Business services are a wide range of tasks and activities that are performed in order to keep a company going. They are not directly related to manufacturing or selling goods, but they help maintain a company’s profitability and growth. These services include information technology, which supports many other business services like procurement, finance and shipping.
They are a recognisable subset of economic services, and share many of the characteristics that distinguish them from products. The essential difference is that businesses are concerned with building service systems in order to deliver value to their customers and to act in the role of service provider and service consumer.
Unlike products, which are produced and sold in physical form, services cannot be stored for future use. They must be provided exclusively every time. This is because consumers do not expect them to be stored in a warehouse for long periods of time.
This means that the service must be delivered in the present, and the provider must be able to respond quickly to changes in demand and expectations. In addition, the provider must be able to meet the expectations of a wide variety of different consumers.
There are four basic elements of service design: the product, customer interaction, operational processes and service quality. Successful service businesses have a working plan that incorporates all of these elements.
The product component of the service is usually an important element of business success, as it can lead to market differentiation. A service that produces a very high-quality product is likely to have a better brand name identification than one that offers mediocre quality. It is also likely to have more brand awareness and more repeat sales.
Typically, customers will pay more for a high-quality product than for an average product. However, this is often difficult to determine because customers do not have a direct incentive to compare prices. They will usually choose the product that best fits their needs and budget, so it is difficult to establish pricing strategies.
In contrast, service delivery involves a much smaller set of factors that influence price. The customers themselves are an important part of the process, and their input can have a significant effect on service quality. For example, an architectural firm’s client may explain the purpose of a new facility well or poorly, which can affect the efficiency and quality of the design process.
These factors, coupled with competition, can make it difficult to build competitive advantage in the service business. Consequently, service companies must be careful to develop a strong reputation for the quality of their service.
They must also be able to provide their services in a way that is convenient for their customers. For example, a TV repairperson must be able to work in the customer’s home instead of in the shop.
Despite these obstacles, service businesses remain a large and growing part of the economy. In fact, they account for 11% of EU GDP. They are crucial to European competitiveness and they are increasingly used in combination with goods to create a new’servitisation’ of the economy.