Consumer Behavior in Service Settings Focus on The Consumer Consumer Behavior in Service Settings

Who are our customers and Where do they fit?

Who Are Our Customers and How Should We Relate to Them? Where should customers fit in our service operation? Do they prefer high or low levels of contact with contact with service personnel and facilities? How do customers (prospects) select, purchase, and use our services? What are the key characteristics of our target market segments? Which customer relationships are worth developing and preserving? What do we do when customers’ expectations are not met?

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. Web) help reduce contact levels

Levels of Customer Contact with Service Organizations Emphasizes encounters with service personnel High Emphasizes encounters with equipment Low

Options for Delivery of Banking Services: High to Low Contact: Visit bank, transact with teller Use ATM Contact bank by mail Telephone speak with bank representative use keys in response to voice commands (or phone screen display) Home banking by computer: use special software conduct transactions by Web

Encounters with Self-Service Technologies Satisfying Incidents for Customers Self-service solved urgent need Self-service better than alternative easy to use avoid service personnel saved time when I want where I want saved money Self-service did its job

Encounters with Self-Service Technologies Dissatisfying Incidents for Customers Technology failure Process failure Poor design technology design problem service design problem Customer caused failure

Levels of Customer Participation across Different Services Low: Customer presence required during service delivery products standardized service regardless of individual purchase payment only required customer input Moderate: Customer inputs required for service creation client inputs customize a standard service service requires customer purchase customer inputs needed but firm provides service High : Customer co-produces the service product active participation guides customized service creation involves customer purchase, active participation customer inputs mandatory, co-produce outcome

Where does your service fit?

Service encounter: A period of time during which customers interact directly with a service Moments of truth: Defining points in service delivery where customers interact with employees or equipment Critical incidents: specific encounters that result in especially satisfying/dissatisfying outcomes for either customers or service employees

Managing Service Encounters-- Employee’s Role: Service success often rests on performance of junior contact personnel Must train, coach, role model desired behavior Customer’s Role Thoughtless or badly behaved customers can cause problems for service personnel (and other customers) Must educate customers, clarify what is expected, manage behavior

Managing Customers as Partial Employees to Increase Productivity and Quality 1. Analyze customers’ present roles in the business and compare to management’s ideal 2. Determine if customers know how to perform and have necessary skills 3. Motivate customers by ensuring that they will be rewarded for performing well 4. Regularly appraise customers’ performance; if unsatisfactory, consider changing roles or termination

Stages in Consumer Decision Making and Evaluation of Services

The Purchase Process for Services Pre-purchase Stage Awareness of need Information search Evaluation of alternative service suppliers Service Encounter Stage Request service from chosen supplier Service delivery Post-purchase Stage Evaluation of service performance Future intentions

Categories in Consumer Decision-Making and Evaluation of Services Information Search Evaluation of Alternatives  Use of personal sources  Perceived risk  Evoked set  Emotion and mood Purchase and Consumption Post-Purchase Evaluation  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty

Decision Making Process Describe the decision making process for a good that you recently purchased (e.g. shoes, stereo, or clothes) and compare it with a recent service purchase (e.g. cable TV, plumber, or insurance). How was the decision making process for the service similar and different than for the good?

Issues to Consider in Examining the Consumer’s Service Experience Services as processes Service provision as drama Service roles and scripts The compatibility of service customers Customer coproduction Emotion and mood

The Drama of Service Delivery In high-contact environments, service delivery consists of a performance--may be quite theatrical Service dramas unfold on a “stage” --settings may change as performance unfolds Many service dramas are tightly scripted Front stage personnel are like members of a cast Like actors, employees may wear special costumes, speak required lines, behave in specific ways Support comes from a backstage production team

Three Overlapping Subsystems within the Service System 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 3. Service Marketing (front stage) Includes service delivery and all other contacts between service firm and customers

The Service Business as a System Physical support Tech-nical Other Customer core Customers Contact personnel Backstage Front Stage (Invisible) (Visible to customer)

Service as Theater “All the world’s a stage and all the men and women merely players. They have their exits and their entrances and each man in his time plays many parts” William Shakespeare As You Like It

Role and Script Theories Role: A set of behavior patterns learned through experience and communication Role congruence: In service encounters, employees and customers must act out defined roles for good outcomes

Service Scripts Service scripts consist of a set of ordered actions, actors, and objects that, through repeated involvement define what the customer expects. - A sequence of behavior to be followed by employees and customers during service delivery Some scripts (e.g teeth cleaning) are highly routinized, others are flexible. Technology change may require a revised script Should reexamine existing scripts to find ways to improve delivery, increase productivity, enhance experiences

Service Script for a Haircut. 1. Recognize a need for a haircut 2. Make an appointment 3. Arrive at the salon 4. Enter the salon 5. Greeting by receptionist 6. Possible wait time (read a magazine) 7. Greeting by hair stylist 8. Questions about desired style 9. Go to the hair wash station 10. Hair is cut and styled 11. Casual conversation occurs 12. Hair is dried 13. Styling is completed 14. Mirror is provided for you to evaluate results 15. Stylist escorts you to the cashier 16. Pay for the services 17. Tip hair stylist 18. Exit store 19. Get comments from friends

Discussion Question What three parts of this script are most likely to go smoothly and conform to the expectations of the customer? Why? What three parts of this script are most likely to deviate from the expectations of the customer? Why? What actions could be taken by management to ensure that the service performance does not deviate from the service script envisioned by the customer? Be specific.

Types of Product Attributes Search attributes - features that customers can readily evaluate prior to purchase Experience attributes - attributes a consumer can determine after purchase (or during consumption) of a product Credence attributes - features that customers may not be able to evaluate even after use

How Product Attributes Affect Ease of Evaluation Most Goods Most Services Easy Difficult to evaluate Clothing Haircut to evaluate Motor vehicle Chair Restaurant meals Lawn fertilizer Entertainment Computer repair Legal services Complex surgery Foods Education High in search High in experience High in credence Source: Adapted from Zeithaml fig 3.2 attributes attributes attributes

Tangible Elements and Communications in the Service Marketing System Service personnel Service facilities and equipment Non-personal communications Other people

Perceived Risks in Purchasing and Using Services Functional risk Financial risk Temporal risk Physical risk Psychological risk Social risk Sensory risk

Customer Expectations of Service Focus on The Consumer Customer Expectations of Service

Possible Levels of Customer Expectations

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

Expectations Desired service expectations are ideal and do not change frequently because what one hopes for does not change frequently. Adequate service expectations are constantly in flux, most likely rising incrementally as service is improved in a particular company or industry

Customer Expectations What is the difference between desired service and adequate service? Why would a services marketer need to understand both types of service expectations?

Customer Delight: Going Beyond Satisfaction Research shows that delight is a function of 3 components Unexpectedly high levels of performance Arousal (e.g., surprise, excitement) Positive affect (e.g., pleasure, joy, or happiness)

Discussion Question: Is it possible for customers to be delighted by very mundane services?

The Zone of Tolerance Desired Service Zone of Tolerance Adequate Service Range within which customers are willing to accept variations in service delivery

Important Factors Consider a recent service purchase that you have made. What factors were most important in your decision?

Different Service Dimensions Zones of Tolerance for Different Service Dimensions Desired Service Level of Expectation Zone of Tolerance Desired Service Adequate Zone of Tolerance Desired Service Adequate Service Adequate Service Most Important Factors Least Important Factors Source: Berry, Parasuraman, and Zeithaml (1993)

First-Time and Recovery Service Zones of Tolerance for First-Time and Recovery Service First-Time Service Outcome Process Recovery Service Outcome Process LOW HIGH Expectations Source: Parasuraman, Berry and Zeithaml (1991)

Factors that Influence Desired Service Enduring Service Intensifiers Derived service expectations Personal service philosophy Desired Service Personal Needs Zone of Tolerance Adequate Service

Factors that Influence Adequate Service Transitory Service Intensifiers Emergencies Service problems Desired Service Perceived Service Alternatives Zone of Tolerance Self-Perceived Service Role Adequate Service Situational Factors Bad weather Catastrophe Random overdemand

Factors that Influence Desired and Predicted Service Explicit Service Promises Implicit Service Promises Word-of-Mouth Desired Service Zone of Tolerance Past Experience Predicted Service Adequate Service

Factors that Influence Customer Expectations of Services Explicit & Implicit Personal Needs Service Promises Word-of-Mouth Desired Service Past Experience Beliefs about What Is Possible ZONE OF TOLERANCE Perceived Service Alterations Adequate Service Predicted Service Situational Factors Source: Adapted from Zeithaml, Parasuraman & Berry

Total Perceived Quality Expected Quality Experienced Quality Total Perceived Quality Image Image Market Communication Word of Mouth Customer Needs Technical Quality: What Functional Quality: How

Frequently Asked Questions About Customer Expectations What does a service marketer do if customer expectations are “unrealistic”? Should a company try to delight the customer? How does a company exceed customer service expectations? Do customer service expectations continually escalate? How does a service company stay ahead of competition in meeting customer expectations

Customer Perceptions of Service Focus on The Consumer Customer Perceptions of Service

Customer Perceptions of Quality and Customer Satisfaction

Factors Influencing Customer Satisfaction Product/service quality Specific product or service features Consumer emotions Attributions for service success or failure Perceptions of equity or fairness Other consumers, family members, and coworkers Price Personal factors the customer’s mood or emotional state situational factors

Outcomes of Customer Satisfaction Increased customer retention Positive word-of-mouth communications Increased revenues

Relationship between Customer Satisfaction and Loyalty in Competitive Industries Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

Service Quality The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected. Service quality assessments are formed on judgments of: outcome quality interaction quality physical environment quality

The Five Dimensions of Service Quality Reliability Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to inspire trust and confidence. Physical facilities, equipment, and appearance of personnel. Caring, individualized attention the firm provides its customers. Willingness to help customers and provide prompt service. Assurance Tangibles Empathy Responsiveness

Exercise to Identify Service Attributes In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view. Reliability: Assurance: Tangibles: Empathy: Responsiveness:

SERVQUAL Attributes RELIABILITY EMPATHY RESPONSIVENESS TANGIBLES Providing service as promised Dependability in handling customers’ service problems Performing services right the first time Providing services at the promised time Maintaining error-free records Giving customers individual attention Employees who deal with customers in a caring fashion Having the customer’s best interest at heart Employees who understand the needs of their customers Convenient business hours RESPONSIVENESS TANGIBLES Keeping customers informed as to when services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service ASSURANCE Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer customer questions

The Service Encounter is the “moment of truth” occurs any time the customer interacts with the firm can potentially be critical in determining customer satisfaction and loyalty types of encounters: remote encounters, phone encounters, face-to-face encounters is an opportunity to: build trust reinforce quality build brand identity increase loyalty

A Service Encounter Cascade for a Hotel Visit Check-In Bellboy Takes to Room Restaurant Meal Request Wake-Up Call Checkout

A Service Encounter Cascade for an Industrial Purchase Sales Call Delivery and Installation Servicing Ordering Supplies Billing

Critical Service Encounters Research GOAL: understanding actual events and behaviors that cause customer dis/satisfaction in service encounters METHOD: Critical Incident Technique DATA: stories from customers and employees OUTPUT: identification of themes underlying satisfaction and dissatisfaction with service encounters

Sample Questions for Critical Incidents Technique Study Think of a time when, as a customer, you had a particularly satisfying (dissatisfying) interaction with an employee of ______________. When did the incident happen? What specific circumstances led up to this situation? Exactly what was said and done? What resulted that made you feel the interaction was satisfying (dissatisfying)?

Common Themes in Critical Service Encounters Research Recovery: Adaptability: employee response to service delivery system failure employee response to customer needs and requests Coping: Spontaneity: unprompted and unsolicited employee actions and attitudes employee response to problem customers

Recovery DO DON’T Acknowledge problem Explain causes Apologize Compensate/upgrade Lay out options Take responsibility Ignore customer Blame customer Leave customer to fend for him/herself Downgrade Act as if nothing is wrong “Pass the buck”

Adaptability DO DON’T Recognize the seriousness of the need Acknowledge Anticipate Attempt to accommodate Adjust the system Explain rules/policies Take responsibility Ignore Promise, but fail to follow through Show unwillingness to try Embarrass the customer Laugh at the customer Avoid responsibility “Pass the buck”

Spontaneity DO DON’T Take time Be attentive Anticipate needs Listen Provide information Show empathy Exhibit impatience Ignore Yell/laugh/swear Steal from customers Discriminate

Coping DO DON’T Listen Try to accommodate Explain Let go of the customer Take customer’s dissatisfaction personally Let customer’s dissatisfaction affect others

Evidence of Service from the Customer’s Point of View Contact employees Customer him/herself Other customers Operational flow of activities Steps in process Flexibility vs. standard Technology vs. human People Physical Evidence Tangible communication Servicescape Guarantees Technology Website Process Source: From “Managing the Evidence of Service” by M. J. Bitner from The Service Quality Handbook, eds. E. E. Scheuing and W. F. Christopher (1993), pp. 358-70.

Who Are Our Customers and How Should We Relate to Them? Where should customers fit in our service operation? Do they prefer high or low levels of contact with contact with service personnel and facilities? How do customers (prospects) select, purchase, and use our services? What are the key characteristics of our target market segments? Which customer relationships are worth developing and preserving? What do we do when customers’ expectations are not met?