Services Marketing

.People .Technology .Strategy

Chapter 2 Consumer Behavior in a Services Context
Week 2
 Learning Objectives
1. Understand the three-stage model of service consumption.
2. Use the multi-attribute model to understand how consumers evaluate and choose between alternative
service offerings
3. Learn why consumers often have difficulties evaluating services, especially those with many experience and
credence attributes.
4. Know the perceived risks customers face in purchasing services and the strategies firms can use to reduce
consumer risk perceptions.
5. Understand how customers form service expectations and the components of these expectations.
6. Know the moment-of-truth metaphor.
7. Contrast how customers experience and evaluate high- versus low contact services.
8. Be familiar with the servuction model and understand the interactions that together create the service
experience.
9. Obtain insights from viewing the service encounter as a form of theater.
10. Know how role, script, and perceived control theories contribute to a better understanding of service
encounters.
11. Describe how customers evaluate services and what determines their satisfaction.
12. Understand service quality, its dimensions and measurement, and how quality relates to customer loyalty.
 Consumer Buyer Behavior
• Consumer buyer behavior refers to the buying behavior of final consumers
– individuals and households who buy goods and services for personal
consumption
• All of these final consumers combine to make up the consumer market
LO 1 Understand the three-stage model of
service consumption.
Consumer Decision Making: The Three-Stage Model

Consumer Decision Making: The Three-Stage Model

• Pre-purchase Stage
• Service Encounter Stage
• Post-purchase Stage
 The Pre-Purchase Stage
• The pre-purchase stage begins with need awareness and continues through the
information search and evaluator of alternatives to deciding whether or not to
buy a particular service.
Need Awareness
When a person or organization decides to buy or use a service, it is triggered by an
underlying need or need arousal.
Needs may be triggered by:
 People’s unconscious minds (personal identity and aspirations).
 Physical conditions (Munro’s hunger drover her to Burger King).
 External sources (social media or a service !rm’s marketing activities
 
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 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
 Four Categories of Services
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
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”
 Four Categories of Services
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.
 Pre-purchase Stage
Pre-purchase 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
 Customers Seek Solutions to Aroused
Needs
• People buy goods and services to meet specific needs/wants
• External sources may stimulate the awareness of a need
• Companies may seek opportunities by monitoring consumer attitudes
and behavior
 LO 1 Understand the three-stage model of service
consumption.
Summary
• Service consumption can be divided into the following three stages:
(1) pre-purchase stage,
(2) service encounter stage, and
(3) post-encounter stage.
• The pre-purchase stage consists of the following four steps:
(1) need awareness,
(2) information search,
(3) evaluation of alternative solutions and suppliers, and
(4) making a purchase decision.
 LO 2 Evaluation of Alternative Services
Use the multi-attribute model to understand how
consumers evaluate and choose between alternative
service offerings.
 LO 2 Pre-purchase Stage – Evaluation of
Alternatives
• Service Attributes: Search attributes help customers evaluate a product before
purchase Example: Style, color, texture, taste, sound
• Experience attributes cannot be evaluated before purchase—must “experience”
product to know it For Example: Vacations, sporting events, medical procedures
• Credence (believe in or accept as something true) attributes are product
characteristics that customers find impossible to evaluate confidently even after
purchase and consumption. Example: Quality of repair and maintenance work
 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 before purchase—must “experience”
product to know it. Vacations, sporting events, medical procedures
• Credence attributes are product characteristics that customers find impossible to
evaluate confidently even after purchase and consumption. Quality of repair and
maintenance work
 LO 2 Pre-purchase Stage – Evaluation of Alternatives

• Perceived Risks
• Functional – unsatisfactory performance outcomes
• Financial – monetary loss, unexpected extra costs
• Temporal – wasted time, delays leading to problems
• Physical – personal injury, damage to possessions
• Psychological – fears and negative emotions
• Social – how others may think and react
• Sensory – unwanted impact on any of five senses
 LO 2 Pre-purchase Stage – Evaluation of
Alternatives
• Perceived Risks - How Do Consumers Handle Them?
• Seeking information from respected personal sources
• Using Internet to compare service offerings and search for independent reviews
and ratings
• Relying on a firm that has a good reputation
• Looking for guarantees and warranties
• Visiting service facilities or trying aspects of service before purchasing
• Asking knowledgeable employees about competing services
 Pre-purchase Stage – Need Awareness
A service purchase is triggered by an underlying need (need arousal)
Needs may be due to:
• People’s unconscious minds (e.g., aspirations)
• Physical conditions (e.g., chronic back pain)
• External sources (e.g., marketing activities)
When a need is recognized, people are likely take action to resolve it
 Pre-purchase Stage – Information Search
• When a need is recognized, people will search for solutions.
• Several alternatives may come to mind and these form the evoked set
• Evoked set – set of possible services or brands that a customer may
consider in the decision process.
• When there is an evoked set, the different alternatives need to be
evaluated before a final choice is made
LO 2 Pre-purchase Stage – Evaluation of Alternatives
• Perceived Risks – Strategies for Firms to Manage Consume Perceptions
of Risk Free trial (for services with high experience attributes)
• Advertise (helps to visualize)
• Display credentials
• Use evidence management (e.g., furnishing, equipment etc.)
• Offer guarantees
• Encourage visit to service facilities
• Give customers online access to information about order status
LO 2 Pre-purchase Stage – Evaluation of Alternatives
Pre-purchase Stage – Evaluation of Alternatives
• Service Expectations : Customers evaluate service quality by comparing what they
expect against what they perceive
• Situational and personal factors also considered
• Expectations of good service vary from one business to another, and differently
positioned service providers in same industry
• Expectations change over time
• Example: Service Perspective. Parents wish to participate in decisions relating to
their children’s medical treatment for heart problems
• Media coverage, education, Internet has made this possible
 LO 2 Pre-purchase Stage – Evaluation of
Alternatives
Pre-purchase Stage – Evaluation of Alternatives
• Service Expectations – Components of Custom 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
• Zone of Tolerance: Range within which customers are willing to accept variations
in service delivery
 LO 2 Pre-purchase Stage – Evaluation of
Alternatives
• Pre-purchase Stage – Purchase Decision
When possible alternatives have been compared and evaluated, the best option
is selected
• Can be quite simple if perceived risks are low and alternatives are clear
• Very often, trade-offs are involved.
• The more complex the decision, the more trade-offs need to be made Price is
often a key factor in the purchase decision
• Once the consideration set and key attributes are understood, the consumer
typically makes a purchase decision.
• In marketing, we often use multi-attribute models to simulate consumer decision-
making.
 LO 2 Pre-purchase Stage – Evaluation of
Alternatives
• LO 2 The following theories help us to better understand consumer behavior in
this stage:
• Recognizing a need motivates customers to search for solutions to satisfy that
need.
• Several alternatives may come to mind, and these form the evoked set, which is
further narrowed down to a few alternatives to seriously consider, that is, the
consideration set.
• During the search process, consumers also learn about service attributes they
should consider and form expectations about how firms in the consideration set
will perform on those attributes.
 LO 2 Pre-purchase Stage – Evaluation of
Alternatives
• Multi-attribute model.
• Many decisions involve complex trade-offs along several attributes. The multi-attribute
model simulates this decision-making by combining customers’ attribute performance
expectations for each firm in the consideration set and the importance weights of each
attribute.
• Two common consumer decision rules in the multi-attribute model are the linear
compensatory rule and the conjunctive rule. Given the same attribute ratings, consumers
can arrive at different decisions when different decision rules are applied.
• Firms should actively manage key variables in the multi-attribute model to increase the
chances of their service being the one chosen.
• This includes ensuring that the firm’s services are in the consideration set and shaping their
target customers’ attribute performance perceptions, attribute weights and even decision
rules towards the firm’s strengths.
 LO 3 Service Attributes
Learn why consumers often have difficulties evaluating services,
especially those with many experience and credence attributes.
 LO 3 Service Attributes
The multi-attribute model assumes that consumers can evaluate all
important attributes before purchase. However, this is often not the case
as some attributes are harder to evaluate than others. There are three
types of attributes .
They are:
• Search Attributes
• Experience Attributes
• Credence attributes
 LO 3 Service Attributes
• Search attributes – they are tangible characteristics that customers can
evaluate before purchase.
• For example, search attributes for a restaurant include type of food,
location, type of restaurant (e.g., fine dining, casual or family-friendly),
and price.
• You can also check out a golf course before actually playing a round, or
take a tour of a health club and try working out with one or two pieces
of the gym equipment.
• These tangible search attributes help customers better understand and
evaluate a service, therefore reducing the sense of uncertainty or risk
associated with the purchase.
 LO 3 Service Attributes

• Experience attributes – they cannot be evaluated before purchase.

• Customers must “experience” the service before they can assess
attributes such as reliability, ease-of-use, and customer support.
• In our restaurant example, you won’t know how much you actually like
the food, the service provided by your waiter, and the atmosphere in
the restaurant until you are actually using the service.
 LO 3 Service Attributes

• Credence attributes __are characteristics that customers find hard to

evaluate even after consumption.
• Here, the customer is forced to believe or trust that certain tasks have
been performed at the promised level of quality.
• In our restaurant example, credence attributes include the hygiene
conditions in the kitchen, the nutritional quality and the freshness of
ingredients used (e.g., “Do they really use the higher grade olive oil for
cooking?”)
 LO 3 Service Attributes
• It’s not easy for a customer to determine the quality of repair and maintenance
work performed on a car, and patients can’t usually evaluate how well their
dentists have performed complex dental procedures.
• Also, consider the purchase of professional services.
• People seek such assistance precisely because they lack the necessary training
and expertise themselves — think about counseling, surgery, legal advice, and
consulting services.
• How can you really be sure that the best possible job was done?
• Often it comes down to a matter of having confidence in the provider’s skills and
professionalism.
• All products can be placed on a continuum ranging from “easy to evaluate” to
“difficult to evaluate,” depending on whether they are high in search,
experience, or credence attributes
 LO3 Service attributes
Summary
• People often have difficulty in evaluating services as they tend to have
a low proportion of search attributes and a high proportion of
experience and credence attributes.
• This makes it difficult for consumers to evaluate services before
purchase.
• Tangible cues then become important, and firms need to manage them
carefully to shape their customer’s expectations and perceptions of
experience and credence attributes