The Nature Of Services

Service industries are quite varied. The government sector, with its courts, employment services, hospitals, loan agencies, military services, police and fire departments, post office, regulatory agencies, and schools, is in the service business. The private nonprofit sector, with its museums, charities, churches, colleges, foundations, and hospitals, is in the service business. A good part of the business sector, with its airlines, banks, hotels, insurance companies, Internet service providers, law firms, management consulting firms, medical practices, motion-picture companies, plumbing-repair companies, real estate firms, and Web-based services, is in the service business. Many workers in the manufacturing sector, such as computer operators, accountants, and legal staff, are really service providers. In fact, they make up a "service factory" that provides services to the "goods factory."

A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.

Services such as banking and other financial services are a mainstay of the Internet. E*Trade, for example, the second-largest U.S. on-line broker, allows customers to quickly buy and sell stocks, bonds, and mutual funds at a low cost through its Web site. E*Trade's nearly 2 million accountholders can also use the Web site to locate research about stocks and bonds, plan their portfolios, and get checking accounts and loans through the firm's Telebanc subsidiary. Even noncustomers can access the site's free financial news, tax and investment tips, and money-related chat rooms.3

Many manufacturers and distributors also use a service strategy to differentiate themselves. Acme Construction Supply in Portland, Oregon, has invested more than $135,000 in its Night Owl delivery service: Acme personnel deposit orders into lock-boxes at construction sites during the nighttime hours, so materials are available first thing in the morning. Says the company's regional team leader, "People that are very, very price sensitive don't do business here. But people who see the overall value we provide do. And it's very intimidating to our competition. They have to walk around our delivery boxes every day to make their sales calls."4

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