Difference Between Product and Service Based Company

Difference Between Product and Service Based Company

Introduction

Deciding on a career path is a very crucial step in one’s life. While a few decide their dream companies since childhood, others do it on their journey. The number of options available is wide. One has to choose the type of company that best suits their ideologies and method of working. Primarily, companies are categorized as Product-based companies and Service-based companies. The dream companies of many people are equally categorized under both categories. They both differ in the type of tasks they undertake and methods of working. Nevertheless, their ultimate aim is to serve the consumers in every way possible. 

Let us understand what Product-based and Service-based companies are. How different are they in their ideologies? What makes them unique, and how can one opt for companies? 

What are Product-Based Companies? 

Product Based Companies
Product Based Companies

Product-based companies are the ones that are focused on producing or introducing products that have a high market value and are capable enough to satisfy the customer. The important aspect of these companies is to produce top-quality products. These companies constantly improve the products with new features and upgrades using different and new technologies that are at their disposal. 

How about understanding through an example? 

Imagine you enter the showroom of company XYZ to buy a pair of sneakers. The company asks you to fill in a survey form about their product, and you fill it. The next time you go to the same showroom, you’ll see a pair of sneakers that look similar to the feedback you gave. 

This is how product-based companies are. They constantly improve on the products to give better quality to the consumers. They identify what serves the consumers best and make sure to deliver them at the earliest. A few famous product-based companies are Amazon, Flipkart, McAfee, Adobe, etc.  

Pros and Cons of Product-Based Companies

Pros:

  • Scalability: Production is relatively easier and does not necessarily require additional employees, office space, etc. As the prototype would be ready, scaling up will not be a tedious task until money flows in for the development. 
  • Creativity: Although the customer’s view matters, the production of an entirely new product is still viable. Aligned with the company’s aim, an employee will have complete freedom to design something of their interest and push it towards the market. 
  • Ownership: A product, once sold, becomes the property of the consumer. However, the creator has the right to claim intellectual property for creating the product. 
  • Revenue: With the help of the marketing team and expertise, the creator can generate a lump sum of money on the products. 
  • High Valuation: With time and performance, the capital of the company increases drastically. A company whose initial investment is around 10000$ might value in millions. They involve public through Initial Public Offering(IPO) and let the public be a shareholder in their companies

Cons: 

  • Gamble: The risk involved in these types of companies is high. A new product launch may not be successful and deals a lot of loss to the company. 
  • Investment: Product-based companies require money upfront. They require investment from scratch until the product reaches the market.
  • Customer Service: The employees have to lend their ears to customers for constant feedback on their products. This can be time-consuming and delays the process of production. 
  • Monotonous Work: The employees who work in a product based company always work with the same role. There are very less chances of switching between domains. 

For more information on Product-Based Companies, Click here.

What are Service-Based Companies?

Service Based Company
Service Based Companies

Service-Based Companies are the ones that give customers or clients a solution in the form of amenities (any desirable feature), skills, and/or expertise based on their needs. The important aspect of this type of company is the client. They do not prepare anything specific before the problem arises at the client’s end. Their sole aim is to ensure that the service provided to the client is of the best quality. 

Let us understand this through an example. 

Say you run a company, and you require software to ensure that your work is automated to some extent. At such times, you can approach company ABC to consult and help you out with the same. ABC will come up with a solution that helps your company work smoothly. A few notable service-based companies are Infosys, Tata Consultancy Services, Wipro, Tech Mahindra, etc. 

Pros and Cons of Service-Based Companies

Pros: 

  • Initial investment: These kinds of companies do not need a high initial capital. They need to have enough money to handle the employees and overhead costs at the beginning. 
  • New things on the table: Every client comes up with a unique problem, and thus, the work does not remain monotonous. There is also a possibility of changing roles at regular intervals. 
  • Pre-existing Market: The number of people who need solutions never ends. The market is always open. The only thing is to be prepared to deliver at any point. 

Cons: 

  • Scalability: The scalability factor is low in service-based companies. The revenue is directly dependent on the billable hours and thus is slightly tedious to scale up if the initial investment is less. 
  • Creativity: The space to be creative is less. The employees need to stick to the requirements of the clients and work as per their instructions. 
  • Client Meetings: Frequent meetings with the client and changes consumes a lot of time. This can turn in working overtime to complete the work on time. 
  • Revenue: The revenue goes to a halt once the service is delivered and the next need arises. The more the short-term service, the lesser the revenue. 

For more information on Service-Based Companies, Click here. 

Difference between Product-based and Service-based Companies

Product Based Vs Service Based Companies
Product-Based CompaniesService-Based Companies
These are companies that produce products of their own and sell them to consumers through the market. These are companies that provide services when clients or companies approach them. 
The products are produced well in advance. The service is provided only after the initial meetings with the client. 
They hire a very limited number of candidates for their work. They hire candidates in mass. 
The salary is high and salary hikes happen on a regular basis. The salary is low and the hike is not seen often. 
The interview rounds are complex and consist of multiple rounds of interviews and tests. The interview is relatively easier and consists of very few interviews. 
Working is only in a single domain and role switching is almost not possible. Working happens in different domains and role switching is relatively easy. However, sticking to one domain is difficult. 
Job security is relatively high. Job security is relatively low.
The economic growth has declined over the years. The economic growth has increased steadily over years. 
Invests a lot of revenue in advertising and marketing. Invests very little in marketing and directly contacts clients. 
They have a quick turnaround time as consumers buy their products instantaneously. The turnaround time is low and depends on the consumer’s requirements. 
Example: Google, Microsoft, etc. Example: Wipro, Infosys, etc. 

Conclusion

There is an ocean full of companies and opportunities for one to get into. Depending on the interests, one can decide which among these two categories they need. While product-based companies seem to pay a lot, there isn’t much work diversity. On the other hand, service-based companies contribute well to the economy with very tight working conditions. Both the categories have their ups and downs. One needs to understand the motive of the company, see if it aligns with their ideology, and then decide on where to step in. 

Frequently Asked Questions

Q: Which are the few best product-based companies?
A: Product-based companies are dream companies for many programmers. A few popular ones are Google, Microsoft, Adobe, Hewlett-Packard, Intel, etc.

Q: Which are the few best service-based companies?
A: Notable Service-based companies include Infosys, Tata Consulting Service, Wipro, Tech Mahindra, etc. 

Q: How is the culture in a product-based company?
A: The culture of a product-based company is employee-friendly. They provide flexible work hours, work from home, and non-corporate activities to reduce the stress of the employees.

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