Service (economics)

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A hotel porter is an example of a service-related occupation. Portier mit Zylinder.JPG
A hotel porter is an example of a service-related occupation.

A service is an "(intangible) act or use for which a consumer, firm. or government is willing to pay." [1] Examples include work done by barbers, doctors, lawyers, mechanics, banks, insurance companies, and so on. Public services are those that society (nation state, fiscal union or region) as a whole pays for. Using resources, skill, ingenuity, and experience, service providers benefit service consumers. Service is intangible in nature. Services may be defined as acts or performances whereby the service provider provides value to the customer.

Contents

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.

Two I's

Services can be described in terms of I's. [2]

Intangibility

Services are by definition intangible. They are not manufactured, transported or stocked.

One cannot store services for future use. They are produced and consumed simultaneously.

Perishability

Services are perishable in two regards:

The service provider must deliver the service at the exact time of service consumption. The service is not manifested in a physical object that is independent of the provider. The service consumer is also inseparable from service delivery. Examples: The service consumer must sit in the hairdresser's chair, or in the airplane seat. Correspondingly, the hairdresser or the pilot must be in the shop or plane, respectively, to deliver the service.

Inconsistency (variability)

Each service is unique. It can never be exactly repeated as the time, location, circumstances, conditions, current configurations and/or assigned resources are different for the next delivery, even if the same service is requested by the consumer. Many services are regarded as heterogeneous and are typically modified for each service-consumer or for each service-context. [3] Example: The taxi service which transports the service consumer from home to work is different from the taxi service which transports the same service consumer from work to home – another point in time, the other direction, possibly another route, probably another taxi-driver and cab. Another and more common term for this is heterogeneity.

Service quality

Mass generation and delivery of services must be mastered for a service provider to expand. This can be seen as a problem of service quality. Both inputs and outputs to the processes involved providing services are highly variable, as are the relationships between these processes, making it difficult to maintain consistent service quality. Many services involve variable human activity, rather than a precisely determined process; exceptions include utilities. The human factor is often the key success factor in service provision. Demand can vary by season, time of day, business cycle, etc. Consistency is necessary to create enduring business relationships.

Specification

Any service can be clearly and completely, consistently and concisely specified by means of standard attributes that conform to the MECE principle (Mutually Exclusive, Collectively Exhaustive).

Delivery

Coffee house - a type of service delivery. StarbucksVaughanMills.JPG
Coffee house - a type of service delivery.

The delivery of a service typically involves six factors:

The service encounter is defined as all activities involved in the service delivery process. Some service managers use the term "moment of truth" to indicate that point in a service encounter where interactions are most intense.

Many business theorists view service provision as a performance or act (sometimes humorously referred to as dramalurgy, perhaps in reference to dramaturgy). The location of the service delivery is referred to as the stage and the objects that facilitate the service process are called props. A script is a sequence of behaviors followed by those involved, including the client(s). Some service dramas are tightly scripted, others are more ad lib. Role congruence occurs when each actor follows a script that harmonizes with the roles played by the other actors.

In some service industries, especially health care, dispute resolution and social services, a popular concept is the idea of the caseload, which refers to the total number of patients, clients, litigants, or claimants for which a given employee is responsible. Employees must balance the needs of each individual case against the needs of all other current cases as well as their own needs.

Under English law, if a service provider is induced to deliver services to a dishonest client by a deception, this is an offence under the Theft Act 1978.

Lovelock used the number of delivery sites (whether single or multiple) and the method of delivery to classify services in a 2 x 3 matrix. Then implications are that the convenience of receiving the service is the lowest when the customer has to come to the service and must use a single or specific outlet. Convenience increases (to a point) as the number of service points increase.

Service-commodity goods continuum

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

The distinction between a good and a service remains disputed. The perspective in the late-eighteenth 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 famous book, The Wealth of Nations , published 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 describe a continuum with pure service on one terminal point and pure commodity good on the other. [4] 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 that deliver water — utilities are usually treated as services.

Service types

The following is a list of service industries, grouped into sectors. Parenthetical notations indicate how specific occupations and organizations can be regarded as service industries to the extent they provide an intangible service, as opposed to a tangible good.

List of countries by tertiary output

Service output as a percentage of the top producer (USA) as of 2005 2005gdpServices.png
Service output as a percentage of the top producer (USA) as of 2005

Below is a list of countries by service output at market exchange rates at peak level as of.

20 largest Countries by Tertiary Output (in nominal terms) according to IMF and CIA World Factbook, at peak level as of 2018
Economy
Countries by tertiary output (in nominal terms) at peak level as of 2018 (billions in USD)
(01) Flag of the United States.svg  United States
16,451
(—) Flag of Europe.svg  European Union
13,616
(02) Flag of the People's Republic of China.svg  China
7,025
(03) Flag of Japan.svg  Japan
4,299
(04) Flag of Germany.svg  Germany
2,792
(05) Flag of the United Kingdom.svg  United Kingdom
2,481
(06) Flag of France.svg  France
2,284
(07) Flag of Brazil.svg  Brazil
1,903
(08) Flag of Italy.svg  Italy
1,775
(09) Flag of India.svg  India
1,654
(10) Flag of Russia.svg  Russia
1,431
(11) Flag of Canada (Pantone).svg  Canada
1,294
(12) Flag of Spain.svg  Spain
1,219
(13) Flag of Australia (converted).svg  Australia
1,101
(14) Flag of South Korea.svg  South Korea
965
(15) Flag of Mexico.svg  Mexico
841
(16) Flag of the Netherlands.svg  Netherlands
669
(17) Flag of Turkey.svg  Turkey
584
(18) Flag of Switzerland.svg   Switzerland
523
(19) Flag of Indonesia.svg  Indonesia
466
(20) Flag of Belgium (civil).svg  Belgium
415

The twenty largest countries by tertiary output (in nominal terms) at peak level as of 2018, according to the IMF and CIA World Factbook.

See also

Related Research Articles

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Services marketing 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.

An application service provider (ASP) is a business providing computer-based services to customers over a network; such as access to a particular software application using a standard protocol.

Goods Tangible or intangible things that satisfy human wants and can be transferred

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Information technology service management (ITSM) are the activities that are performed by an organization to design, build, deliver, operate and control information technology (IT) services offered to customers.

Goods and services Products and actions made and done to meet the wants and needs of people

Goods are items that are usually tangible, such as pens, physical books, salt, apples, and hats. Services are activities provided by other people, who include doctors, lawn care workers, dentists, barbers, waiters, or online servers, a digital book, a digital video game or a digital movie. 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.

A value network is a graphical illustration of social and technical resources within/between organizations and how they are utilized. The nodes in a value network represent people or, more abstractly, roles. The nodes are connected by interactions that represent deliverables. These deliverables can be objects, knowledge or money. Value networks record interdependence. They account for the worth of products and services. Companies have both internal and external value networks.

A service delivery platform (SDP) is a set of components that provides a service(s) delivery architecture for a type of service delivered to consumer, whether it be a customer or other system. Although it is commonly used in the context of telecommunications, it can apply to any system that provides a service. Although the TM Forum (TMF) is working on defining specifications in this area, there is no standard definition of SDP in industry and different players define its components, breadth, and depth in slightly different ways.

Financial Management for IT Services is a Service Strategy element of the ITIL best practice framework. The aim of this ITIL process area is to give accurate and cost effective stewardship of IT assets and resources used in providing IT Services. It is used to plan, control and recover costs expended in providing the IT Services negotiated and agreed to in a service-level agreement (SLA).

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A value proposition is a promise of value to be delivered, communicated, and acknowledged. It is also a belief from the customer about how value (benefit) will be delivered, experienced and acquired.

Cloud computing Form of shared Internet-based computing

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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.

Service blueprint

The service blueprint is a technique originally used for service design, but has also found applications in diagnosing problems with operational efficiency. The technique was first described by G. Lynn Shostack, a bank executive, in the Harvard Business Review in 1984. The service blueprint is an applied process chart which shows the service delivery process from the customer's perspective. The service blueprint has become one of the most widely used tools to manage service operations, service design and service positioning.

Third-party logistics in logistics and supply chain management is an organization's use of third-party businesses to outsource elements of its distribution, warehousing, and fulfillment services.

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.

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.

References

  1. McConnell, Campbell R.; et al. (2009). Economics. Principles, Problems and Policies (PDF) (18th ed.). New York: McGraw-Hill. ISBN   978-0-07-337569-4. Archived from the original (PDF contains full textbook) on 6 October 2016., Glossary, p. G-25.
  2. Verma, Harsh V. (2011). Services Marketing: Text and Cases, 2/e. Pearson Education India. ISBN   978-81-317-5447-4.
  3. Harrison, Tina; Estelami, Hooman (5 December 2014). The Routledge Companion to Financial Services Marketing. ISBN   9781134095629.
  4. Anders Gustofsson and Michael D. Johnson, Competing in a Service Economy (San Francisco: Josey-Bass, 2003), p.7.

Further reading