It used to be that when you opened up your wallet, you knew whether you were buying a product or a service. New pair of shoes? Product. Haircut? Service. Trip to Disney World? Service. Mickey Mouse T-Shirt? Product.
Knowing what you're getting is important for setting your expectations as a customer. If you're buying a product you don't expect the seller to do much other than deliver it and fix it if it breaks, and you get to continue enjoying the product until it's either used up or worn out.
When you buy a service you expect the seller to do something for you. This could be one time or an ongoing basis, but you generally expect to keep paying as long as the seller is providing the service. Once you stop buying the service (or the seller has fulfilled their obligation) you aren't entitled to keep getting the service.
One of the joys of living in the 21st century is that we now have consumer products that are both products and services, thanks to the Internet and smart devices. That lightbulb you just bought from Home Depot might actually be a "smart" lightbulb which requires ongoing services provided by the manufacturer in order to deliver all the features listed on the box. And if the manufacturer decides to stop providing the services, the lightbulb stops working.
That may sound like a made-up example, but it literally happened this summer. "Connected by TCP" brand lightbulbs, sold by Home Depot among other places, needed to connect to an online service provided by the manufacturer in order to do all the cool things the box said they would do. TCP decided it was no longer worth providing the service, so they shut it down on June 1st, and all those expensive "smart" lightbulbs (as of today, still for sale for $137/pair) instantly became a whole lot dumber.
This is a customer experience nightmare. The company has done a terrible job of setting expectations about what exactly customers are buying. It sits on the shelf at Home Depot just like any other lightbulb, looking and acting like a consumer product, but what customers are actually getting is a product plus an embedded service, and neither the product nor the service is fully functional without the other.
This is also not the first time a "smart" product was crippled or completely disabled when the manufacturer decided to stop providing the hidden service that made it work. Nor will it be the last. As these incidents keep happening, I expect the negative customer experiences to taint the whole market for adding smarts to ordinary consumer products. Most consumers will not be willing to buy "smart" lightbulbs, thermostats, refrigerators, and other devices when they know the manufacturer might not be willing to keep supporting the product for its entire expected lifespan.
To get past this, manufacturers of "smart" products need to make sure that customers are guaranteed a good customer experience even if the company isn't around to provide it. That probably means a combination of setting customer expectations ("Comes with five years of service included!" makes it clear that the service is part of the product), and making better choices about how to deliver the embedded services.
Because the only thing more disappointing than buying a product that breaks, is buying a product that breaks because the manufacturer broke it.