Service (economics)

In economics, a service is a transaction in which no physical goods are 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. Service is intangible in nature.

Portier mit Zylinder
A hotel porter is an example of a service-related occupation.

Two I's

Services can be described in terms of I's.


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:

  • Service-relevant resources, processes and systems are assigned for service delivery during a specific period in time. If the service consumer does not request and consume the service during this period, the related resources may go unused. From the perspective of the service provider, this is a lost business opportunity if no other use for those resources is available. Examples: A hairdresser serves another client. An empty seat on an airplane cannot be filled after departure.
  • When the service has been completely rendered to the consumer, this particular service irreversibly vanishes. Example: a passenger has been transported to the destination.

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.

Inconsistency (variability)

Each service is unique. It can never be exactly repeated as the time, location, circumstances, conditions, current configurations and/or as signed resources are different for the next delivery, even if the same service is requested by the consumer. Many services are regarded as heterogeneous and are typically modified for each service consumer or each service contextual. 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. ach service is unique. It can never be exactly repeated as the time, location, circumstances, conditions, current configurations and/or as signed resources are different for the next delivery, even if the same service is requested by the consumer. Many services are regarded as heterogeneous and are typically modified for each service consumer or each service contextual.

Service quality

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).

  • Service consumer benefits – (set of) benefits that are triggerable, consumable and effectively utilizable for any authorized service consumer and that are rendered upon request. These benefits must be described in terms that are meaningful to consumers.
  • Service-specific functional parameters – parameters that are essential to the respective service and that describe the important dimension(s) of the servicescape, the service output or the service outcome, e.g. whether the passenger sits in an aisle or window seat.
  • Service delivery point – the physical location and/or logical interface where the benefits of the service are rendered to the consumer. At this point the service delivery preparation can be assessed and delivery can be monitored and controlled.
  • Service consumer count – the number of consumers that are enabled to consume a service.
  • Service delivery readiness time – the moments when the service is available and all the specified service elements are available 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 (SPoC) for service inquiries. At those times, the service desk can be reached via commonly available communication 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 the service, expressed as the ratio of the count of successful service deliveries to the count of service requests by a single consumer or consumer group over some time period.
  • Service impairment duration – the maximum allowable interval between the first occurrence of a service impairment and the full resumption and completion of the service delivery.
  • Service delivery duration – the maximum allowable period for effectively rendering all service benefits to the consumer.
  • Service delivery unit – the scope/number of action(s) that constitute a delivered service.Serves as the reference object for the Service Delivering Price, for all service costs as well as for charging and billing.
  • Service delivery price – the amount of money the customer pays to receive a service. Typically, the price includes a service access price that qualifies the consumer to request the service and a service consumption price for each delivered service.


Coffee house - a type of service delivery.

The delivery of a service typically involves six factors:

  • Service provider (workers and managers)
  • Equipment used to provide the service (e.g. vehicles, cash registers, technical systems, computer systems)
  • Physical facilities (e.g. buildings, parking, waiting rooms)
  • Service consumer
  • Other customers at the service delivery location
  • Customer contact

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

Service-goods continuum
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.[1] 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.

Service types

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

Service output as a percentage of the top producer (USA) as of 2005

Below is a list of countries by service output at market exchange rates at peak level as of.

20 largest Countries by Tertiary Output (in nominal terms) according to IMF and CIA World Factbook, at peak level as of 2018
Countries by tertiary output (in nominal terms) at peak level as of 2018 (billions in USD)
(01)  United States
(—)  European Union
(02)  China
(03)  Japan
(04)  Germany
(05)  United Kingdom
(06)  France
(07)  Brazil
(08)  Italy
(09)  India
(10)  Russia
(11)  Canada
(12)  Spain
(13)  Australia
(14)  South Korea
(15)  Mexico
(16)  Netherlands
(17)  Turkey
(18)   Switzerland
(19)  Indonesia
(20)  Belgium

The twenty largest countries by tertiary output (in nominal terms) at peak level as of 2018, according to the IMF and CIA World Factbook.

See also


  1. ^ Anders Gustofsson and Michael D. Johnson, Competing in a Service Economy (SanFrancisco: Josey-Bass, 2003), p.7.
  • Athens University of Economics and Business: Introduction to Services Marketing
  • Zeithaml, Valarie A.; Parasuraman, A.; Berry, Leonard L. (1990). Delivering Quality Service: Balancing Customer Perceptions and Expectations. Simon and Schuster. ISBN 978-0-02-935701-9.
  • Valerie Zeithaml, A. Parasumaran, Leonhard Berry (1990): SERVQUAL [1]
  • Sharon Dobson: Product and Services Strategy
  • John Swearingen: Operations Management - Characteristics of services
  • James A. Fitzsimmons, Mona J. Fitzsimmons: Service Management - Operations, Strategy, Information Technology
  • Russell Wolak, Stavros Kalafatis, Patricia Harris: An Investigation Into Four Characteristics of Services
  • Sheelagh Matear, Brendan Gray, Tony Garrett, Ken Deans: Moderating Effects of Service Characteristics on the Sources of Competitive Advantage - Positional Advantage Relationship
  • Johnston, Robert; Clark, Graham (2008). Service Operations Management: Improving Service Delivery. Financial Times/Prentice Hall. ISBN 978-1-4058-4732-2.
  • Petit, Pascal (1991). "Services". In Eatwell, John; Newman, Peter K.; Milgate, Murray (eds.). The New Palgrave: A Dictionary of Economics. 4. Macmillan. pp. 314–15. ISBN 978-0-333-37235-7.
  • Alan Pilkington, Kah Hin Chai, "Research Themes, Concepts and Relationships: A study of International Journal of Service Industry Management (1990 to 2005)," International Journal of Service Industry Management, (2008) Vol. 19, No. 1, pp. 83–110.
  • Downton, Steve; Rustema, Hilbrand; van Veen, Jan (1 August 2010). Service Economics: Profitable Growth with a Brand Driven Service Strategy. Novetum Service Management, Limited. ISBN 978-9963-9838-0-3.

External links

Climate change adaptation

Climate change adaptation is a response to global warming (also known as "climate change" or "anthropogenic climate change"), that seeks to reduce the vulnerability of social and biological systems to relatively sudden change and thus offset the effects of global warming. Even if emissions are stabilized relatively soon, global warming and its effects should last many years, and adaptation would be necessary to the resulting changes in climate. Adaptation is especially important in developing countries since those countries are predicted to bear the brunt of the effects of global warming. That is, the capacity and potential for humans to adapt (called adaptive capacity) is unevenly distributed across different regions and populations, and developing countries generally have less capacity to adapt. Furthermore, the degree of adaptation correlates to the situational focus on environmental issues. Therefore, adaptation requires the situational assessment of sensitivity and vulnerability to environmental impacts.Adaptive capacity is closely linked to social and economic development. The economic costs of adaptation to climate change are likely to cost billions of dollars annually for the next several decades, though the amount of money needed is unknown. Donor countries promised an annual $100 billion by 2020 through the Green Climate Fund for developing countries to adapt to climate change. However, while the fund was set up during COP16 in Cancún, concrete pledges by developed countries have not been forthcoming. The adaptation challenge grows with the magnitude and the rate of climate change.

Another response to climate change is known as climate change mitigation. It advocates to reduce greenhouse gas (GHG) emissions or enhance the removal of these gases from the atmosphere (through carbon sinks). Even the most effective reductions in emissions, however, would not prevent further climate change impacts, making the need for adaptation unavoidable. A study has concluded, with very high confidence, that in the absence of mitigation efforts, the effects of climate change would reach such a magnitude as to make adaptation impossible for some natural ecosystems. Others are concerned that climate adaptation programs might interfere with the existing development programs and thus lead to unintended consequences for vulnerable groups. For human systems, the economic and social costs of unmitigated climate change would be very high.

Elliott Sclar

Elliott D. Sclar is a professor of urban planning at Columbia University Graduate School of Architecture, Planning and Preservation (GSAPP). An economist and urban planner, he is the director of the Center for Sustainable Urban Development (CSUD) at Columbia University's Earth Institute. His research interests include urban economic development, transportation, and public service economics.

Fluminense Federal University

The Fluminense Federal University (Portuguese: Universidade Federal Fluminense, UFF) is a public higher education institution located mainly in Niterói and in other cities of Rio de Janeiro state. It was first established on December 18, 1960, with the name of Universidade Federal do Estado do Rio de Janeiro (UFERJ), through an integration of different academic colleges in the city of Niterói. On November 5, 1965, the current name became official.

It is considered one of the main centers of excellence in Brazil, ranked in the 9th position in the Center for World University Rankings of the best universities in the country. UFF is among the top 25 universities in Latin America, according to research published by the Webometrics Ranking of World Universities. Besides, UFF has become the sixteenth largest university in the country, the sixth largest public university and the third largest federal university in the country.


In economics, goods are materials that satisfy human wants and provide utility, for example, to a consumer making a purchase of a satisfying product. A common distinction is made between goods that are tangible property, and services, which are non-physical. A good may be a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods, such as air, are naturally in abundant supply and need no conscious effort to obtain them. Personal goods are things such as televisions, living room furniture, wallets, cellular telephones, almost anything owned or used on a daily basis that is not food related. Commercial goods are construed as any tangible product that is manufactured and then made available for supply to be used in an industry of commerce. Commercial goods could be tractors, commercial vehicles, mobile structures, airplanes and even roofing materials. Commercial and personal goods as categories are very broad and cover almost everything a person sees from the time they wake up in their home, on their commute to work to their arrival at the workplace.

Commodities may be used as a synonym for economic goods but often refer to marketable raw materials and primary products.Although in economic theory all goods are considered tangible, in reality certain classes of goods, such as information, only take intangible forms. For example, among other goods an apple is a tangible object, while news belongs to an intangible class of goods and can be perceived only by means of an instrument such as print or television.

James Morgan

James Morgan may refer to:

James (Pokemon)

Managed services

Managed services is the practice of outsourcing on a proactive basis certain processes and functions intended to improve operations and cut expenses. It is an alternative to the break/fix or on-demand outsourcing model where the service provider performs on-demand services and bills the customer only for the work done.Under this subscription model, the client or customer is the entity that owns or has direct oversight of the organization or system being managed whereas the Managed Services Provider (MSP) is the service provider delivering the managed services. The client and the MSP are bound by a contractual, service-level agreement that states the performance and quality metrics of their relationship.

National Highway System (Canada)

The National Highway System in Canada is a federal designation for a strategic transport network of highways and freeways. The system includes but is not limited to the Trans-Canada Highway, and currently consists of 38,021 kilometres (23,625 mi) of roadway designated under one of three classes: Core Routes, Feeder Routes, and Northern and Remote Routes.The Government of Canada maintains very little power or authority over the maintenance or expansion of the system beyond sharing part of the cost of economically significant projects within the network. Highways within the system are not given any special signage, except where they are part of a Trans-Canada Highway route.

Personal property

Personal property is property that is movable. In common law systems, personal property may also be called chattels or personalty. In civil law systems, personal property is often called movable property or movables – any property that can be moved from one location to another.

Personal property can be understood in comparison to real estate, immovable property or real property (such as land and buildings).

Movable property on land (larger livestock, for example) was not automatically sold with the land, it was "personal" to the owner and moved with the owner.

The word cattle is the Old Norman variant of Old French chatel, chattel (derived from Latin capitalis, “of the head”), which was once synonymous with general movable personal property.

Service chain optimization

Service chain optimization is the application of processes and tools that embrace all functions for improving the efficiency, productivity and, eventually, the profitability of service organizations.

In this regard, profitability of a service organization is measured by the revenue generated from service demand (in the form of service work orders being carried out), and by the costs due to activity of the enterprise's human resources (who provide the service). Service chains consider the full life-cycle of service demand from early stages of forecasting, through planning, scheduling, dispatch, execution and post-analysis.

Service chain optimization is closely related to the fields of workforce management and field service management; the activity performed by field service resources is managed through the latter while being planned and optimized through the former. This relationship is analogous to the relation between supply chain optimization and supply chain management in the domain of manufacturing. In this regard, the service chain benefits from demand forecasting, resource planning and scheduling, and long term analysis activities similarly to the manner these contribute in the supply chain (being typically managed by ERP systems and optimized by supply chain optimization systems).

Service contract

Service contract may refer to:

employment contract

extended warranty

Metropolitan Bus Service Contract

Programmatic service contract in service-oriented architecture

standardized service contract - software design principle

water service contract

Service design

Service design is the activity of planning and organizing people, infrastructure, communication and material components of a service in order to improve its quality and the interaction between the service provider and its customers. Service design may function as a way to inform changes to an existing service or create a new service entirely.

The purpose of service design methodologies is to establish best practices for designing services according to both the needs of customers and the competencies and capabilities of service providers. If a successful method of service design is employed, the service will be user-friendly and relevant to the customers, while being sustainable and competitive for the service provider. For this purpose, service design uses methods and tools derived from different disciplines, ranging from ethnography to information and management science to interaction design. Service design concepts and ideas are typically portrayed visually, using different representation techniques according to the culture, skill and level of understanding of the stakeholders involved in the service processes (Krucken and Meroni, 2006).

Service management

Service management in the manufacturing context, is integrated into supply chain management as the intersection between the actual sales and the customer point of view. The aim of high performance service management is to optimize the service-intensive supply chains, which are usually more complex than the typical finished-goods supply chain. Most service-intensive supply chains require larger inventories and tighter integration with field service and third parties. They also must accommodate inconsistent and uncertain demand by establishing more advanced information and product flows. Moreover, all processes must be coordinated across numerous service locations with large numbers of parts and multiple levels in the supply chain.

Among typical manufacturers, post-sale services (maintenance, repair and parts) account for less than 20 percent of revenue. But among the most innovative companies in service, those same activities often generate more than 50 percent of the profits.

Service science, management and engineering

Service science, management, and engineering (SSME) is a term introduced by IBM to describe service science, an interdisciplinary approach to the study, design, and implementation of service systems – complex systems in which specific arrangements of people and technologies take actions that provide value for others. More precisely, SSME has been defined as the application of science, management, and engineering disciplines to tasks that one organization beneficially performs for and with another.

Today, SSME is a call for academia, industry, and governments to focus on becoming more systematic about innovation in the service sector, which is the largest sector of the economy in most industrialized nations, and is fast becoming the largest sector in developing nations as well. SSME is also a proposed academic discipline and research area that would complement – rather than replace – the many disciplines that contribute to knowledge about service. The interdisciplinary nature of the field calls for a curriculum and competencies to advance the development and contribution of the field of SSME.

Social shaping of technology

According to Robin A. Williams and David Edge (1996), "Central to social shaping of technology (SST) is the concept that there are choices (though not necessarily conscious choices) inherent in both the design of individual artifacts and systems, and in the direction or trajectory of innovation programs."

If technology does not emerge from the unfolding of a predetermined logic or a single determinant, then innovation is a 'garden of forking paths'. Different routes are available, potentially leading to different technological outcomes. Significantly, these choices could have differing implications for society and for particular social groups.

SST is one of the models of the technology: society relationship which emerged in the 1980s with MacKenzie and Wajcman's influential 1985 collection, alongside Pinch and Bijker's social construction of technology framework and Callon and Latour's actor-network theory. These have a common feature of criticism of the linear model of innovation and technological determinism. It differs from these notably in the attention it pays to the influence of the social and technological context of development which shapes innovation choices. SST is concerned to explore the material consequences of different technical choices, but criticizes technological determinism, which argues that technology follows its own developmental path, outside of human influences, and in turn, influences society. In this way, social shaping theorists conceive the relationship between technology and society as one of 'mutual shaping'.

Some versions of this theory state that technology affects society by affordances, constraints, preconditions, and unintended consequences (Baym, 2015). Affordance is the idea that technology makes specific tasks easier in our lives, while constraints make tasks harder to complete. The preconditions of technology are the skills and resources that are vital to using the technology to its fullest potential. Finally, the unintended consequences of technology are unanticipated effects and impact of technology. The cell phone is an example of social shaping of technology (Zulto 2009). The cell phone has evolved over the years to make our lives easier by providing people with handheld computers that can answer calls, answer emails, search for information, and complete numerous other tasks (Zulto, 2009). Yet it has constraints for those that are not technologically savvy, hindering many people in society who do not understand how to utilize these devices. There are preconditions, such as monthly bills and access to electricity. There are also many unintended consequences such as the unintended distraction they cause for many people.

Not only does technology affect society, but according to SST, society affects technology by way of economics, politics, and culture (Baym, 2015). For instance, cell phones have spread in poor countries due to cell phones being more affordable than a computer and internet service (economics), government regulations which have made it fairly easy for cell phone providers to build networks (politics), and the small size of cell phones which fit easily into many cultures’ need for mobile communication (culture).

Stanisław Flejterski

Stanisław Flejterski (born September 10, 1948 in Tomaszów, Poland) is a Polish economist, Professor of Economic Sciences. He is employed as Full Professor at Szczecin University.

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