Business services are the services that help businesses and organizations to achieve their objectives. They include everything from advertising to marketing, consulting to logistics (including travel and facilities), waste handling, staffing services, shipping, administration, and security services.
The term “business” is derived from the Latin word biznus, which means “to work.” It refers to any activity undertaken to make money. The basic idea behind business is to increase profit, and the main way to do that is by producing or selling products or services to other businesses.
In many service businesses, the pricing is not based on cost but rather on value, which customers typically assign to services, and sometimes to competing products as well. This approach allows entrepreneurs to take on more risks and to develop new niches.
Product and service differentiation is an important barrier to entry for service companies, which must develop a unique brand name identification in the market place. This branding can take the form of a physical presence, such as a storefront or a telephone number, or it can involve a more abstract process of developing relationships with customers.
It is often hard for the average manager to imagine what a service business is. In contrast, the mental image for a product-oriented company is of a physical good that has been designed, built, and sold.
While the basic components of any business–money, capital, and people–are all necessary to run a business successfully, the most critical elements are the products or services that customers buy, how they choose them, and the ways in which they are delivered. If a business fails to effectively meet these needs and desires, it is unlikely to last long.
What distinguishes a service business from a product business is that managers must get the four critical elements of service design – customer experience, employee experience, operational effectiveness, and strategic management – pulling together in harmony or else they will risk pulling their business apart.
The design of a service is more complex than the design of a product, because there are many different types of customer, each with its own set of expectations. While it is still possible to think of the characteristics that a customer will value in a product-oriented business, service companies have to be more creative to identify those aspects of their services that will attract the attention and loyalty of customers.
When a customer dithers at a fast-food counter, that customer may cause the service to take longer than it should. That in turn can cause the costs of delivering that service to rise, even though the customer is not paying extra for that time.
This is why the design of a service business is so complex and challenging. In order to be successful, a service business must develop a unique, appealing product that satisfies the needs and preferences of a diverse group of customers.
This challenge is especially difficult for product-oriented businesses, where the reality of a physical object is so powerfully etched into our mental image of “the way things work.” But it is also true that the differences between service and product businesses are more significant than their similarities, and much of what determines the health of a product business can be applied to a service business as well.