The business of providing a service is a broad industry, covering many different categories of business operations, including advertising, marketing, consulting, logistics (including travel and facilities services), waste handling, staffing, shipping, administration and security. The industry is a major source of employment and income for both small and large businesses, and almost all companies need some kind of service at some point in their business life cycle.
Service Design
As with product businesses, it is essential that service companies create offerings that meet the needs and desires of an attractive group of customers. This requires a shift in perspective: Whereas product designers focus on the characteristics buyers will value, service designers must focus on the experiences they want to deliver.
Service design is often an ongoing process, requiring a lot of input and feedback from the service company’s employees. This input can include everything from the quality of customer interaction to how fast a business processes orders.
In some cases, service design also requires a significant amount of involvement by the customer. For instance, a customer who dithers at the cash register at a fast-food restaurant can affect the speed of service for all the other customers in the area.
A customer who is not satisfied with the quality of a service may be willing to pay more for the same product elsewhere. This can help service providers to attract new customers and increase revenues.
Pricing
In many service businesses, the price of a service is based more on the value than on cost. This is because the value of a service is usually determined by the customer and to some extent by competition, which can make it hard to accurately determine the price.
The cost of providing a service can be affected by multiple factors, including how much time and effort it takes to perform the work. For example, a plumber who is unable to do the job in a timely manner may charge more than a rushed service performed by a technician.
Unlike goods, which can be stored for future use, services must be delivered when they are requested. This can lead to a greater emphasis on responsiveness and responsiveness is a core value of most service businesses.
Service differentiation is another key barrier to entry for services, but this can be overcome with effective strategic management and market planning. In some case, this is achieved through developing a brand identity for the type and quality of the service that is being offered.
Reputation is also a key factor in the success of a service business. This is particularly true for abstract and complex services, which have a much higher likelihood of developing a reputation that can serve as a barrier to entry.
In addition to the above barriers, a number of other challenges exist for service businesses. One of these is a lack of economies of scale. This is because services are often performed by a single unit of equipment or people and cannot be centralized. This can result in a lower overall economic benefit for the provider than for goods that can be produced on a larger scale and sold in bulk to a larger market.