Service

In economics, a service is the non-material equivalent of a good. Service provision has been defined as an economic activity that does not result in ownership, and this is what differentiates it from providing physical goods. It is claimed to be a process that creates benefits by facilitating either a change in customers, a change in their physical possessions, or a change in their intangible assets.

By supplying some level of skill, ingenuity, and experience, providers of a service participate in an economy without the restrictions of carrying stock (inventory) or the need to concern themselves with bulky raw materials. On the other hand, their investment in expertise does require marketing and upgrading in the face of competition which has equally few physical restrictions.

Table of contents
1 Key attributes
2 Service Delivery
3 The Service-Goods Continuum
4 Examples of economic services
5 See Also:
6 Finding related topics

Key attributes

Services are said to have several key attributes:

  • Intangibility - They cannot be seen, handled, smelled, etc. There is no need for storage. Because they are difficult to conceptualize, services marketing requires creative visualizations to effectively make the intangible more concrete. From the customers point of view, this makes it difficult to evaluate or compare services prior to experiencing the service.
  • Perishability - Unsold service time is "lost", that is, it cannot be regained. It is a lost economic opportunity. For example a doctor that is booked for only two hours a day can never regain that economic opportunity.
  • Lack of transportability - Services must be consumed at the point of "production".
  • Lack of standardization - Services are typically custom designed for each client or each new situation. Mass production of services is very difficult. This can be seen as a problem of inconsistent quality. Both inputs and outputs are highly variable making it difficult to maintain consistent quality.
  • Labour intensity - Services usually involve considerable human activities. Human resource management is important. The human factor is often the key success factor in service industries. It is difficult to achieve economies of scale or gain dominant market share.
  • Demand fluctuations - It is very difficult to estimate demand. Demand can vary by season, time of day, business cycle, etc.
  • Buyer involvement - Most service provision requires a high degree of interaction between client and service provider.

Service Delivery

The delivery of a service typically involves five factors:

  • The service providers (people)
  • Equipment used to provide the service
  • The physical facilities (building, parking,waiting rooms, ect.)
  • The client
  • Other customers at the service delivery location
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 defining point in a specific service encounter where interactions are most intense.

Many business theorists view service provision as a performance or act (sometimes referred to as dramalurgy). 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 behaviours followed by all 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.


Service-Goods continuum

The Service-Goods Continuum

The dichotomy between physical goods and intangible services should not be given too much credence. These are not discrete categories. Most business theorists see a continuum with pure service on one terminal point and pure commodity good on the other terminal point. Most products fall between these two extremes. For example, a restaurant provides a physical good (the food) and also provides a service.










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

Examples of economic services

See Also:

Finding related topics




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