Unit 2 Consumer Behavior in Services

7/30/2019 Unit 2 Consumer Behavior in Services

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UNIT II: CONSUMER BEHAVIOR IN SERVICES

THE CUSTOMER GAP

The primary objectives of service producers and marketers are to develop and provide

offerings that satisfy consumer needs and expectations which implies closing the

Customer Gap. It is the basis for economical survival of service business. To achieve

these objectives, service providers need to understand Consumer Behavior

regarding services which includes:

Consumer Decision Making Process

Consumer Experience and Post Experience Evaluation

Customer Expectations of Services

Customer Perceptions of Services

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Expected

Service

Perceived

Service

Customer

Gap


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CONSUMER DECISION MAKING PROCESS

The fist important area of consumer behavior that marketers are concerned with is how

customers choose and make decisions and the steps that lead to the purchase of a

particular service. The consumer decision making process follows a logical sequenceincluding following steps:

1. Need RecognitionThe process of buying a service begins with the recognition that a need or want exists.

Although there are many different ways to characterize needs, the most widely known is

Maslow s Hierarchy of Needs, which specifies following five need categories arranged

in sequence from basic lower-level needs to higher needs.

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Need

Recogn

ition

Inform

ation

Search

Evaluati

on of

Alternati

ves

Purcha

se


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Physiological Needs are biological needs such food, water, sleep, clothing etc. Eg.

Restaurants, Coffee Shops, Hotels provide services to satisfy the basic physiological needs.

Safety and Security Needs include shelter, protection and security. Consumers seek to

provide for their own and their loved ones shelter, safety, and security through many typesof services. For examples Parents are particularly focused on services that provide for

their childrens security like quality child care, education, medical care, etc.

Social Needs are for social values like affection, friendship, and acceptance. For example;

many of the Internet Services that focus on social connections among people like

Facebook, Twitter, Internet Dating Sites, etc to satisfy the basic human social needs.

3

.

Ego Needs

Social Needs

Safety and Security Needs

Physiological Needs

Self Actualization

Needs


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Services like sports clubs, bars, discos, restaurants also address the social needs of

consumers, the need to be accepted and be in the in-group.

Ego Needs are for prestige, success, accomplishment, status and self esteem. Food,

safety and social belonging are not enough for many consumers, they seek to look good toothers as well as feel good about themselves, which is attached to their success or

accomplishments in life. Eg. Services like Professional training, education, health clubs

etc help their customers to fulfill their Ego/ Self-esteem Needs.

Self-actualization involves need for self-fulfillment and enriching experiences, quite

different from basic needs of day-to-day living and other needs in Maslows

hierarchy. For example, Consumers purchase experiences such as bungee jumping,

sky-diving, paragliding, etc for the pure thrill of the experience. Some people selfactualize through meditation centers, classes in abstract painting, poetry, drama, etc.

Hierarchy of needs and level of satisfaction of needs derived from different services

greatly depend upon the perception of consumers. For example a youngster passionate

about cricket may derive self-actualization needs from a Cricket Coaching Program,

whereas others less passionate may be limited to Ego Needs or Social Needs, etc.

The hierarchical nature of Maslows need categorization, which assumes that consumersmove to higher level needs only after fulfillment of lower needs, has been disputed or

criticized. Evidences exist that people with unfulfilled basic needs can be motivated to

self-actualize.

Services can fill all these needs, and they have become increasingly important for

higher-level social, ego and self actualization needs.

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2. Information Search

Once they recognize a need, consumers obtain information about services that might

satisfy the need.

Seeking information may be an extensive, formalized process if the service is

important to the consumer or represents a major investment (E.g Honeymoon Trip,

Legal Advice etc). In other cases information search may be quick and relatively

automatic in case of general services like restaurants for quick lunch, Hair cutting

saloon, beauty parlors, etc)

Consumers use both personal sources (such as friends or experts) and non-personal

sources (such as mass or selective media, websites, etc) to gain information about

services. Especially in-case of services, consumers seek and rely more on personal

sources rather than non-personal sources due to following reasons:

Mass and Selective Media can convey information about search qualities but can

communicate far less about experience qualities.

Due to intangible, variable and perishable feature of services and the fact that

consumers can assess only few attributes before purchase of service, the

perceived risk is greater in selecting service than goods. Hence, consumers arelikely to feel even greater riskto make service purchase decisions on the basis of

non-personal sources only.

Many types ofnon-personal sources of information are not readily available for

services. Example, local restaurants, saloons, professional services rarely promote

through mass media.5


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In recent time, there has been a significant rise in use of internet by consumers to

search information about services. Through the Internet, consumers are now able to seek

non-personal information about services in the form of visuals, photographs, virtual tours,

etc. Consumers can also seek the personal opinions of others via Web through online

ratings, discussion blogs, social networking sites, etc.

3. Evaluations of Service Alternatives

The evoked set of alternatives-that set of products that a consumer considers

acceptable in a given product category-is likely to be smaller with services than with

goods. Hence, service consumers are normally involved in lesser amount of

evaluationdue to following factors:

Most of the goods are purchased through retail outlets where number of

competing products/brands are readily available and displayed in close proximity to

each-other (Eg Bhatbhateni Store). Whereas, in order to purchase service consumers

need to visit an establishment (such as a bank, hotel, hospital etc) that mostly offers

only a single brand for sale.

Consumers are unlikely to find too many businesses providing the same

services in a given geographic area, whereas they may find numerous retailstores carrying the identical products.

Relative difficulty in obtaining adequate pre-purchase information about

services.

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Hence, faced with the complicated task of collecting and evaluating service

experiences, consumers may simply select the first alternative rather than

searching may alternatives.

Further the evaluation of service alternatives by consumers also involves evaluating theoption of doing the service by consumer themselves or purchasing it from

another party. This implies greatly in-case of non professional services. For example

working people may choose between cleaning their own homes or hiring housekeepers,

between staying home to take care of their children or admitting the child in a

daycare center. Self-service via technology is also a viable alternative for many

services. Eg. Using Automatic Washing Machine instead of paying for laundry service,

making barbeque at home with portable barbeque stoves instead of going to

restaurants, etc.

4. Service Purchase

Following consideration of alternatives (whether an extensive process or more

automatic/casual) consumers make the decision to purchase a particular service or to

do it themselves. Unlike Goods which are generally produced first and later

purchased, most of the services are purchased, produced, experienced and evaluated

almost simultaneously-as with a restaurant meal or live entertainment. In other casesconsumers pay all or part of the purchase price up-front for a service they will not

fully experience until it is fully produced for them much later. This situation arises

with services such as vacation tours or house construction or ongoing services such

as health club memberships or university education and in business to business

service contracts.

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CONSUMER EXPERIENCE AND POST EXPERIENCE EVALUATION

Services are high in experience and credence qualities relative to goods; thus, how

consumers experience the service and how they evaluate the actual experience

of the service is critical in their decision to repurchase later. Hence, creating andmanaging effective processes and experiences are essential management tasks for service

organizations.

Various elements of consumer experience may take following forms:

Services as Processes

Service Provision as Drama

Service Roles and Scripts

Compatibility of Service Customers

Customer Co-production

Customer Emotion and Mood

Following the service experience, customers form an evaluation that determines to a large

degree whether they will return/repurchase or not or even continue to be sincerely loyal to

the service organization. Post-experience evaluation can have following impacts:

Influences the Word-of Mouth Communication

If customer is dissatisfied, then dissatisfaction is attributed to different attributes andsources of services.

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Customers remember negative events and occurrences more than positive ones andare more influenced by negative information than by positive information.

Impressive Post-experience evaluation can lead to developing Brand Loyalty among

consumersConsumer Experience and Post-Experience Evaluation is greatly influenced bythe Culture, in which consumers have been brought up.

CUSTOMER EXPECTATIONS OF SERVICES

Expectations are reference points against which service delivery is compared. For example;

you went to a normal local restaurant,( Momo Mantra, Quality Kitchen, Lumbini Tandoori

House, etc) for which you held lower level of expectations, paid relatively lower level of

money and were served immediately with good food. Next, suppose you went to a premiumrestaurant (Eg. TAMAS, Road-House Caf, Cafereena, etc), for which you held higher level

of expectations, paid a lot of money, and were served fairly quickly with good (but not

fantastic) food. Which experience is likely to be judged best? The answer is likely to be

greatly influenced by the expectations or the reference points you brought to the

experience. Hence, customers expectations create a benchmark/yardstick, on the basis of

which quality of service delivery is judged.

Levels of Customer Expectations

Customers hold different types of expectations about services, which can be categorized to

fall in the continuum/ range, between the highest level i.e. the Desired Service and the

minimum level i.e. The Adequate Service.

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Desired Service

Adequate

Zone of

Tolerance


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This figure presents the idea that customers assess service performance on the basis of

two standard boundaries: what they desire and what they think is acceptable.

Desired Service is the level of service the customer hopes to receive-the wished for

level of performance. Desired Service is a blend of what the customer believes can be

and should be. For example, consumers who sign up for an online dating service expect

at best to find compatible, attractive, interesting people to date and perhaps even

someone to marry.

Adequate Service is the minimum level of service performance acceptable to the

customer or minimum tolerable expectation, below which customer will be dissatisfied. For

example in-case of online dating service, customers expect to at-least meet a dating

partner and a decent one. If the service is not able to find them any partner, they will

surely be dissatisfied.The extent to which customers recognize and are willing to accept the variation between

Desired Service and Adequate Service is called the Zone of Tolerance. If service drops

below Adequate Service the minimum level considered acceptable-customers will be

frustrated and most likely be dissatisfied with the company. If service performance is above

the Zone of Tolerance at the top end-where performance exceeds desired service-

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customers will be very pleased and probably quite surprised as well. (For example Happy

Birthday Wish from ATM)

Further, it can be considered that the Zone of Tolerance is the range or window in

which customers do not particularly notice service performance. When it fallsoutside the range (either very low or very high), the service gets the customers attention

in either a positive or negative way. As an example, consider the service at a checkout line

in Bhatbhateni Super Store. Most customers hold the range of acceptable times for this

service encounter-probably somewhere between 5-10 minutes. If service consumes that

period of time, customers do not pay much attention to the wait. If the counter assistant

deals with people before that customer extremely fast and he is done with bill payment

within 2-3 minutes, he/she may notice the service and judge it as excellent. On the other

hand, if a customer has to wait in line for 15 minutes, he may begin to grumble and look at

his watch. The longer the wait is below the Zone of Tolerance (10 mins in this example), the

more frustrated the customer becomes.

The zone of tolerance is not static; its dynamic and variable because:

Different customers possess different zones of tolerance

Example: An educated and well informed customer is likely to expect higher level of expertadvice from his financial consultant i.e. have zone of tolerance at higher level and of limited

range. Whereas an uneducated small business entrepreneur, is likely to be satisfied with

relatively lower level of service from his financial consultant, i.e. have zone of tolerance at

lower levels and of broad range.

Zone of tolerance fluctuates with situational factors

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Example: A student running late for college is likely to narrow his/her zone of tolerance for

public transport service ,more than as compared to the situation when he/she is not late for

the college. A minutes delay for anything that occurs prior to reaching the college stop

(like vehicle stoppage time at stations, running speed, traffic jam etc) seems much longer

and his/her adequate service level increases.

Zones of Tolerance vary for Service Dimension (Higher and Narrow for important

dimensions, Lower and Broad for less important dimensions)

Example: For example A customer in a restaurant will be less tolerable to unhealthy and

low quality food, whereas he will be comparatively more tolerable to delay in service or

unattractive interior decoration.

Zones of Tolerance can also fluctuate with organization controlled factors

like Service Price, Communication, etc

Example: For premium restaurants having higher range of prices and high class image,

customers are likely to have higher and narrow zones of tolerance.

The fluctuation in the individual customers zone of tolerance is more a function of

changes in the Adequate Service Level, which moves readily up and down because of

situational circumstances, than in the Desired Service Level, which tends to move upwardincrementally because of accumulated experiences. Desired service is relatively

idiosyncratic (having distinctive features) and stable compared with adequate service,

which moves up and down in response to competition and other factors.

Hence, the marketer must understand not just the size and boundary levels for the zone of

tolerance but also when and how the tolerance zone fluctuates for a given customer.12


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FACTORS THAT INFLUENCE CUSTOMER EXPECTATIONS OF SERVICE

As expectations play a critical role in customer evaluation of services, marketer need and

want to understand the factors that shape them. However, many of the forces that

influence customers expectations are beyond the control of marketers.

1. Sources of/ Factors Influencing Desired Service Expectations

There are two major sources or influencers of Desired Service Expectations, namely:

Personal Needs

Lasting Service Intensifiers

Personal Needs

Personal Needs are those states or conditions essential to the physical or psychological

well-being of the customers and are the major factors that shape what customers desire in

a service. Personal Needs can fall into many categories, including physical, social,

psychological and functional. For example: A person, who is more romantic in nature but

single, while going for a dance or yoga classes is likely to have higher level of social needand may desire the class to have beautiful girls or even the tutor to be a beautiful lady.

Whereas, a person, who is not so romantic and in a relationship, is not likely to have such

higher level of social need and hence not have such kind of desired expectations.

Another example: A football fan going to watch a game after work, being hungry and

thirsty, will expect the mobile vendors inside the stadium to visit his section more

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frequently, whereas another person, going to see the game after having huge lunch, is less

likely to have such expectations.

Hence personal needs can greatly influence the desired service expectations of customers.

Lasting Service Intensifiers

Another major influence on desired service expectations are Lasting Service Intensifiers-

individual, stable factors that increases the customers sensitivity towards service. Two

major service intensifiers are:

Derived Service Expectations

Derived Service Expectations occur when customer expectations are driven by another

person or group of people. For example; when a parent is choosing a family vacation

destination, his/her service expectation is more of a Derived Expectation as it is greatly

influenced by the desires/ expectations of all the family members. In such situation,

customers individual expectations are intensified because they represent and must answer

to other parties who will receive the service.

In the context of business-to-business service, customers expectations are driven by theexpectations of their own customers or expectations from their managers or superiors.

Example: A premium class airlines like Kingfisher Airlines, Singapore Airlines, etc expect top

class on-flight catering services from their catering service providers, because their target

customers are mainly higher class people who expect higher level of catering service.

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Example: Purchasing staffs or agents in an organization may increase the demands for

faster delivery at lower cost when company management is strictly emphasizing cost

reduction in the company.

Personal Service Philosophy

Another lasting service intensifier is Personal Service Philosophy-the customers underlying

generic attitude about the meaning of service and proper conduct of service providers.

Different customers may have different personal perception or outlook towards the service

and hence have different levels of desired expectations. In general, customers who are

themselves in service businesses or have worked for them in the past seem to have

especially strong service philosophies.

For example, a customer, who has already worked in a bank and is knowledgeable about

internal working process and standards, is likely to have strong and realistic service

philosophy and be less tolerant to unnecessary delay or submission of unnecessary

documents. However, such customer may also be compassionate towards the service

employee and be more tolerant or lower their expectations.

Hence, personal service philosophies and derived expectations can intensify the level of

desired service.

2. Sources of/ Factors Influencing Adequate Service Expectations

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Set of factors that influence Adequate Service Expectations the level of service that the

customer finds acceptable; are generally short-term in nature and tend to fluctuate more

than the factors that influence desired service.

Five of the major factors that influence Adequate Service Expectations are:

Temporary Service Intensifiers

Temporary Service Intensifiers refer to short-term, occasional individual factors that make a

customer more aware of the need for service. Personal emergency situations in which

service is urgently needed ( such as conducting Money Transfer transaction in a bank

during quarter end closing or on the last date for loan settlement or meeting a deadline

for payment etc), raise the level of adequate service expectations, particularly in terms of

level of responsiveness required and considered acceptable. For example, A Cyber Caf

tends to be more demanding of its internet service provider during peak periods of the

week or day. Any system break-down or slow processing will be tolerated less during these

intense periods than at other times.

Another temporary service intensifier is the situation in which the initial service has

resulted in failure and there is natural pressure for the service provider to make it right the

second time and maintain its reliability. Customers will naturally have higher level of

adequate service expectation and be less tolerable to failure, when they are seeking the

service second time following a failure.

Hence, in situations where temporary service intensifiers are present, the level of adequate

service will increase and the zone of tolerance will narrow.

Perceived Service Alternatives

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Perceived Service Alternatives are other providers from whom the customer can obtain

service. If customers believe they have multiple service providers to choose from or if they

can provide the service for themselves (such as washing, personal grooming, etc), then

their levels of adequate service are higher than those of customers who believe it is not

possible to get better service elsewhere.

For example: People living in Jomsom are willing to take ride on a local Jeep or Bus through

a dangerous rocky roads and have very low level of adequate service expectations in terms

of comfort because it is the only alternative modern means of travel they have, except

expensive airplane flights. Whereas people traveling from Pokhara to Kathmandu, will have

higher adequate service expectations from local carriers as they have number of service

alternatives in the form of micro-vans, local bus, tourist bus, etc providing different levels

of service.

Hence, the customers perception that service alternatives exist raises the level of

adequate service and narrows the zone of tolerance.

Customers Self Perceived Service Role

Level of Adequate Service is also affected by the Customers perception of how well they

have contributed or performed their role required in the service delivery. For example, one

of the roles of the customer is to clearly specify the type or level of service expected. If a

restaurant customer ordering a Biryani doesnt specify his preferred level of spiciness in the

dish and later finds that the dish is too spicy for him, he will be fairly dissatisfied. However,

if the customer specifies his preferred level of spiciness while making the order and still

receives a very spicy Biryani, then he is likely to be even more dissatisfied because he

assumes that the restaurant has failed in fulfilling its role, despite of him fulfilling his role.

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Customers zone of tolerance expand when they sense they are not fulfilling their roles. On

the other hand, when customers believe they are doing their part in service delivery, their

expectations of adequate service are heightened and zone of tolerance contracts.

Situational Factors

Levels of adequate service are also influenced by situational factors, defined as service

performance conditions that customers view as beyond the control of service provider. For

example In Nepal, due to frequent strikes and Nepal Bandh, people have started to take

it as granted that level of service of service organizations like schools, colleges, hospitals,

banks etc will not be proper on such days. People consider that such political forces are

beyond the control of service providers; hence they tend to lower the level of adequate

service expectation and broaden their zone of tolerance.

Predicted Service

The final factor that influences adequate service is predicted service the level of service

that customers believe/assume they are likely get for the upcoming service transaction.

Predicted service is typically an estimate or calculation of the service that a customer will

receive in an individual transaction rather than in the overall relationship with a serviceprovider. For example: If you go to bank counter to cash a cheque and see very few

customers are present, then you assume or predict that it will not take much time to be

done with your job there. This automatically increases your expected level of adequate

service in terms of speed of service delivery. And if it still takes more time than you have

anticipated, you are likely to be annoyed.

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However, in another situation, if you see the bank counter crowded with customers, you

assume its going to take relatively longer time and your expected level of adequate

service decrease, as you will be willing to wait for a longer period.

As predicted service refers to prediction about individual service encounters, they are likelyto be more concrete and more specific than the types of expectations customer hold for

adequate service or desired service. Hence, predicted service is viewed more as an

influencer of adequate service.

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3. Sources of both Desired and Predicted Service Expectations

There are following three external factors and one internal factor that influences both

desired and predicted service expectations of customers:

Explicit Service Promises

Explicit Service Promises are personal and non-personal statements about the service

made by the service organization to customers. The statements are personal when they are

communicated by salespeople or service personnel; they are non-personal when they come

from other promotional tools like advertisements, web pages, brochures, etc.

Explicit service promises shape what customers desire in general as well as what they

predict will happen in the next service encounter. For example, Dominos pizzas schemeof delivering pizza within 30 minutes of making order otherwise no charge for pizza, is an

explicit service promise and it influence customers to desire and predict fast service.

Explicit services are one of the few influences on expectations that are completely within

the control of the service provider. However, the provider should be cautious about

overpromising and make appropriate promises.

Implicit Service Promises

Implicit Service Promises are service related cues other than explicit promises that lead to

customers inferences about the service should and will be like. These quality cues

primarily refer to price and the tangibles associated with the service. In general, the higher

the price and the more impressive the tangibles, the more a customer will expect from the

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service. For example, a customer who stays at a posh hotel is likely to desire and predict

higher standard of service than from a hotel with less impressive facilities.

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Word-of Mouth Communication

Word-of Mouth Communication is probably the most important influencer of service

expectations. Personal and sometimes Non-personal statements made by parties other

than the organization convey to the costumers what the service will be like and influenceboth predicted and desired service. Word-of-Mouth communication carries particular weight

as an authentic information source because it is perceived as being unbiased by

consumers. Besides friends and family, experts like Market Analysts, consumer reports,

internet forums, etc also considerable sources of word-of- mouth communication.

Past Experience

Past Experience is the internal factor of consumers which influences service predictions and

desires. For example a customer may compare each stay at a particular hotel with his

previous stay in that hotel and assume the services to be at similar level as in previous

stays. Customer may also compare each stay with their experiences in other hotels and

develop their desired service expectations.

Different sources of Customer Expectations vary in terms of their credibility/reliability as

well as their potential to be influenced by marketers. Manager need to know the pertinent

expectation sources and their relative importance for a customer population, a customer

segment, and perhaps even a particular customer. For example they need to know the

relative weight of word-of-mouth, explicit service promises and implicit service promises in

shaping desired and predicted service. Some of these sources are more stable and

permanent in their influence (such as lasting service intensifiers and personal needs) than

the others, which fluctuate considerably over time (like perceived service alternatives,

situational factors, etc).

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(Note: For possible strategies that marketers can use to manage the expectations

influencing factors, refer to Strategy Insight on Page 95, of the course book, Service

Marketing by Valarie, Mary, Dwayne and Ajay.)

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Figure: Factors That Influence Customer Expectations of Services

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Desired

Service

AdequateService

Zone of

Tolerance

Predicted

Explicit

Service

Promises

Implicit

Service

Promises

Word-of-

Mouth

Communic

ationPast

Experience

Personal

Needs

Lasting

ServiceIntensifiers

Temporary

Service

Intensifiers

Perceived

Service

AlternativesSelf-

Perceived

Service

RolesSituational

Factors


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CUSTOMER PERCEPTIONS OF SERVICES

Customer perception of services refers to how customers assess, evaluate or think about

the service they have received. It is related to the Perceived Service box in the Gaps

Model.Customer perceptions are generally developed in relation to customer expectations. As

expectations are dynamic, perceptions may also change over time-from person to person

and from culture to culture. What is perceived as quality service today may be perceived a

moderate quality in future or a service from an organization may be considered of being

top quality by one person whereas disliked by another person. However, in case of service

marketing the customers perceptions of the service quality is more important than the true

objective quality itself.

In considering perceptions, it is also important to recognize that customers will have

perceptions of single, transaction-specific encounters as well as overall perceptions of a

company based on all their experience. For example, a customer goes to his bank and on

that day, the front desk staff makes a rude comment, he is likely to have a negative

perception about the bank that day. However, despite of this incident, the customer may

have overall positive perception about the bank, which has been developed by the

numerous positive interactions that the customer had with the bank over the years.

Customer Perceptions primarily refers to customers perceptions about

Satisfaction Level

Service Quality

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Service Encounters

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CUSTOMER SATISFACTION

As per the definition offered by Richard Oliver, Satisfaction is the consumers fulfillment

response. It is a judgment that a product or service feature, or product or service itself,

provides a pleasurable level of consumption-related fulfillment.In less technical terms, Customer Satisfaction is the customers evaluation of a product or

service in terms of whether that product or service has met the customers needs and

expectations. Failure to meet needs and expectations is assumed to result in dissatisfaction

with the product or service.

In addition to a sense of fulfillment in the knowledge that ones needs have been met,

satisfaction can also be related to other types of feelings depending upon particular context

or type of service. Satisfaction can be viewed as:

Contentment-more of a passive response that consumers may associate with the

services that are more routine in nature and they do not think a lot about such

services. (Eg. Delivery of daily newspapers, milk etc at home)

Pleasure- for services that make the consumer feel good or are associated with a

sense of happiness (Eg. Fun park, concerts, etc)

Delight-for those services that really surprise the consumer in a positive way or

exceed expectations (Eg. Bungee jumping in Last Resort)

Relief- for situations in which the removal of a negative leads to satisfaction ( Eg.

Hospitals, spa )

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Ambivalence-for situations when there is a mix of positive and negative experience

associated with the service (Eg. A restaurants staff is not friendly but the food is one

of the best in town)

Customer Satisfaction is also a dynamic concept, which develops over a period of time andinfluenced by variety of factors.

Factors Determining Customer Satisfaction

Customer Satisfaction or the customers perception of their satisfaction level is influenced

by following factors:

Product/ Service Features and Quality

Customer Satisfaction is greatly influenced by the customers evaluation of product/ service

features and quality. If a customer perceives that the service offered by a particular

company has all the required features with good quality then, he is likely to be satisfied

with the service of that company. For example for a service such as resort hotel, important

features might include the swimming pool area, restaurants, room comfort and privacy,courteous staffs, etc and a if a consumers perceive such features to be of good quality,

then he is likely to perceive himself as being satisfied.

Personal Factors

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Personal factors refer to customers own individual feelings, emotions and beliefs, which

impact their derived level of satisfaction from a particular service. Some of the major

personal factors are:

Consumer Emotions

Consumer Emotions like mood state, happiness, sorrow, compassion, anger etc affect

consumers level of satisfaction. For example a customer in jolly mood is likely to ignore

little delay or hassles in service and be still satisfied, whereas a customer in a bad mood

may not tolerate even a little delay or single hassle and be utterly dissatisfied.

Consumer belief about reasons for Service Success or Failure

When consumers are surprised by an outcome, whether service success or failure, theytend to look for the reasons and their assessments of reasons can influence their

satisfaction. A costumer is likely to be less dissatisfied with a service failure if he or she

believes that the major reason for service failure is outside the service providers control or

failure in their part to fulfill their role in service delivery. For example if a person himself

doesnt go to gym regularly, and has not been able to lose weight even after 6 months of

joining the gym, he will probably not be much dissatisfied with the services of the gym.

Perception of Equity or Fairness

Notion of fairness are central to customers perceptions of satisfaction with services.

Customers are likely to be extremely dissatisfied if they perceive that they havent been

treated fairly or equally by the service provider. For example, suppose a bank charges 12%

interest rate for five year period auto loan to Customer A, whereas charges 11% to

Customer B for the same loan. If customer A finds out about this difference in interest29


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rates, he may perceive he has been exploited by the bank and is very likely to move to

another bank. (In fact this is very common in Nepalese banking industry)

Situational Factors

Situational factors refer to other external factors beyond the control of customer as well asservice provider. One of the major situational factors that influence consumers perception

of satisfaction from service, is the reactions, emotions and opinions of other consumers,

family members, friends, etc. For example you go for a game of Paintball with your friends,

you didnt really enjoy the experience but your friends were thrilled and amazed by the

experience and talked a lot about it. Then, you may also perceive that it was not that bad

an experience as you have thought initially and your perception about your level of

satisfaction from the game might change (normally happens in-case of movies as well)Other situational factors refers to weather conditions, incidents, etc which affect the service

encounter.

Price

Another important factor that greatly influences the customers level of satisfaction is the

price charged for the service. Even if the service provided great features with great quality,

a customer tends to be dissatisfied if he perceives that he has paid excessive price for that

service. Customer needs to perceive that the price he has paid for the service matches the

value he has derived from the service.

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SERVICE QUALITY

Service Quality is a critical element of customer perceptions. In order to judge the quality of

service; costumers generally look at following three aspects of the service:

Technical outcome provided

The process by which that outcome was delivered

The quality of physical surroundings where the service is delivered

For example, a restaurant customer will judge the service on her perceptions of the meal

(technical outcome quality), how the meal was served and how the employees interacted

with her (interaction quality) and how dcor and surrounding of the restaurant.Service Quality Dimensions

The underlying factors of the service that the customers refer to or rely on to form their

perceptions of service quality are regarded as the dimensions of service quality. The

presence of following five service quality dimensions in a service is likely to influence

the customer to have positive perception about service quality:

Reliability: Delivering on Promises

Reliability is defined as the ability to perform the promised service dependably and

accurately. A company is reliable means that it is able to deliver on its promises- promises

about delivery, service provision, problem resolution, and pricing. Customers want to do

business with companies that keep their promises.

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For example: CG Finco, the money remittance agent Western Union Money Transfer in

Nepal, has its slogan as Inspiring Confidence (Bishwosniata ki Anubhuti ) as its slogan. In

order to be reliable, CG Finco needs to keep this promise by transferring the remitted

money on time, delivering it to the right person only, and should not have hidden charges.

CG Finco excels in these aspects and has become the number one agent of Western Unionin Nepal.

Responsiveness: Being willing to help

Responsiveness is the willingness to help customers and to provide prompt service.

Responsiveness is communicated to customers by the length of time they have to wait for

assistance, answers to questions, or attention to problems. To excel on the dimension of

responsiveness, a company must view the process of service delivery and handlingrequests from the customers point of view rather from the companys point of view.

Companies need to have well staffed customer service departments as well as responsive

frontline people in all contact positions. For example: One of the reasons for Norvic Hospital

to have better reputation in terms of service quality is that the nurses and other health

staffs are strictly instructed and properly trained to be responsive to patients.

Assurance: Inspiring Trust and Confidence

Assurance is defined as employees knowledge and courtesy and the ability of the firm and

its employees to inspire customer trust and confidence. This dimension is likely to be

particularly important for services that customers perceive as high risk or which they feel

uncertain about their ability to evaluate outcomes, for example banking, insurance,

brokerage, medical and legal services. The recent incidents of financial frauds and collapse

of few financial institutions in Nepal has made it difficult for the banks to assure customers

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about the safety of their deposits. Hence banks nowadays tend to focus more on assurance

aspect while designing their promotional messages.

Empathy: Treating Customers as Individuals

Empathy is defined as the caring, individualized attention that firm provides to itscustomer. The essence of empathy is to conveying, through personalized or customized

service, that customers are unique and special and their needs are understood. For

example: Hair Cutting Saloons like Easy Cuts/ Niel David has focused on empathy aspects

as they tend to advise customers on the type of hair styles or grooming techniques that

suit individual customer.

In business to business services, customers want supplier firms to understand their

industries and its specific issues. Hence, many small technical consulting firms have beenable to successfully compete with large vendors by positioning themselves as specialists in

particular industries.

Tangibles: Representing the Service Physically

Tangibles are defined as the appearance of physical facilities, equipment, personnel, and

communication materials, which provide cues for the customers to evaluate or develop

their perception about service quality. Tangibles are particularly influential in case of newcustomers. Tangibles are often combined with other dimensions of service quality to more

effective. For example, restaurants who promise of hygienic food menu also tend to make

their kitchen area visible to the customers. Hence, the dimension of reliability is supported

by tangibles as well.

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Customers may refer to all the five dimensions to make their judgment about quality or

may refer to relevant or selected dimensions only. For example for assessing the service of

an ATM, empathy may not be a relevant dimension to consider. But while assessing the

service of the bank as a whole, all the dimensions of service quality are important. The

importance the customers place on each of service quality dimensions depend upon theconsumer personal factors, situational factors as well as cultural factors.

(Note: For examples of How Customers Judge the Five Dimensions of Service Quality in

different industries, refer to Table 5.2 on Page 122, of the course book, Service Marketing

by Valarie, Mary, Dwayne and Ajay.)

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Customer Satisfaction versus Service Quality

Customer satisfaction and service quality are inter-related but they imply different

concepts. Although they have certain things in common, satisfaction in generally viewed as

a broader concept, whereas service quality focuses specifically on dimensions of service.Based on this view, perceived service quality is component of or among the factors

influencing customer satisfaction.

Perception of Service Quality is a focused evaluation that reflects the customers

perceptions of Reliability, Responsiveness, Assurance, Empathy, Tangibles in a Service.

Whereas, perception of Satisfaction is more inclusive and it if influenced by perceptions of

service/product features, price, as well as situational and personal factors.

For example Service Quality of a health club is judged on attributes such as availability ofrequired equipments, training and responsive of the staffs, facility maintenance, etc.

Whereas, customer satisfaction with the health club is a broader concept that is certainly

influenced by perceptions of service quality but also include perceptions of service features

(facilities in the club), price of membership, personal factors such as the consumers

emotional state, and even uncontrollable situational factors such as a weather conditions

and incidents happening while driving to and from the health club.

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Figure: Customer Perceptions of Service Quality and Customer Satisfaction

The continuity of Customer Satisfaction developed by Service Quality, for a considerable

period of time, leads to development of Customer Loyalty.

36

Service

Quality

Product

Quality

Price

Situationa

l Factors

Customer

Satisfacti

on

Personal

Factors

Customer

Loyalty

Dimensions:

Reliability

Responsiven

ess

Assurance

Empathy

Tangibles


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SERVICE ENCOUNTERS

Service Encounters or Moments of Truth are referred as the building blocks for customer

perceptions as it is from service encounters that customers build their perceptions. Service

encounters (sometimes referred as Real-time Marketing) are where promises are kept or

broken.

From the customers point of view, the most vivid impression of service occurs in the

service encounter, when the customer interacts with the service firm. For example, among

the service encounters that a hotel customer experience as checking into the hotel, being

taken to a room by a bell person, eating a restaurant meal, requesting a wake-up call, and

checking out. It is in these encounters that customers receive a snapshot of the

organizations service quality, and each encounter contributes to the customers overallsatisfaction and willingness to do business with the organization again. From the

organizations point of view, each encounter thus presents an opportunity to prove its

potential as a quality service provider and to increase customer loyalty.

Importance of Encounters

If a customer is interacting with a firm for the first time, the initial phone contact or face-to-

face experience with a representative of the firm can take on significant importance in the

customers perceptions of quality. Mistakes or problems that occur in the early stages of

the service delivery process create negative impression on customer which makes it more

difficult for the service provider to achieve customer satisfaction.

In case of multiple encounters, although early events in the encounter flow are likely to be

especially important, each individual encounter is important in a creating a composite

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image of the firm in the customers memory. Many positive experiences add up to a

composite image of high quality, whereas many negative interactions will have the

opposite effect. On the other hand, a combination of positive and negative interactions will

leave the customer feeling unsure of the firms quality, doubtful of its consistency in

service delivery, and vulnerable to the appeals of competitors.

Studies suggest that not all encounters are equally important in building customer

relationships. For example, in a hospital context, a study of patients revealed that

encounters with nursing staff were more important in predicting satisfaction than were

encounters with meal service or patient discharge personnel.

In addition to these key encounters, there are some momentous encounters (like the

proverb one rotten apple spoils all the all in the basket) that drive the customer away nomatter how many or what type of encounters have occurred in the past. For example, a

sound system supplier provides sound system on lease for a huge musical concert and at

the start of the concert the sound system breaks down, forcing the concert organizers to

cancel the concert and pay compensation for audience tickets and sponsors as well. This

kind of momentous failures can terminate the relationship of the sound system supplier

with that concert organizer forever.

However, on the other hand, momentous positive encounters can sometimes bind acustomer to an organization for life. For example, if a bank provides loan to an organization

during recession and saves it from going bankrupt, then that organization is likely to be

loyal to that bank for a long time, unless neutralized by another momentous negative

encounter.

Types of Service Encounters

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Generally there are following three types service encounters;

Remote Encounters

Remote Encounters are those encounters occurring without any direct human contact.

Example: Customers interaction with a bank through the ATM system, with a retailerthrough its Internet website, etc. In remote encounters, the tangible evidence of the service

and the quality of the technical processes and system becomes the primary bases for

judging quality.

Phone Encounters

Phone Encounters are the encounters occurring over the telephone and is the most

frequent type of encounter between end customer and the firm. Tone of voice, employeeknowledge, and effectiveness/efficiency in handling customer issues become important

criteria for judging service quality.

Face-to-Face Encounters

Face-to-Face Encounters refer to encounters that occur between an employee and a

customer in direct contact. Determining and understanding service quality issues in face-to-face encounters is the most complex of all. Both verbal and non-verbal behaviors are

important determinants of quality, as are tangible cues such as employee dress and others

symbols of service (servicescape, information brochures, etc). Customers behavior while

participating in the encounter also influences quality of service delivered.

Sources of Pleasure and Displeasure in Service Encounters

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On the basis of study done on thousands of service encounter stories, following four

common themes have been identified as the sources of customer satisfaction/

dissatisfaction in memorable service encounters.

Recovery- Employee Response to Service Delivery System Failures

The fist theme includes all incidents in which there has been a failure of the service

delivery system and an employee is required to respond in some way to consumer

complaints and disappointments. The failure may be, for example, a hotel room that is not

available; an airplane is delayed for six hours. In such situation, customer satisfaction/

dissatisfaction results from the way employees respond to such failures.

Adaptability-Employee Response to Customer Needs and Requests

Another major determinant of Customer satisfaction or dissatisfaction is how adaptable the

service delivery system is when the customer has special needs or requests that place

demands on the process. For example: a customer asking for extra pillow in flights, an

illiterate customer asking for the bank employee to fill up the form, etc. Customers judge

service encounter quality in terms of the flexibility of the employees and the system.

Spontaneity- Unprompted and Unrequested Employee Actions

Even when there is no system failure or no special request or need of the customer, service

encounters can be very satisfying or very dissatisfying depending on the

spontaneity/eagerness of the employees in providing regular service and sometimes40


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unrequested service. Satisfying incidents in this theme represent very pleasant surprises

for the customer (special attention, being treated like royalty, receiving something nice but

not requested) whereas dissatisfying incidents in this group represent negative and

unacceptable employee behaviors (rudeness, discrimination, ignoring the customers).

Coping-Employee Response to Problem Customers

Another different kind of source for Customer Satisfaction/ Dissatisfaction is the ability of

the employees to Cope, which refers to the behavior generally required of employees to

handle problem customer encounters. Problem customers refer to those customers who are

basically unwilling to cooperate with the service provider, other customers, and industry

regulations/laws. Rarely can problem customers be satisfied but through effective coping

their dissatisfaction can be minimized.(Note; For Examples of Service Encounter Themes and Dos and Donts of Service

Encounters, refer to Exhibit 5.2 and Table 5.3 in Page no 132 & 133 of the course book,

Service Marketing by Valarie, Mary, Dwayne and Ajay.)

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Technology-Based Service Encounters

Technology-Based Service Encounters refer encounters which involve customers interacting

with Internet-based services, automated phone services, kiosk/ Machine services, services

delivered via audio/video technology. Often these systems are referred as self-service

technologies (SSTs) because the customer essentially provides his or her own service.

Satisfying SST

Solves an intensified need or helps a customer in desperate need

Is better than the alternative

Does its job without failure

Dissatisfying SST

Has frequent technology and system failures

Has Poor and Complicated Design

Difficult for customers to use the technology properly

As companies progress further with SSTs and become better at delivering service this way,it is expected that growing numbers of businesses will be delivering there services in future

via technology.

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Evidence of Service Encounters

The additional tools in Extended Marketing Mix for Services-Process, People and Physical

Evidence, can also be referred as the Evidence of Service Encounters as customers come to

contact with these elements in their interaction with the service provider. The evaluation of

these elements greatly determines the customer satisfaction and their perception about

service quality. For example; when a patient has an appointment with a doctor in a health

clinic, the first encounter of the visit is frequently with the receptionist in a clinic waiting

area. The quality of that encounter will be judged by how the appointment registration

process works, the actions and attitude of the receptionist (people) and the appearance of

the waiting area (physical evidence). The three elements of the evidence may be

differently important depending on the type of service encounter (remote, phone, face-to-

face). All three elements will be important in case of face-to-face, whereas physicalevidence is particularly important in-case of remote but not important in-case of phone

encounter. [END OF UNIT 2]

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Unit 2 Consumer Behavior in Services

Documents

Transcript of Unit 2 Consumer Behavior in Services