Customer Decision Making

1.

2.

SM Lecture 2:
Understanding
Service Consumers
Lecturer: Makhsuma Abdullaeva
Contact email: [email protected]
Office hours: By appointment
Office:ATB203

3.

Customer Decision Making:
Three-Stage Model of Service
Consumption

4.

Prepurchase Stage: Overview
Prepurchase
Stage
Service
Encounter
Stage
• Customers seek solutions to aroused needs
• Needs may be triggered by people’s
unconscious minds, physical conditions,
external sources
• Customers search for information: alternatives
come from evoked set and consideration set.
• Evaluating a service may be difficult
• Uncertainty about outcomes increases
perceived risk
• Understanding customers’ service expectations
PostEncounter
Stage
• Components of customer expectations
• Making a service purchase decision

5.

Evaluating a Service May Be Difficult
Search attributes are tangible characteristics that customers can
evaluate before purchase
E.g.Style, color, texture, taste, sound (type of food, location, type of restaurant,
price)
Experience attributes cannot be evaluated before purchase—must
“experience” product to know it
Reliability, ease-of-use, customer support/ e.g. Vacations, sporting events,
medical procedures (Atmosphere in the restaurant, service provided by waiter,
food taste)
Credence attributes are product characteristics that customers find
impossible to evaluate confidently even after consumption
Quality of repair and maintenance work (E.g. hygiene conditions in the kitchen,
nutritional quality and freshness of ingredients used)

6.

Restaurant dining experience

7.

How Product Attributes Affect Ease of Evaluation
Most Goods
Easy
to evaluate Clothing
Most Services
Restaurant meals
Laptop repair
Furniture
Lawn fertilizer
Education
Automobile
Haircut
Legal services
Breakfast cereals
Rock concert
Complex surgery
High in search
attributes
High in experience
attributes
*NOTE: Difficulty of evaluation tends to decrease with broad exposure
to a service category and frequency of use of a specific supplier
Difficult
to evaluate*
High in credence
attributes
Source:
Adapted from Zeithaml

8.

Perceived Risks in Purchasing and Using Services
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

9.

Strategic Responses to Managing Customer
Perceptions of Risk
Offer performance warranties, guarantees to
protect against fears of monetary loss
For products where customers worry
about performance, sensory risks:
Offer previews, free trials (provides experience)
Advertising (helps to visualize)
For products where customers perceive
physical or psychological risks:
Institute visible safety procedures
Deliver automated messages about anticipated problems
Websites offering FAQs and more detailed background
Train staff members to be respectful and empathetic

10.

Understanding Customers’ 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 among differently
positioned service providers in the same
industry
Expectations change over time
Parents wish to participate in decisions relating to
their children’s medical treatment for heart problems
Media coverage, education, the Internet has made
this possible

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Factors Influencing Customer Expectations of Service
Explicit & Implicit
Personal Needs
Service Promises
Word-of-Mouth
Desired Service
Past Experience
Beliefs about
ZONE
Adequate Service Level:
Predicted Service Level:
OF
TOLERANCE
Service level that customer
believes firm will actually
deliver
Perceived Service
Alterations
Situational Factors
Wished-for level of service
quality that customer
believes can and should be
delivered
Minimum acceptable level of
service
What Is Possible
Adequate Service
Desired Service Level:
Predicted Service
Zone of Tolerance:
Range within which
customers are willing to
accept variations in service
delivery

12.

Service Encounter Stage: Overview
Prepurchase
Stage
Service encounters are
“Moments of truth”
Service encounters range
from high- to low-contact
Service Encounter
Stage
Understanding the
servuction system
Role and script theories
Post-Encounter
Stage
Theater as a metaphor for
service delivery: An
integrative perspective

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Service Encounters Range from
High-Contact to Low-Contact
• Internet Banking
• Telephone Banking
• Retail Banking

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High-Contact and Low-Contact Services
High-Contact Services
Customers visit service facility and remain throughout service
delivery
Active contact between customers and service personnel
Includes most people-processing services
Low-Contact Services
Little or no physical contact with service personnel
Contact usually at arm’s length through electronic or physical
distribution channels
New technologies (e.g. the Web) help reduce contact levels
Medium-Contact Services Lie in between These Two

15.

The Servuction System:
Service Production and Delivery
Technical core (front stage and
backstage)
Where inputs are processed
and service elements created
Includes facilities, equipment,
and personnel
Service Delivery system (front
stage)
Where “final assembly” of
service elements takes place
and service is delivered to
customers
Includes customer
interactions with operations
and other customers

16.

Post-Encounter Stage: Overview
Prepurchase
Stage
Evaluation of
service
performance
The Expectancy –
Service
Encounter Stage
Disconfirmation
Model of
Satisfaction
Measuring Service
qualiy
Post-Encounter
Stage
Future intentions

17.

Customer Satisfaction
Satisfaction defined as attitude-like judgment following a service
purchase or series of service interactions
Customers have expectations prior to consumption, observe service
performance, compare it to expectations
Satisfaction judgments are based on this comparison
Positive disconfirmation if better than expected
Confirmation if same as expected
Negative disconfirmation if worse than expected
Satisfaction reflects perceived service quality, price/quality
tradeoffs, personal and situational factors

18.

Customer Delight: Going Beyond Satisfaction
Research shows that delight is a
function of three components:
Unexpectedly high levels of performance
Arousal (e.g., surprise, excitement)
Positive affect (e.g., pleasure, joy, or
happiness)
Is it possible for customers to be
delighted by very mundane
services?
Strategic links exist between
customer satisfaction and corporate
performance.
Getting feedback during service
delivery help to boost customer
loyalty
Progressive Insurance seeks to
delight customers through
exceptional customer service

19.

Service Quality
• Excellent service quality means that a firm consistently meets or
exceeds customer expectations
• In contrast to customer satisfaction (which is transaction-specific
and refers to a single service experience), service quality is a
consumer’s belief and attitude about the general performance of a
firm.
Tangibles: Appearance of physical elements
Dimensions of
service quality
developed by
Parasuraman et al.
Reliability: Dependable and accurate performance
Responsiveness: Promptness; helpfulness
Assurance: Competence, courtesy, credibility, security
Empathy: Easy access, good communication,
understanding of customer

20.

Capturing the Customer’s Perspective of
Service Quality: SERVQUAL
Survey research instrument based on premise that customers
evaluate firm’s service quality by comparing
Their perceptions of service actually received
Their prior expectations of companies in a particular industry
Poor quality
Perceived performance ratings < expectations
Good quality
Perceived performance ratings > expectations
Developed primarily in context of face-to-face encounters
Scale contains 22 items reflecting five dimensions of service quality

21.

E
Sample
of questionnaire based on SERVQUAL model

22.

Lecture 2
Part.2.
Positioning Services in
Competitive Markets

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24.

Important vs Determinant Service Attributes
Consumers usually choose between alternative service offerings based on
perceived differences between them
Attributes that distinguish competing services from one another are not
necessarily the most important ones
Determinant attributes determine buyers’ choices between competing
alternatives
Service characteristics that are important to purchasers
Customers see significant differences between competing alternatives on
these attributes
E.g. Convenience of departure & arrival times, quality of in-flight service,
ease of making reservations, availability of frequent flyer miles and related
loyalty privileges – determinant characteristics for business travelers when
selecting an airline

25.

Segmentation based on Service levels in
Different Industries
Industry
Tiers
Key Service Attributes and Physical
Elements Used in Tiering
Lodging
Star or diamond
ratings (5 to 1)
Architecture; landscaping; room size;
furnishings and décor; restaurant facilities
and menus; room service hours; array of
services and physical amenities; staffing
levels; caliber and attitudes of employees
Airline
Classes
(intercontinental):
first, business,
premium economy,
economy
Class of vehicle
Seat pitch; seat width and reclining
capability; meal and beverage service;
staffing ratios; check-in speed; departure
and arrival lounges; baggage retrieval
speed
Vehicle size (from subcompact to full
size); degree of luxury; special vehicle
types (minivan, SUV, convertible)
Car Rental

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Capsule Hotels

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Targeting Service Markets

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29.

Four Principles of Positioning Strategy
Must establish position for firm or product in minds of
customers
Position should be distinctive, providing one simple, consistent
message
Position must set firm/product apart from competitors
A company cannot be all things to all people—must focus its
efforts

30.

Recommended reading
1. Lovelock, C.H., Wirtz, J., Keh, H.T. and Lu, X., 2012. Services marketing
in Asia: managing people, technology, and strategy. Singapore: Prentice Hall.
Chapter 2, 3
2. Palmer, A. (2011) Principles of Services Marketing. (7thed.) Berkshire,
England:
McGraw-Hill Education. Chapter 6.
3. Zeithaml, V.A., Bitner, M.J. and Gremler, D.D., 2013.
Services marketing: Integrating customer focus across the firm, 6th ed., Chapter
2,3.