In economics, a service is a transaction in which no physical goods is transferred from the seller to the buyer. The benefits of such a service are held to be demonstrated by the buyer's willingness to make the exchange. Public services are those that society (nation state, fiscal union, region) as a whole pays for. Using resources, skill, ingenuity, and experience, service providers benefit service consumers.
Services can be described in terms of their key characteristics, sometimes called the "Five I's of Services".
Services are by definition intangible. They are not manufactured, transported or stocked.
Services cannot be stored for a future use. They are produced and consumed simultaneously.
Services are perishable in two regards:
The service provider must deliver the service at the time of service consumption. The service is not manifested in a physical object that is independent of the provider. The service consumer is also inseparable from service delivery. Examples: The service consumer must sit in the hairdresser's chair, or in the airplane seat. Correspondingly, the hairdresser or the pilot must be in the shop or plane, respectively, to deliver the service.
Each service is unique. It can never be exactly repeated as the time, location, circumstances, conditions, current configurations and/or assigned resources are different for the next delivery, even if the same service consumer requests the same service. Many services are regarded as heterogeneous and are typically modified for each service consumer or each service context. Example: The taxi service which transports the service consumer from home to work is different from the taxi service which transports the same service consumer from work to home – another point in time, the other direction, possibly another route, probably another taxi driver and cab. Another and more common term for this is heterogeneity.
Both service provider and service consumer participate in the service provision.
Mass generation and delivery of services must be mastered for a service provider to expand. This can be seen as a problem of service 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 service quality. Many services involve variable human activity, rather than a precisely determined process; exceptions include utilities. The human factor is often the key success factor in service provision. Demand can vary by season, time of day, business cycle, etc. Consistency is necessary to create enduring business relationships.
Any service can be clearly and completely, consistently and concisely specified by means of standard attributes that conform to the MECE principle (Mutually Exclusive, Collectively Exhaustive).
The delivery of a service typically involves six factors:
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 point in a 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 behaviors followed by 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 for which a given employee is responsible. Employees must balance the needs of each individual case against the needs of all other current cases as well as their own 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.
Lovelock used the number of delivery sites (whether single or multiple) and the method of delivery to classify services in a 2 x 3 matrix. Then implications are that the convenience of receiving the service is the lowest when the customer has to come to the service and must use a single or specific outlet. Convenience increases (to a point) as the number of service points increase.
Service-commodity goods continuum
The distinction between a good and a service remains disputed. The perspective in the late-eighteenth and early-nineteenth centuries focused on creation and possession of wealth. Classical economists contended that goods were objects of value over which ownership rights could be established and exchanged. Ownership implied tangible possession of an object that had been acquired through purchase, barter or gift from the producer or previous owner and was legally identifiable as the property of the current owner.
Adam Smith’s famous book, The Wealth of Nations, published in 1776, distinguished between the outputs of what he termed "productive" and "unproductive" labor. The former, he stated, produced goods that could be stored after production and subsequently exchanged for money or other items of value. The latter, however useful or necessary, created services that perished at the time of production and therefore did not contribute to wealth. Building on this theme, French economist Jean-Baptiste Say argued that production and consumption were inseparable in services, coining the term "immaterial products" to describe them.
Most modern business theorists describe a continuum with pure service on one terminal point and pure commodity good on the other. 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 that 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.
The following is a list of service industries, grouped into 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.
List of countries by tertiary output
Below is a list of countries by service output at market exchange rates in 2015.