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

Customer Behavior inService Encounters


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Overview Of Lecture 2

How Differences among Services Affect CustomerBehavior

Customer Decision Making: The Three Stage Model ofService Consumption

Prepurchase StageService Encounter StagePost-Encounter Stage


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A Framework for Developing EffectiveService Marketing Strategies

Understanding Customer Needs, Decision Making,and Behavior in Service Encounters

Lecture-2

Building the Service ModelLecture-3&7

Managing the Customer Interface

Lecture-8&11

Implementing Profitable Service StrategiesLecture-12&15


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A Framework for Developing EffectiveService Marketing Strategies

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

Differences amo ng Services AffectCus tom er Behav ior

Three-Stage Mod el of Service Cons um pt ion

Prepurc hase Stage: Search, evaluation ofalternatives, decision

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

low-contact delivery

Post-Encounter Stage : Evaluation againstexpectations, future

intentions


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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 processingPossession processingMental stimulus processingInformation processing


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Four Categories Of Services (Fig 2.1)

Inform at ion process ing

(services directed atintangible assets):

Accounting

Banking

Nature of the Service Ac t People Possessions

Tangible Actions People process ing

(services directed at

people s bodies): Barbers

Health care

Who or W hat Is the Direc t Recip ient of the Service?

Possess ion p rocess ing

(services directed at

physical possessions): Refueling

Disposal/recycling

Mental s t imulusp rocess ing

(services directed atpeople s minds):

Education

Advertising/PR

Intangible Actions



People Processing

Customers must:

Physically enter the servicefactoryCo-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



Possession Processing

Possession Processing

Customers are less physicallyinvolved compared to peopleprocessing services

Involvement is limited

Production and consumptionare separable



Mental Stimulus Processing

Mental Stimulus Processing

Ethical standards required whencustomers who depend on suchservices can potentially be

manipulated by suppliersPhysical presence of recipientsnot required

Core content of services isinformation-based

Can be inventoried



Information Processing

Information Processing

Information is the mostintangible form of serviceoutput

But may be transformed intoenduring forms of serviceoutput

Line between informationprocessing and mentalstimulus processing may beblurred.



The Purchase Process for Services

Prepurchase Stage

Service EncounterStage

Post-Encounter Stage



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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Evaluating a Service May Be Difficult

Search attributes help customers evaluate a productbefore purchase

Style, color, texture, taste, sound

Experience attributes cannot be evaluated beforepurchase must experience product to know it

Vacations, sporting events, medical procedures

Credence attributes are product characteristics thatcustomers find impossible to evaluate confidently evenafter purchase and consumption

Quality of repair and maintenance work



How Product Attributes AffectEase of Evaluation

M o s t G o o d s

High in searchattributes

High in experienceattributes

High in credence attributes

Difficult to evaluate *

Easyto evaluate

Mos t Services

ClothingChairMotor vehicleFoods

Restaurant mealsLawn fertilizerHaircutEntertainment

Computer repairEducationLegal servicesComplex surgery



Perceived Risks in Purchasing andUsing Services

Functional unsatisfactory performanceoutcomes

Financial monetary loss, unexpectedextra costs

Temporal wasted time, delays leadingto problems

Physical personal injury, damage topossessions

Psychological fears and negative

emotionsSocial how others may think and react

Sensory unwanted impact on any of fivesenses



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



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 proceduresDeliver automated messages about anticipated problemsWebsites offering FAQs and more detailed backgroundTrain staff members to be respectful and empathetic



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



Understanding CustomersService Expectations

Customers evaluate service quality by comparing whatthey expect against what they perceiveSituational 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 2.1Parents wish to participate in decisions relating to their childrensEducational issuesMedia coverage, education, the Internet has made this possible



Factors Influencing CustomerExpectations of Service (Fig 2.8)

Predicted Service

Explicit & ImplicitService PromisesWord-of-MouthPast 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 (2008): pp 1 12.


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Components of Customer Expectations

Desired Service Level:Wished-for level of service quality thatcustomer believes can and should bedelivered

Adequate Service Level:Minimum acceptable level of servicePredicted Service Level:

Service level that customer believes firm willactually deliver

Zone of Tolerance:Range within which customers are willing toaccept 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 Cus tomer Contac twith Service Organizations


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Distinctions between High-Contactand Low-Contact Services

High-Contact ServicesCustomers visit service facility and remain throughout servicedeliveryActive contact between customers and service personnel

Includes most people-processing servicesLow-Contact Services

Little or no physical contact with service personnelContact usually at arms length through electronic or physical

distribution channelsNew 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 createdIncludes facilities, equipment, and personnel

Service Delivery (front stage)Where final assembly of service elements takes place and serviceis delivered to customersIncludes customer interactions with operations and other customers

Service Marketing (front stage)Includes service delivery (as above) and all other contacts betweenservice firm and customers


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

TheCustomer

TechnicalCore

Interior & Exterior

Facilities

Equipment

Service People

OtherCustomers

Advertising

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 Op erat ions System

Backstage (invisible)

Front Stage (visible)

OtherCustomers

SERVICE MA RK ETING SYSTEM


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

The

Customer

Backstage (invisible)

Front Stage (visible)

Advertising

Market ResearchSurveys

Billing/Statements

Random Exposure

to Facilities/VehiclesWord of Mouth

Phone,Fax, Web-site, etc.

SelfServiceEquipment

Mail

TechnicalCore

Other Con tact Points Service Delivery System

Service Operat ionsSystem

SERVICE MA RK ETING SYSTEM


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Theater as a Metaphor forService Delivery

All the worlds a stage and all themen and women merely players.They have their exits and theirentrances and each man in his time

plays many parts

William Shakespeare

As You Like It


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Theatrical Metaphor:An Integrative Perspective

Service dramas unfold on a stage settings 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 audience depending 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- Unders tand Ins t ruc t ions Wh en Travel ing


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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 comparisonPositive disconfirmation if better than expectedConfirmation if same as expectedNegative 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 performanceArousal (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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Summary of Chapter 2:Customer Behavior in Service Encounters (1)

Four broad categories of services

People processing, possession processing, mental stimulusprocessing, information processingBased on differences in nature of service act (tangible or

intangible), and who or what is direct recipient of service(people or possessions)Each poses distinctive service management challenges

Three-Stage Model of service consumption helps us to

understand and better manage customer behavior


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Summary of Chapter 2:Customer Behavior in Service Encounters (2)

Prepurchase stageCustomers seek solutions to aroused needs

Evaluation alternatives are more difficult when a service involvesexperience and credence attributes

Customers face a variety of perceived risks in selecting, purchasingand using services

Steps taken to reduce customers risk perceptions, include: (1)guarantees and warranties, (2) previews of service and visits toservice facilities, (3) employee training, (4) instituting visiblesafety procedures, (5) easy access to information, and (6) advancenotice of problems or delaysCustomer expectations of service range from desired toadequate with a zone of tolerance in between; if actual serviceis perceived as less than adequate, customers will be dissatisfied


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