the service-based company.
- A company that offers a platform to find the best buyers for your used product.
Points to Remember
- The services rendered by a service-based firm are exclusive in nature. This implies that the services are tailored according to the needs and specifications of the clients. Also, the services are not shared with other clients.
- In IT Sector, a service-based company provides services like engineering, design and other services to the business houses.
- While hiring employees these companies look for a mix of both soft skills as well as hard skills.
- These companies face cut-throat competition in the market. And so for the maintenance of quality and reputation in the market, they have to be unique.
Example
| Company Name | Services Rendered |
|---|---|
| Tata Consultancy Services (TCS) | Consultancy, Engineering and Business Solutions. |
| Infosys | Information Technology and Consulting Services. |
| HCL Technologies | Multi-service solutions to clients of different domains. |
| Wipro | IT solutions, Consulting and Business Process Services. |
| Bharti Airtel | DTH, 2G, 3G, 4G Wireless services, Broadband Connection, Fixed line services, etc. |
| Deloitte Touche Tohmatsu Limited | Financial Services, Consulting, Risk Advisory, Audit, and Assurance services. |
Also Read: Difference Between Customer and Client
Key Differences Between Product-Based and Service-Based Company
- A company whose main source of income comes from selling products is a Product-Based Company. But, a company which do not have its own product but works for other companies or clients is a service-based company.
- In a product based company quality is regarded as the king in terms of the scalability of the product. As against, clients are considered as king. This is because these companies want their customers to be completely satisfied with the services, only then they would be retained for the long term.
- In the case of product-based companies, there is a physical or digital exchange of the product. Whereas, in service-based companies, the client pays for the experience.
- While in product-based companies, the quality and quantity of the product are the same. As against, the quality and quantity of service are different for different clients.
- Product-based companies recruit only a few candidates from the best colleges all over the world. In contrast, service-based companies often hire many candidates at the time of campus placements from different colleges.
- When it comes to the learning curve, it is good in product-based companies. But in the case of service-based companies, the learning curve is average.
- The employees of a product-based company enjoy flexible working hours. Conversely, there is a fixed work timing for employees of service-based companies.
- Taking about job security, it is higher in the case of a product-based company as compared to a service-based company.
- Product-Based Companies invest a huge amount in advertising and marketing the products they offer. But, service-based companies spend very little amount on their marketing and contacting clients directly.
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Recurring Revenue
Recurring Revenue is not possible with product-based companies. This is because the firm needs to create new products to attract more customers and generate income for your business.
Conversely, service-based companies get the benefit from the potential for recurring revenue. This is because the client pays a regular fee to continue their services. And recurring revenue is quite a good thing because a specific sum is credited to the company’s business account each month or year. Moreover, with the increase in the client base of the company, this amount multiplies. In this way, it adds to the income of the company in the long term.
Conclusion
As every person wants to excel in their career, and everyone wants growth. People working in tech companies, always face the dilemma of joining a product-based or service-based company. Both have their pros and cons. They can choose any one of them, depending on what they want from their career.
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