Consumer Behavior in Services

Overview

• How consumers seek, choose, purchase, experience and evaluate services

• Two most important influences- consumers life stage and the generation in which he/she was born

• Diff generations of consumers have personalities shaped by events, history and people drive their needs for different types of services .

Search, experience and credence properties

Search Qualities• attributes a consumer can determine prior to purchase of a

product. Eg color, price, fit, feel Eg jewelry, cars clothing

Experience Qualities• attributes a consumer can determine after purchase (or during

consumption) of a product eg taste wear ability Eg vacations and restaurant meals

Credence Qualities• characteristics that may be impossible to evaluate even after

purchase and consumption Eg surgeries

Continuum of Evaluation for Different Types of Products

Clo t

hin g

Jew

elry

Furn

iture

Hou

ses

Auto

mob

iles

Rest

aura

nt m

eals

Vaca

tions

Hai

rcut

s

Child

car

e

Tele

visi

on re

pair

Lega

l ser

vice

s

Root

can

als

Auto

repa

ir

Med

ical

dia

gnos

is

Difficult to evaluateEasy to evaluate

High in searchqualities

High in experiencequalities

High in credencequalities

MostGoods

MostServices

Perceived risks in purchasing and using services

• Perceived risk is relevant for services – that are diff to evaluate before purchase and consumption

• First time users – more uncertain• Eg functional risks: unsatisfactory performance

outcome, financial risk: monetary costs, temporal risk : wastage of time, consequence of delays, physical risk : personal injury and damage to possessions, psychological risk : personal fear and emotions,social risk and sensory risk

How do customers handle perceived risks?

• Seek info from personal/family sources (family, friends, peers)

• Rely on firm that has good reputation• Guarantees and warrantees• Visit service facilities or trying aspect of services before

purchasing• Ask knowledgeable employees about competing services• Examine tangible cues or physical evidence• Use internet for competitor service offerings and to

search for independent review and ratings

Risk reduction strategies developed by suppliers

• Offer performance warrantees• Money back guarantee• Prospective customers can preview service through

brochures/web/tv• Encourage prospects to visit service facilities• Institute visible safety procedures• Train staff to be respectful and empathetic in their dealings

with customers• Provide toll free no/website• Deliver messages to cell phone (delayed flights by airlines)• Giving customers online tracker to track order status

Strategic responses to manage risk• Services high in experience/credence attributes- lot of intangible elements are

involved• Thus variability of inputs/outputs leads to QC issues• Thus present a special challenge to marketers regarding reassuring customers

and reducing risks• Eg products high in experience attributes- generate free trials for prospective

customers• Advt also used to stimulate consumer interest. Eg credit card use• Providers of services with high credence attributes often display their

credentials to reassure of quality service Eg Doctors, architects • Evaluation of such services may be also affected by customers interaction with

physical environment• Smart providers also engage in evidence management- an organized approach

to present coherent evidence- employees dress, behaviour,furnishings,equipment and facilities

Understanding Customers service expectations

• Customers evaluate service quality by comparing what is expected with what they receive from supplier

• If expectations are met/exceeded, customers believe that they have received high quality service. If price/quality relationship is acceptable and other situational factors are positive- customers likely to make repeat purchases and remain loyal to that supplier

• Customers expectation of a good service varies from one business to another. Pre experience also plays an imp part

• Expectations also vary depending upon positioning Eg no frills airline service vs full service airline service.

• Service expectations change over time influenced by advt, pricing, new tech, service innovations, social trends, increased access to info through various media Eg Parents involvement in medical care for child

Customer expectations

• Customer expectations are beliefs about service delivery that serve as a standards or reference points against which performance is judged.

• Because customers compare their perceptions of performance with these reference points when evaluating service quality, knowledge about customer expectations is important

• Knowing what customers expect is the fist step in assuring service quality

Possible Levels of Customer Expectations

Components of service expectations

• Desired service• Adequate service• Predicted service• Zone of tolerance

Desired and adequate service levels

• Desired service: Type of service which customers hope to receive

• ‘Wished for level”: - a combination of what customers believe can and should be delivered in the context of personal needs

• A blend of what customers believes “can be” and “should be”• Adequate Service : Minimum level of service which

customers will accept without being dissatisfied.• Customers are realistic- they have threshold level of

expectations Eg fast food service restaurant vs an expensive gourmet meal restaurant

Factors influencing Customers expectation about service

Adequate Service

Desired Service

Zone ofTolerance

Explicit and Implicit service promises,

word of mouth, past experience

Predicted Service

Personal needs

Beliefs abt what is possible

Perceived service

alterations

Situational factors

Predicted service level

• The level of service which customers actually anticipate receiving

• Directly affects how they define adequate service at that level

• Customer prediction will be situation specific• Eg long queues for tickets for amusement

park on a holiday

Zone of tolerance

• Diff for firms to achieve consistent delivery by all employees in same company and even by same service employee from one time of day to another.

• The extent to which customers are willing to accept this variation is called as zone of tolerance

• Too low performance: frustration and dissatisfaction amongst customers, exceeding: pleases and delights customers

• Other words: The range of service within which customers don’t pay explicit attention to service performance. When service falls outside this range customers either react positively/negatively

Zone of tolerance

• Size of ZOT will be large or small depending upon factors such as competition, price, importance of specific service attributes which can influence the level of adequate service Eg waiting time at checkout at grocery store 9 eg 2-3 m vs 15 mins)

• Diff customers possess diff zones of tolerance. Eg customers who work/vs at home for repairing

• Also varies for service dimensions: less tolerant for unreliable service than for service deficiencies

Consumer choice• Need recognition: Begins with the recognition that a need or want exists.• Maslow's hierarchy to characterize needs.• Physiological needs: Biological needs such as food, water and sleep.

Recognition of needs is fairly easy.• Safety and security needs: incl shelter, protection and security. Consumers

seek to provide for their own and their loved ones shelter, safety and security through many types of services. For eg parents looking for child care, education etc

• Social needs: need for affection, friendship and acceptance Eg internet services – social connections

• Ego needs: for prestige,success,accomplishment and self esteem eg spa services, plastic surgery etc

• Self actualization needs: self fulfillment and enriching experiences. Eg sky diving etc

FACTORS THAT INFLUENCE CUSTOMER EXPECTATIONS OF SERVICE

Sources of desired service expectation

• Personal needs: Needs which are essential to physical/psychological well being of customer are pivotal to customers desire in service. Eg physical, social,functional and psychological . Eg sports fan.

• Lasting service intensifiers: individual, stable factors which lead the customer to a heightened sensitivity to service- one most imp factors is “derived service expectation”- occur when customer expectation is driven by another person or group. Eg birthday party organized by mother for her kid

• Personal service philosophy : the customers underlying generic attitude about meaning of service and proper conduct of service providers. Eg delivery within 30 mins

Sources of adequate service expectation

Temporary service intensifiers

• short term individual factors that make customer more aware for service need.•Eg personal emergency situations- accidents • Problems with initial service also leads to heightened expectations eg auto repair

Perceived service alternatives

• Are other providers from whom the customer can obtain service. Eg salons, airlinbe customer from a smaller town • Marketers should fully understand the complete set of options that customers view as perceived alternatives. Eg small town customers view rail as an another option

Self perceived service role

• Customer perceptions of the degree to which customers exert an influence on the level of service they receive• Eg meal ordering in an restaurant

Sources of adequate service expectation

Situational factors

• Service performance conditions that customers view as beyond the control of service provider.•Eg natural disasters Hurricane Sandy

Predicted service

• Level of service that customers believe they are likely to get• Its an estimate or calculation of service that a customer will receive in an individual transaction rather than in an overall relationship with a service provider

Sources of both desired and predicted service expectations

• Interested consumers- likely to seek or take in information from various sources. Eg call a store, ask a friend, track ads in newspapers. They may also receive service info by watching TV, surf-thus search actively as well as passively.

• Factors which influence both desired as well as predicted service expectations are

1. Explicit service promises2. Implicit service promises3. Word of mouth communications4. past experience

Factors which influence both desired and predicted service expectations

Explicit service promise

•Are personal/non personal statements about service made by the organization to the customers • Personal- salespeople, service personnel, non personal: webpage, advt, brochures etc• Completely within the control of the service provider• Sometimes companies deliberately overpromise by stating best estimates about service delivery in the future• Direct effect on service expectation. Eg total solution, 24 hrs service

Implicit service promise

• are service related cues other than explicit promises that lead to inferences about what the service should and will be like• Quality cues are dominated by price and other tangible components.• Higher the price, more impressive the tangibles, more the customer will expect from the service

Word of mouth communication• personal/non personal statements made by customers other than the organization• Carry more weight – unbiased • imp for services which are difficult to purchase/evaluate

Factors which influence both desired and predicted service expectations

Past experience

• Customers previous exposure to service that is relevant to focal service. Eg hotel visits

THE THREE STAGE MODEL OF SERVICE CONSUMPTION

Customer Decision Making

Three stage model

1. Prepurchase stage2. Service Encounter stage3. Post encounter stage

The Pre Purchase stage• Begins with the need arousal- the prospective customers

awareness of need and continues through information search and evaluation of alternatives on whether to make a service purchase

• Needs are unconscious and may concern with personal identity and aspirations. Some needs may be overt Eg back pain hunger etc.

• External sources – eg mktg activities may also stimulate awareness of a need. Eg insurance cos using advt to urge people to start about thinking about retirement plans- then visit a website

• When people are aware of needs – more motivated to resolve it- and search for alternatives

The service encounter stage

• Experience of purchasing and consuming a service typically takes form of a series of encounters

• A service encounter is a period of time during which you as a customer interacts directly with service provider

• Eg leisurely meals, taxi rides, one day at amusement park etc

Service Encounters as “Moments of Truth”

• Shows the importance of contact points with the customers

• Eg bull fighting with bull and matador. The moment of truth is the point where matador slays the bull.

• Importance of relationship mktg which states that to prevent the mis encounter to potentially destroy what is already or potential of becoming a long term relationship

• Basic service challenge is defining and managing the moments of truth the customer will encounter in that particular industry

Service Encounters- high contact services

• Using this service entails interactions through service delivery between customers and the organization.

• The customers exposure to service provider takes a physical and tangible nature.

• When customers visit the facility where service is being delivered , they enter a “service” factory. Eg hotel- is a lodging factory, hospital is a health treatment factory.

• These industries focus on processing people – challenge is to make experience appealing one for customers in terms of service environment and their interaction with service personnel

• During course of service delivery customers are exposed to many physical clues abt the org- interior/exterior of building, equipment and furnishings, appearance and behavior of service personnel and even other customers

Low contact services

• Involve little physical contact between customers and providers.

• Instead the contact takes place through physical distribution channels/electronically

• Many high contact services are being converted to low contact services as customers undertake more self service- conduct their insurance/banking transactions by mail, telephone,internet and do purchasing online

Levels of customer contact in service organizations

High

Low

Emphasizes encounters with service personnel

Emphasizes encounters with equipment

Nursing home

Haircut

Four star hotel

Mgt consulting

Telebanking

Car Repair

Drycleaning

Movie theater Netbanking

Internet based

services

Airline travel

Insurance

SERVUCTION SYSTEM

Pierre Eiglier and Eric Langeard

• Conceptualized service business as a system that integrated marketing, operations and customers themselves

• Servuction system- is that part of service organizations physical environment that is visible to customers, contact personnel, other customers and customer in person

• Comprises of Service operations , Service delivery and other contact points

Service operations• Where inputs are processed and elements of service product are created• Visible components of service operations can be divided to those relating to

service personnel and to those relating to physical facilities/tangibles/equipment

• Customers evaluate the product on those elements which they actually experience during their encounter and perceived service outcome

• If back office fails to perform the task efficiently, the front office image will suffer. For eg unavailability of any item on menu

• The proportion of overall service visible to customers varies according to level of contact

• High contact services- physical customer- visible component has to be higher• Low contact services- minimize customer contact with service provider- most

of the service element is located remotely and front end- mail and telecon

Service Delivery

• Where final assembly of elements takes place and product is delivered to customers often in presence of other customers

• Includes the visible elements of the service (personnel, buildings, equipment) but also exposure to other customers

• Customers of low contact services – normally never see the factory- will talk to rep. Make judgments on ease of tel access, followed by voice and responsiveness of tel based customer service rep

• If service is delivered electronically such as self service machines, IVR, web etc- firms compensate by adding color, music, drama

Other contact points

• Includes all points of customer contact- advt, billing,and market research

• Communication, participation news stories, word of mouth etc

Service Marketing system for High and low contact services

• The visible part of service operations ,service delivery and other contact points – service marketing system

• Represents all diff ways customer may learn and encounter about the organization in questions

• Service is experiential, each of these many elements offers clues about the nature and quality of service product

• Inconsistency amongst the various elements – weakens the credibility in the customers eyes

Service Marketing system for High contact services

TECHNICAL CORE

THE CUSTOMER

ADVTSALES CALLS

MKT RESEARCH SURVEYSBILLING/STATEMENTS

MISC MAIL,PHONE,FAXWEBSITES

RANDOME EXPOSURE TO FACILITIES/VEHICLES

CHANCE ENCOUNTERS WITH SERVICE PERSONNELWORD OF MOUTH

OTHER CONTACT POINTSSERVICE DELIVERY SYSTEM

SERVICE OPERATIONS SYSTEM

BACK STAGEINVISIBLE

FRONT STAGEVISIBLE

INTERIOR & EXTERIOR FACILITIES

EQUIPMENT

SERVICE PEOPLE

OTHER CUSTOMERS

OTHER CUSTOMERS

Service Marketing system for LOW contact services

TECHNICAL CORE

MAILSELF SERVICE EQUIPMENT

PHONE,FAX,WEBSITE

THE CUSTOMER

ADVTMKT RESEARCH SURVEYS

BILLING/STATEMENTSRANDOME EXPOSURE TO

FACILITIES/VEHICLESWORD OF MOUTH

OTHER CONTACT POINTSSERVICE DELIVERY SYSTEMSERVICE

OPERATIONS SYSTEM

BACK STAGEINVISIBLE

FRONT STAGEVISIBLE

Role and script theories

• Servuction model- static and describes a single service encounter or moment of truth

• Service processes – series of encounters Eg flight booking, travel, arrival, retrieving luggage etc

• Knowledge of role and script theories- helps us to understand, design, manage both customer and employee behaviour in these encounters

Roles• A set of behavior patterns learned through experience and

communication, to be performed by an individual in a certain social interaction in order to attain maximum effectiveness in goal accomplishment

• As combination of social cues or expectations that guide behavior in specific setting or context

• In service encounters both employees and customers have roles to play• The satisfaction or productivity depends on extent to which each

person acts out his/her prescribed role during a service encounter• Employees must perform their roles wrt customer expectations or else

dissatisfy/lose customers• Customers must also play by rules or risk problems to firm/employees

and other customers

Scripts• Specifies the sequences of behaviour that employees and

customers are expected to learn and follow during service delivery• Employees receive formal training• Customers learn scripts through experience, education and

communication. More experience- more familiarity with the script• Unwillingness to learn a new script may be a barrier to switch to

competition• Any deviation- employee and customer dissatisfaction• If co decides to change service script (technology), customers and

employees should be educated about the new approach and benefits it provides

Scripts

• Some scripts are highly structured and allow employees to move through their scripts quickly and efficiently Eg flight attendants- helps to overcome two challenges- variability reduction and ensuring uniform quality. But frequent repetition – leads to mindless service delivery without bothering about the customer needs

• Scripts tend to be more flexible for providers of highly customized services- designers, educators,stylists etc . Some customers if they are new to service they may be fearful of behaving incorrectly- org need to educate them about their service delivery

Script for a dental examPatient

• 1. Phone for appt• 3. Arrive at

dental office• 6. Sit in waiting

room• 8. Enter room, sit

in chair• 10. Respond to

questions• 15. Rinse mouth• 20. Rise from

chair• 22. Leave room• 24. Pay bill• 27 . Leave dental

office

Receptionist

• 2. Confirms needs and sets date

• 4. Greet patient, verify purpose, direct to waiting room, notify dentist of arrival

• 23. Greet patient, confirm treatment received, present bill

• 25. Give receipt• 26.Thank patient

and say goodbye

Service scripts for..

• Visit to a salon for a haircut• Lecture delivery• Flight travel• Restaurant meal

Customer participation in service delivery

• More work customer does as a co producer in service delivery-greater info he requires to perform the task correctly

• Advt for new services, brochures,websites all provide info. Eg phone besides an ATM

• Customers look towards employees and other asisstants for help and are frustrated if they cant find it

• Some service providers give a realistic service preview- video experience

The post encounter stage

• Customers have certain service standards in mind before consumption (their expectations),observe service performance, compare it to stds, and then form satisfaction judgments based on this comparison

• Negative disconfirmation- if service is worse than expected, positive disconfirmation- if it is better than expected and simple confirmation if it is as expected

• If substantial positive disconfirmation, plus an element of pleasure and surprise- customer is likely to be delighted

Feedback during service delivery

• Service personnel can be trained to be more observant so that they can identify customers who appear having difficulties ,look frustrated or ill at ease if they need assistance .

• If experience shows that customers are perpetually discomforted by a particular aspect of service encounter- indicates a need for redesign and improvement