Teaching Slides C02

Services Marketing:
People, Technology, Strategy

CHAPTER 2
Understanding Service Consumers
1
Learning Objectives
By the end of this chapter, the reader should be able to:
• Understand the three-stage model of service consumption.
• Use the multi-attribute model to understand how consumers
evaluate and choose between alternative service offerings.
• Learn why consumers often have difficulties evaluating
services, especially those with many experience and credence
attributes.
• Know the perceived risks customers face in purchasing
services and the strategies firms can use to reduce consumer
risk perceptions.
• Understand how customers form service expectations and the
components of these expectations.
2
Learning Objectives
• Know the moment-of-truth metaphor.
• Contrast how customers experience and evaluate high- versus low-
contact services.
• Be familiar with the servuction model and understand the
interactions that together create the service experience.
• Obtain insights from viewing the service encounter as a form of
theater.
• Know how role, script, and perceived control theories contribute to a
better understanding of service encounters.
• Describe how customers evaluate services and what determines their
satisfaction.
• Understand service quality, its dimensions, and measurement, and
how quality relates to customer loyalty.
• Know why customer loyalty is important.
3
Three-Stage Model
• Service consumption can be divided into three main
stages.
Pre- Service Post-
purchase Encounter encounter
Stage Stage Stage
4
Three-Stage Model
Stages of Service Consumption Key Concepts
Awareness of needs Need arousal
• Clarify needs Evoked set
Information search Consideration set
• Explore solutions
• Identify alternative service products and
suppliers
Pre-purchase Stage
5
Three-Stage Model
Evaluation of alternatives (solutions and
suppliers)
• Review supplier information Multi-attribute model
(e.g. advertising, brochures, websites) Search, experience, and credence
• Review information from third parties attributes
(e.g. online reviews, ratings, comments on Perceived risk
the web, blogs, awards, and comparison
Pre-purchase Stage
portals)
• Discuss options with service personnel
• Get advice and feedback from third-party
advisors, friends and family, and other
customers Formation of expectations: desired
Make decisions on service purchase and service level, predicted service
often make a reservation level, adequate service level, zone
of tolerance
6
Three-Stage Model

Request service from a chosen supplier Moments of truth
or initiate self-service (payment may be Service encounters
upfront or billed later) Low- vs. high-contact encounters
Servuction system
Service Encounter Stage
Service delivery by personnel or self- Theater as a metaphor

service Role and script theories
Perceived control theory
7
Three-Stage Model
Evaluation of service performance Confirmation/Disconfirmation of
expectations
Future intentions Dissatisfaction, satisfaction, and
delight
Service quality
Word-of-mouth
Post-encounter Stage
Repurchase
Loyalty and engagement
8
Need Arousal
• Decision to buy or use a service is triggered by need

arousal.
• Triggers of need:
– Unconscious minds (e.g., personal identity and
aspirations)
– Physical conditions (e.g., hunger )
– External sources (e.g., a service firm’s marketing activities)
• Consumers are then motivated to find a solution for
their need.
9
Information Search
• Need arousal leads to attempts to find a solution.

• Evoked set – a set of products and brands that a
consumer considers during the decision-making
process – that is derived from past experiences or
external sources.
• Alternatives then need to be evaluated before a final
decision is made.
10
Evaluating Alternatives –
Service Attributes
• Search attributes help customers evaluate a product
before purchase
– E.g., type of food, location, type of restaurant and price
• Experience attributes cannot be evaluated before
purchase
– E.g., the consumer will not know how much they will enjoy the food,
the service, and the atmosphere until the actual experience
• Credence attributes are those that customers find
impossible to evaluate confidently even after purchase
and consumption
– E.g., hygiene conditions of the kitchen and the healthiness of the
cooking ingredients
11
How Product Characteristics Affect Ease of
Evaluation
Adapted from Valarie A. Zeithaml (1981), “How Consumer Evaluation Processes Differ Between Goods and Services,” in
James H. Donnelly and William R. George, eds. Marketing of Services. Chicago, IL: American Marketing Association.
12
Multi-Attribute Model
Current Dry Campus Dry New Dry Importance
Cleaner Cleaner Cleaner Weight
Quality of Dry 9 10 10 30%
Cleaning
Convenience of 10 8 9 25%
Location
Price 8 10 8 20%
Opening Hours 6 10 9 10%
Reliability of On- 2 9 9 5%
Time Delivery
Friendliness of 2 8 8 5%
Staff
Design of Shop 2 7 8 5%
Total Score 7.7 9.2 9.0 100%
Table 2.1 Modeling Consumer Choice – Susan Munro’s Multi-Attribute

Model for Choosing a Dry Cleaner
13
Perceived Risks in Purchasing and Using Services
Type of Risk Examples of Customer Concerns
Functional (unsatisfactory performance • Will this credit card be accepted

outcomes) wherever and whenever I want to make
a purchase?
• Will the dry cleaner be able to remove
stains from this jacket?
• Will I get access to a ride from the car
sharing service when I need it?
Financial (monetary loss, unexpected • Will I lose money if I make the

costs) investment recommended by my robo-
advisor?
• Could my credit card details be stolen if
I register with this website?
• Will repairing my car cost more than
the original estimate?
14
Temporal (wasting time, consequences • Will I have to wait in line for a long
of delay) time before I can enter the exhibition?
• Will this online application work
smoothly without me having to re-enter
my data several times?
• Will the renovation of our bathroom
be completed before our friends come
to stay with us?
Physical (personal injury or damage to • Will there be complications or scars if I

possessions) go for this cosmetic surgery?
• Will the contents of this package get
damaged in the mail?
• Will there be a lot of germs in the
vehicles of the car sharing service?
15
Psychological (personal fears and • Can I be sure that the equipment at

emotions) this theme park is safe?
• Will the consultant make me feel
embarrassed or stupid?
• Will the doctor’s diagnosis upset me?
Social (how others think and react) • What will my friends think of me if
they learned that I use this dating app?
• Will my relatives approve of the
restaurant I have chosen for the family
reunion dinner?
• Will my business colleagues disapprove
of my selection of an unknown law firm?
16
Sensory (unwanted effects on any of the • Will I get a view of the parking lot
five senses) rather than the beach from my
restaurant table?
• Will I be kept awake by noise from the
guests in the room next door?
• Will my room smell of stale cigarette
smoke?
17
How Might Consumers Handle
Perceived Risk?
• Seeking information from trusted and respected
personal sources such as family, friends, and peers.
• Using the Internet and comparison portals:
– to compare service offerings
– to search for independent reviews and ratings
– to explore discussions on social media.
• Relying on a firm that has a good reputation.
• Looking for service guarantees and warranties.
18
Perceived Risk?
• Visiting service facilities or trying aspects of the
service before purchasing
• Examining tangible cues or other physical
evidence such as the feel and look of the service
setting
• Looking out for awards won by the firm
19
Perceived Risk?
• Asking knowledgeable employees about competing

services to learn about what to look out for when
making a purchase decision.
20
Strategic Responses to Managing
Customer Perceptions of Risk
• Encourage prospective customers to preview the service

through their company websites and videos.
• Encourage prospective customers to visit the service
facilities before purchase.
• Offer free trials suitable for services with high experience
attributes.
• For services with high credence qualities and high
customer involvement, advertising helps to communicate
the benefits, usage, and how consumers can enjoy the
best results.
21
• Display credentials.
• Use evidence management.
– This is an organized approach where customers are
presented with coherent evidence of the company’s
targeted image and its value proposition.
22
• Have visible safety procedures that build confidence

and trust.
• Give customers access to online information about
the status of an order or procedure.
• Offer service guarantees such as money-back
guarantees and performance warranties.
23
Factors Influencing Customer
Expectations of Service
Source: Adapted from Valarie A. Zeithaml, Leonard L. Berry, and A. Parasuraman (1993), “The Nature and Determinants of Customer
Expectations of Service,” Journal of the Academy of Marketing Science, Vol. 21, No. 1, pp. 1–12.
24
Components of Customer Expectations
Desired Service Level
• “Wished-for” level of service quality that customer believes can and
should be delivered
• Also influenced by explicit and implicit promises made by service
providers, word-of-mouth, and past experiences
Adequate Service Level

• Minimum acceptable level of service
Predicted Service Level

• Service level that customer believes firm will actually deliver
• Customer predictions of service often are situation specific
Zone of Tolerance
• Acceptable range of variations in service delivery
• Exceeding the zone of tolerance can surprise and delight customers.
25
Purchase Decision
• Possible alternatives are compared and evaluated,
whereby the best option is selected.
– Simple if perceived risks are low and alternatives are clear
– Complex when trade-offs increase
26
Service Encounter Stage
• Service encounter – a period of time during which a
customer interacts directly with the service provider
– Might be brief or extend over a period of time
• Models and frameworks:
1.“Moments of Truth” – importance of managing touch
points
2.High-/low-contact model – extent and nature of contact
points
3.Servuction model – variations of interactions
4.Theater metaphor – “staging” service performances
27
Moments of Truth
[W]e could say that the perceived quality is realized at

the moment of truth, when the service provider and the
service customer confront one another in the arena. At
that moment they are very much on their own… It is the
skill, the motivation, and the tools employed by the
firm’s representative and the expectations and behavior
of the client which together will create the service
delivery process.
Richard Normann
28
Distinctions between High-Contact
and Low-Contact Services
High-Contact Services
• Customers visit service facility and remain throughout service
delivery
• Active contact
• Includes most people-processing services
Low-Contact Services
• Little or no physical contact
• Contact usually at arm’s length through electronic or physical
distribution channels
• Facilitated by new technologies
29
The Servuction System
• The servuction model (combining the terms

“service” and “production”) conceptualizes service
businesses as systems that integrate:
– Marketing
– Operations
– Customers
• It shows what is experienced by customers.
30
Service delivery
Technical core
system
Servuction
System
31
• Technical core:
 Inputs are processed and service elements are
created.
 Typically back stage and invisible to the
customer (e.g., kitchen in a restaurant).
32
 Invisible components can be termed “back stage”

or “back office.”
 Visible components can be termed “front stage”
or “front office.”
 What goes on back stage usually is not of interest
to customers.
 If what goes on back stage affects the quality of
front-stage activities, customers will notice.
33
• Service delivery system:

 It is where the final “assembly” takes place
and the product is delivered to the customer.
 Includes the visible part of the service
operations system — buildings, equipment,
and personnel — and possibly other
customers.
34
Adapted and expanded from an original concept by Eric Langeard and Pierre Eiglier.
35
Theatrical Metaphor:
An Integrative Perspective
Service facilities Personnel
• Stage on which drama • Front stage personnel are
unfolds like members of a cast
• This may change from • Backstage personnel are
one act to another support production team
Roles Scripts
• Like actors, employees • Specifies the sequences
have roles to play and of behavior for customers
behave in specific ways and employees
36
Role Theory
• A role is defined as:

– a set of behavior patterns
– learned through experience and communication
– to be performed by an individual
– in a certain social interaction
– in order to attain maximum effectiveness in goal
accomplishment
• Employees must perform their roles in accordance
with customer expectations or risk dissatisfying
customers.
37
Script Theory
• A service script specifies the sequences of behavior

employees and customers are expected to follow
during service delivery.
• Customers learn scripts through experience and
communication with others and through firm-
provided communications and education.
• The more experience a customer has with a service
company, the more familiar that particular script
becomes.
38
Perceived Control Theory
• Control is a major driving force of customer behavior

and satisfaction.
• The higher the level of perceived control during a
service situation, the higher their level of satisfaction
will be.
39
Control can be managed via

different types
Behavioral control: Decisional control: Cognitive control:
Customer can change the Customer can choose Customer understanding
situation and ask for between two or more why something happens
customization beyond standardized options, but
what the firm typically without changing either
offers option
40
• Perceived control- largely compensatory additive,

meaning, reduction in behavioral control can be
compensated through higher decisional and
cognitive control.
41
Post-Encounter Stage
• Involves consumers’ attitudinal and behavioral

responses to the service experience.
• Important consumer responses are:
– customer satisfaction
– service quality perceptions
– repeat purchase
– customer loyalty
42
Customer Satisfaction
• In the post-encounter stage:

– Customers evaluate the service performance they have
experienced
– Compare it with their prior expectations
43
The Expectancy-Disconfirmation
Model of Satisfaction
• Satisfaction is a judgment following a series of

consumer product interactions.
• In the model, confirmation or disconfirmation of
expectations is the essential determinant of
satisfaction.
44
The Expectancy-Disconfirmation Model of
Satisfaction
Source: Adapted from Richard L. Oliver (2010), Satisfaction: A Behavioral Perspective on the Consumer, 2nd ed. Armonk, NY: M. E. Sharpe.
45
Where do service expectations in our satisfaction model

come from?
• During the decision-making process, customers

assess the attributes and risks related to a service
offering.
• In the process, they develop expectations about how
the service they choose will perform.
46
Satisfaction judgments are then formed based on
comparison.
• If performance perceptions are worse than

expected, it is called negative disconfirmation.
• If performance is better than expected, it is called
positive disconfirmation.
• If it is as expected, then it is simply called
confirmation of expectations.
47
• Customers will be satisfied as long as perceived

performance falls within the zone of tolerance, that
is, above the adequate service level.
• Satisfaction with service attributes results from the
experience of attribute specific performance and
strongly influences consumers’ overall satisfaction.
• Multi-attribute models help to understand the
formation process of customer satisfaction.
48
Are Expectations Always the Right
Comparison Standard?
• Comparing performance to expectations works well

in reasonably competitive markets.
• In uncompetitive markets or in situations in which
customers do not have free choice, there are risks to
defining customer satisfaction relative to their prior
expectations.
• The Expectancy-Disconfirmation Model works very
well for search and experience attributes but less for
credence attributes.
49
Are Expectations Always the Right
Comparison Standard?
• Customers rely on their expectations to form their

satisfaction evaluations.
• Firms have to understand how customers evaluate

their service to proactively manage those aspects of
their operations that have a strong effect on
customer satisfaction — also called halo effect.
50
How is Customer Delight Different
from Satisfaction?
Unexpectedly
high levels of
performance
Customer Positive affect

Arousal (e.g.,
surprise, Delight (e.g., pleasure,
excitement) joy, or happiness
51
How is Customer Delight Different
from Satisfaction?
• Achieving a customer’s delight requires focusing on

what is currently unexpected.
• Once a customer is delighted, it has a strong impact

on a customer’s loyalty.
52
Service Quality
• Excellent service quality is a high standard of

performance that consistently meets or exceeds
customer expectations.
• It is a key driver of important customer behaviors,
including word-of-mouth recommendations,
repurchasing, and loyalty.
53
Customer Satisfaction versus Service
Quality
Customer satisfaction: An evaluation of a
single consumption experience, a fleeting
judgment, and a direct and immediate
response to that experience.
Service quality: Refers to relatively stable

attitudes and beliefs about a firm, which can
differ significantly from satisfaction.
54
Customer Satisfaction Versus Service
Quality
• Consumers’ repurchase intentions are influenced by

their general beliefs about the service quality of the
firm at the time of their next purchase decision.
Figure 2.22 From attribute satisfaction to repeat purchase
55
Dimensions of Service Quality
Zeithaml et al., identified five broad dimensions used by
consumers in evaluating service quality.
• Tangibles
• Reliability
• Responsiveness
• Assurance
• Empathy
56
Dimensions of Definition Sample Illustrations
Service Quality
Tangibles Appearance of physical Are the hotel’s facilities

facilities, equipment, attractive?
personnel, and Is my accountant dressed
communication materials appropriately?
Is my bank statement easy
to understand?
Reliability Ability to perform the Does my lawyer call me

promised service back when promised?
dependably and Is my telephone bill free
accurately of errors?
Was my TV repaired right
the first time?
Source: Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry (1990), Delivering Quality Service. New York,
NY: The Free Press. See also: Valarie A. Zeithaml, Mary Jo Bitner, and Dwayne D. Gremler (2018), Services
Marketing: Integrating Customer Focus Across the Firm, 7th ed. New York, NY: McGraw-Hill, pp. 125–128.
57
Service Quality
Responsiveness Willingness to help When there is a problem, does the
customers and provide firm resolve it quickly?
prompt service Is my stockbroker willing to answer
my questions?
Is the cable TV company willing to
give me a specific time when the
installer will show up?
Assurance Trustworthiness, Does the hospital have a good

• Credibility believability, and reputation?
honesty of the service Does my stockbroker refrain from
provider pressuring me to trade?
Does the repair firm guarantee its
work?
58
Service Quality
• Security Freedom from danger, Is it safe for me to use the bank’s ATMs
risk, or doubt at night?
Is my credit card protected against
fraud?
Can I be sure that my insurance policy
provides complete coverage?
• Competence Possession of the skills Can the bank teller process my

and transaction without fumbling around?
knowledge required to Is my health insurance able to obtain
perform the service the information I need when I call?
Does the dentist appear to be
competent?
59
Service Quality
• Courtesy Politeness, respect, Does the flight attendant have a

consideration, and pleasant demeanor?
friendliness of contact Are the telephone operators
personnel consistently polite when answering my
calls?
Does the gardener take off his muddy
shoes before stepping on my carpet?
Empathy Approachability and How easy is it for me to talk to a

• Access ease of supervisor when I have a problem?
contact Does the airline have a 24-hour, toll-
free service hotline?
Is the hotel conveniently located?
60
Service Quality
• Communication Listening to customers When I have a complaint, is the

and keeping them manager willing to listen to me?
informed in the Does my doctor avoid using technical
language they can jargon?
understand Does the electrician call when he is
unable to keep a scheduled
appointment?
• Understanding Making the effort to Does someone in the hotel recognize

the customer know customers and me as a regular guest?
their needs Does my stockbroker try to determine
my specific financial objectives?
Is the moving company willing to
accommodate my schedule?
61
Measuring Service Quality
• Valarie Zeithaml and her colleagues developed a

survey instrument called SERVQUAL.
• SERVQUAL — A generic measurement tool that can
be applied across a broad spectrum of service
industries.
62
The SERVQUAL Scale
The SERVQUAL scale includes five dimensions:

tangibles, reliability, responsiveness,
assurance, and empathy. Within each
dimension, several items are measured. There
are many different formats in use, and we
show the most basic 21 items for ideal
perceptions below for a banking context. The
statements are accompanied by a seven-point
scale, ranging from “strongly disagree = 1” to
“strongly agree = 7.”
Source: Adapted from A. Parasuraman, Valarie A. Zeithaml, and Leonard Berry.

63
The SERVQUAL Scale
The firm’s performance is measured by

rewording the same items (e.g., for item 1
in the table below: “XYZ firm has modern-
looking equipment”). The difference
between the scores for each item,
dimension, and overall service quality is
computed and used as an indicator of a
firm’s level of service quality.

64
The SERVQUAL Scale
If measuring both ideal (or expected) and

actual performance perceptions is not possible
due to time constraints during the interview,
both measures can also be combined by using
the same 21 items (e.g., “modern looking
equipment”) and scale anchors “Lower than my
desired service level,” “The same as my desired
service level,” and “Higher than my desired
service level.”

65
The SERVQUAL Scale
Tangibles
• Excellent banks will have modern-looking equipment.
• The physical facilities at excellent banks will be
visually appealing.
• Employees at excellent banks will be neat in
appearance.
• Materials (e.g., brochures or statements) associated
with the service will be visually appealing in an
excellent bank.

66
The SERVQUAL Scale
Reliability
• When excellent banks promise to do something by a

certain time, they will do so.
• Excellent banks will perform the service right the first
time.
• Excellent banks will provide their services at the time
they promise to do so.
• Excellent banks will insist on error-free records.

67
The SERVQUAL Scale
Responsiveness
• Employees of excellent banks will tell customers

exactly when service will be performed.
• Employees of excellent banks will give prompt service
to customers.
• Employees of excellent banks will always be willing to
help customers.
• Employees of excellent banks will never be too busy to
respond to customer requests.

68
The SERVQUAL Scale
Assurance
• The behavior of employees of excellent banks will

instill confidence in customers.
• Customers of excellent banks will feel safe in their
transactions.
• Employees of excellent banks will be consistently
courteous with customers.
• Employees of excellent banks will have the knowledge
to answer customer questions.

69
The SERVQUAL Scale
Empathy
• Excellent banks will give customers individual

attention.
• Excellent banks will have operating hours convenient
to all their customers.
• Excellent banks will have employees who give
customers personal attention.
• The employees of excellent banks will understand the
specific needs of their customers.
• Excellent banks have your best interest at heart.
Source: Adapted from A. Parasuraman, Valarie A. Zeithaml, and Leonard Berry. 70

Customer Loyalty
• Loyalty is a customer’s willingness to continue
patronizing a firm over the long-term.
• It includes preference, liking, and future intentions.
• Loyalty is an important outcome of satisfied
customers who believe that the firm delivers great
service.
71
Customer Loyalty
The opposite of loyalty is

defection, which is used to
describe customers who
drop off a company's radar
screen and transfer their
loyalty to another supplier.
72
Customer Loyalty
• A rising defection rate indicate that something is
wrong with quality and may also be a leading
indicator signaling a fall in profits.
• The most important step toward building a loyal
customer base include:
– Delivering great service experiences that satisfy your
customers
– Build positive service quality perceptions
73
Conclusion
• The three-stages of service consumption are:
– pre-purchase
– service encounter
– post-encounter
• The three-stage model of service consumption helps
us:
– to understand how individuals recognize their needs
– search for alternative solutions
– address perceived risks
– choose a particular service
– use a particular service
– experience a particular service
– evaluate their service experience resulting in a customer
satisfaction outcome
74
Conclusion
• The various models we explored for each of the

stages are complementary and together provide a
rich and deep understanding of consumer behavior
in a services context.
• In all types of services, managing customer behavior
in the three stages of service consumption effectively
is central to creating satisfied customers who will be
willing to enter into long-term relationships with the
service provider.
• Gaining a better understanding of customer behavior
should lie at the heart of all services marketing
strategies.
75

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Services Marketing:

People, Technology, Strategy

Stages of Service Consumption Key Concepts

Service delivery by personnel or self- Theater as a metaphor

• Decision to buy or use a service is triggered by need

• Need arousal leads to attempts to find a solution.

Table 2.1 Modeling Consumer Choice – Susan Munro’s Multi-Attribute

Type of Risk Examples of Customer Concerns

Functional (unsatisfactory performance • Will this credit card be accepted

Financial (monetary loss, unexpected • Will I lose money if I make the

Type of Risk Examples of Customer Concerns

Physical (personal injury or damage to • Will there be complications or scars if I

Type of Risk Examples of Customer Concerns

Psychological (personal fears and • Can I be sure that the equipment at

Type of Risk Examples of Customer Concerns

• Asking knowledgeable employees about competing

• Encourage prospective customers to preview the service

• Have visible safety procedures that build confidence

Adequate Service Level

Predicted Service Level

[W]e could say that the perceived quality is realized at

• The servuction model (combining the terms

 Invisible components can be termed “back stage”

• Service delivery system:

• A role is defined as:

• A service script specifies the sequences of behavior

• Control is a major driving force of customer behavior

Control can be managed via

• Perceived control- largely compensatory additive,

• Involves consumers’ attitudinal and behavioral

• In the post-encounter stage:

• Satisfaction is a judgment following a series of

Where do service expectations in our satisfaction model

• During the decision-making process, customers

• If performance perceptions are worse than

• Customers will be satisfied as long as perceived

• Comparing performance to expectations works well

• Customers rely on their expectations to form their

• Firms have to understand how customers evaluate

Customer Positive affect

• Achieving a customer’s delight requires focusing on

• Once a customer is delighted, it has a strong impact

• Excellent service quality is a high standard of

Service quality: Refers to relatively stable

• Consumers’ repurchase intentions are influenced by

Figure 2.22 From attribute satisfaction to repeat purchase

Tangibles Appearance of physical Are the hotel’s facilities

Reliability Ability to perform the Does my lawyer call me

Assurance Trustworthiness, Does the hospital have a good

• Competence Possession of the skills Can the bank teller process my

• Courtesy Politeness, respect, Does the flight attendant have a

Empathy Approachability and How easy is it for me to talk to a

• Communication Listening to customers When I have a complaint, is the

• Understanding Making the effort to Does someone in the hotel recognize

• Valarie Zeithaml and her colleagues developed a

The SERVQUAL scale includes five dimensions:

Source: Adapted from A. Parasuraman, Valarie A. Zeithaml, and Leonard Berry.

The firm’s performance is measured by