Goods vs Services Overview

Goods

• A good is a tangible item that can be supplied to a buyer, transferring ownership from seller to buyer.

Services

• Services are intangible actions satisfying demands, not always tied to a product or service.
• Examples include banking and telecommunication services.

Features of Services

1. Intangibility

• Services cannot be touched. They are experiential.
• Service quality is often impossible to evaluate before consumption.
• Service providers strive to create a positive experience.

2. Inconsistency

• No typical tangible product exists; services are performed uniquely each time.
• Customers have varying needs and expectations.

3. Inseparability

• Simultaneous production and consumption make services inseparable
• Services must be used in the order they are created.
• Technology may be used to substitute human interaction, but it often remains fundamental.

4. Inventory

• Services cannot be saved for later use; they are perishable.
• Suppliers hold limited amounts of related commodities.
• Demand and supply must be regulated, as services must be provided when requested.
• Services cannot be completed and consumed later—they must be provided when needed.

5. Involvement

• A service characteristic is customer involvement in the delivery process.
• Customers can have services customized to meet their individual needs.

Difference between Goods and Services

• Goods are tangible, and services intangible.
• Goods are homogeneous or similar while services are heterogeneous.
• Goods can be produced/made before consumption.
• Services are produced during consumption.
• Inventory of goods can be stored but not services.

Nature

• Activities or processes (e.g., watching a movie).
• Physical objects (e.g., video cassette).

Type

• Heterogeneous (e.g., doctor treatment).
• Homogeneous (e.g., medicine).

Intangibility

• Intangible service (e.g., doctor treatment).
• Tangible good (e.g., medicine).

Inconsistency

• Different customers have different demands.
• Mobile phone services may vary across customers.

Inseparability

• Simultaneous production and consumption (e.g., eating ice cream).
• Separation of production and consumption (e.g., purchasing ice cream).

Inventory

• Cannot be kept in stock (e.g., train journey).
• Can be kept in stock (e.g., movie ticket).

Types of Services

1. Business Services

• Services used by businesses for daily operations.
• Examples include banking, insurance, & transportation services.

2. Social Services

• Services offered freely to achieve social goals.
• Example include raising living standards of the poor and improving health & sanitation in slums.

3. Personal Services

• Services that differ in how various clients receive them, and their nature is not always consistent.
• Examples include various tailored services.

Banking

• Banking companies lend and invest public funds, handling deposits and withdrawals and generating profit through lending.
• Banks operate on demand deposits and lending.

Types of Banks

• Commercial Banks, Cooperative Banks, Specialized Banks, and Central Banks are listed as types of banks.
• -These are further differentiated by their function and governing body.

Purpose of Banks

• Accepting deposits, lending or investing funds,.

Examples of Banks

• EXIM Bank, SIDBI, NABARD, RBI

Functions of Commercial Banks

1. Acceptance of Deposits

• Banks act as both lenders and borrowers—deposit operations are fundamental.
• Deposits may be current (withdrawable anytime) or fixed (time deposits with higher interest).
• Premature withdrawal may result in interest loss.

2. Cheque Facility

• Cheques are an advanced credit instrument and primary method of exchange.
• Bearer and crossed cheques differ in terms of their usage and disbursement rules.

3. Lending of Funds

• Banks provide loans and advances to customers from public deposits.

4. Remittances of Funds

• Transferring funds from one location to another using bank drafts, pay orders, and mail transfers. Commission charges may apply.

5. Allied Services

• Services like bill payment, locker facilities, and underwriting/share/debenture transactions are considered allied services.

E-Banking

• Online banking/ internet banking or e-banking enables customers to execute various financial transactions through a bank's website.
• It utilizes internet as the primary delivery mode.
• E-banking benefits include digital payments and financial transparency.

Insurance

• A contract where one party (insured) agrees to pay another (insurer) a premium for financial protection against certain risks.

Types of Insurance

• Life
• General (e.g., marine, fire, health, burglary, cattle, vehicle).

Basic Terminology

• Insured: The individual/entity covered by the insurance policy and exposed to a potential risk.
• Insurer: The party who agrees to bear the insurance risk, and agrees to pay if the insured loss occurs.
• Premium: The fee paid by the insured in return for insurance.
• Insurance Policy: The contract document outlining the terms of insurance.
• Sum Assured: The compensation amount paid out in the event of a certain loss.

Features of Insurance

• Insurance is a contract that exchanges a monthly premium (payment) for significant risk mitigation.

Functions of Insurance

1. Certainty

• Insurance minimizes risk and compensates for losses.
• Premium is charged for this certainty by the insurer.

2. Protection

• Protection against losses caused by specific events (e.g., fire, theft).
• Insurers reimburse the insured for incurred losses.

3. Risk Sharing

• Insurers pool risk from many policyholders.
• Insured parties contribute to a common fund to cover losses.

4. Capital Formation

• Insurers invest accumulated premiums in income-generating schemes.
• Funds facilitate economic growth and development.

Principles of Insurance

1. Utmost Good Faith

• Both insured and insurer act honestly and transparently.
• Full disclosure of relevant information is critical.
• Dishonesty can make a policy null and void.

2. Insurable Interest

• The insured must have a financial stake in the subject matter of the insurance.
• This is crucial in life or property insurance.

3. Indemnity

• Only compensation for actual loss/damage is allowed—no profit.
• Insurance aims to restore the insured to the pre-loss situation (i.e., pre-loss)
• Loss can only be reimbursed up to the maximum assured amount.

4. Proximate Cause

• If multiple causes are at play, the nearest or immediate cause is examined to determine the compensation liability.

5. Subrogation

• This principle applies when a negligent third party causes damage.
• Insurer's rights to pursue the third party and recover compensation for insured losses are often defined by the insurance contract.

6. Contribution

• If a loss is covered by multiple policies, insurers pay their share of the loss in accordance with the insured sums for the specific risks stated in their respective policies.

7. Mitigation of Loss

• The insured party has a responsibility to limit the loss, thereby reducing the claim amount.
• Insurance policies state requirements like prompt reporting to mitigate loss amount.

Warehousing Services

• Warehousing involves storage and handling of goods.
• Facilities can include consolidation, break-bulk, stockpiling, value-added services (e.g., packaging), and price stabilization.

Types of Warehouses

• Cooperative Warehouses (members of cooperative societies)
• Government Warehouses (operated/managed by the government)
• Bonded Warehouses (for imported goods requiring tax payment)
• Public Warehouses (open to any member of the public)
• Private Warehouses (owned and managed by private businesses)

Functions of Warehousing

• Consolidation - Combining multiple shipments.

• Break Bulk - Dividing large shipments into smaller ones.

• Balancing supply and demand - Storage buffers fluctuations, supporting timely shipment or consumer access.

• Stockpiling - Storing goods for future seasons.

• Value-Added Services - Adding value during storage.

• Price Stabilization - Keeping prices relatively stable, accommodating demand/supply trends.

• Financing - Financing warehousing operations; this is often done through loans.

Telecommunication Services

• Essential for economic and social development.
• Modern infrastructure is key (e.g., fibre optic cables).
• Types include cellular mobile, cable, fixed line, VSAT, and DTH (Direct-to-Home) services.

Postal Services

• A vital part of the Indian communication network offering widespread coverage.
• Services include mail, parcel, registration, and certain financial services.

Transportation Services

• Crucial for moving goods and people, effectively bridging distance.
• Includes freight services and various modes (road, rail, air, and sea).
• Supports and/or facilitates related services (e.g., insurance, logistics, and other related auxiliary services).

This quiz explores the differences between goods and services, including the key features of services such as intangibility, inconsistency, inseparability, and perishability. Test your understanding of these concepts and their implications in various industries.