Business services are the activities that benefit businesses without supplying them with physical products. They include a wide range of aspects that goods and products can’t cover, such as marketing, production, safety and cost. These services are essential to businesses, especially larger firms that need to keep up with work demands and have limited resources.
What are the differences between service businesses and product businesses?
The most obvious difference is that in product-oriented businesses, the transfer of a tangible, concrete product is a clear part of the overall process. In pure service businesses, the transfer of a service is all that’s sold–for example, management consulting or a computer repair service.
Strategic management of a service business requires more of a conceptualization than in product-oriented companies. A service-oriented manager must think about the service in terms of the customer’s experience, and he or she must develop a new approach to managing the business, based on a new understanding of what the customer does.
Developing an effective and profitable service business requires getting four key elements of the service design process working together: customers, staff, technology, and information. It also requires that managers be able to adapt their approach to the unique needs of each service business.
For instance, while a product-oriented company may produce a single product that’s differentiated by a strong brand, a service business must develop a reputation for its kind of service. In the most successful service businesses, this reputation is so strong that it serves as a barrier to entry.
Another critical component of the service model is that service businesses tend to have less control over their supply chain than product-oriented companies do. This means that a service company must develop relationships with distributors and retailers in order to meet its customers’ needs.
This is particularly true in the service-oriented industries like insurance, real estate and transportation. These industries typically use many distribution channels, including grocery stores and department stores. This can make it challenging for a service company to create economies of scale and develop cost-effective pricing practices.
As a result, the pricing of services can be very variable. It’s a function of market demand and competition, but it’s also influenced by the specific value that customers place on the service.
A key element of the service model is that customer input can influence both the quality and cost of service delivery. This can be a challenge for managers of service-oriented companies, but it’s a necessary part of the process.
For instance, if a service company’s customer does a poor job explaining the purpose of a project, it can affect both the cost and quality of the final product.
Similarly, if an employee does a poor job explaining the importance of a service to a customer, it can have a negative impact on that employee’s performance and the quality of the service itself.
These issues can make it difficult for a service business to survive in tough economic times. However, they can be overcome through a strong focus on service excellence. Ultimately, a strong service business can help businesses thrive in any economy.