Goods, services and types of market

Can one coffee machine, from one shelf, be two different kinds of product? A three-hundred-pound coffee machine sits in its box in a shop. If you take it home and make your morning latte with it, it is one kind of product. If a cafe owner buys the very same machine and uses it to sell two hundred coffees a day, it becomes a different kind. You might guess the cafe needs a bigger, special model, but it is the same box at the same price. So what changed? Hold on to that box, because the coffee machine comes back before the end.

Goods are physical products you can touch, such as a coffee machine, a loaf or a phone. Services are actions or tasks done for you, which you cannot touch or keep, such as a haircut, a train journey or a bank account. A cafe sells both. The coffee in the cup is a good, while making it and bringing it to your table is a service. If your course only asks you to tell goods from services, that first part is the one you need. The other pairs and the market types appear on some courses, so check your specification. A quick sort. Which of these is a service? A, a bicycle. B, a bike repair. C, a bike lock. B, the repair. It is a task done for you, and once it is finished, there is nothing you can pick up and keep apart from the bike you already owned.

Goods split again by who buys them and why. A consumer good is bought by a person for their own use. A producer good is bought by a business to make other goods or to provide services. That is what happened to the coffee machine. At home, it is a consumer good, because you bought it to use yourself. In the cafe, it is a producer good, because the owner bought it to make coffees to sell. An item is never always one or the other. Who buys it, and why, decides it. Now you try one. A supplier sells the same stand mixer to Mo, who bakes cakes for his family, and to Rise Up, a bakery making three hundred loaves a day. For which buyer is it a producer good? Rise Up. The bakery bought the mixer to make bread that it sells, so it helps produce other goods. Mo bakes for his own family and sells nothing, so his mixer is a consumer good. A second pair sorts goods by how long they last. A durable good lasts a long time and is used many times, such as a fridge, a bike, or that stand mixer. A non-durable good is used up quickly, or once, such as milk or shampoo. Now test the second pair. Is the flour Rise Up pours into its mixer durable or non-durable? Non-durable, because each bake consumes it. Which means, for Rise Up, the mixer is a one-off investment in its production, while the flour is a cost it pays again every week.

Services split into two kinds as well: personal services and commercial services. A personal service is provided directly to an individual customer, such as a hairdresser, a driving instructor or a dog groomer. Personal means for a person. It does not mean personalised or made to order: a cheap, standard haircut is still a personal service. A commercial service is provided to help businesses trade and operate, such as banking, insurance, transport and delivery, or advertising. So a personal service is done for an individual customer, while a commercial service helps a business do its business. Now sort two. A courier firm delivers parcels for online shops, and a dog walker walks people's dogs while they are at work. Which one is the commercial service? The courier. Its delivery work helps online shops trade. The dog walker works directly for individual customers, so that is a personal service. One examiner's report says students struggled with a personal service, and thought it meant personalised and bespoke. The report says the answer only needed to mention that the service was for a customer or a consumer. So the fix is to define a personal service by who receives it, an individual customer, and never by how special it is.

A market is where buyers and sellers meet, and markets are described in eight ways. Local, national and global describe how far a market reaches. A local market is customers in one town or area. A national market covers the whole country. A global market covers customers in many countries. Business-to-business, or B2B, means selling to other businesses, like a mill selling flour to bakeries. Business-to-consumer, or B2C, means selling to members of the public, like a high-street shoe shop. A mass market is a large market of many customers with similar wants, like toothpaste. A niche market is a small, specialised part of a market, like gluten-free bread or climbing shoes. Niche describes the market, not the business. A big supermarket chain selling a gluten-free range is a large business in a niche market. Now a quick one. A firm makes saddles for show-jumping horses and sells them across Europe. Mass or niche? Niche. Show-jumpers are a small, specialised part of the horse-riding market, even though the firm sells to them across a whole continent. The eighth type is a seasonal market, where sales happen mostly at certain times of year, like sun cream or fireworks. Frost and Fir is a Christmas tree farm in Powys. In December, families drive out from nearby towns to buy a tree, and it also supplies forty garden centres across Wales and England. Pause it there and work it out for yourself. Which three types of market does Frost and Fir sell into? Seasonal, because nearly every sale falls in a few weeks of the year. B2B, because its trade buyers are businesses that resell. And B2C, because it also sells straight to the public. Local and national would be right too: families from nearby towns, and garden centres across two countries. A business can sell into several markets at once. Being seasonal shapes the whole business. Frost and Fir takes nearly all its money in about six weeks, but it pays staff and land costs all year, which means December's money has to last until the next Christmas. One examiner's report calls spotting a seasonal market statistically the easiest question on its paper, with ninety-seven per cent of students getting it right. Know all eight types as well as that one, and those questions are yours too. Now one that uses everything. Lena runs a one-woman dog-grooming van. She drives to customers' homes and grooms their dogs on the driveway. Which two describe Lena's business? A, a personal service. B, a commercial service. C, a durable good. D, a business-to-consumer market. Pick two, then hold on to them. A and D. Lena serves individual dog owners directly, so it is a personal service, and her customers are members of the public, so she sells in a business-to-consumer market. Now the harder part, and it needs a reason. Why is B wrong for Lena? A commercial service helps businesses trade, like banking or delivery, and Lena's customers are households. C is wrong as well, because Lena sells a service, and her van is a good she uses, not what she sells. One examiner's report, on a question about a business serving the public, says the students who went wrong mostly thought it was providing a commercial service. The report reads that as a gap in knowing what a commercial service is. The fix is to ask who the customer is. Households mean a personal service, and businesses being helped to trade mean a commercial one.

Time for a recap, and every case in it is new.

A plumber fixes a leak in someone's kitchen. Good or service, and personal or commercial?

A service, and a personal one, because the plumber does a task directly for an individual customer.

Now a farmer buys a tractor. Consumer good or producer good, and why?

A producer good, because the farmer bought it to grow crops that are sold, not for personal use.

A different question. A firm sells most of its barbecue charcoal between May and August. Which type of market is that?

A seasonal market, because its sales happen mostly at one time of year.

Now say it in one line: what is a commercial service?

A commercial service is one that helps businesses trade and operate, such as banking, insurance or delivery.

Back to the coffee machine in its box. At home, it is a consumer good, bought for your own lattes. In the cafe, it is a producer good, bought to make coffees to sell. Nothing about the machine changed. The buyer and the purpose changed, and in both kitchens it is still a durable good.

If you could sort Lena's business without a second look, give this a thumbs-up, because that's in the bag. If not, save it, give it a day, and look again.

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