Services can be distinguished from products along the following dimensions: tangibility, perishability, heterogeneity, and separability. Let us discuss each of these in turn.
Perishability: Services are perishable and cannot be stored for later use. They must be provided at the time they are needed, or they are lost forever. Products can be stored for later use.
Heterogeneity: Services are characterized by high heterogeneity. They are often customized to meet the needs of individual customers, which means they can vary in quality. Products are often mass-produced, which means they are generally uniform in quality. Products are therefore termed as homogeneous.
Separability: Services are and produced and consumed simultaneously, which means the customer is often present during the service delivery process. This is why services are considered to be inseparable. In contrast, products are separable, Products can be produced and consumed at different times. The customer does not need to be present during the production process.
However, it must be noted that most offerings are neither pure products nor services. Most offerings fall somewhere between pure products and pure services on the product-service continuum. For example, a hotel offers both a physical place to stay (a product) and services such as housekeeping and a continental breakfast (services).
Business model innovation opportunities emerge when a company considers how to make their offering more product-like or more service-like along the four key dimensions of tangibility, perishability, heterogeneity, and separability. In doing so, companies can create new business model innovations that differentiate their offering from competitors and meet the changing needs of their customers.
For example, a company that sells a physical product, such as a washing machine, may consider adding a service component, such as a subscription for regular maintenance and repair. This would make the offering more service-like, as the customer would be paying for a service in addition to the physical product. On the other hand, a company that provides a service, such as lawn care, may consider adding a product component, such as selling fertilizers and other lawn care products to customers. This would make the offering more product-like, as the customer would be purchasing a physical product in addition to the service.
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