Services are economic activities that provide work, access, an experience or another benefit to a customer or community. Repairing a bicycle, transporting a passenger, teaching a class and processing a payment are services.
A service often uses physical goods, and its benefits can last after the work ends. The activity being provided and the objects used to provide it are different parts of the transaction.
What a service provides
Services can change the condition of a person or their possessions, or help transactions take place. UN Trade and Development’s definition uses these distinctions when explaining international trade in services.
A mechanic improves a machine’s condition. A transport operator moves people or goods. A teacher helps learners develop knowledge. Financial services include activities such as processing payments and providing insurance.
Services can be supplied to households, other businesses or the public. They include both commercial activities and public provision, such as non-market health or education services. The customer or user does not always pay the provider directly for each use.
Goods and services in one purchase
Physical goods are objects such as bicycles, tyres and tools. When someone buys a bicycle, they acquire the object. When they pay a mechanic to repair a bicycle they already own, they buy work on that object.
A single purchase can combine both. The Universal Marketing Dictionary, drawing on the American Marketing Association’s dictionary, describes offers containing tangible and intangible elements, including services that support a product’s use.
In this fictional repair bill, a replacement tyre costs £30 and fitting and adjustment cost £20. The £50 total, before any tax, includes a physical part and a service. These invented figures illustrate the distinction rather than represent a market price.
Unused capacity and lasting outputs
An empty seat on a bus that has departed cannot be kept and sold on that same journey tomorrow. That is unused capacity at a particular time. Tomorrow’s departure is a different service opportunity.
This does not mean every service’s result disappears. A repaired bicycle remains repaired after the mechanic finishes. Design work can produce a drawing that the customer keeps and uses later.
The System of National Accounts’ production guidance also recognises knowledge-capturing products, including reports, software, films and music that can be accessed repeatedly. Such products may be classified as goods or services. The fact that an output can be stored does not, on its own, settle the classification.
Common service characteristics have limits
Marketing discussions often highlight intangibility, inseparability, variability and perishability. These describe useful patterns. They are not universal tests that every part of every service must meet.
- Intangibility: the customer buys a performance, benefit or access, even when equipment and materials are involved.
- Inseparability: some services, such as a haircut, require interaction as they are delivered. A customer need not remain beside a mechanic throughout a bicycle repair.
- Variability: results can differ between providers or occasions. Standardised processes and automation can also make delivery consistent.
- Perishability: unused capacity for a particular appointment or journey cannot simply be carried forward. This is different from saying a service cannot leave a lasting result.
- Customer involvement: a customer may supply information, possessions or participation without being present throughout the work.
A University of Surrey overview discusses the limitations of applying the traditional characteristics to services as a whole. Looking at the specific activity, capacity and output gives a clearer explanation.
Services can be supplied remotely
Providers and users do not always share a location. The US Bureau of Economic Analysis describes remote supply over the internet or phone as one way international services are delivered.
The World Trade Organization gives banking and architectural work transmitted across borders as examples. The service concerns the work or access supplied, while digital files, devices and physical materials may support its delivery.
Last checked and updated on November 2, 2026 by the MBN editorial team.