Noida Institute of Engineering and Technology, Greater Noida
Understanding Consumer Behavior and Service Design
Unit: II
AMBAMK0413
Dr. Ajay Gangele
MARKETING OF SERVICES
School of Management
MBA
IV SEM
Ajay Gangele AMBAMK0413 Unit-2
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04/09/2024
Topic Objective /Topic Outcome
Unit 2 : Consumer Behavior & Service Design
Topic 1:
To know about consumer behavior
To understand consumer decision
making process
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Consumer Behavior (CO2)
• Consumer behavior Consumer behavior can be defined as “the decision
process and physical activity engaged in evaluating, acquiring, using or
disposing of goods and services.”
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Understanding Consumer Behavior(CO2)
The study of Consumer Behavior helps in understanding how
individuals make decisions to spend their available resources like time,
money, and effort while purchasing goods and services. It is a subject
that explains the basic questions that a normal consumer faces − what
to buy, why to buy, when to buy, where to buy from, how often to buy,
and how they use it.
Marketing strategies and tactics are normally based on explicit and
implicit beliefs about consumer behavior. Decisions based on explicit
assumptions and sound theory and research are more likely to be
successful than the decisions based solely on implicit intuition.
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Consumer Decision making Process (CO2)
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Consumer behavior in Services (CO2)
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Search, Experience, Credence (SEC) classification of
goods and services(CO2)
Search Qualities
Attributes a consumer can determine prior to purchase of a product. Eg
color, price, fit, feel Eg jewelry, cars clothing
Experience Qualities
Attributes a consumer can determine after purchase (or during
consumption) of a product eg taste wear ability Eg vacations and
restaurant meals
Credence Qualities
Characteristics that may be impossible to evaluate even after purchase
and consumption Eg surgeries, legal advice
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Continuum of Evaluation for Different Types of
Products (CO2)
Most Most
Goods Services
Easy to evaluate Difficult to evaluate
High in search High in experience High in credence
qualities qualities qualities
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Daily Quiz
1. List products of search qualities.
2. What are credence qualities?
3. Explain Experience qualities?
4. List down 7 O’s framework of consumer
behavior?
5. Explain Consumer Buying behavior process.
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Topic Objective /Topic Outcome
Unit 2 : Consumer Behavior & Service Design
Topic 2:
• Perceived Risk in Services
• Understanding Customers service
expectations
• Zone of tolerance
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Prerequisite and Recap
• Meaning of consumer behavior
• Factors affecting consumer behavior
• Search, Experience, Credence (SEC) classification of goods and
services
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Topic Objectives
To know Perceived risk of customers
To understand customer service expectations
To learn levels of customer expectation.
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Perceived Risk in Services (CO2)
• Functional - Perceived risks can include the fear and or doubt a consumer
has that the product they are buying will fail to perform its intended
function. The consumer might be afraid that if they buy a car, the engine or
other parts may malfunction.
• Social - If a person is of a high or wealthy social class, they want to buy
products that their friends would also buy. For example, they may decide
not to buy a cheap car for fear that their friends would disapprove or that
it might impact their social status among their peers.
• Financial -For example, buying a car could leave them with little to no
money or with loans that will affect their income for the next few months
or even years.
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Perceived Risk in Services (CO2)
• Physical - An item that could cause bodily harm to a person or their family
causes perceived risk. Buying a gun, for instance. The gun could
accidentally malfunction and cause an accident. A book, on the other
hand, can rarely cause any physical harm.
• Time - If a product breaks or fails a few days after purchase and needs
replacement, this is a time risk. You’ll need to go back to the store and
wait in line to have it replaced or repaired, thus wasting time.
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Ways to handle perceived risk (CO2)
• Security/Warranty: The period of the warranty will determine how
uncertain the buyer will be. A warranty makes them more trusting because
they know if the product breaks down, they can get a replacement. The
warrant should cover a long duration to boost the buyer’s confidence in the
product.
• Hidden Extra Costs: If there are hidden costs to the selling price, there is
cause for alarm. These costs could be just a scam to rip a couple more
dollars off the buyer.
• Reputation/Brand Name: When purchasing a product like a car, one wants
to get the best available product. He or she can ask around or conduct
research on the particular car he or she wants before deciding on which
manufacturer to go for. This way he or she can identify and cut risk.
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Understanding Customers service expectations (CO2)
Basic Customer Service Expectations
• To feel heard, appreciated, and valued.
• For the process to feel easy and without friction.
• To see action being taken regarding the request or issue.
• For an action to be relatively quick.
• For all communication to happen on a channel that is convenient for
them.
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Possible Levels of Customer Expectations (CO2)
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Components of service expectations (CO2)
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Desired and adequate service levels (CO2)
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Factors influencing Customers expectation about service
(CO2)
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Zone of tolerance (CO2)
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Zone of tolerance (CO2)
• Size of ZOT will be large or small depending upon factors such as
competition, price, importance of specific service attributes which can
influence the level of adequate service Eg waiting time at checkout at
grocery store 9 eg 2-3 m vs 15 mins)
• Different customers possess diff zones of tolerance. Eg customers who
work/vs at home for repairing
• Also varies for service dimensions: less tolerant for unreliable service
than for service deficiencies
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Sources of adequate service expectation (CO2)
Temporary service Perceived service Self perceived service
intensifiers alternatives role
• short term • Are other • Customer
individual factors providers from perceptions of the
that make customer whom the degree to which
more aware for customer can obtain customers exert an
service need. service. Eg influence on the level of
• Eg personal emergency salons, airlinbe service they receive
situations- accidents customer from a • Eg meal ordering
• Problems with smaller town in an restaurant
initial service also • Marketers should
leads to heightened fully understand the
expectations eg auto complete set of options
repair that customers view as
perceived alternatives.
Eg small town
customers view rail as
an another option
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Sources of adequate service
Sources of adequate service expectation(CO2)
expectation
Situational factors Predicted service
• Service performance • Level of service that
conditions that customers view customers believe they are
as beyond the control of likely to get
service provider. • Its an estimate or
• Eg natural disasters calculation of service that a
Hurricane Sandy customer will receive in an
individual transaction rather
than in an overall relationship
with a service provider
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Factor influences desired and predicted service expectations
(CO2)
Explicit service promise Implicit service promise Word of mouth communication
• Are personal/non personal • are service related cues • personal/non
statements about service other than explicit promises personal statements
made by the organization to that lead to inferences about made by customers
the customers what the service should and other than the
• Personal- salespeople, will be like organization
service personnel, non • • Carry more weight –
Quality cues are
personal: webpage, advt, dominated by price and unbiased
brochures etc other tangible components. • imp for services which are
• Completely within the • Higher the price, more difficult to
control of the service impressive the tangibles, more purchase/evaluate
provider the customer will expect from
• Sometimes companies the service
deliberately overpromise by
stating best estimates about
service delivery in the future
• Direct effect on service
expectation. Eg total solution,
24 hrs service
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Daily Quiz
1. Explain Zone of tolerance.
2. Differentiate guarantee and warrantee
3. Explain perceived risk
4. Differentiate explicit and implicit service
promises
5. What are temporary service intensifiers?
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Topic Objective /Topic Outcome
Unit 2 : Consumer Behavior & Service Design
Topic 3:
• Customer Decision Making
• Service Marketing system for High and
low contact services
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Prerequisite and Recap
Perceived risk of customers
Understand customer service expectations
To learn levels of customer expectation.
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Topic Objectives
To understand three stage model of consumer decision making
process
To learn about Levels of customer contact in service organization
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Customer Decision Making (CO2)
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The Pre Purchase stage (CO2)
• Pre Purchase stage
• Need Awareness
– Uncurious minds (e.g personal identity and aspiration)
– Physical conditions (e.g. if u r hunger drove o to Burger stall)
– External Sources (e.g. a service firm‟s marketing activities)
• Information Search
• Evaluation of alternatives
– Service attributes
– Perceived Risk
– Service expectations
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The service encounter stage (CO2)
Service encounters are “ Moments of Truth”
• Service encounters range from High contact to Low contact
• The Servuction system
• Theater as Metaphor for services Delivery: An integrated perspective
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Post Purchase stage(CO2)
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•Service Encounters as “Moments of Truth”(CO2)
A moment of truth is usually defined as an instance wherein the
customer and the organization come into contact with one
another in a manner that gives the customer an opportunity to
either form or change an impression about the firm.
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Service Encounters- high contact services (CO2)
• Using this service entails interactions through service delivery
between customers and the organization.
• The customers exposure to service provider takes a physical and
tangible nature.
• When customers visit the facility where service is being delivered , they
enter a “service” factory. Eg hotel- is a lodging factory, hospital is a health
treatment factory.
• These industries focus on processing people – challenge is to make
experience appealing one for customers in terms of service environment
and their interaction with service personnel
• During course of service delivery customers are exposed to many
physical clues abt the org- interior/exterior of building, equipment and
furnishings, appearance and behavior of service personnel and even
other customers
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Low contact services (CO2)
• Involve little physical contact between customers and providers.
• Instead the contact takes place through physical distribution
channels/electronically
• Many high contact services are being converted to low contact services
as customers undertake more self service- conduct their
insurance/banking transactions by mail, telephone,internet and do
purchasing online
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Levels of customer contact in service organizations (CO2)
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Service Delivery (CO2)
• Where final assembly of elements takes place and product is delivered to
customers often in presence of other customers
• Includes the visible elements of the service (personnel, buildings,
equipment) but also exposure to other customers
• Customers of low contact services – normally never see the factory- will
talk to rep. Make judgments on ease of tel access, followed by voice and
responsiveness of tel based customer service rep
• If service is delivered electronically such as self service machines,
IVR, web etc- firms compensate by adding color, music, drama
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Service Marketing system for High and low contact
services(CO2)
• The visible part of service operations ,service delivery and other
contact points – Service marketing system
• Represents all diff ways customer may learn and encounter
about the organization in questions
• Service is experiential, each of these many elements offers clues
about the nature and quality of service product
• Inconsistency amongst the various elements – weakens the credibility in
the customers eyes
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Service Marketing system for High contact services (CO2)
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Service Marketing system for LOW contact services(CO2)
OTHER CONTACT POINTS
SERVICE SERVICE DELIVERY SYSTEM
OPERATIONS
SYSTEM
MAIL ADVT
TECHNICAL SELF SERVICE THE MKT RESEARCH SURVEYS
CORE EQUIPMENT CUSTO BILLING/STATEMENTS
PHONE,FAX,W MER RANDOME EXPOSURE TO
EBSITE FACILITIES/VEHICLES
WORD OF MOUTH
BACK STAGE
INVISIBLE
FRONT STAGE
VISIBLE
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Daily Quiz
1. Explain Service Marketing system for LOW contact services
2. What is technical core?
3. Give examples of low contact services?
4. What are moment of truths?
5. List any example of company providing service differentiation?
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Topic Objective /Topic Outcome
Unit 2 : Consumer Behavior & Service Design
Topic 4:
• Role and script theory
• Demand and Capacity Management
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Prerequisite and Recap
Three stage model of consumer decision making process
High level service contact
Low level service contact
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Topic Objectives
To understand role theory
To learn how to make script of a service
To know the concept of demand and capacity management
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Role and script theories (CO2)
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Scripts (CO2)
• Specifies the sequences of behaviour that employees and customers are
expected to learn and follow during service delivery.
• Employees receive formal training.
• Customers learn scripts through experience, education and communication.
• More experience- more familiarity with the script.
• Unwillingness to learn a new script may be a barrier to switch to
competition.
• Any deviation- employee and customer dissatisfaction.
• If co decides to change service script (technology), customers and
employees should be educated about the new approach and benefits it
provides.
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Roles (CO2)
• 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
• As combination of social cues or expectations that guide behavior in
specific setting or context
• In service encounters both employees and customers have roles to play
• The satisfaction or productivity depends on extent to which each person
acts out his/her prescribed role during a service encounter
• Employees must perform their roles with customer expectations or else
dissatisfy/lose customers
• Customers must also play by rules or risk problems to
firm/employees and other customers
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Script for a dental exam (CO2)
Patient Receptionist Dentist
• 1. Phone for • 2. Confirms needs and sets • 5. Review note on patient
appointment date • 7. Greet patient, direct to
• 3. Arrive at dental office • 4. Greet patient, verify treatment room
• 6. Sit in waiting room purpose, direct to waiting • 9. Get history and issues
• 8. Enter room, sit in chair room, notify dentist of • 11. Place covers
arrival • 12. Lower chair, put
• 10. Respond to questions
• 23. Greet patient, confirm
• 15. Rinse mouth protective gear
treatment • 13. Inspect teeth,
• 20. Rise from chair received, present bill
• 22. Leave room ask
• 25. Give receipt
• 24. Pay bill question
• [Link] patient and say • 14. Complete cleaning
• 27 . Leave dental office goodbye process
• 16. Dispose protective
gear
• 17. Complete notes write
Rx and return file to
receptionist
• 18. Remove cover
• 19. offer advice on dental
care
• 21. Thanks and goodbye
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Customer participation in service delivery (CO2)
• More work customer does as a co producer in service delivery-
greater info he requires to perform the task correctly
• Advertisement for new services, brochures,websites all provide
info. Eg phone besides an ATM
• Customers look towards employees and other asisstants for help and
are frustrated if they cant find it
• Some service providers give a realistic service preview- video
experience
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The post encounter stage (CO2)
• Customers have certain service standards in mind before consumption
(their expectations), observe service performance, compare it to
standards, and then form satisfaction judgments based on this
comparison
• Negative disconfirmation- if service is worse than expected,
positive disconfirmation- if it is better than expected and simple
confirmation if it is as expected
• If substantial positive disconfirmation, plus an element of pleasure
and surprise- customer is likely to be delighted
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Feedback during service delivery (CO2)
• Service personnel can be trained to be more observant so that they can
identify customers who appear having difficulties ,look frustrated or ill at
ease if they need assistance .
• If experience shows that customers are perpetually discomforted by
a particular aspect of service encounter- indicates a need for redesign
and improvement
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Demand & Capacity management (CO2)
Since the services can’t be stored as an inventory for future use, and since
services are perishable, hence the demand becomes critical.
Once the demand is not catered, it’s lost for ever.
The best a marketer can do is to minimize to some extent by careful planning
and adopting some strategies.
The following are the factors which affect demand fluctuation
Expansion or Boom
Contraction and Recession
Technological Developments
Demographics
Natural and Other Disasters
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DEMAND / CAPACITY VARIATIONS (CO2)
At any given moment, a fixed-capacity service may face one of four
conditions : 1. Excess demand—the level of demand exceeds maximum
available capacity, with the result that some customers are denied
service and business is lost.
2. Demand exceeds optimum capacity—no one is actually turned away,
but conditions are crowded and all customers are likely to perceive a
decline in service quality.
3. Demand and supply are well balanced at the level of optimum
capacity—staff and facilities are busy without being overtaxed, and
customers receive good service without delays.
4. Excess capacity—demand is below optimum capacity and productive
resources are underutilized, resulting in low productivity. In some
instances, this poses a risk that customers may find the experience
disappointing or have doubts about the viability of the service.
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Demand & Capacity management (CO2)
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Random Demand Variations(CO2)
Some other service demands are not easily predictable, or they occur
randomly, even if the cause can be ascertained.
Say health care or insurance when a flood or earthquake occurs.
Demand Patterns by Market Segments
Another more specialized database keeping is done for different
demand pattern of customers of different segments. E.g., for a group
of family the bonus time is holiday time, whereas for another group
this is insurance premium pay time.
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STRATEGIES TO MATCH DEMAND AND CAPACITY (CO2)
• The most important job of the service marketer is balancing / matching
the demand and capacity. In a particular demand cycle there should be
minimum occasions for demand being more, or the idle capacity, with
the least extra cost. This can be done as already given and by shifting
demand :Demand Shift :
• There are some services where the demand can be shifted, that means
the timings can be changed without much discomfort, like use of
telephone or internet etc. The prices are more during the peak period
and less in slack period. But there is a limitation, it is not practical in a
restaurant, if there is no additional capacity, then the firm looses
customer who go to another.
Demand Shift :
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Demand Shift (CO2)
There are some other methods :
(1) - Communicating with the customers : By the effective communication, the
service marketer can explain the practical situation to the potential customers,
so that they can shift their requirement timings. Again this is applicable to a
small portion of cases, where choices are available. Some customers are by
nature rush avoiders, so to some extent the nature takes care of the shifting.
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Demand Shift (CO2)
(2)- Varying the original services offer : Bigger service providers offering
smaller services during low demand period. Like marriage caterers offering
smaller parties of birthday, business gatherings etc.
(3) - Altering the service delivery timings : Earlier banks used to work from 10
am to 2 pm. Now the scheduled banks have working hours 10 to 3.30, and
the new generation private banks have 9.30 to 4.30 timings, and some even
are open on Sundays. This is apart from the 24-hr ATMs.
(4) - Price differentiation : This concept works on the basis of the economy of
supply and demand. Having a differential pricing as mentioned earlier, say for
bars daytime is low priced. But here there is a limitation – it doesn’t apply to
many services or many customers. Also there is a danger of attracting another
segment or dissatisfying the target segment. The marketer has to be very
particular about the price sensitivity of the customers.
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Align Capacity with Demand Fluctuations (CO2)
Another set of options involves tailoring the overall level of capacity to
match variations in demand.
• This strategy is known as ―Chase Demand Strategy‖.
Align Capacity with Demand Fluctuations :
1. Schedule downtime during periods of low demand. To ensure that
100 percent of capacity is available during peak periods, repairs
and renovations should be conducted when demand is expected
to be low. Employee holidays should also be taken during such
periods.
2. Use part-time employees. Many organizations hire extra workers
during their busiest periods. Examples include postal workers and
retail store clerks during the pre-Christmas season, extra staff in
tax preparation firms at the end of the financial year, and
additional hotel employees during holiday periods and major
conventions.
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Align Capacity with Demand Fluctuations (CO2)
3. Rent or share extra facilities and equipment. To limit investment in fixed
assets, a service business may be able to rent extra space or machines at
peak times. Firms with complementary demand patterns may enter into
formal sharing agreements.
4. Cross-train employees. Even when the service delivery system appears to
be operating at full capacity, certain physical elements—and their
attendant employees - may be under- utilized. If employees can be cross-
trained to perform a variety of tasks, they can be shifted to bottleneck
points as needed to help increase total system capacity.
5. Modify or move Facilities and Equipment. Sometimes it is possible to
adjust, move, or creatively modify existing capacity to meet demand
fluctuations. Like Hotel conference halls may be partitioned into two or
three halls when demand is more.
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Strategies for Shifting Demand to Match Capacity (CO2)
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Strategies for Flexing Capacities to Match Demand (CO2)
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