Service (business)

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Business services are a recognisable subset of economic services, and share their characteristics. The essential difference is that businesses are concerned about the building of service systems in order to deliver value to their customers and to act in the roles of service provider and service consumer. [1]

Contents

Definition

A service is a set of one-time consumable and perishable benefits that are:

Service specification

Any service can be clearly and completely, consistently and concisely specified by means of the following 12 standard attributes which conform to the MECE principle (mutually exclusive, collectively exhaustive):

Service-commodity goods continuum

Service-Commodity Goods continuum Service-goods continuum.png
Service-Commodity Goods continuum

There has been a long academic debate on what makes services different from goods. The historical perspective in the late-eighteen and early-nineteenth centuries focused on creation and possession of wealth. Classical economists contended that goods were objects of value over which ownership rights could be established and exchanged. Ownership implied tangible possession of an object that had been acquired through purchase, barter or gift from the producer or previous owner and was legally identifiable as the property of the current owner.

Adam Smith’s book The Wealth of Nations, published in Great Britain in 1776, distinguished between the outputs of what he termed "productive" and "unproductive" labor. The former, he stated, produced goods that could be stored after production and subsequently exchanged for money or other items of value. The latter, however useful or necessary, created services that perished at the time of production and therefore did not contribute to wealth. Building on this theme, French economist Jean-Baptiste Say argued that production and consumption were inseparable in services, coining the term "immaterial products" to describe them.

Most modern business theorists see a continuum with pure service on one terminal point and pure commodity good on the other terminal point. [2] Most products fall between these two extremes. For example, a restaurant provides a physical good (the food), but also provides services in the form of ambience, the setting and clearing of the table, etc. And although some utilities actually deliver physical goods — like water utilities which actually deliver water — utilities are usually treated as services.

In a narrower sense, service refers to quality of customer service: the measured appropriateness of assistance and support provided to a customer. This particular usage occurs frequently in retailing.

Economic services

Economic services that are recognised in practice are listed in economic services.

See also

Related Research Articles

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The tertiary sector of the economy, generally known as the service sector, is the third of the three economic sectors in the three-sector model. The others are the primary sector and the secondary sector (manufacturing).

<span class="mw-page-title-main">Public utility</span> Entity which operates public service infrastructure

A public utility company is an organization that maintains the infrastructure for a public service. Public utilities are subject to forms of public control and regulation ranging from local community-based groups to statewide government monopolies.

In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. A typical example is the machinery used in a factory. At the macroeconomic level, "the nation's capital stock includes buildings, equipment, software, and inventories during a given year."

<span class="mw-page-title-main">Service (economics)</span> Activity for which payment is due

A service is an act or use for which a consumer, firm, or government is willing to pay. Examples include work done by barbers, doctors, lawyers, mechanics, banks, insurance companies, and so on. Public services are those that society as a whole pays for. Using resources, skill, ingenuity, and experience, service provider's benefit service consumers. Services may be defined as intangible acts or performances whereby the service provider provides value to the customer.

Information goods are commodities that provide value to consumers as a result of the information it contains and refers to any good or service that can be digitalized. Examples of information goods includes books, journals, computer software, music and videos. Information goods can be copied, shared, resold or rented. Information goods are durable and thus, will not be destroyed through consumption. As information goods have distinct characteristics as they are experience goods, have returns to scale and are non-rivalrous, the laws of supply and demand that depend on the scarcity of products do not frequently apply to information goods. As a result, the buying and selling of information goods differs from ordinary goods. Information goods are goods whose unit production costs are negligible compared to their amortized development costs. Well-informed companies have development costs that increase with product quality, but their unit cost is zero. Once an information commodity has been developed, other units can be produced and distributed at almost zero cost. For example, allow downloads over the Internet. Conversely, for industrial goods, the unit cost of production and distribution usually dominates. Firms with an industrial advantage do not incur any development costs, but unit costs increase as product quality improves.

The theory of consumer choice is the branch of microeconomics that relates preferences to consumption expenditures and to consumer demand curves. It analyzes how consumers maximize the desirability of their consumption, by maximizing utility subject to a consumer budget constraint. Factors influencing consumers' evaluation of the utility of goods include: income level, cultural factors, product information and physio-psychological factors.

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Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acquire the goods, the manufacturing cost, the marketplace, competition, market condition, brand, and quality of product.

<span class="mw-page-title-main">Services marketing</span> Branch of marketing specialised in services

Services marketing is a specialized branch of marketing which emerged as a separate field of study in the early 1980s, following the recognition that the unique characteristics of services required different strategies compared with the marketing of physical goods.

<span class="mw-page-title-main">Goods</span> Tangible or intangible things that satisfy human wants and can be transferred

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<span class="mw-page-title-main">Goods and services</span> Products and actions made and done to meet the wants and needs of people

Goods are items that are usually tangible, such as pens or apples. Services are activities provided by other people, such as teachers or barbers. Taken together, it is the production, distribution, and consumption of goods and services which underpins all economic activity and trade. According to economic theory, consumption of goods and services is assumed to provide utility (satisfaction) to the consumer or end-user, although businesses also consume goods and services in the course of producing other goods and services.

SERVQUAL is a multi-dimensional research instrument designed to capture consumer expectations and perceptions of a service along five dimensions that are believed to represent service quality. SERVQUAL is built on the expectancy–disconfirmation paradigm, which, in simple terms, means that service quality is understood as the extent to which consumers' pre-consumption expectations of quality are confirmed or disconfirmed by their actual perceptions of the service experience. When the SERVQUAL questionnaire was first published in 1985 by a team of academic researchers, A. Parasuraman, Valarie Zeithaml and Leonard L. Berry to measure quality in the service sector, it represented a breakthrough in the measurement methods used for service quality research. The diagnostic value of the instrument is supported by the model of service quality which forms the conceptual framework for the development of the scale. The instrument has been widely applied in a variety of contexts and cultural settings and found to be relatively robust. It has become the dominant measurement scale in the area of service quality. In spite of the long-standing interest in SERVQUAL and its myriad of context-specific applications, it has attracted some criticism from researchers.

Customer satisfaction is a term frequently used in marketing to evaluate customer experience. It is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals." Enhancing customer satisfaction and fostering customer loyalty are pivotal for businesses, given the significant importance of improving the balance between customer attitudes before and after the consumption process.

The following outline is provided as an overview of and topical guide to marketing:

In marketing, a company’s value proposition is the full mix of benefits or economic value which it promises to deliver to the current and future customers who will buy their products and/or services. It is part of a company's overall marketing strategy which differentiates its brand and fully positions it in the market. A value proposition can apply to an entire organization, parts thereof, customer accounts, or products and services.

Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defect to another product or business, or to non-use entirely. Selling organizations generally attempt to reduce customer defections. Customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship and successful retention efforts take this entire lifecycle into account. A company's ability to attract and retain new customers is related not only to its product or services, but also to the way it services its existing customers, the value the customers actually perceive as a result of utilizing the solutions, and the reputation it creates within and across the marketplace.

Service quality (SQ), in its contemporary conceptualisation, is a comparison of perceived expectations (E) of a service with perceived performance (P), giving rise to the equation SQ = P − E. This conceptualistion of service quality has its origins in the expectancy-disconfirmation paradigm.

<span class="mw-page-title-main">Service blueprint</span> Technique originally used for service design

The service blueprint is an applied process chart which shows the service delivery process from the customer's perspective. The service blueprint is one of the most widely used tools to manage service operations, service design and service.

Operations management for services has the functional responsibility for producing the services of an organization and providing them directly to its customers. It specifically deals with decisions required by operations managers for simultaneous production and consumption of an intangible product. These decisions concern the process, people, information and the system that produces and delivers the service. It differs from operations management in general, since the processes of service organizations differ from those of manufacturing organizations.

Consumer value is used to describe a consumer's strong relative preference for certain subjectively evaluated product or service attributes.

Economists and marketers use the Search, Experience, Credence (SEC) classification of goods and services, which is based on the ease or difficulty with which consumers can evaluate or obtain information. These days most economics and marketers treat the three classes of goods as a continuum. Archetypal goods are:

References

  1. AXELOS (29 July 2011). ITIL Service Strategy. AXELOS. ISBN   9780113313044.
  2. Anders Gustofsson and Michael D. Johnson, Competing in a Service Economy (San Francisco: Josey-Bass, 2003), p.7.