Service (economics)

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This article is about a term used in economics. For other uses, see Service.
Hotel portier.
Hotel portier.

A service is the non-material equivalent of a good. A service provision is 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.

Providers of services make up the Tertiary sector of industry.

Contents

[edit] Key characteristics

Services can be paraphrased in terms of their main attributes. They are intangible and insubstantial; they cannot be handled, smelled, tasted, heard, etc. There is neither potential nor need for storage and they are said to be inseparable and perishable. Because services are difficult to conceptualize, marketing them requires creative visualization to effectively evoke a concrete image in the customer's mind. From the customer's point of view, this characteristic makes it difficult to evaluate or compare services prior to experiencing the service delivery. They are perishable, unsold service time is a lost economic opportunity. For example a doctor who is booked for only two hours a day cannot later work those hours— she has lost her economic opportunity. Other service examples are airplane seats (once the plane departs, those empty seats cannot be sold), and theatre seats (sales end at a certain point). There is a lack of transportability as services tend to be consumed at the point of "production" although this does not apply to outsourced business services. Services are regarded as heterogeneity or lack of homogeneity and are typically modified for each consumer or each new situation (consumerised). Mass production of services is very difficult. This can be seen as a problem of inconsistent 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 quality. There is labor intensity as services usually involve considerable human activity, rather than a precisely determined process. 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. There are demand fluctuations and it can be difficult to forecast demand which is also true of many goods. Demand can vary by season, time of day, business cycle, etc. There is buyer involvement as most service provision requires a high degree of interaction between service consumer and service provider. There is a client-based relationship based on creating long-term business relationships. Accountants, attorneys, and financial advisers maintain long-term relationships with their clientes for decades. These repeat consumers refer friends and family, helping to create a client-based relationship.

[edit] Service definition

The clear-cut, consistent, generic definition of the service term reads as follows:

A service is a set of benefits delivered from the accountable service provider, mostly in close coaction with his service suppliers, generated by the functions of technical systems and/or by distinct activities of individuals, respectively, commissioned according to the needs of his service consumers by the service customer from the accountable service provider, rendered individually to the authorized service consumers on their dedicated request, and, finally, utilized by the requesting service consumers for executing and/or supporting their day-to-day business tasks or private activities.

[edit] Service specification

Any service can be completely, consistently and cleary specified by means of the following 12 standard attributes

  1. Service Consumer Benefit(s)
  2. Service-specific Functional Parameter(s)
  3. Service Delivery Point
  4. Service Consumer Count
  5. Service Readiness Time(s)
  6. Service Support Time(s)
  7. Service Support Language(s)
  8. Service Fulfillment Target
  9. Maximum Impairment Duration per Incident
  10. Service Delivering Duration
  11. Service Delivery Unit
  12. Service Delivering Price

The meaning and content of these attributes are:

1. Service Consumer Benefits describe the (set of) benefits which are callable, receivable and effectively utilizable for any authorized service consumer and which are provided to him as soon as he requests the offered service. The description of these benefits must be phrased in the terms and wording of the intended service consumers.

2. Service-specific Functional Parameters specify the functional parameters which are essential and unique to the respective service and which describe the most important dimension of the service output, e.g. maximum e-mailbox capacity per registered and authorized e-mail service consumer.

3. Service Delivery Point describes the physical location and/or logical interface where the benefits of the service are made accessible, callable and receivable to the authorized service consumers. At this point and/or interface, the preparedness for service delivery can be assessed as well as the effective delivery of the service itself can be monitored and controlled.

4. Service Consumer Count specifies the number of intended, identified, named, registered and authorized service consumers which are allowed and enabled to call and utilize the defined service for executing and/or supporting their business tasks or private activities.

5. Service Readiness Times specify the distinct agreed times of day when

  • the described service consumer benefits are
    • accessible and callable for the authorized service consumers at the defined service delivery point
    • receivable and utilizable for the authorized service consumers at the respective agreed service level
  • all service-relevant processes and resources are operative and effective
  • all service-relevant technical systems are up and running and attended by the operating team
  • the specified service benefits are comprehensively delivered to any authorized requesting service consumer without any delay or friction.

The time data are specified in 24 h format per local working day and local time, referring to the location of the intended service consumers.

6. Service Support Times specify the determined and agreed times of day when the usage and consumption of the contracted services is supported by the service desk team for all identified, registered and authorized service consumers within the service customer’s organizational unit or area. The service desk is the single point of contact for any service consumer inquiry regarding the contracted and delivered services. During the defined service support times, the service desk can be reached by phone, e-mail, web-based entries and/or fax, respectively. The time data are specified in 24 h format per local working day and local time, referring to the location of the intended service consumers.

7. Service Support Languages specifies the languages which are spoken by the service desk team(s) to the service consumers calling them.

8. Service Fulfillment Target specifies the service provider’s promise of effective and seamless delivery of the defined benefits to any authorized service consumer requesting the service within the defined service times. It is expressed as the promised minimum ratio of the counts of successful individual service deliveries related to the counts of called indivdual service deliveries. The effective service fulfillment ratio can be measured and calculated per single service consumer or per consumer group and may be referred to different time periods (workday, calenderweek, workmonth, etc.)

9. Maximum Impairment Duration per Incident specifies the allowable maximum elapsing time [hh:mm] between

  • the first occurrence of a service impairment, i.e. service quality degradation or service delivery disruption, whilst the service consumer consumes and utilizes the delivered service,
  • and the full resumption and complete execution of the service delivery to the content of the affected service consumer.

10. Service Delivering Duration specifies the promised and agreed maximum period of time for effectively delivering all specified service consumer benefits to the requesting service consumer at the defined service delivery point.

11. Service Delivery Unit specifies the basic portion for delivering the defined service consumer benefits. The service delivery unit is the reference and mapping object for all cost for service generation and delivery as well as for charging and billing the consumed service volume to the service customer who has ordered the service delivery.

12. Service Delivering Price specifies the amount of money the service customer has to pay for the consumption of distinct service volumes. Normally, the service delivering price comprises two portions

  • a fixed basic price portion for basic efforts and resources which provide accessiblity and usablity of the service delivery functions, i.e. service access price
  • a price portion covering the service consumption based on
    • fixed flat rate price per authorized service consumer and delivery period without regard on the consumed service volumes,
    • staged prices depending on consumed service volumes,
    • fixed price per particularly consumed service delivering unit.

[edit] Service delivery

The delivery of a service typically involves six factors:

  • The accountable service provider and his service suppliers (e.g. the people)
  • Equipment used to provide the service (e.g. vehicles, cash registers)
  • The physical facilities (e.g. buildings, parking, waiting rooms)
  • The requesting service consumer
  • Other customers at the service delivery location
  • Customer contact

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 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 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.

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 that a given employee is presently responsible for. On a daily basis, in all those fields, employees must balance the needs of any individual case against the needs of all other current cases as well as their own personal 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.

Service-Goods continuum
Service-Goods continuum

[edit] 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.[citation needed] 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.

[edit] List of economic services

Service output in 2005
Service output in 2005

In 2005, USA was the largest producer of services followed by Japan and Germany, reports the International Monetary Fund. Services accounted for 78.5% of the U.S. Economy in 2007[1], compared to 20% in 1947.

The following is an incomplete list of service industries, grouped into rough 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.

[edit] See also

[edit] Finding related topics

[edit] References

  1. ^ CIA World Factbook: https://www.cia.gov/library/publications/the-world-factbook/fields/2012.html
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