Products vs. Services: Buy with Intention

Have you ever bought products or services from a new source and then felt disappointed? Was the expectation too high, or was the delivery too low? Today, we live in an experience-based economy. Delivering a defect-free product is no longer enough. Amazon and others figured this out and capitalized on making the buying event something we want to repeat. In this article, we will explain the difference between a product and a service and how contracts can help you buy with intention and enjoy your customer journey at every stage.

First, let's analyze the difference between a service and a product. The customer journey is different when buying products and services, though the functions may be the same. The basic functions are vendor selection, product selection, order placement, fulfillment, and payment.

Products and services represent the two main categories of offerings that businesses provide to consumers. Products are tangible items or goods that a consumer buys to own or use. These could range from electronics, clothes, and furniture to food items and automobiles. Products are typically standardized, produced in large quantities, and can be stored and used over time. 

On the other hand, services are intangible and are consumed at the point of sale. Services involve the provision of skills, knowledge, or efforts to satisfy a customer's need or want. Examples of services range from hairdressing, medical check-ups, and consultancy to facility management and transportation services. Unlike products, services are usually customized to the individual customer's needs and wants and cannot be stored or resold.

In the product vs service opposition, there are a few similarities between its components. Both are designed to satisfy the needs and wants of customers, and they require value exchange between the consumer and the business. The success of both products vs services depends on their quality, price, availability, and customer satisfaction level.

However, when comparing product versus service, key factors stand out:

So, in short, while the difference between product and services might appear vast, both play crucial roles in satisfying varied customer needs and wants. In the service versus product discussion, the goals remain the same — customers' satisfaction and fostering long-term business relationships.

Naturally, the customer journeys for services and specially made products are different. So, how to improve your customer journey when buying services or specially made products? The short answer is to buy with intention by using a written contract. Assuming that you selected the right vendor, there is no better way to receive a great customer experience than to get it in writing.

A key legal principle is "get it in writing." The English Parliament established the writing requirement in 1677 in the "Act for the Prevention of Frauds and Perjuries," which is better known as simply the "Statute of Frauds." Many statutes have attempted to promote this principle in modern commerce, including the Article 2 of the Uniform Commercial Code (UCC). For example, §2-201 says that deals involving the sale of goods with a value of $500 or more are unenforceable unless there is a signed written contract.

Legislators for centuries recognized that important contracts must be in writing. They have defined "important contracts" to include those involving real estate, personal guarantees, inheritance, and products with a value of at least $500. They have tried to guard against injustice that can occur from fading memories, missing witnesses, misunderstandings, fraud, or the rationalization of self-interest. 

Choose your vendors carefully. Scammers and fraudsters are working very hard to separate you from your money. I am not only referring to phishing farms, which is somewhat of a different issue. There are still plenty of unscrupulous vendors that try to lure you into making an unconditional obligation to pay without a corresponding obligation to perform. Without a professionally written contract that favors the buyer, you bear more risk.

Assuming that you pick an honest and ethical trading partner, casual conversation and oral agreements are far more likely to lead to problems, than with a professionally written contract. Does the contract clearly articulate expectations? Are key terms properly defined? Starting with a good template reduces the likelihood that you omit a material term or that ambiguous language will lead to a misunderstanding.

A client once told me that the ideal contract is one that goes in the drawer after it is signed and never looked at again. In business-to-business (B2B) transactions, I certainly agree. One of the wonderful things about B2B is that parties develop long-term, mutually beneficial relationships over years of doing countless transactions. Everyone knows the rules and follows them to the best of their ability.

However, different stuff may happen, like hurricanes, pandemics, global supply chain shortages, product defects, and vehicle crashes. That is when it may be necessary to pull out that written contract, which was signed years ago, and figure out what to do because nobody remembers or was even around when the contract went into the drawer. Well-written contracts are more likely to deliver solutions. 

Vendors often are in a superior position in a transaction because it is what they do, and they have superior knowledge about all the aspects of the deal and what can go wrong. Therefore, most vendors will develop a written contract for you to sign.

At Waldrop & Colvin, we help vendors draft standard sales contracts, terms and conditions, credit agreements, website terms of use, privacy policies, etc. Our clients use them to manage their risk. Written contracts that we have drafted for current and former clients are used to transact over $10B per year. Some clients prefer their written contracts to be very one-sided. Others ask for a more balanced approach. I cannot recall a client asking for a sales contract that favors the buyer, unless they are the buyer.

Written contracts that favor your perspective will allow you to manage risk and get a better deal. Do-it-yourself templates are often great for lower-value and lower-risk deals. Many are written to allow non-lawyers to easily insert critical information that is necessary to get a good result.

When the stakes are high, or the deal is complex or unique, it often pays to invest in hiring an experienced commercial lawyer to assist. Experienced lawyers have learned the difference between service and product and how to spot good deals from failure and can guide clients accordingly. Whether you present the seller with your contract or need to review third-party paper, experienced commercial lawyers can deliver great value by customizing the contract to the deal or doing a redline of third-party paper to prepare for a negotiation. 

We are in an experience-based economy. Using a written contract for services and specially made goods allows you the best chance to actually get what you negotiate. The written contract allows you to buy with intention by defining the specifications of the product or service and articulating fulfillment requirements like a method of shipment and due date, along with payment terms. No matter which element of the services vs products discussion your deal concerns, having a well-drafted contract is always a good idea.