Role of Expectation and

Perception in Services
Dr Yamini S.
Faculty of Operations and Analytics
Department of Management Studies, NIT
Trichy

9 May 2022 Yamini | Services Operations Management 1

 The influence of expectations and beliefs
• We usually think that we observe reality. But, the reality we observe or
experience is influenced by what we think we are going to observe and
experience
• Expectations are more than mere anticipations, they determine our perceptions
• Previous experiences are influenced by what has happened recently and
repetitively
• Each of us interpret, understand and perceive the world differently to one
another even when looking at the same stimulus
• Our senses are imperfect, our point of view is limited, and the reality we
experience is never the total picture

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 Effect of expectation on Taste
• Previous knowledge and impressions can actually modify the neural
activity underlying the taste
• Our experiences are tied to our rational brains, clever marketing
campaigns tricks us with a distorted awareness of the world
• We can often make better decisions (more realistic ones) when we
have less information about the product
Blind trials consistently show that the cheapest beer / coffee are rated highest according to smell,
taste and texture
• Don’t underestimate the power of presentation. The effect of branding is
strong and genuinely improves the enjoyment of the product
By adding a packaging effect, most expensive ones are rated as the favourites

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 How previously held impressions could cloud
our point of view ?
• Does it matter if the knowledge comes before or after the
experience?
• It is essential for building a reputation of the product or brand
• Marketing is all about providing information that will heighten
someone’s anticipated and real pleasure
• Coke Vs Pepsi challenge ads. Who is fudging their statistics?
• Ways of evaluation of market research: Coke tasted better in a non-
blind (sighted) test and Pepsi tasted better on blind taste test

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 Law of demand

The law of demand states that conditional on all else

being equal, as the price of a good goes up, the
demand for it goes down and, conversely, as the price
of a good goes down, the demand for it goes up

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 The power of price
• Does a pricey medicine make us feel better (physiologically) than a cheap
medicine?
• Does the expensive procedure, new generation apparatuses influence their
efficacy?
• We feel better when we consult a doctor, a highly acclaimed specialist,
when we pop a pill
• Self-fulfilling effect: Combination of past experience and expectation of
getting better. Two mechanisms shape the expectation that placebo work
• Belief - our confidence or faith
• Conditioning - familiarity with repeated experiences

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 Relationship between price and placebo effect
• The price can change the experience, we get what we pay for
• People get better results, when the drug they take costs more
• The effect was particularly pronounced for people who had more
experience with recent pain, since they depend on pain medications
• The benefit is lesser when the product is purchased at a discounted
price
• Price does make a difference on the expected performance too
• Effect of training programs on the performance of employees

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 Relationship between Price and Quality
• Can a implied difference in quality influence the actual experience?
• Pain experienced for the electrical shock - the actual pain relieved varies
based on the price of the pain reliever
• While discounting seems like a good solution to increase short-term
sales, but it hurts the sales in long-term
• With some self-control, we can usually steer ourselves away from the
most expensive brands
• Conversely rising prices may suddenly increase sales for a luxury product
where price reflects history, quality, legend, prestige

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 Bandwagon Effect
• What are the influential factors?
• Pressure to conform to the groupthink
• A desire to be right, and be a part of the winning side
• Fear of exclusion / need to be included
• Adopting the norms and attitude of the majority – to gain acceptance and approval
• Existence of positive network externalities
• Bandwagon beliefs can have serious and damaging consequences
• Large scale avoidance of vaccinations can have serious health issues
• Revealing about the leading side in polls may change many votes to conform to the winning
side – 1992 U.S. Presidential elections
• It can also help in adoption of healthy behaviours

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 Marketing strategies
• Leveraging the group think phenomenon to increase sales and grow your
company.
• Consumers tend to adapt a bandwagon mind-set in four main ways:
Following the herd
Trusting the herd
Following their peers
Following influential people
• Followers wont blindly follow you wherever you go
• Build a solid foundation of customers
• Maintain a positive position of leadership, knowledge and wisdom within
the industry

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