What a service is

A good is a physical product that you can see and touch, and when you buy it, ownership passes to you: you buy mangoes from a shop and take them home. A service is an intangible activity that satisfies a want: you can feel its effect, but you cannot hold it. Goods are produced; services are performed.

The features of services are often remembered as the five Is:

• Intangibility: a service cannot be touched; it can only be experienced.
• Inconsistency: the same service is never exactly the same twice, because each customer's needs differ and each performance varies.
• Inseparability: the service is produced and consumed at the same time. When a new film comes out, nobody else can watch it for you.
• Inventory (less): services cannot be stored for later; an empty seat on today's train cannot be sold tomorrow.
• Involvement: the customer takes part in the service, and can shape it to suit his or her needs.

So you can take home the effect of a service (a good haircut, a clear explanation), but never the service itself.

Services fall into three groups:

• Business services, which businesses use to run their work: banking, insurance, transport, warehousing and communication.
• Social services, provided voluntarily for social goals, such as health care and education run by NGOs.
• Personal services, which each person experiences differently: tourism, restaurants, recreation.

Even a simple business needs many services. A petrol pump needs transport to bring in fuel, warehousing (its tanks) to store it, communication to order supplies, banking to handle the money, and insurance against fire.