Service (economics)

A service is an action or use that a consumer, business, or government pays for. Examples include the work of barbers, doctors, lawyers, accountants, mechanics, and institutions like banks, finance firms, and insurance companies. Public services—such as hospitals, elementary schools, or libraries—are paid for by society as a whole (a nation, fiscal union, or region). Service providers use resources, skill, ingenuity, and experience to benefit consumers. Services can be understood as intangible acts or performances that deliver value to the customer.

**Characteristics**

Services have three key features:

**Intangibility** Services are intangible by nature. They are not manufactured, transported, or stocked. Unlike physical goods, they cannot be stored for later use; they are produced and consumed at the same time.

**Perishability** Services are perishable in two ways. First, the resources, processes, and systems set aside for a service are assigned for a specific time period. If the consumer does not request and use the service during that time, those resources may go unused, representing a lost opportunity for the provider (e.g., a hairdresser serves another client; an empty airplane seat cannot be sold after departure). Second, once a service is fully delivered to the consumer, it vanishes irreversibly (e.g., a passenger has been transported to their destination). The provider must deliver the service exactly when it is consumed, and the service is not tied to a physical object independent of the provider. The consumer is also inseparable from the delivery—for instance, the consumer must sit in the hairdresser’s chair or on the airplane seat, while the hairdresser or pilot must be present to perform the service.

**Variability** Every service is unique. It can never be exactly repeated because time, location, circumstances, conditions, current configurations, or assigned resources may differ for the next delivery, even if the same service is requested. Many services are heterogeneous and are often modified for each consumer or context. For example, a taxi ride from home to work differs from a ride from work to home—different time, direction, possibly a different route, driver, and cab. This is also called heterogeneity.

**Service Quality** To expand, a service provider must master mass generation and delivery of services, which is a challenge for service quality. Both inputs and outputs in service processes are highly variable, as are the relationships between these processes, making consistent quality hard to maintain. Many services involve variable human activity rather than a precise process (exceptions include utilities). The human factor is often key to success. Demand can fluctuate by season, time of day, or business cycle. Consistency is essential for building lasting business relationships.

**Specification** Any service can be clearly, completely, consistently, and concisely specified using standard attributes that follow the MECE principle (Mutually Exclusive, Collectively Exhaustive). These attributes include:

- **Service consumer benefits** – the set of benefits that are triggerable, consumable, and effectively usable by any authorized consumer upon request. These should be defined in terms meaningful to consumers. - **Service-specific functional parameters** – essential parameters that describe key dimensions of the servicescape, output, or outcome (e.g., whether a passenger sits in an aisle or window seat). - **Service delivery point** – the physical location or logical interface where benefits are rendered to the consumer. Here, delivery preparation can be assessed, and delivery can be monitored and controlled. - **Service consumer count** – the number of consumers enabled to use a service. - **Service delivery readiness time** – the moments when the service is available and all specified elements are ready at the delivery point. - **Service consumer support times** – the moments when the support team (service desk) is available. The service desk is the single point of contact for inquiries, reachable via common methods (phone, web, etc.). - **Service consumer support language** – the language(s) spoken by the service desk. - **Service fulfillment target** – the provider’s promise to deliver, expressed as the ratio of successful deliveries to requests by a consumer or group over a period. - **Service impairment duration** – the maximum allowable interval between the first occurrence of a service impairment and the full resumption and completion of delivery. - **Service delivery duration** – the maximum allowable period for effectively rendering all benefits to the consumer. - **Service delivery unit** – the scope or number of actions that constitute a delivered service, serving as the reference for pricing, costs, and billing. - **Service delivery price** – the amount a customer pays to receive a service, typically including a service access fee that qualifies the consumer to request the service and a service consumption fee.