Customer Behavior in Service Encounters

Evaluating a Service May Be Difficult

Search attributes help customers evaluate a product

before purchase
Style, color, texture, taste, sound

Experience attributes cannot be evaluated before

purchase

must experience product to know it

Vacations, sporting events, medical procedures

Credence attributes are product characteristics that

customers find impossible to evaluate confidently even after purchase and consumption
Quality of repair and maintenance work

How Product Attributes Affect Ease of Evaluation

Most Goods Most Services

Easy to evaluate
Clothing Chair Motor vehicle Foods Restaurant meals Lawn fertilizer Haircut Entertainment Computer repair Education Legal services Complex surgery

Difficult to evaluate*

High in search attributes

High in experience attributes

High in credence attributes

Source: Adapted from Zeithaml

*NOTE: Difficulty of evaluation tends to decrease with broad exposure

to a service category and frequency of use of a specific supplier

Differences among Services Affect Customer Behavior

Consumers are rarely involved in the manufacture of goods but often

participate in service creation and delivery with service operations

Challenge for service marketers is to understand how customers interact 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

Four Categories Of Services

Who or What Is the Direct Recipient of the Service? Nature of the Service Act Tangible Actions People People processing (services directed at peoples bodies):  Barbers  Health care Intangible Actions Mental stimulus processing (services directed at peoples minds):  Education  Advertising/PR Possessions Possession processing (services directed at physical possessions):  Refueling  Disposal/recycling Information processing (services directed at intangible assets):  Accounting  Banking

Four Categories Of Services (contd.) People Processing

y Customers must: y Physically enter the service factory y Co-operate actively with the service operation y Managers should think about

process and output from customer s perspective

y To identify benefits created and

non-financial costs:
y

Time, mental, physical effort

Possession Processing Possession Processing

 Customers are less physically involved compared to people processing services  Involvement is limited  Production and consumption are separable

Mental Stimulus Mental Stimulus Processing Processing

 Ethical standards required when customers who depend on such services can potentially be manipulated by suppliers  Physical presence of recipients not required  Core content of services is information-based
 Can be inventoried

Information Processing Information Processing

 Information is the most intangible form of service output  But may be transformed into enduring forms of service output  Line between information processing and mental stimulus processing may be blurred.

Prepurchase Stage: Overview

y Customers seek solutions to aroused

Prepurchase Stage

needs

y Evaluating a service may be difficult y Uncertainty about outcomes

increases perceived risk

y What risk reduction strategies can

Service Encounter Stage

service suppliers develop? expectations expectations

y Understanding customers service y Components of customer y Making a service purchase decision

Post-Encounter Stage

Perceived Risks in Purchasing and Using Services

y Functional

unsatisfactory performance monetary loss, unexpected extra wasted time, delays leading to

outcomes
y Financial

costs
y Temporal

problems
y Physical

personal injury, damage to possessions fears and negative emotions

y Psychological y Social y Sensory

how others may think and react unwanted impact on any of five

senses

How Might Consumers Handle Perceived Risk?

y Seeking information from respected personal sources y Relying on a firm that has a good reputation y Looking for guarantees and warranties y Visiting service facilities or trying aspects of service before purchasing y Asking knowledgeable employees about competing services y Examining tangible cues or other physical evidence y Using the Internet to compare service offerings and search for independent

reviews and ratings

Strategic Responses to Managing Customer Perceptions of Risk

Offer performance warranties, guarantees to protect

against fears of monetary loss For products where customers worry about performance, sensory risks:
Offer previews, free trials (provides experience) Advertising (helps to visualize)

For products where customers perceive physical or

psychological 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

Understanding Customers Service evaluate service quality by comparing what Customers Expectations
they 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 service providers in the same industry Expectations change over time Example: Service Perspectives

Parents wish to participate in decisions relating to their

children s medical treatment for heart problems Media coverage, education, the Internet has made this possible

Service Encounter Stage: Overview

Prepurchase Stage
 Service encounters range from high- to low-contact  Understanding the servuction system  Service marketing systems: highcontact and low-contact

Service Encounter Stage

 Role and script theories  Theater as a metaphor for service delivery: An integrative perspective  Implications for customer participation in service creation and delivery

Post-Encounter Stage

Service Encounters Range from High-Contact to Low-Contact

Service Marketing System for a High-Contact Service SYSTEM SERVICE MARKETING

Service Delivery System Service Operations System
Interior & Exterior Facilities Other Customers

Other Contact Points

Advertising Sales Calls Market Research Surveys Billing/Statements

Technical Core

Equipment

The Customer

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

Service People

Random Exposure to Facilities/Vehicles Other Customers Chance Encounters with Service Personnel Word of Mouth

Backstage (invisible)

Front Stage (visible)

Service Marketing System for a Low-Contact Service SYSTEM Service Operations SERVICE MARKETING
System Service Delivery System Mail Other Contact Points Advertising

Technical Core

Self Service Equipment Phone, Fax, Web- site, etc.

The Customer

Market Research Surveys Billing/Statements Random Exposure to Facilities/Vehicles Word of Mouth

Backstage (invisible)

Front Stage (visible)

Distinctions between High-Contact and Low-Contact Services

High-Contact Services Customers visit service facility and remain throughout service delivery 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 arm s 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

Theatrical Metaphor: An Integrative Perspective

as performance unfolds improvised

Service dramas unfold on a stage

settings may change

Many service dramas are tightly scripted, others Front-stage personnel are like members of a cast Like actors, employees have roles, may wear special Support comes from a backstage production team Customers are the audience

costumes, speak required lines, behave in specific ways depending on type of performance, may be passive or active participants

Implications of Customer Participation in Service Delivery

Greater need for information/training to help customers to perform well, get desired results Customers should be given a realistic service preview in advance of service delivery, so they have a clear picture of their expected role

Tourists Appreciate Easy-to-Understand Instructions When Traveling

Post-Encounter Stage: Overview

Prepurchase Stage

Service Encounter Stage

 Evaluation of service performance  Future intentions

Post-Encounter Stage

Customer Satisfaction Is Central to the Marketing Concept

y Satisfaction defined as attitude-like judgment following a service

purchase or series of service interactions y Customers have expectations prior to consumption, observe service performance, compare it to expectations y Satisfaction judgments are based on this comparison
y Positive disconfirmation if better than expected y Confirmation if same as expected y Negative disconfirmation if worse than expected

y Satisfaction reflects perceived service quality, price/quality tradeoffs,

personal and situational factors y Research shows links between customer satisfaction and a firm s financial performance

Customer Delight: Going Beyond Satisfaction

y Research shows that delight is a function of

three components:

y Unexpectedly high levels of performance y Arousal (e.g., surprise, excitement) y Positive affect (e.g., pleasure, joy, or happiness)

y Is it possible for customers to be delighted by

very mundane services?

y Strategic links exist between customer

satisfaction and corporate performance. boost customer loyalty

y Getting feedback during service delivery help to y Progressive Insurance seeks to delight

customers through exceptional customer service (Best Practice in Action 2.1)

Factors Influencing Customer Expectations of Service

Personal Needs Desired Service Beliefs about What Is Possible Explicit & Implicit Service Promises Word-of-Mouth Past Experience

ZONE OF TOLERANCE

Perceived Service Alterations Adequate Service Situational Factors Predicted Service

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.

Components of Customer Expectations

Desired Service Level: Wished-for level of service quality that customer believes can and should be delivered Adequate Service Level: Minimum acceptable level of service Predicted Service Level: Service level that customer believes firm will actually deliver Zone of Tolerance: Range within which customers are willing to accept variations in service delivery

Defining Core and Supplementary Elements of Our Service Product

y How is our core product defined and what supplementary elements

augment it?
y What product benefits create most value for customers? y Is our service package differentiated from competition in meaningful

ways for target customers?

y What are current levels of service on core product and each

supplementary element?
y Can we charge more for higher service levels? For example:
y y y y y

Faster response and execution Better physical amenities Easier access Higher staffing levels Superior caliber personnel

y Alternatively, should we cut service levels and charge less?

The Flower of Service

Information Payment
Core

Consultation

Billing

Order Taking

Exceptions Safekeeping
KEY:

Hospitality

Facilitating elements Enhancing elements

y Not every core product is surrounded by supplementary elements from all

How to Determine What Supplementary Services Should Be Offered

y Which supplementary services must be offered y Which might usefully be added to enhance value and ease of doing

eight clusters y Nature of product helps to determine:

business with the organization

y People-processing and high-contact services tend to have more

supplementary services y Market positioning strategy helps to determine which supplementary services should be included y Firms that offer different levels of service often add extra supplementary services for each upgrade in service level

The Flower of Service: Facilitating Services Information

Customers often require information about how to obtain and use a product or service. Core Examples of elements:  Directions to service site  Schedule/service hours  Prices  Conditions of sale  Usage instructions

The Flower of Service: Facilitating Services Order Taking

Customers need to know what is available and may want to secure commitment to delivery. The process should be fast and smooth. Examples of elements:  Applications  Order entry  Reservations and check-in

Core

The Flower of Service: Facilitating Services Billing

How much do I owe you? Bills should be clear, Accurate, and intelligible. Core Examples of elements:  Periodic statements of account activity  Machine display of amount due

The Flower of Service: Facilitating Services Payment

Customers may pay faster and more cheerfully if you make transactions simple and convenient for them. Core Examples of elements:  Self service payment  Direct to payee or intermediary  Automatic deduction

The Flower of Service: Enhancing Services Consultation

Value can be added to goods and services by offering advice and consultation tailored to each customers needs and situation. Examples of elements:  Customized advice  Personal counseling  Management consulting

Core

The Flower of Service: Enhancing Services Hospitality

Customers who invest time and effort in visiting a business and using its services deserve to be treated as welcome guests after all, marketing invited them!

Core

Examples of elements:  Greeting  Waiting facilities and amenities  Food and beverages  Toilets and washrooms  Security

The Flower of Service: Enhancing Services Safekeeping

Customers prefer not to worry about looking after the personal possessions that they bring with them to a service site. Core Examples of elements:  Looking after possessions customers bring with them  Caring for goods purchased (or rented) by customers

The Flower of Service: Enhancing Services Exceptions

Customers appreciate some flexibility when they make special requests and expect responsiveness when things dont go according to plan. Examples of elements:  Special requests in advance  Complaints or compliments  Problem solving  Restitution

Core

Managerial Implications
y To develop product policy and pricing strategy,

managers need to determine:

y Which supplementary services should be offered as a

standard package accompanying the core y Which supplementary elements could be offered as options for an extra charge

y In general, firms that compete on a low-cost, no-frills

basis needs fewer supplementary elements than those marketing expensive, high-value-added services y Each flower petal must receive consistent care and concern to remain fresh and appealing

Core and Supplementary Services at Luxury Hotel (Offering Much More than Cheap Motel!)
Reservation Valet Cashier Parking Business Center A Bed for the Night in an Room Elegant Private Service Room with a Bathroom Wake-up Call Internet Reception

Baggage Service Cocktail Bar

Entertainment/ Restaurant Sports/ Exercise

Planning and Branding Service Products

Service Products
y A product implies a defined and consistent bundle of output and also ability of firm to differentiate its bundle of output from competitors y Service firms can differentiate their products in similar fashion to various models offered by manufacturers y Providers of more intangible services also offer a menu of products
y Represent an assembly of elements that are built around the

core product y May include certain value-added supplementary services

y Most service organizations offer a line of products rather

Product Lines and Brands

than just a single product y They may choose among three broad alternatives:
y Single brand to cover all products and services y A separate, stand-alone brand for each offering y Some combination of these two extremes

Example: British Airways Subybrands British Airways offers six distinct air travel products
y Four intercontinental offerings:
y y y y

First (deluxe service) Club World (business class) World Traveller Plus (premier economy class) World Traveller (economy class)

y Two intra-European offerings:

y y

Club Europe Euro-Traveller

y Branding can be employed at both corporate and product levels y Corporate brand:
y Easily recognized y Holds meaning to customers y Stands for a particular way of doing business

y Product brand:
y Helps firm communicate distinctive experiences and benefits associated with a

specific service concept

Offering a Branded Experience

y Target profitable customers,

employing behavior segmentation rather than demographics. y Understand what the target customers value. y Create a brand promise-an articulation of what target customers can expect from their experience with organization which is of value to customers, addresses a need, is actionable & can be incorporated into standards and provides focus for the organization & its employees.

y Apply that understanding to

y y y

shape a truly differentiated customer experience. Give employees the skills, tools and supporting processes needed to deliver the defined customer experience. Make everyone the brand manager Make promises that your processes can exceed. Measure & monitor: Consistency of delivery is paramount

A Hierarchy of New Service Categories Major service innovations

y New core products for previously undefined markets
(E.g. FedEx s overnight, eBay s launch of online auction services)

Major process innovations

y Using new processes to deliver existing products with

added benefits
(E.g. Education sector with new format / new retail models with the advent of internet)

Product-line extensions
y Additions to current product lines

Process-line extensions
y Alternative delivery procedures

A Hierarchy of New Service Categories (Contd..)

Supplementary service innovations

y Addition of new or improved facilitating or enhancing

elements ( E.g. Rainforest Caf)

Service improvements
y Modest changes in the performance of current products

Style changes y Visible changes in service design or scripts (E.g. Color changes/uniform change/ new bank cheque design)

Physical Goods as a Source Of New Service Ideas

y Services can be built around rentals: Alternatives to owning a physical good and/or doing work oneself y Customers can rent goods use and return for a fee instead of purchasing them y Customers can hire personnel to operate own or rented equipment y Any new durable good may create need for after-sales services now and in future possession processing y Shipping y Installation y Problem-solving and consulting advice y Cleaning and maintenance y Upgrades y Removal and disposal

Reengineering Service Processes

y Service processes affect not only customers, but also cost, speed, and productivity with which desired outcome is achieved y Reengineering involves analyzing and redesigning processes to achieve faster and better performance
y Running tasks in parallel instead of sequence can

reduce/eliminate dead time y Examination of processes can lead to creation of alternative delivery methods that constitute new service concepts
y Add/eliminate supplementary services y Resequence delivery of service elements y Offer self-service options

What Happens, When, in What Sequence? Time Dimension in Augmented Product

Reservation
Parking Check in Internet Lobby USE GUESTROOM OVERNIGHT Get car Check out Internet

Porter Meal Pay TV Room service

Before Visit

Time Frame of An Overnight Hotel Stay (Real-time service use)

Flowcharting Service Delivery Helps to Clarify Product Elements

y Offers way to understand totality of customer s service

experience
y Useful for distinguishing between core product itself

and service elements that supplement core

y Restaurants: Food and beverage (core) y Reservations (supplementary services)

y Shows how nature of customer involvement with

service organizations varies by type of service:

y People processing y Possession processing y Mental Stimulus processing y Information processing

Simple Flowchart for Delivery of a People-Processing Service

People Processing Stay at Motel

Park Car Check In Spend Night in Room Breakfast Check Out

Maid Makes up Room

Breakfast Prepared

Simple Flowchart for Delivery of a Possession-Processing Service

Possession Processing Repair a DVD Player

Travel to Store Technician Examines Player, Diagnoses Problem Leave Store Return, Pick up Player and Pay (Later) Play DVDs at Home

Technician Repairs Player

Simple Flowchart for Delivery of Mental Stimulus-Processing Service

Mental Stimulus Processing Weather Forecast

Turn on TV, Select Channel Collect Weather Data View Presentation of Weather Forecast Confirm Plans for Picnic

Meteorologists Input Data to Models and Creates Forecast from Output

TV Weatherperson Prepares Local Forecast

Simple Flowchart for Delivery of An Information-Processing Service

Information Processing Health Insurance

Learn about Options Select Plan, Complete Forms Pay Insurance Coverage Begins Printed Policy Documents Arrive

University and Insurance Company Agree on Terms of Coverage

Customer Information Entered in Database

Creating Services as Substitutes for Owning and/or Using Goods

Own a Physical Good Rent Use of a Physical Good

Perform Work Oneself

 Drive Own Car  Use Own Computer

 Rent a Car and Drive it  Rent Use of Computer

Hire Someone to Do Work

 Hire a Chauffeur to Drive  Hire a Typist to Type

 Hire a Taxi or Limousine  Send Work Out to a Secretarial Service

Achieving Success in Developing New Services

y Services are not immune to high failure rates that plague new manufactured products y dot.com companies y In developing new services y Core product is of secondary importance y Ability to maintain quality of the total service offering is key y Accompanying marketing support activities are vital y Market knowledge is of utmost importance

Success Factors in New Service Development

y Market synergy
y Good fit between new product and firm s image/resources y Advantage versus competition in meeting customers needs y Strong support from firm during/after launch y Firm understands customer purchase decision behavior

y Organizational factors
y Strong interfunctional cooperation and coordination y Internal marketing to educate staff on new product and its competition y Employees understand importance of new services to firm

y Market research factors

y Scientific studies conducted early in development process y Product concept well defined before undertaking field studies

The Services Marketing Triangle Company

(Management)
Internal Marketing
enabling promises

External Marketing
setting promises

Employees

Interactive Marketing
keeping promises

Customers

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Leading Service Brands