Entrepreneurs can offer services or sell products – or both. What exactly is meant by a service and what different types there are, we reveal here.

Definition of service: what is meant by it?

Installing dishwashers, cutting hair or representing clients in court. All these are services. The defining characteristic of this activity is that one or more persons perform the service for others. The handyman who installs the dishwasher for the homeowner, the hairdresser who cuts the client’s hair, and the lawyer who defends her client in court. In return, the service provider receives payment or remuneration for the service.

Services are therefore intangible goods. They cannot be stored, nor do they have a value in themselves. Tangible goods, such as certain machines or raw materials, have this value in themselves. 

And there is a third characteristic that makes the service stand out: The so-called uno-actu principle. This principle states that the service is consumed when the service provider provides it. Production and consumption of the service thus run in parallel. The haircut is “consumed” at the moment when the customer sits in the barber’s chair and calmly watches the barber cut the hair.

In addition to production and industry, services form another, the tertiary, sector of the economy.

Who is providing services?

A service can be provided either by natural persons, such as doctors, lawyers or hairdressers. However, legal entities such as associations or corporations can also provide services.

The different types of service management

Services can be distinguished, among other things, by the type of qualification the service provider requires:

  1. Primary Services: For primary services, a short training is sufficient. Studies and/or additional training are usually not necessary for this type of service. Primary services can be found in sales, for example. The work of cleaners is also considered a primary service. 
  2. Secondary services: Secondary services, on the other hand, require longer training and often additional qualifications. The activities of tax consultants or pharmacists, for example, count as secondary services. 

4 different types of service

In addition, there are other criteria for services, which lead to the fact that the services can be further subdivided. Thus one distinguishes four different forms of the service, namely:

  1. Personal service: As the name suggests, this type of service is very closely related to the person concerned. Person-related services can therefore only be provided if the client or the recipient of the service is present and participates. Depending on what the client’s participation looks like, a distinction is made between an active person-related service and a passive person-related service. An active service in this sense is, for example, participation in a fitness class. A passive person-related service is a visit to the doctor. 
  2. Non-cash service: Non-cash services require neither the active nor the passive participation of the customer. This form of service is characterized by the fact that it results in an immediate benefit for the customer. For example, someone who calls directory assistance to obtain a telephone number is using a factual service. 
  3. Product-accompanying service: This form of service is also known as an industry-related service. It is immediately clear why this is so: These services are usually offered in addition to a product. The customer who buys the product receives an additional benefit through the product-accompanying service. Depending on when this service is offered, a distinction is made:
    1. Pre-sales services: This service is provided before the customer buys the product. For example, consulting sessions or information videos on specific products can be considered as pre-sales services.
    2. Pre-sales services: This service is provided before the customer buys the product. For example, consulting sessions or information videos on specific products can be considered as pre-sales services.
  4. Original service: Original services are found in companies or freelancers that exclusively offer services. Unlike, for example, product-related services, the company offering original services does not produce or sell any products or goods that are available for sale. Typical original services are, for example, the consulting activities of lawyers, tax consultants or coaches.

Contract with the service provider: the different options

Customers can conclude contracts with service providers in two different ways. The type of contract has very different implications for the service provider in each case:

  1. Contract for work and services: If the customer and the service provider conclude a contract for work and services, the latter undertakes to deliver a specific “work”. A work in this sense can be, for example, that the service provider develops a social media strategy that brings his customer 10,000 additional followers. The contract for work and services is not fulfilled until the customer can actually record 10,000 additional followers as a result of the strategy. With a contract for work and services, the service provider therefore also always commits to ensuring that its performance will be successful.
  2. Service contract: The situation is different for a service contract. Here, the client and contractor merely agree that a specific service will be provided. To stay with our example, the customer is to receive a new social media strategy. Whether the strategy is successful, i.e. whether the customer gains 10,000 more followers, is irrelevant in a service contract.

Entrepreneurs can offer services or sell products – or both. What exactly is meant by a service and what different types there are, we reveal here.