Business services are a category of activity that supports businesses without producing or delivering a physical product. They include a variety of activities, including information technology, logistics, procurement, finance and shipping.
They are important to many companies and their customers because they allow them to focus on their core business operations. They can help to improve the efficiency of a business and increase profits.
The definition of business services is broad, but they can be distinguished by five characteristics: Intangibility; Inconsistency; Inventory; Involvement; and Inseparability. These characteristics differentiate services from goods.
Intangibility: Unlike tangible goods, which can be stored and reused for future use, services are intangible. They cannot be physically possessed or produced, but must be delivered to meet the needs of customers at a moment’s notice.
Inconsistency: Unlike goods, which can be manufactured in a controlled environment, service businesses must be operated in a non-regulated setting where their quality and cost are largely determined by market forces. They may also have to be operated with a wide variety of equipment and personnel, making them more difficult to manage than products.
Inventory: Unlike tangible goods, which can be stocked for later use, services must be delivered to meet the needs of customers when needed.
Involvement: Unlike goods, which can be produced in a controlled environment, service businesses must have customer involvement to ensure that their quality and cost are largely determined by the needs of customers at a moment’s warning.
The success or failure of a service business is rooted in how effectively managers craft their offerings to appeal to an attractive group of customers. It can be difficult for managers to do this successfully, but the process is essential if a service business is to succeed. Developed as a core teaching module at Harvard Business School, the four elements of service design (design, pricing, delivery and communication) are critical for managers to master. They represent the foundation for a successful service business and should be integrated into every aspect of its operating plan.