Services Marketing

Chapter 2:
Consumer Behavior
in a Services Context

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 1
 Services Marketing
 The primary objectives of services producers and marketers are
identical to those of all marketers: to develop and provide
offerings that satisfy consumer needs and expectations, thereby
ensuring their own economic survival.

 To achieve these objectives, service providers need to

understand how consumers choose, experience and evaluate
their service offerings.

 However, most of what is known about consumer evaluation

processes pertains specifically to goods.

 However, services‟ characteristics result in some differences in

consumer evaluation processes compared with those used in
assessing goods.
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 2
 Overview Of Chapter 2
Services Marketing

Customer Decision Making: Pre-purchase Stage

The Three-Stage Model of
Service Consumption

Service Encounter Stage

Post-encounter Stage

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 3
 Services Marketing

Pre-purchase Stage

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 4
 Pre-purchase Stage - Overview
Services Marketing

Pre-purchase Stage  Customers seek solutions to

aroused needs
 Evaluating a service may be
difficult
 Uncertainty about outcomes
Increases perceived risk
Service Encounter  What risk reduction strategies
Stage can service suppliers develop?
 Understanding customers‟
service expectations
 Components of customer
expectations
Post-encounter Stage  Making a service purchase
decision

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 5
 Evaluating Alternatives –
Service Attributes
Services Marketing

 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

 The consumer will not know how much s/he 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

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 6
 How Product Attributes Affect
Ease of Evaluation
Services Marketing
Most Goods Most Services

Easy Difficult
To Evaluate To evaluate

Clothing Restaurant Meals Computer Repair

Chair Lawn Fertilizer Education

Motor Vehicle Haircut Legal Services

Foods Entertainment Complex Surgery

High In High In High In

Search Experience Credence
Attributes Attributes Attributes

Source: Adapted from Valarie A. Zeithaml , “How Consumer Evaluation Processes Differ Between Goods & Services,” in J.H. Donelly and W. R. George, Marketing of
Services (Chicago: American Marketing Association, 1981)
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 7
 Perceived Risks of Purchasing and
Using Services
Services Marketing

 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

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 8
 How Might Consumers Handle
Perceived Risk?
Services Marketing

 Seek information from respected personal sources

 Compare service offerings and search for independent

reviews and ratings via the Internet

 Relying on a firm with good reputation

 Looking for guarantees and warranties

 Visiting service facilities or going for trials before purchase

and examining tangible cues or other physical evidence

(example, DHL, gyms and health clubs)

 Asking knowledgeable employees about competing services

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 9
 Understanding Customers’
Service Expectations
Services Marketing

 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

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 10
 Factors Influencing Customer
Expectations of Service
Services Marketing

Source: Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, “The Nature and Determinants of Customer Expectations of
Service,” Journal of the Academy of Marketing Science 21, no. 1 (1993): 1-12
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 11
 Components of Customer
Expectations
Services Marketing

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
• Acceptable range of variations in service delivery

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 12
 Discussion questions
Services Marketing

 1 What does a service marketer do if customer expectations are

„unrealistic‟?

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 Discussion questions
Services Marketing

 2 How does a company exceed customer service expectations?

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 Discussion questions
Services Marketing

 3 Should a company try to delight the customer?

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 Customer Delight:
Going Beyond Satisfaction
Services Marketing

 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)

 Strategic links exist between customer satisfaction and

corporate performance
 By creating more value for customers (increased satisfaction), the
firm creates more value for the owners

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 16
 Services Marketing

 4 Do customer service expectations continually escalate?

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 Services Marketing

 5 How does a service company stay ahead of competition in

meeting customer expectations?

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 Purchase Decision
Services Marketing

 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

 Trade-offs are often involved

 After making a decision, the consumer moves into the

service encounter stage

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 19
 Services Marketing

Service Encounter Stage

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 Service Encounter Stage - Overview
Services Marketing

Pre-purchase Stage ● Service encounters range from high-

to low-contact

● Understanding the servuction

system

Service Encounter ● Theater as a metaphor for service

Stage delivery: An integrative perspective

 Service facilities

 Personnel

Post-encounter Stage  Role and script theories

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 21
 Service Encounter Stage
Services Marketing

 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 (e.g., a phone call or
visit to the hospital)

 Models and frameworks:

1. “Moments of Truth” – importance of managing touchpoints
2. High/low contact model – extent and nature of contact points
3. Servuction model – variations of interactions
4. Theater metaphor – “staging” service performances

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 22
 Moments of Truth
Services Marketing

“[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

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 23
 Services Marketing

 „moments of truth‟ sometimes called „real-time marketing‟

where promises are kept or broken and where the proverbial
„rubber meets the road‟. It is from these service encounters that
customers build their perceptions.

 Eg. service encounters in a hotel customer experiences are:

checking into the hotel, being taken to a room by a hotel porter,
eating a restaurant meal, requesting a wake-up call and
checking out

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 24
 Services Marketing

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 25
 Services Marketing

 It is in these encounters that customers receive a snapshot of

the organization‟s service quality, and each encounter
contributes to the customer‟s overall satisfaction and willingness
to do business with the organization again.

 From the organization‟s point of view, each encounter thus

presents an opportunity to prove its potential as a quality service
provider and to increase customer loyalty.

 Some services have few service encounters, and others have

many.

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 26
 Services Marketing
 The Disney Corporation estimates that each of its amusement
park customers experiences about 74 service encounters and
that a negative experience in any one of them can lead to a
negative overall evaluation. Mistakes or problems that occur in
the early levels of the service cascade may be particularly
critical.

 Marriott Hotels learned this through their extensive customer

research to determine what service elements contribute most to
customer loyalty. They found that four of the top five factors
came into play in the first ten minutes of the guest‟s stay

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 27
 Services Marketing

 In a hospital context, a study of patients revealed that

encounters with nursing staff were more important in predicting
satisfaction than were encounters with catering or administrative
staff

 In addition to these key encounters, there are some momentous

encounters that, like the proverbial „one bad apple‟, simply ruin
the rest

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 28
 Services Marketing

 Although early events in the encounter cascade are likely to be

especially important, any encounter can potentially be critical in
determining customer satisfaction and loyalty.

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 29
 Services Marketing

 A service encounter occurs every time a customer interacts with

the service organization.

 There are three general types of service encounters:

 remote encounters
 telephone encounters
 face-to-face encounters

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 30
 Services Marketing

 remote encounters: can occur without any direct human contact

such as when a customer interacts with a bank through the ATM
system, with a car park management company through an
automated ticketing machine, with a retailer through its Internet
website or with a mail-order service through automated
touchtone telephone ordering. Remote encounters also occur
when the firm sends its billing statements or communicates
other types of information to customers by mail.

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 Services Marketing

 telephone encounters: such as insurance companies, utilities

and telecommunications). Many firms (whether goods
manufacturers or service businesses) rely on telephone
encounters to some extent for customer service, general inquiry
or order-taking functions. The judgement of quality in telephone
encounters is different from remote encounters, because there is
greater potential variability in the interaction. Tone of voice,
employee knowledge and effectiveness/efficiency in handling
customer issues become important criteria for judging quality in
these encounters.

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 Services Marketing

 face-to-face encounters: Determining and understanding service

quality issues in face-to-face contexts is the most complex of all.
Both verbal and nonverbal behaviours are important
determinants of quality, as are tangible cues such as employee
dress and other symbols of service (equipment, informational
brochures, physical setting). In face-to-face encounters, the
customer also plays a role in creating quality service for him or
herself through his or her own behavior during the interaction.

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 Services Marketing

 A customer may experience any of these types of encounters, or

a combination of all three, in his or her relations with a service
firm.

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 34
 Services Marketing

 Describe an „encounter cascade‟ for a commercial flight.

 In your opinion, what are the most important encounters in this

cascade for determining your overall impression of the quality of
the airline?

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 35
 Customer perceptions

Services Marketing

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 36
 Service Encounters Range from
High-Contact to Low-Contact
Services Marketing

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 37
 Distinctions between High-Contact
and Low-Contact Services
Services Marketing

 High-Contact Services  Low-Contact Services

 Customers visit service  Little or no physical contact
facility and remain  Contact usually at arm’s
throughout service delivery length through electronic or
 Active contact physical distribution
 Includes most people- channels
processing services  Facilitated by new
technologies

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 38
 The Servuction System
Services Marketing

Source: Adapted and expanded from an original concept by Eric Langeard and Pierre Eiglier

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 39
 The Servuction System:
Service Production and Delivery
Services Marketing

 Servuction System: visible front stage and invisible

backstage

 Service Operations
 Technical core where inputs are processed and service elements
created
 Contact people
 Inanimate environment

 Service Delivery
 Where “final assembly” of service elements takes place and service is
delivered
 Includes customer interactions with operations and other customers

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 40
 Theater as a Metaphor for
Service Delivery
Services Marketing

“All the world‟s a stage and all the men

and women merely players. They have
their exits and their entrances and each
man in his time plays many parts.”

William Shakespeare
As You Like It

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 41
 Theatrical Metaphor:
an Integrative Perspective
Services Marketing
Good metaphor as service delivery is a series of events that
customers experience as a performance

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

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 42
 Implications of Customer
Participation in Service Delivery
Services Marketing

 Greater need for information/training

 Help customers to perform well, get desired results

 Customers should be given a realistic service preview in

advance of service delivery
 This allows them to have a clear idea of their expected role and
their script in this whole experience
 Manages expectations and emotions

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 Perceived control theory
Services Marketing

 The Perceived Control Theory holds that customers have a need

for control during the service encounter. The higher the level of
perceived control during a service situation, the higher will be
their level of satisfaction.

 Eg. Never let the customer wait without indicating how long the
wait is likely to be

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 Services Marketing

Post-Encounter Stage

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 45
 Post-purchase Stage - Overview
Services Marketing

Pre-purchase Stage

● Evaluation of service
performance
Service Encounter
Stage ● Future intentions

Post-encounter Stage

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 46
 Customer Satisfaction with
Service Experience
Services Marketing

 Satisfaction: judgment following a service purchase or

series of service interactions
 Whereby customers have expectations prior to consumption,
observe service performance, compare it to expectations

 Satisfaction judgments are based on this comparison

 Positive disconfirmation (better)
 Confirmation (same)
 Negative disconfirmation (worse)

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 47
 Summary
Services Marketing

• Key Steps • Customers face perceived risks

1. Need arousal which marketers should reduce
Pre-purchase 2. Information search with some strategic responses
Stage 3. Evaluation of alternative
solutions • Zone of tolerance: Adequate to
4. Purchase decision desired. Dissatisfaction if service
level falls below adequate level.

• Moments of Truth: importance of • Servuction model – variations of

Service Encounter effectively managing touchpoints interactions
Stage
• High/low contact service model – • Theater metaphor – “staging”
understanding the extent and service performances
nature of contact points

• In evaluating service performance, • Unexpectedly high levels of

Post-encounter customers can have expectations performance, arousal, and
positively disconfirmed, confirmed, positive affect are likely to lead
Stage or negatively disconfirmed to delight

Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 2 – Page 48