Service economics is an umbrella phrase, coined by the authors, to convert the wide-ranging intangible aspects of service (including but not limited to processes, people, customers, strategy, brand values, competencies) into something tangible (financial information) that can be applied by the broader business community. The target is to capitalise on the value that the service business represents to the customer and stakeholder when dealing with the growing complexity of demands and expectations of customers and suppliers, to achieve an effective and profitable partnership of supplier and customer.
For a long time it has been difficult for service to be the source of excellent performance and profitability; this aspect of business is now proving an exciting area of opportunity and some companies are achieving profitable growth. Businesses struggling with shrinking profit margins underline the importance of discovering in what areas value is gained by successful companies, and demonstrated in these growth figures provided by a number of research authorities:
- annual growth rates of 20 – 40% from high value-adding services,
- gross margins of 50% or more, net margins of 25% or more,
- annual increases in profitability through productivity improvements of 10% or more,
- sales increases of 20% or more of total company revenue through development of staff as trusted advisors,
- 5% increase in customer loyalty through improved customer experience could increase profits by 25-85%
The data has shown that service operations are growing rapidly, even as the rest of the business struggles, demonstrated by headlines in the digital press “BBC News Channel”
Service sector growth hits 3 year high
With a subtext
The service sector in the
A selection of comments verifying this trend appeared in various supplementary digital media reports:
“The service sector is a vital component of the
"It's a staggering rise which suggests the services sector in the
“Job losses in the sector have slowed, while expectations among businesses remained positive”
The companies leading this customer service success have come from the hospitality sector - hotels and restaurants etc (for a long time their service was considered, somehow, as different to providing support to products). However when we consider that these statements are sourced from reports across the world, it becomes obvious that there is widespread acceptance and understanding that customer service delivering (loyalty, retention, innovation and satisfaction) is now the most important capability to have and deliver. Companies such as Amazon and Google continually demonstrate this capability in the way they interface and continually deliver to their customer needs. They have successfully adapted, not only their processes, but their whole organisations to become much more customer centric, to deliver consistent cost-effective service in such a way that each customer perceives a personalised service, and these businesses are enjoying significant revenue growth as a result.
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