While many organisations offer both, the fundamental differences between services and physical goods often dictate vastly different managerial approaches. Richard Normann, among others, meticulously defined the core characteristics that set services apart, offering a crucial framework for effective service design and delivery. Understanding these distinctions becomes paramount for any business aiming for excellence in the service economy.

Firstly, services are inherently intangible. Unlike a tangible product such as a car or a book, a service cannot be seen, touched, or held before it is purchased or consumed. This intangibility presents unique challenges in marketing, as customers cannot physically inspect the offering. Consequently, service providers must focus on building trust, demonstrating competence, and providing tangible cues – such as clean facilities, professional staff, or clear communication – to assure quality.

Secondly, services are typically characterised by simultaneity of production and consumption. The service is often created and experienced at the very same moment. Consider a haircut or a consultation with a lawyer; the service is delivered as it is being consumed. This simultaneity means that the customer often participates in the production process, and the quality of the interaction directly impacts the perceived value. This characteristic also limits the ability to stockpile or inventory services, unlike physical goods.

Thirdly, services exhibit significant heterogeneity. The quality and experience of a service can vary from one instance to another, even when delivered by the same provider. A doctor's consultation might differ slightly depending on the patient's specific needs, or a hotel stay might feel different based on the specific room or staff encountered. This variability arises from the human element in service delivery and the unique circumstances of each service encounter. Managing heterogeneity requires rigorous training, standardised processes where appropriate, and robust quality control mechanisms.

Finally, services are perishable. They cannot be stored, saved, or resold once the moment for their delivery has passed. An empty seat on an aeroplane or an unused hour of a consultant's time represents lost revenue that cannot be recouped. This perishability necessitates effective capacity management and demand forecasting to match supply with demand, minimising wasted resources and maximising revenue.

Recognising and actively managing these four fundamental characteristics – intangibility, simultaneity, heterogeneity, and perishability – empowers organisations to move beyond a product-centric mindset. It enables them to design more effective service processes, train their personnel appropriately, and ultimately create superior customer experiences in a world increasingly defined by service interactions.