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Nature and Types of Services

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Nature of Services - definition

  • All services are essentially intangibles. The sale of a service does not give you an ownership of physical product. As we now know the definition of a service, lets move on and understand the nature of services

  • Intangibility is the basic nature of services.

  • Services need to be made or provided again and again. They are generally inconsistent because different customers have different expectation.

  • The production and consumption of services is inseparable. For example, ATMs may replace the banking manager for the front office activities like cash withdrawal and cheque deposit. But, at the same time, the presence of the customer, is required and his/her interaction with the process has to be managed.

  • Services cannot be stored. Basically, you cannot have an inventory of services. There might be goods that could be stored associated to the service, but the service itself will not be stored as it is intangible.

  • The major difference between a good and a service is that a good is produced whereas a service is performed.

Types of Services - definition

  1. Services are diversified in three groups; Business services, social services and personal services.

  2. Business services are the services used by businesses to conduct their business activities. This could banking, insurance, transportation, etc. Today, businesses are relying on specialised business services more than ever.

  3. Social services are the services provided by NGO's to pursue a certain set of social goals.

  4. Personal services, is a service wherein every customer will have a different need. Examples of personal services would be tourism, recreational services and restaurants.

Meaning of Services - definition

  • Services are essentially intangibles. Their purchase does not result in the ownership of anything physical. For example, you can only seek advice from the doctor, you cannot purchase him.
  • Services are all those economic activities that are intangible and imply an interaction to be realized between the service provider and the consumer.
  • Services are the separately identifiable, essentially intangible activities that provides satisfaction of wants, and are not necessarily linked to the sale of a product or another service.

Difference between Services and Goods - definition








An activity or process. e.g., watching a movie
in a cinema hall

A physical object. e.g., video cassette of movie





Intangible e.g., doctor treatment

e.g., medicine



 Different customers having different
e.g., mobile

Different customers getting standardized demands fulfilled. e.g., mobile phones


Simultaneous production and consumption. e.g., eating
ice-cream in a restaurant

Separation of production and consumption. e.g., purchasing ice cream from a store


Cannot be kept in stock. e.g., experience of a train

Can be kept in stock. e.g.,
train journey ticket


Participation of customers at the
of service delivery. e.g.,
self-service in a fast food

Involvement at the time
of delivery not possible. e.g., manufacturing a vehicle

Business Services - definition

  • Business services are the services used by businesses to conduct their business activities. For example, banking, insurance, transportation, warehousing and communication services.
  • Today, businesses are relying on specialized business services more than ever.

Social Services - definition

  • Social services are those services that are generally provided voluntarily in pursuit of certain social goals.
  • These social goals may be to improve the standard of living for weaker sections of society, to provide educational services to their children, or to provide health care and hygienic conditions in slum areas.
  • These services are usually provided voluntarily but for some consideration to cover their costs. For example, health care and education services provided by certain Non-government organisations (NGOs) and government agencies .

Personal Services - definition

  • Personal services are those services which are experienced differently by different customers.
  • These services cannot be consistent in nature.
  • They will differ depending upon the service provider.
  • They will also depend upon customers preferences and demands. For example, tourism, recreational services, restaurants.

Role of Services in an Economy - definition

  • The services sector including power, telecom and transport account for 60-65 per cent of the economy in most OECD (Organisation for Economic Cooperation and Development) countries.
  • Sustained, high and broad-based growth is essential for economic development and poverty alleviation.
  • As with any growing economy the sectoral composition of GDP has been changing with the services showing an increased share of above 50 per cent and that of agriculture declining to 25 per cent.
  • Nearly 70 per cent of the labour force in developed economies is employed in the services sector.

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