Business services are a broad group of non-financial activities that support organizations but do not produce physical goods. Examples include information technology, shipping and procurement. These services are often specialized and exclusive, which makes them attractive to many businesses.
One of the most distinguishing characteristics of services is that they do not have any physical presence. They can only be practiced, unlike products that can be produced and stored for future use. This is why people who provide business services are usually called consultants or advisers instead of simply technicians.
Intangibility also means that there are no consistent patterns of operation. Each time a service is provided, it must be done exclusively to meet the needs and expectations of the customer.
The Intangibility of Business Services
Most modern business theorists recognize a continuum between product-oriented and service-oriented businesses, with pure services on one terminal and commodity goods on the other. For example, a restaurant provides a physical good, such as food, but also provides ambience, setting and clearing of the table; utilities provide services, such as water, electricity, gas or sewerage, and so on.
This distinction is an important point because it helps service companies avoid being locked into a particular market niche. For example, a carpet cleaning company will not waste its marketing dollars trying to reach other business; it will target its customers’ individual needs, such as a family’s pets.
Other examples of this are animal control and pest extermination services, which are necessary to protect the safety and health of employees. Maintenance services are also popular with companies that need to repair or replace appliances or other equipment, such as HVAC systems.
These types of services are not only necessary for the safety and well-being of employees, but they also help avoid code violations and other costly penalties. These business services help keep companies up and running, so they can continue to serve their clients.
The Intangibility of Business Service Pricing
Most business services are based on value, rather than cost. This is because value primarily depends on the customer, and comparison shopping is often difficult. Consequently, price is not always a direct indicator of a business’s profitability.
However, price does have an indirect effect on a service’s profitability, because the value of the service is not necessarily known until the end of the contract. Therefore, service companies must be careful to communicate their costs to their customers in a clear and concise manner so that they can understand how the price will affect their overall profitability.
In some cases, a service is offered from its own premises or from the customer’s home or workplace. For example, a TV repairperson can come to a customer’s home or to the store where the appliance was purchased to service it.
This allows the service company to develop a strong relationship with its customers while maintaining a healthy balance between overhead and revenue. It also enables the company to develop a strong brand image for its services.