1. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 1 Chapter 2 Customer Behaviour in Service Encounters

2. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 2 A Framework for Developing Effective Service Marketing Strategies Understanding Customer Needs, Decision Making, and Behaviour in Service Encounters Chapter 2 Building the Service Model Part II: Chapters 3-7 Managing the Customer Interface Part III: Chapters 8-11 Implementing Profitable Service Strategies Part IV: Chapters 12-15

3. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 3 A Framework for Developing Effective Service Marketing Strategies Two Key Themes in Part I of the Services Marketing Strategy Framework: Differences among Services Affect Customer Behaviour Three-Stage Model of Service Consumption Prepurchase Stage: Search, evaluation of alternatives, decision Service Encounter Stage: Role in high-contact vs. low-contact delivery Post-Encounter Stage: Evaluation against expectations, future intentions

4. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 4 Learning Objectives – Chapter 2  Deliver satisfied customers by understanding the impact of the Nature of The Service Act  Determine the service management challenges of the 4 categories of the service act  Better manage service encounters by understanding service consumption, expectations and perceived risks  Examine the 6 key elements of the “all important” customer service encounter

5. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 5 How Differences among Services Affect Customer Behaviour

6. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 6 Differences among Services Affect Customer Behaviour  Consumers often involved in service production and may have preferences for service delivery  Service marketers need to understand how customers interact 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

7. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 7 Four Categories of Services (Fig 2.1) Information processing (services directed at intangible assets):  Accounting  Banking Nature of the Service ActPeoplePossessions Tangible Actions People processing (services directed at people ’ s bodies):  Barbers  Health care Who or What Is the Direct Recipient of the Service? Possession processing (services directed at physical possessions):  Refueling  Disposal/recycling Mental stimulus processing (services directed at people ’ s minds):  Education  Advertising/PR Intangible Actions

8. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 8 People Processing  Customers must:  Physically enter the service factory  Co-operate actively with the service operation  Managers should think about process and output from customer’s perspective  To identify benefits created and non-financial costs: ― Time, mental, physical effort Four Categories Of Services

9. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 9 Possession Processing  Customers are less physically involved compared to people processing services  Involvement is limited  Production and consumption are separable

10. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 10 Mental Stimulus 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”

11. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 11 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.

12. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 12 Customer Decision Making: Three-Stage Model of Service Consumption

13. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 13 The Purchase Process for Services Prepurchase Stage Service Encounter Stage Post-Encounter Stage

14. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 14 Prepurchase Stage

15. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 15 Prepurchase Stage Service Encounter Stage Post-Encounter Stage Prepurchase Stage: Overview  Customers seek solutions to aroused needs  Evaluating a service may be difficult  Uncertainty about outcomes increases perceived risk  What risk reduction strategies can service suppliers develop?  Understanding customers’ service expectations  Components of customer expectations  Making a service purchase decision

16. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 16 Service Encounter Stage

17. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 17 Prepurchase Stage Service Encounter Stage Post-Encounter 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  Theatre as a metaphor for service delivery: An integrative perspective  Implications for customer participation in service creation and delivery

18. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 18 High Versus Low Contact Services  Service marketers must manage the ways customers encounter the service organization  Each element they encounter must be consistent or the organization’s credibility is weakened  High contact services present marketing challenges  More contact points, more moments of truth  Requires consistent messaging at each contact point  Low contact services have less contact points with higher importance  Customer more reliant on the contact point chosen  Importance of self service technology (SST) that works

19. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 19 The Servuction System = Service + Production  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 and visible to customers  Includes customer interactions with operations and other customers  Service Marketing (front stage)  Visible part of service operations, service delivery and other contact points

20. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 20 Post-Encounter Stage

21. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 21 Prepurchase Stage Service Encounter Stage Post-Encounter Stage Post-Encounter Stage: Overview  Evaluation of service performance  Future intentions

22. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 22 Customer Satisfaction Is Central to the Marketing Concept  Satisfaction defined as attitude-like judgment following a service purchase or series of service interactions  Customers have expectations prior to consumption, observe service performance, 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/quality tradeoffs, personal and situational factors  Research shows links between customer satisfaction and a firm’s financial performance

23. Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 2- 23 Summary – Chapter 2  People, Possession, Mental Stimulus and Information processing are the 4 Categories of Services  Services can be difficult to evaluate and customers will use search, experience and credence attributes to do so  Service marketers need to manage at least 6 key variables during the service encounter stage  Long term customer relationships are built on satisfying customer expectations