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Customer Behavior in

Service Encounters

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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 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

Most Services

Clothing

Chair

Motor vehicle

Foods

Restaurant meals

Lawn fertilizer

Haircut

Entertainment

Computer repair

Education

Legal services

Complex surgery

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

to a service categoryandfrequency of use of a specific supplier

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Differences among Services Affect

Customer Behavior Consumers are rarely involved in the manufacture of goods but often

participate in service creation and delivery

Challenge for service marketers is to understand how customers interactwith service operations

Based on differences in nature of service act (tangible/intangible) andwho or what is direct recipient of service (people/possessions), there arefour categories of services: People processing Possession processing

Mental stimulus processing Information processing

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Four Categories Of Services

Information processing

(services directed atintangible assets):

Accounting

Banking

Nature of the Service Act People Possessions

Tangible Actions People processing

(services directed at

peoples bodies):

Barbers

Health care

Who orWhatIs the Direct Recipient of the Service?

Possession processing


physical possessions):

Refueling

Disposal/recycling

Mental stimulus processing


peoples minds):

Education

Advertising/PR

Intangible Actions

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Four Categories Of Services

(contd.) People Processingy Customers must:

y Physically enter the service factory

y Co-operate actively with the service

operationy Managers should think about

process and output fromcustomers perspective

y To identify benefits created andnon-financial costs:

y Time, mental, physical effort

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Possession ProcessingPossession Processing Customers are less physically

involved compared to peopleprocessing services

Involvement is limited

Production and consumptionare separable

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Mental Stimulus ProcessingMental Stimulus Processing Ethical standards required when

customers 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 ProcessingInformation Processing Information is the most

intangible form of serviceoutput

But may be transformed intoenduring forms of serviceoutput

Line between information

processing and mental stimulusprocessing may be blurred.

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Prepurchase Stage

Service Encounter Stage

Post-Encounter Stage

Prepurchase Stage: Overviewy Customers seek solutions to aroused

needs

y Evaluating a service may be difficult

y Uncertainty about outcomes

increases perceived risky What risk reduction strategies can

service suppliers develop?

y Understanding customers serviceexpectations

y

Components of customerexpectations

y Making a service purchase decision

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Perceived Risks in Purchasing

and Using Services

y Functionalunsatisfactory performanceoutcomes

y Financialmonetary loss, unexpected extracosts

y

Temporalwasted time, delays leading toproblems

y Physicalpersonal injury, damage topossessions

y Psychologicalfears and negative emotions

y Socialhow others may think and react

y Sensoryunwanted impact on any of fivesenses

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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 independentreviews and ratings

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Strategic Responses to Managing

Customer Perceptions of Risk

Offer performance warranties, guarantees to protectagainst 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 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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Understanding Customers

Service 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 toanother, and among differently positioned serviceproviders in the same industry

Expectations change over time

Example: Service Perspectives 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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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 from

High-Contact to Low-Contact

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Service Marketing System for a

High-Contact Service

The

CustomerTechnical

Core

Interior & Exterior

Facilities

Equipment

Service People

Other

Customers

Advertising

Sales Calls

Market Research SurveysBilling/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 Operations System

Backstage(invisible)

Front Stage(visible)

Other

Customers

SERVICE MARKETING SYSTEM

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Service Marketing System for a

Low-Contact Service

The

Customer

Backstage(invisible)

Front Stage(visible)

AdvertisingMarket ResearchSurveys

Billing/Statements

Random Exposure to

Facilities/Vehicles

Word of Mouth

Phone, Fax,Web- site,etc.

SelfServiceEquipment

Mail

TechnicalCore

Other Contact PointsService Delivery System

Service Operations

System

SERVICE MARKETING SYSTEM

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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 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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Theatrical Metaphor:

An IntegrativeP

erspective 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 of

performance, may be passive or active participants

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Implications of Customer

Participation in Service Delivery

Greater need forinformation/training to helpcustomers to perform well,

get desired results Customers should be given a

realistic service preview inadvance of service delivery, so

they have a clear picture of their expected role Tourists Appreciate Easy-to-UnderstandInstructionsWhen Traveling

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Prepurchase Stage



Post-Encounter Stage: Overview

Evaluation of service

performance

Future intentions

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Customer Satisfaction Is Central

to the Marketing Concept

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

y Customers have expectations prior to consumption, observe service

performance, compare it to expectationsy 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 firmsfinancial performance

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Customer Delight:

Going Beyond Satisfactiony Research shows that delight is a function of

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

y Is it possible for customers to be delighted byvery mundane services?

y Strategic links exist between customersatisfaction and corporate performance.

y Getting feedback during service delivery help toboost customer loyalty

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

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Factors Influencing Customer

Expectations of Service

P

redicted 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

): pp112

.

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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 service

Predicted Service Level:

Service level that customer believes firm

will actually deliver Zone of Tolerance:

Range within which customers are willingto accept variations in service delivery

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Defining Core and Supplementary

Elements of Our Service Producty 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 eachsupplementary element?

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

Faster response and executiony Better physical amenities

y Easier access

y Higher staffing levels

y Superior caliber personnel

y

Alternatively, should we cut service levels and charge less?

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The Flower of Service

Core

Information

Consultation

Order Taking

Hospitality

Payment

Billing

Exceptions

Safekeeping

Facilitating elements

Enhancing elements

KEY:

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How to Determine What Supplementary

Services Should Be Offeredy Not every core product is surrounded by supplementary elements from all

eight clustersy Nature of product helps to determine:

y Which supplementary services must be offeredy

Which might usefully be added to enhance value and ease of doingbusiness with the organization

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

y Market positioning strategy helps to determine which supplementaryservices should be included

y Firms that offer different levels of service often add extra supplementaryservices for each upgrade in service level

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The Flower of Service:

Facilitating ServicesInformation

Core

Customers often require

information about how to obtain

and use a product or service.

Examples of elements:

Directions to service site

Schedule/service hours

Prices

Conditions of sale

Usage instructions

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Facilitating ServicesOrder Taking

Core

Customers need to know what

is available and may want to

secure commitment to

delivery. The process shouldbe fast and smooth.


Applications

Order entry

Reservations and check-in

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Facilitating ServicesBilling

Core

How much do I owe you?

Bills should be clear,

Accurate, and intelligible.


Periodic statements ofaccount activity

Machine display of amount

due

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Facilitating ServicesPayment

Core

Customers may pay faster

and more cheerfully if you

make transactions simple

and convenient for them.


Self service payment

Direct to payee or intermediary

Automatic deduction

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Core


Enhancing ServicesConsultationValue can be added to goods

and services by offering advice

and consultation tailored to

each customers needs and

situation.


Customized advice

Personal counseling

Management consulting

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Enhancing ServicesHospitalityCustomers 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!


Greeting

Waiting facilities and amenities

Food and beverages

Toilets and washrooms Security

Core

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Core


Enhancing ServicesSafekeepingCustomers prefer not to worry

about looking after the personal

possessions that they bring

with them to a service site.


Looking after possessions

customers bring with them

Caring for goods purchased(or rented) by customers

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Core


Enhancing ServicesExceptionsCustomers appreciate some

flexibility when they make

special requests and expect

responsiveness when things

dont go according to plan.


Special requests in advance Complaints or compliments

Problem solving Restitution

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Managerial Implicationsy

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 optionsfor an extra charge

y In general, firms that compete on a low-cost, no-frillsbasis needs fewer supplementary elements than

those marketing expensive, high-value-addedservices

y Each f lower petal must receive consistent care andconcern to remain fresh and appealing

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Core and Supplementary Services at Luxury Hotel

(Offering Much More than Cheap Motel!)

ReservationValet

Parking

Reception

Baggage

Service

CocktailBar

RestaurantEntertainment/

Sports/

Exercise

Internet

Wake-upCall

Room

Service

Business

Center

Cashier

A Bed for the

Night in an

Elegant Private

Room with a

Bathroom

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Planning and Branding ServiceProducts

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Service Productsy A product implies a defined and consistent bundle of output

and also ability of firm to differentiate its bundle of outputfrom competitors

y Service firms can differentiate their products in similar fashionto various models offered by manufacturers

y Providers of more intangible services also offer a menu ofproducts

y Represent an assembly of elements that are built around thecore product

y May include certain value-added supplementary services

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Product Lines and Brandsy Most service organizations offer a line of products ratherthan just a single product

y They may choose among three broad alternatives:

y

Single brand to cover all products and servicesy A separate, stand-alone brand for each offering

y Some combination of these two extremes

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Example: British Airways Sub-

brandsy British Airways offers six distinct air travel productsy Four intercontinental offerings:

y First (deluxe service)

y

Club World (business class)y World Traveller Plus (premier economy class)

y World Traveller (economy class)

y Two intra-European offerings:

y Club Europe

y Euro-Traveller

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y Branding can be employed at both corporateandproduct 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

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Offering a Branded Experiencey Target profitable customers,

employing behaviorsegmentation rather thandemographics.

y Understand what the targetcustomers value.

y Create a brand promise-anarticulation of what targetcustomers can expect from theirexperience with organizationwhich is of value to customers,addresses a need, is actionable& can be incorporated intostandards and provides focusfor the organization & itsemployees.

y Apply that understanding toshape a truly differentiatedcustomer experience.

y Give employees the skills, toolsand supporting processes neededto deliver the defined customer

experience.y Make everyone the brand

manager

y Make promises that yourprocesses can exceed.

y Measure & monitor: Consistencyof delivery is paramount

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A Hierarchy of New Service Categories

Major service innovationsy New core products for previously undefined markets

(E.g. FedExs overnight, eBays launch of online auction services)

Major process innovations

y

Using new processes to deliver existing products withadded 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 extensionsy Alternative delivery procedures

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A Hierarchy of

New Service Categories (Contd..)

Supplementary service innovationsy Addition of new or improved facilitating or enhancing

elements ( E.g. Rainforest Caf)

Service improvementsy

Modest changes in the performance of current productsStyle changes

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

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Physical Goods as a Source Of

New Service Ideas

y Services can be built around rentals: Alternatives to owning aphysical good and/or doing work oneselfy Customers can rent goodsuse and return for a feeinstead

of purchasing them

y Customers can hire personnel to operate own or rentedequipment

y Any new durable good may create need for after-sales servicesnow and in futurepossession processingy Shipping

y Installationy Problem-solving and consulting advicey Cleaning and maintenance

y Upgradesy

Removal and disposal

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Reengineering Service Processesy Service processes affect not only customers, but also cost,

speed, and productivity with which desired outcome isachieved

y Reengineering involves analyzing and redesigning processesto achieve faster and better performance

y Running tasks in parallel instead of sequence canreduce/eliminate dead time

y Examination of processes can lead to creation of alternativedelivery methods that constitute new service concepts

y Add/eliminate supplementary servicesy Resequence delivery of service elementsy Offer self-service options

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What Happens, When, in What Sequence?

Time Dimension in Augmented Product

Before Visit

Reservation

Parking Get car

Check in

Porter

Lobby

MealPay TV

Room service

Internet

Check out

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

USE GUESTROOM OVERNIGHT

Internet

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Flowcharting Service Delivery

Helps to Clarify Product Elements

y Offers way to understand totality of customers serviceexperience

y Useful for distinguishing between core product itselfand service elements that supplement core

y Restaurants: Food and beverage (core)

y Reservations (supplementary services)

y Shows how nature of customer involvement withservice organizations varies by type of service:

y People processing

y Possession processing

y Mental Stimulus processing

y Information processing

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Simple Flowchart for Delivery of a

People-Processing Service

Park Car Check In

Spend

Night inRoom

BreakfastCheck

Out

Breakfast

Prepared

Maid

Makes up

Room

People Processing Stay at Motel

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Simple Flowchart for Delivery of a

Possession-Processing Service

Possession Processing Repair a DVD Player

Travel to

Store

Technician Examines

Player, DiagnosesProblem

Leave

Store

Return, Pick up

Player and Pay

Technician Repairs Player

(Later) Play

DVDs at Home

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Simple Flowchart for Delivery of Mental

Stimulus-Processing Service

Mental Stimulus Processing Weather Forecast

Turn on TV, Select

Channel

View Presentation of

Weather Forecast

TV Weatherperson

Prepares Local

Forecast

Confirm Plans for

Picnic

Meteorologists Input Data

to Models and Creates

Forecast from Output

Collect

Weather

Data

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Simple Flowchart for Delivery of An

Information-Processing Service

Information Processing Health Insurance

Learn about

Options

Select Plan,

Complete Forms Pay

Customer Information

Entered in Database

Printed Policy

DocumentsArrive

Insurance

Coverage Begins

University and Insurance

CompanyAgree on Terms of

Coverage

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Creating Services as Substitutes for

Owning and/or Using Goods

Drive Own Car

Use Own Computer

Rent a Car and Drive it

Rent Use of Computer

Hire a Chauffeur to Drive

Hire a Typist to Type

Hire a Taxi or Limousine

Send Work Out to a

Secretarial Service

Own a Physical GoodRent Use of a PhysicalGood

Perform Work

Oneself

Hire Someoneto Do Work

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Achieving Success in Developing

New Servicesy

Services are not immune to highfailure rates that plague newmanufactured products

y dot.com companies

y In developing new servicesy Core product is of secondary

importance

y Ability to maintain quality ofthe total service offering is key

y Accompanying marketingsupport activities are vital

y Market knowledge is of utmostimportance

S F t i

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Success Factors in

New Service Development

y Market synergy

y Good fit between new product and firms 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 factorsy Scientific studies conducted early in development process

y Product concept well defined before undertaking field studies

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The Services Marketing Triangle

InternalMarketing

Interactive Marketing

ExternalMarketing

Company(Management)

CustomersEmployees

enablingpromises

keeping promises

settingpromises

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

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Leading Service Brands

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