What Is an Example of an Intangible Good?
Most companies that sell goods sell tangible products. This ranges from construction products to home-care goods to agricultural products. However, with the rise of the telecommunications and technology sectors, more companies sell intangible products than ever before. Intangible goods differ from services. Although services often rely on intellectual know-how or other intangible goods or assets, a service is not a good in and of itself.
Intangible Good Defined
An intangible good is good that is not tangible, meaning it is a non-physical item that you typically cannot perceive by the senses. You cannot feel, smell, taste, hear or see it. The value of intangible goods derives from intellectual or legal rights and from the value they add to the other goods or assets. Intangible goods were less common in the industrial era but are relatively common in the digital era.
Intangible Goods Overview
Since intangible goods are not physical, they cannot be destroyed by acts of nature, although they can be expropriated, or taken over by a country's regime. Intangible goods and assets can be classified into two separate categories, limited life and unlimited life. Intangible goods with a limited life include copyrights and patents, which expire after a defined period of time. Intangible goods with an unlimited life include trademarks and knowledge, which never expire.
Uses of Intangible Goods
Intangible goods are assets but not considered inventory. Since their value can be hard to quantify, you typically cannot use them as collateral for loans. Your company can unlock the value of intangible goods through salable physical goods including use of copyrights to publish books, the use of patents to produce drugs or the use of name recognition to brand commodity products.
Copyrights and Reputation
An example of an intangible good is a copyright. A book or music that are licensed are tangible products, but the rights to them are intangible. As an author, artist or company, you can license your copyright to others and generate revenue from those licensing fees. Another example of an intangible good is reputation. If a company has a strong, positive reputation in one industry, it can help a company that has less visibility in that industry gain customers and revenues. This is typically done through co-marketing or co-branding, where one company leverages the reputation of another.
In today's world, much information is delivered over the Internet. As the world goes increasingly digital, the level of digital content increases. All of the digital content delivered over the Internet is intangible goods. This includes intellectual content delivered as e-books, downloadable music files and downloadable software. You can also convert intangible goods to services, including subscription services for software as a service,, which is accessible online as long as you pay the subscription fee.
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