Product vs. Service-Based Companies: Understanding the Fundamental Differences

Product vs. Service-Based Companies: Understanding the Fundamental Differences

4 mins read1.5K Views Comment
clickHere
Vikram
Vikram Singh
Assistant Manager - Content
Updated on Apr 4, 2023 14:28 IST

Want to know the difference between a product-based company and a service-based company? Our comprehensive guide breaks down the fundamental differences between these two types of companies. Whether you’re a budding entrepreneur or simply curious about the business world, this article has everything you need to know about deciding between a product-based or service-based company.

2023_03_MicrosoftTeams-image-256.jpg

When any business starts, one of the major choices entrepreneurs have to make is whether they have to sell any existing physical or digital product or make their own product and provide a specific service in exchange for fees. Based on these, companies are broadly classified into service-based and product-based companies.

As the name suggests, service-based companies sell the existing product, while product-based companies make their product that caters for the specific need of customers.

This article will explore the key differences between product- and service-based companies. So, let’s explore!! 

Table of Content

What is the Difference Between a Product-Based Company and a Service-Based Company?

Parameter Product-Based Company Service-Based Company
Meaning A company that creates its own product and sells it. A company that works on the existing product depends on the need of its clients.
Focus Creating and selling product Provide expertise and value to clients
Product Lifecycle Products have a lifecycle: from introduction to retirement It can be ongoing
Innovation Focus on improving and updating products Focuses on improving and developing services.
Intellectual Property Protection is through patents and trademarks. Protection is through trade secrets and contract
Scalability High Potential Low Potential
Business Model Typically one-time transaction It can be a recurring revenue model
Marketing High investment requires for marketing and advertisement. Low investment requires for marketing and advertisement.
Revenue Source Sale of Products Fee of Services
Example Naukri, Shiksha, Jeevansathi, 99Acre, Zomato Tata Consultancy Services, tech mahindra
Learning the Art and Science of Emotional Intelligence
Learning the Art and Science of Emotional Intelligence
The importance of Emotional Intelligence (EI) in the workplace is undeniable. EI involves understanding and managing emotions, crucial for success and effective leadership. Developing skills like assertive communication, empathy, and...read more
What is the Difference Between Management and Administration?
What is the Difference Between Management and Administration?
Management typically refers to the day-to-day operations and implementation of strategies within an organization, focusing on guiding teams and managing resources. In contrast, administration is more about setting policies, making...read more
Difference Between Advertising and Publicity
Difference Between Advertising and Publicity
Advertising is a paid form of communication intended to persuade an audience to purchase products or services, while publicity is unpaid exposure that aims to generate media coverage and public...read more

What is a Product-Based Company?

A company focusing only on creating and selling physical or digital products to customers is known as a product-based company. It can be a technology company (naukri, jeevansathi), a manufacturing company (TATA, Mahindra), or a clothing company.

Product-based companies aim to create a product that solves a specified problem and then sell it to as many customers as possible. Product-based companies heavily invest in Research & Development (to create innovative products), marketing, and brand loyalty.

Difference Between Product Management and Project Management 
Difference Between Product Management and Project Management 
The main difference between Product Management and Project Management is that Product Management focuses on creating and evolving a product to meet customer needs, while Project Management is concerned with...read more
Difference Between Product Management and Brand Management
Difference Between Product Management and Brand Management
Product Management focuses on developing and improving products, aligning with customer needs and market trends. Brand Management, on the other hand, concentrates on building and maintaining a brand's image, reputation,...read more
Stay Updated with the 15 Best Resources to Learn Product Management
Stay Updated with the 15 Best Resources to Learn Product Management
Here are the top 15 resources to learn product management that you should consider as a product manager.

List of Top Product-Based Companies in India

Domain Company Name
Technology Infoedge ( Naukri, Shiksha), Ola, Zomato
Consumer Goods Hindustan Unilever Limited, Britania, ITC limited
Automotive TATA Motors, Mahindra & Mahindra, Hero Motor Corp, Bajaj Industries
Pharmaceuticals Cipla, Serum Institute, Sun Pharma
Telecom Airtel, Reliance Jio, TATA Communications
What is Working Capital: Importance and Types
What is Working Capital: Importance and Types
Working capital is a financial metric that represents the operating liquidity that is available to the business, organization, or any entity. The management of the working capital involves managing inventories,...read more
What is Hedging: Types, Advantages and Disadvantages
What is Hedging: Types, Advantages and Disadvantages
Hedging refers to a risk management strategy that is meant to protect future prices or to limit losses. It involves buying and selling investments to reduce the risk of losing...read more
What is Multiplexing: Need, Types and Advantages
What is Multiplexing: Need, Types and Advantages
The process through which multiple signals are transmitted over a physical medium is called as multiplexing. It is a method in computer networks that is used for merging and transmitting...read more

List of Top Product-Based Companies

Domain Company Name
Technology Apple, Microsoft, Google, Meta, Netflix
Consumer Goods P&G, Nestle, Coca-Cola, PepsiCo
Automotive Toyota, Ford, General Motors, Volkswagen
Pharmaceuticals Pfizer, Johnson & Johnson, Novartis
Financial Services JP Morgan & Chase, McKinsey, Wells Fargo 

What is a Service-Based Company?

A company that works on a pre-existing product to improve the quality of the product or any specific service to clients (or customers) is known as a service-based company. These companies aim to provide expertise and add value to their client business in exchange for fees. 

Service-based companies have limited scalability, as service is more time-intensive and requires personalized attention than selling a product. These companies offer services ranging from consulting and coaching services to marketing and design services.

Corporate Communication: Importance and Types
Corporate Communication: Importance and Types
Corporate communication is an important part of communication that orchestrates internal as well as external communications that create a favourable point of view among stakeholders.
Understanding Bad Debts Journal Entry
Understanding Bad Debts Journal Entry
Bad debt is an amount of money that the creditor should write off as a result of a default on the debtor’s part. When the creditor has bad debt on...read more
What is Bank Reconciliation Statement?
What is Bank Reconciliation Statement?
Bank reconciliation statement consists of records of all deposits, withdrawals as well as financial activities with bank over a specific period of time. It acts as a useful tool for...read more

List of Top Service-Based Companies in India

Domain Company Name
Information Technology TCS, Infosys, HCL, Tech Mahindra, Infosys, Wipro 
Consulting KPMG, Delloite, PwC, 
Engineering & Construction Larsen & Turbo
Banking & Finance ICICI, HDFC,  SBI
Hospitality OYO

List of Top Service-Based Companies

Domain Company Name
Information Technology IBM, Cognizant, Accenture, Capgemini, 
Financial Services Visa, Master Card, American Express, Delloite, 
Hospitality Marriott International, Airbnb
Transportation Uber, Lyft
What is Fixed Capital: Types and Importance
What is Fixed Capital: Types and Importance
Fixed capital is a portion of total capital outlay invested into fixed assets that remain permanently within the business for at least one period of accounting. The circulation of this...read more
Understanding the Difference Between Working Capital and Fixed Capital
Understanding the Difference Between Working Capital and Fixed Capital
Both working capital and fixed capital are required for the smooth business operations. If the business lacks any of these two, it will directly impact the operations. In this article,...read more
Difference Between Banking and Finance Industries
Difference Between Banking and Finance Industries
In this article, we will be discussing the main differences between the banking and finance industries in detail. Finance is about how people and businesses manage their money—saving, spending, and...read more

What are the Key Differences Between Product-Based Companies and Service-Based Companies?

  • Product-based companies focus on creating and selling a physical or digital product. In contrast, service-based companies provide services to their clients in exchange for fees.
  • Generally, product-based companies have a high potential for scalability, while service-based companies have limited potential for scalability.
  • Product-based companies invest highly in research & development and marketing to create and sell the product, whereas service-based companies require a less upfront investment.
  • Regarding the learning curve, it is good in a product-based company. But in service-based companies, the learning curve is average.

Conclusion

In this article, we have discussed the differences between product-based and service-based companies on different parameters. Hope you will like the article.

Happy learning!!

FAQs

What is a product-based company?

A company that creates and sell their own products (physical or digital). These can include anything from technology, food, or clothing. Examples: Naukri, Zomato, 99 Acre

What is a service-based company?

A company that works on the existing product depends on the need of its clients. These can include anything from consulting and professional services to home repair and cleaning services. Example: TCS, Infosys

What are the differences between a product-based company and a service-based company?

The major difference between the product and service-based company is the type of service they are offering. Product and service-based companies create and sell their own products, whereas service-based companies provide intangible services.

About the Author
author-image
Vikram Singh
Assistant Manager - Content

Vikram has a Postgraduate degree in Applied Mathematics, with a keen interest in Data Science and Machine Learning. He has experience of 2+ years in content creation in Mathematics, Statistics, Data Science, and Mac... Read Full Bio