Business services are a broad category of non-financial services that a company can use to support its business operations. They include advertising, marketing, consultation, logistics (including travel and facilities services), waste handling, staffing services, shipping, administration, and security services to name a few.
Businesses need a variety of different business services to run smoothly. For example, some companies hire maintenance service professionals to keep their equipment running properly. Others hire pest exterminators to deal with occasional infestations. Many companies also hire real estate agents to help them find space to rent, including office and retail spaces.
The business services industry is a relatively large and important sector of the economy, as they provide a wide variety of non-financial business support. They help businesses operate effectively and efficiently, ensuring that they can meet customer expectations and provide quality products and services.
Some business services are regulated by the federal government, while others require special permits and licenses from local governments. Check the Small Business Administration, Opens overlay for information on federal and local licensing and permitting requirements.
Service businesses are distinct from product businesses in several critical ways, and they must therefore be managed differently. In my teaching course, Management of Services, I discuss these differences and help students to think about how they affect the way they manage their businesses.
First, unlike product businesses, most service-oriented businesses do not have a brand identification in the market place. Instead, they develop a reputation for the type and quality of the service they produce. This reputation serves as a barrier to entry, and can be difficult to establish for new service businesses.
Second, unlike product businesses, most service-oriented companies do not have economies of scale. As a result, they must often make decisions about where to set up operations that decentralize production and reduce opportunities for economies of scale.
Third, most service-oriented companies do not have a customer-specific price structure. Rather, they tend to charge for value, based on what their customers believe the service is worth. This pricing structure is influenced by the market, which determines the cost of delivering the service and can lead to very different prices between competitors.
Fourth, most service-oriented companies have very little financial resources to invest in marketing. This is because service-oriented companies usually do not have access to the same kinds of capital as product-oriented firms do, and they do not have the ability to raise funds from sales transactions or through other channels to expand their business.
Fifth, most service-oriented companies have to work hard to create and maintain a unique identity in the marketplace. This requires a great deal of time, energy and money.
In my course, I introduce students to four essential elements of a successful service business that can’t be overlooked: (1) The right service offering, (2) A clear and compelling customer proposition, (3) a strong competitive advantage, and (4) a strong and consistent branding strategy. The key is to get each of these four core elements of service design working in tandem to build a highly profitable business.
