How to Enter and Compete in the Business Services Sector
Whether it’s a catering service or an IT support company, business services help large companies operate effectively. But despite their importance to businesses, the industry remains fragmented, and it can be difficult for entrepreneurs to understand how to enter and compete in this growing sector.
A key difference between service and product industries is that, while product companies can make things better, a service company can only provide its customers with different experiences. This is why a successful service business must understand and cater to customer needs in ways that differentiate it from competitors. Using the four core elements of service design—providing convenience, creating familiarity, establishing credibility and building trust—managers can craft a viable business that meets customers’ unique needs and creates strong competitive advantage.
As the economy shifts from one based on manufacturing to one largely driven by services, many sectors of the economy are changing as well. For example, some manufacturing jobs have been replaced by services such as warehousing, distribution and freight forwarding. In addition, the demand for business services has increased as manufacturers rely on them to handle value-added activities like sorting bulk goods into customized lots, packaging goods, controlling and managing inventory, performing light assembly and labeling and marking prices.
Services such as business travel and food services target customers that are both consumer and business-oriented. These services can be delivered either on-demand or in a planned manner. In the latter case, business-to-business services are provided for a flat or hourly rate. For example, an airline may offer a charter flight to attend an industry conference or an IT firm might create a custom-built website for a client.
Other types of business services include rental and leasing, cleaning and utilities. These can be provided to companies as a way of saving money and resources, or as a means of increasing productivity. For example, cleaning services can keep a workplace clean and organized and utility providers can deliver water or electricity to companies as they work.
Pricing a business service is a challenge that can affect the success of a new venture. In a world where customers can easily compare the quality of your service to other available options, it’s important for businesses to set their prices fairly and accurately. Pricing can be especially challenging for small business owners, as it’s often difficult to balance the needs of consumers and other businesses.
For this reason, it’s critical for business owners to consider their customer base and the value of each service they provide as they develop a strategy for entering the marketplace. Ultimately, it’s important to remember that while service business can be lucrative, they are also very risky and require a great deal of planning before they can become profitable. This is particularly true for business-to-business services, which often carry higher startup costs and slower revenue growth than business-to-consumer services.