Service economy

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Service economy
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Services economy is an economy where most of economic activities includes service sector rather than production of goods. The share of service sector has grown rapidly since 1960’s and has become the most important sector in economy. It has been the major feature of structural change in the developed market economies during the last decades. The perfect example of that could be the USA because most of the growth of the U.S. economy is tied to services. It accounts for about 70% of employment and continues to grow.

Driving forces

A number of factors affect the size of services economy. The possible explanations are are:

  • Contractual labor arrangements ( the best example of that is outsourcing )
  • Technical changes and increased importance of specialized high-skilled labor force
  • Increases in construction activity (at least potentially fuel growth in engineering, architectural, surveying, and landscaping and horticultural services.)
  • Slower growth of labor productivity (which was the major reason of the shift in the employment into service sector)
  • The growth in consumers demand of services

Sectors of Service Economy

In service economy the following sectors may be defined:

  • Healthcare and Beauty
  • Education
  • Financial services
  • Tourism
  • Distribution
  • Legal services
  • Entertainment , recreation and amusements
  • Engineering
  • Business services
  • Household services
  • Membership organizations
  • Communication services
  • Design

According to Hermine Vidovic research: traditional services activities such as trade, transport and telecommunications dominate while segments with higher value added, especially business services, are yet lagging behind.

Services Marketing

An increasing importance and share of the service sector in the economies of most developed and developing countries may be now easily observed. Due to that, the provision of services is playing one of the most valuable role in the marketing strategies. Manufacturing goods companies seek do differentiate their offerings by including special services components.  Clearly, skills in marketing and managing services have never been more important.

Marketing Mix of services (7P) Marketing Mix is one of the most widely accepted mix in the discipline of marketing. It is a set of essential tools and activities undertaken and put together by companies to create and encourage exchange with customers. It also helps to satisfy target markets and obtain companies objectives.

In Services Marketing Mix we can distinguish elements as listed below:

Elements that appear in regular Marketing Mix ("4P")

  • Place (physical distribution, supplies, inventory, transportation, storage, etc. )
  • Promotion ( advertising, sales, web sites, merchandising)

And the "additional P's" in Marketing Mix of Services :

  • Process (The actual procedures, sequence of actions taken by service provider, specific order and time)
  • Personel ( All human who play a part in service, people directly involved in consumption, appropriate staff and customers in service environment)
  • Physical evidence or Proof ( tangible aspects of service delivery, the environment in which the service is assembled)


Author: Beata Seweryn