Module II

Consumer Behavior & Service

Reference Books:

• C. Bhatacharjee

• Lovelock

• Consumers rarely involve in manufacture of goods but often participate in service creation and delivery

• Challenge for service marketers is to understand how customers interact with service operations

Where Does the Customer Fit in aService Organization?

– People processing (e.g., Hotel stay): customer is physically involved throughout entire process

– Possession processing (e.g., DVD repair): involvement may be limited to drop off of physical item/description of problem and subsequent pick up

– Mental stimulus processing (e.g., weather forecast): involvement is mental, not physical; here customer simply receives output and acts on it

– Information processing (e.g., health insurance): involvement is mental - specify information upfront and later receive documentation of coverage

High Contact Services

• Customers visit service facility and remain throughout service delivery

• Active contact between customers and service personnel

• Includes most people-processing servicesLow Contact Services

• Little or no physical contact with service personnel

• Contact usually at arm’s length through electronic or physical distribution channels

• New technologies (e.g. Web) help reduce contact levels

High-Contact and Low-Contact Services

Levels of Customer Contact with Service Organizations Emphasizes

encounters with service

personnel

Emphasizes encounters with equipment

High

Low

Management Consulting

Car Repair

InsuranceMotel

Fast Food

Nursing Home

Airline Travel (Econ.)

Cable TV

Telephone Banking

HairCut

Good Restaurant

4-Star Hotel

Dry Cleaning

Retail Banking

Mail Based Repairs

Internet-basedServices

Movie Theater

• Internet BankingSubway

The consumer’s mind is like a ‘Black Box’

EXTERNAL STIMULUS

A.COMPANY CONTROLLED• Service offer• Price• Promotion• Dist..outlets

B. SOCIAL FORCES• WOM• Reference Groups

Consumer’s mind

Response

BUY

NO BUY

Three Buying situations of consumer- Howard & Sheth

• Straight Re- Buy/Routinized response behavior- here the customer comes for repurchase of the same service product- say for photocopying, bank draft. The customer is aware of the service product/brand, the purchase is of daily/frequent necessity. Low involvement with the purchase process.

• Modified Re-buy/ Limited problem solving- Here the customer is aware of the category/brands but not the new version or form.

Liril soap, liquid liril body soap.

• Extensive problem solving/ Critical problem solving/New task- A customer would be in this buying situation when the offer is totally unfamiliar, he is not clear either about his decision criteria or evaluation criteria. Like insurance, travel package, vacations etc. these are high involvement purchasing processes so consumer would require time.

Roles in Service-Buying Behavior

• Initiator/Influencer

• Information gatherer

• Gatekeepers

• The devil’s advocate

• Decider

• Buyer/purchaser

• User

Decision Making Process

Need Arousal

Recognition of Need

Choice of level of involvement

Search for info. / identifying of alternatives

Evaluation of alternative

Decision to buy/not buy

Purchase action and other decisions

Post purchase behavior

Influence on Service Consumer Behavior

SOCIAL/GROUP FORCES

•Family

•Culture/Sub-culture

•Reference group

•Social class

INDIVIDUAL/PSYCHOLOGICAL FORCES•Perception•Motivation•Learning•Attitude

•Personality

DECISION-MAKING PROCESS

•Need Arousal Need.

•Choice of level of involvement

•Search for info. / identifying of alternatives

•Evaluation of alternative

•Purchase decision

•Post-purchase behavior

INFORMATION SOURCE

A. Service offer, price, advertising, outlets

B. SOCIAL-

• Reference Group

• WOM

SITUATIONS

• When

• Where

• What

• why

Managing Service Encounters-1

Service Encounter: A period of time during which customers interact directly with a service

Moments of Truth: Defining points in service delivery where customers interact with employees or equipment

Critical Incidents: specific encounters that result in especially satisfying/dissatisfying outcomes for either customers or service employees

Managing Service Encounters--2

• Service success often rests on performance of junior contact personnel

• Must train, coach, role model desired behavior

• Thoughtless or badly behaved customers can cause problems for service personnel (and other customers)

• Must educate customers, clarify what is expected, manage behavior.

In services, the last experience remains uppermost in your mind. Therefore, it is not enough to be

good, you have to be consistently good

Service Marketing- Module II

Faculty: J.Rai 14

The Purchase Process for Services

The Purchase Process for Services

• Pre-purchase Stage

Awareness of needInformation searchEvaluation of alternative service

suppliers

• Service Encounter Stage

Request service from chosen supplierService delivery

• Post-purchase Stage

Evaluation of service performanceFuture intentions

• Awareness of need.• Information and search qualities• Evaluation of service alternatives

– Problems of comparing service offers.– Customers as competition for service delivery.– Role of mood, emotions and personal

influences .– Role of branding.

• Service encounter• Post purchase evaluation by customers.

Perceived Risks in Perceived Risks in Purchasing and Using ServicesPurchasing and Using Services

Functional – unsatisfactory performance outcomes

Financial – monetary loss, unexpected extra costs

Temporal – wasted time, delays lead to problems

Physical – personal injury, damage to possessions

Psychological – fears and negative emotionsSocial – how others may think and reactSensory – unwanted impacts to any of five

senses

Components of Customer Expectations

Desired Service Level: The type of service customers hope to receive in terms of desired service. It’s a “wished-for” level of service quality that customer believes can and should be delivered

Adequate Service Level: It is a minimum acceptable level of service that the customer will expect without being dissatisfied.

Predicted Service Level: service level that customer anticipates/ believes firm will actually deliver

Zone of Tolerance: range within which customers are willing to accept variations in service delivery

Factors that Influence Customer Expectations of Services

Predicted Service

Explicit & Implicit Service Promises Word-of-Mouth Past ExperienceDesired Service

ZONE OF

TOLERANCE

Adequate Service

Personal Needs

Beliefs about What Is Possible

Perceived Service

Situational Factors

Intangible Attributes, Variability, and Quality Control Problems Make Services Hard to Evaluate

Search attributes – Tangible characteristics that allow customers to evaluate a product before purchase

Experience attributes – Characteristics that can be experienced when actually using the service

Credence attributes – Characteristics that are difficult to evaluate confidently even after consumption

Goods tend to be higher in search attributes, services tend to be higher in experience and credence attributes

Credence attributes force customers to trust that desired benefits have been delivered

How Product Attributes Affect Ease of Evaluation

Source: Adapted from Zeithaml

Most Goods

High in search attributes

High in experience attribute

s

High in credence attributes

Difficult to evaluate

Easy to evaluate

Most Services

Clo

thin

g

Ch

air

Moto

r veh

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Food

s

Resta

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nt

meals

Law

n f

ert

iliz

er

Hair

cu

t

En

tert

ain

men

t

Com

pu

ter

rep

air

Leg

al serv

ices

Com

ple

x s

urg

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Ed

ucati

on

Customer Satisfaction is Central to the Marketing Concept

• Satisfaction defined as attitude-like judgment following a service purchase or series of service interactions

• Customers have expectations prior to consumption, observe service performance, compare it to expectations

• Satisfaction judgments are based on this comparison– Positive disconfirmation if better than expected– Confirmation if same as expected– Negative disconfirmation if worse than expected

• Satisfaction reflects perceived service quality, price/quality tradeoffs, personal and situational factors

• Research shows links between customer satisfaction and a firm’s financial performance

Customer Delight:Going Beyond Satisfaction

• Research shows that delight is a function of 3 components– Unexpectedly high levels of performance– Arousal (e.g., surprise, excitement)– Positive affect (e.g., pleasure, joy, or

happiness)

• Is it possible for customers to be delighted by very

mundane services?

A Service Business is a System Comprising Three Overlapping Subsystems

Service Operations (front stage and backstage)

Where inputs are processed and service elements created.

Includes facilities, equipment, and personnel

Service Delivery (front stage)

• Where “final assembly” of service elements takes place and service is delivered to customers

• Includes customer interactions with operations and other customers

Service Marketing (front stage)

Includes service delivery and all other contacts between service firm and customers

Service Marketing System: (1) High Contact Service--e.g., Hotel

TheCustomer

TechnicalCore

Interior & ExteriorFacilities

Equipment

Service People

OtherCustomers

OtherCustomers

Advertising

Sales CallsMarket Research Surveys

Billing / Statements

Miscellaneous Mail, Phone Calls, Faxes, etc.

Random Exposure toFacilities / Vehicles

Chance Encounters with Service Personnel

Word of Mouth

Service Operations System

Backstage(invisible)

Front Stage(visible)

Service Delivery SystemOther Contact Points

Service Marketing System

Service Marketing System: (2) Low Contact Service--e.g., Credit Card

TechnicalCore

Mail

Self ServiceEquipment

Phone, Fax, Web site

etc.

The

Customer

Service Operations System

Service Delivery System Other Contact Points

Backstage(invisible)

Front Stage(visible)

Advertising

Market Research Surveys

Random ExposuresFacilities, Personnel

Word of Mouth

Service Marketing System

Family Life Cycle

• Bachelor

• Newly Married

• Full Nest I

• Full Nest II

• Full Nest III

• Empty Nest I

• Empty Nest II