Business services are a subset of economic services that help businesses provide their products and/or services to customers. Examples of business services include advertising, marketing, consultation, logistics (including travel and facilities), waste handling, staffing services, shipping, administration, and security services. Nearly every business in operation has need for at least one of these types of service.
The success of a business can depend on how well it manages four critical elements of its business model: (1) service differentiation, (2) service management, (3) cost reduction, and (4) the ability to create value. The service industry is more complex than product-oriented industries, and managing a business that provides services is more challenging than managing a business that sells goods.
Service differentiation is the key to a successful business in the service industry. While product companies develop their brand names into a generic identification in the market place, service businesses develop their reputations based on what type of services they produce. In this way, a business’s reputation forms a barrier to entry for competitors.
When a business offers more than one service, it often reduces costs by centralizing the functions of each service in different areas within the organization or by using third-party providers. This allows for economies of scale and eliminates duplication of effort. It also allows for greater control and insights into performance. Shared services can also improve compliance and enable better decision-making by centralized departments and organizations.
Another benefit of a business providing multiple services is that it can attract and retain more customers. This is because customers tend to perceive a variety of benefits that a company offering more than one service may offer, such as convenience, friendliness, extended hours, and more. In this way, a company that offers several types of service can generate more revenue.
As with product-oriented businesses, the most important challenge for service businesses is designing their offerings to effectively meet the needs and desires of attractive groups of customers. This involves a shift in thinking that is difficult for many managers to make. While product designers focus on the characteristics that buyers will value, service-oriented managers should focus on the experience that the customer will have. The most effective service-oriented firms develop unique, compelling, and distinctive experiences that their customers will want to purchase again. Consequently, these companies often become highly profitable and are a critical contributor to the economy.