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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 2 - 1

Chapter 2:

Customer Behavior inService Encounters

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A Framework for Developing EffectiveService Marketing Strategies

Two Key Themes in Part I of theServices Marketing Strategy Framework:

Dif ferences among Services Affect

Customer Behavior

Three-Stage Model of Service Consumption

Prepurc hase Stage:Search, evaluation ofalternatives, decision

Service Enco un ter Stage:Role in high-contact vs.

low-contact delivery

Post-Encounter Stage:Evaluation against

expectations, futureintentions

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Differences among Services AffectCustomer Behavior

Consumers are rarely involved in the manufacture of goods butoften participate in service creation and delivery

Challenge for service marketers is to understand how customersinteract with service operations

Based on differences in nature of service act (tangible/intangible)and who or what is direct recipient of service(people/possessions), there are four categories of services:

People processing

Possession processing

Mental stimulus processing

Information processing

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Four Categories Of Services (Fig 2.1)

In form at ion processing

(services directed atintangible assets):

Accounting

Banking

Nature of the Service Ac t People Possessions

Tangible Actions People proc essing

(services directed at

peoples bodies):

Barbers

Health care

Who or What Is the Direct Recip ient of the Service?

Possess ion process ing


physical possessions):

Refueling

Disposal/recycling

Mental st imu lus

process ing


peoples minds):

Education

Advertising/PR

Intangible Actions

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People Processing

Customers must:

Physically enter the servicefactory

Co-operate actively with theservice operation

Managers should think aboutprocess and output fromcustomers perspective

To identify benefits created andnon-financial costs:

Time, mental, physical effort

Four Categories Of Services

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7/33Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 2 - 7

Possession Processing

Possession Processing

Customers are less physicallyinvolved compared to peopleprocessing services

Involvement is limited

Production and consumptionare separable

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Mental Stimulus Processing

Mental Stimulus Processing

Ethical standards required whencustomers who depend on suchservices can potentially be

manipulated by suppliers

Physical presence of recipientsnot required

Core content of services is

information-based

Can be inventoried

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Information Processing

Information Processing

Information is the mostintangible form of serviceoutput

But may be transformed intoenduring forms of serviceoutput

Line between information

processing and mentalstimulus processing may beblurred.

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The Purchase Process for Services

Prepurchase Stage

Service EncounterStage

Post-Encounter Stage

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Prepurchase Stage



Prepurchase Stage: Overview

Customers seek solutions toaroused needs

Evaluating a service may bedifficult

Uncertainty about outcomesincreases perceived risk

What risk reduction strategies canservice suppliers develop?

Understanding customers serviceexpectations

Components of customerexpectations

Making a service purchase decision

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Customers Seek Solutions toAroused Needs

People buy goods and servicesto meet specific needs/wants

External sources may stimulatethe awareness of a need

Companies may seekopportunities by monitoringconsumer attitudes andbehavior

Figure 2.4

Prudential Financials advertisingst imu lates th inkin g about ret i rement needs

Courtesy of Masterf i le Corporat ion

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Evaluating a Service May Be Difficult

Search attributes help customers evaluate a productbefore purchase

Style, color, texture, taste, sound

Experience attributes cannot be evaluated beforepurchasemust experience product to know it

Vacations, sporting events, medical procedures

Credence attributes are product characteristics that

customers find impossible to evaluate confidently evenafter purchase and consumption

Quality of repair and maintenance work

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How Product Attributes AffectEase of Evaluation

Source:

Adapted from Zeithaml

Most Goods

High in searchattributes

High in experienceattributes

High in credenceattributes

Difficult

to evaluate*Easyto evaluate

Mos t Services

Clothing

Chair

Motor vehicle

Foods

Restaurant meals

Lawn fertilizer

Haircut

Entertainment

Computer repair

Education

Legal services

Complex surgery

*NOTE: Diff iculty of evaluation tends to decrease with broad expo sure

to a service categoryan dfrequency of use of a specif ic suppl ier

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Perceived Risks in Purchasing andUsing Services

Functionalunsatisfactory performanceoutcomes

Financialmonetary loss, unexpectedextra costs

Temporalwasted time, delays leadingto problems

Physicalpersonal injury, damage topossessions

Psychologicalfears and negative

emotions

Socialhow others may think and react

Sensoryunwanted impact on any of fivesenses

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How Might Consumers HandlePerceived Risk?

Seeking information from respected personal sources

Relying on a firm that has a good reputation

Looking for guarantees and warranties

Visiting service facilities or trying aspects of service beforepurchasing

Asking knowledgeable employees about competing services

Examining tangible cues or other physical evidence

Using the Internet to compare service offerings and search forindependent reviews and ratings

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Strategic Responses to ManagingCustomer Perceptions of Risk

Offer performance warranties, guarantees to protectagainst fears of monetary loss

For products where customers worry aboutperformance, sensory risks:

Offer previews, free trials (provides experience)

Advertising (helps to visualize)

For products where customers perceive physical orpsychological risks:

Institute visible safety procedures

Deliver automated messages about anticipated problems

Websites offering FAQs and more detailed background

Train staff members to be respectful and empathetic

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AOL Offers Free Trial Software toAttract Prospective Customers (Fig 2.6)

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Understanding CustomersService Expectations

Customers evaluate service quality by comparing whatthey expect against what they perceive

Situational and personal factors also considered

Expectations of good service vary from one business to

another, and among differently positioned serviceproviders in the same industry

Expectations change over time

Example: Service Perspectives 2.1 Parents wish to participate in decisions relating to their childrens

medical treatment for heart problems

Media coverage, education, the Internet has made this possible

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Factors Influencing CustomerExpectations of Service (Fig 2.8)

Predicted Service

Explicit & ImplicitService Promises

Word-of-Mouth

Past ExperienceDesired Service

ZONEOF

TOLERANCE

Adequate Service

Personal Needs

Beliefs aboutWhat Is Possible

Perceived ServiceAlterations

Situational Factors

Source:Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, The Nature and Determinants of Customer

Expectations of Service,Journal of the Academy of Marketing Science 21, no. 1 (1993): pp 112.

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Components of Customer Expectations

Desired Service Level: Wished-for level of service quality that

customer believes can and should bedelivered

Adequate Service Level: Minimum acceptable level of service

Predicted Service Level:

Service level that customer believes firm willactually deliver

Zone of Tolerance: Range within which customers are willing to

accept variations in service delivery

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Prepurchase Stage



Service Encounter Stage: Overview

Service encounters range from high-to low-contact

Understanding the servuction system

Service marketing systems: high-

contact and low-contact

Role and script theories

Theater as a metaphor for servicedelivery: An integrative perspective

Implications for customerparticipation in service creation anddelivery

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Service Encounters Range fromHigh-Contact to Low-Contact (Fig 2.9)

Figu re 2.9

Levels of Customer Contact

with Servic e Organizations

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Distinctions between High-Contactand Low-Contact Services

High-Contact Services

Customers visit service facility and remain throughout servicedelivery

Active contact between customers and service personnel

Includes most people-processing services

Low-Contact Services

Little or no physical contact with service personnel

Contact usually at arms length through electronic or physical

distribution channels New technologies (e.g. the Web) help reduce contact levels

Medium-Contact Services Lie in between These Two

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The Servuction System:Service Production and Delivery

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 (as above) and all other contacts between

service firm and customers

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Service Marketing System for aHigh-Contact Service (Fig 2.10)

The

CustomerTechnicalCore

Interior & Exterior

Facilities

Equipment

Service People

Other

CustomersAdvertising

Sales Calls

Market Research Surveys

Billing/Statements

Misc. Mail, Phone Calls,E-mails, Faxes, etc.

Website

Random Exposure toFacilities/Vehicles

Chance Encounters withService Personnel

Word of Mouth

Service Delivery System Other Contact Points

Service Operat ions System

Backstage(invisible) Front Stage(visible) OtherCustomers

SERVICE MARKETING SYSTEM

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Service Marketing System for aLow-Contact Service (Fig 2.11)

TheCustomer

Backstage(invisible)

Front Stage(visible)

Advertising

Market ResearchSurveys

Billing/Statements

Random Exposure

to Facilities/Vehicles

Word of MouthPhone,Fax, Web-site, etc.

SelfServiceEquipment

Mail

TechnicalCore

Other Con tact PointsService Delivery System

Service Operation s

System

SERVICE MARKETING SYSTEM

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Theater as a Metaphor forService Delivery

All the worlds a stage and all the

men and women merely players.

They have their exits and theirentrances and each man in his timeplays many parts

William Shakespeare

As You Like It

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Theatrical Metaphor:An Integrative Perspective

Service dramas unfold on a stagesettings may changeas performance unfolds

Many service dramas are tightly scripted, othersimprovised

Front-stage personnel are like members of a cast

Like actors, employees have roles, may wear specialcostumes, speak required lines, behave in specific ways

Support comes from a backstage production team

Customers are the audiencedepending on type ofperformance, may be passive or active participants

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Implications of CustomerParticipation in Service Delivery

Greater need forinformation/training tohelp customers to performwell, get desired results

Customers should be givena realistic service previewin advance of service

delivery, so they have aclear picture of theirexpected role

Figur e 2.13: Tour ists Ap preciate Easy-to-

Understand Instruct ions When Traveling

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Prepurchase Stage



Post-Encounter Stage: Overview

Evaluation of serviceperformance

Future intentions

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Customer Satisfaction Is Central tothe Marketing Concept

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

Customers have expectations prior to consumption, observe serviceperformance, 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/qualitytradeoffs, personal and situational factors

Research shows links between customer satisfaction and a firmsfinancial performance

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Customer Delight:Going Beyond Satisfaction

Research shows that delight is a function ofthree components:

Unexpectedly high levels of performance

Arousal (e.g., surprise, excitement)

Positive affect (e.g., pleasure, joy, orhappiness)

Is it possible for customers to be delightedby very mundane services?

Strategic links exist between customersatisfaction and corporate performance.

Getting feedback during service deliveryhelp to boost customer loyalty

Progressive Insurance seeks to delightcustomers through exceptional customerservice (Best Practice in Action 2.1)

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