In Business, what are Service Rates?

Service rates are the monetary amounts companies charge consumers for services completed by business employees. Companies usually base their rates on various factors, including the cost of goods, time spent on completing the service and/or other business reasons. Other industries or sectors can also affect the service rates charged by companies. Companies may be forced to set certain rates based on government regulations from federal, state or local government entities. Although many different business factors may affect the rates companies charge consumers for services, a few basic principles are usually followed by companies when setting service rates.

Companies may set service rates based on the experience their employees have in their particular business industry or sector. Experienced employees often bring more knowledge and technical skills to the business environment, which usually means better service will be provided to consumers. Additionally, consumers may be more willing to pay higher prices for services if they believe the service offered by the company is seen as top notch. Industries such as accounting, construction or repair companies are a few examples where consumers may choose to pay a premium for business services. These industries thrive on gaining consumers by marketing their experience as a significant benefit for the consumer, regardless of the service rate charged by individual companies in the industry.

Consumers may also be willing to pay higher service rates for companies with an established brand name. Brand names often invoke positive images or feelings in consumers who believe the brand name is better than substitute or inferior services. Brand name companies usually charge consumers higher services since the company has spent copious amounts of money establishing itself as the number one brand in the economic market. Even though the service may actually be no better than another company, a consumer’s perception regarding the value of the service is what allows the company to charge higher rates.

Business service rates may also be dictated by the overall reach a company has in the economic marketplace. Smaller companies with limited clientele may need to charge higher service rates since they make their profit on individual sales. Large businesses or companies with multiple locations who can reach a wide range of target markets or demographic groups may charge lower service rates since they have the ability to earn higher profits on volume sales. Charging lower service rates may also allow larger companies to increase their overall market share and develop a bigger reach in the economic marketplace.