Professional Documents
Culture Documents
Dedications
About the Authors
About the Contributors of the Cases
Preface
Acknowledgements
v
vi
xi
xxiii
xxxiii
Part I:
Chapter 1
Chapter 2
Chapter 3
4
32
56
Part II:
82
Chapter 4
Chapter 6
Chapter 7
Part III:
196
Chapter 8
Chapter 9
Chapter 10
Chapter 11
198
228
252
276
Part IV:
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 5
i-xxxii_ESM_SL.indd 1
84
110
134
168
306
338
365
408
Part V: Cases
430
Glossary
Credits
Name Index
Subject Index
541
549
553
561
8/15/08 4:45:29 PM
CHAPTER
consumer behavior in a
SERVICES
CONTEXT
LEARNING OBJECTIVES
By the end of this chapter, students should be able to:
LO 1 Understand the three-stage
OPENING VIGNETTE1
SUSAN LEE, SERVICE CUSTOMER
Figure 2.1 New York University is
the gateway to bigger and better
things for students like Susan Lee.
32
usan Lee, a nal-year business student, had breakfast and then logged onto the
Internet to check the local weather forecast. It predicted rain, so she grabbed an
umbrella before leaving the apartment. On the way to the bus stop, she dropped
a letter in a mailbox. The bus arrived on schedule. It was the usual driver, who
recognized her and gave a cheerful greeting as she showed her commuter pass.
PART I
Arriving at her destination, Susan left the bus and walked to the College of Business.
Joining a crowd of other students, she found a seat in the large lecture theater
where her marketing class was held. The professor was a very dynamic individual
who believed in having an active dialog with the students. Susan made several
contributions to the discussion and felt that she learned a lot from listening to
others analyses and opinions.
Susan and her friends had lunch at the recently renovated Student Union. It was a
well-lit and colorfully decorated new food court, featuring a variety of small kiosks.
There were both local suppliers and brand-name fast food chains, which offered
choices of sandwiches, as well as health foods and a variety of desserts. Although
she had wanted a sandwich, there was a long queue of customers at the sandwich
shop. Thus, Susan joined her friends at Burger King and then splurged on a caf
latte from the adjacent Have-a-Java coffee stand. The food court was unusually
crowded that day, perhaps because of the rain pouring down outside. When they
nally found a table, they had to clear away the dirty trays. Lazy slobs! commented
her friend Mark, referring to the previous customers.
...Customers
today are
subjected to
many service
choices...
After lunch, Susan stopped at the cash machine, inserted her bank card, and
withdrew some money. When she remembered that she had a job interview at
the end of the week, she telephoned her hairdresser and counted herself lucky to
be able to make an appointment for later. This was because of a cancellation by
another client. When she left the Student Union, it was still raining.
Susan looked forward to her visit to the hairdresser. The store, which had a bright, trendy
dcor, was staffed by friendly hairdressers. Unfortunately, the cutter was running late
and Susan had to wait for 20 minutes. She used that time to review a human resources
course. Some of the other waiting customers were reading magazines provided by
the store. Eventually, it was time for a shampoo, after which the cutter proposed a
slightly different cut. Susan agreed, although she drew the line at the suggestion to
lighten her hair colour as she had never done it before and was unsure how it would
look. She did not want to take the risk. She sat very still, watching the process in the
mirror and turning her head when requested. She was very pleased with the result
and complimented the cutter on her work. Then she tipped the cutter and paid at the
reception desk.
The rain had stopped and the sun was shining as Susan left the store. On the way
home, she stopped by the cleaners to pick up some clothes. The store was rather
gloomy, smelled of cleaning solvents, and the walls badly needed repainting. She
was annoyed to nd that although her silk blouse was ready as promised, the suit
that she needed for the interview was not. The assistant, who had dirty ngernails,
mumbled an apology in an insincere tone. Although the store was convenient and
the quality of work was quite good, Susan considered the employees unfriendly and
not very helpful and was unhappy with their service. However, she had no choice
but to use them as there were no other dry cleaners around.
Back at her apartment building, she opened the mailbox in the lobby. Her mail included
a bill from her insurance company. However, it required no action since payment was
deducted automatically from her bank account. She was about to discard the junk mail
when she noticed a yer promoting a new dry-cleaning store, which included a discount
coupon. She decided to try the new rm and pocketed the coupon.
Since it was her turn to cook dinner, she looked in the kitchen to see what food was
available. Susan sighed when she realized that there was nothing much. Maybe she
would make a salad and call for delivery of a large pizza.
Understanding Service Products, Consumers and Markets
33
LO 1
Understand the three-stage
model of service consumption.
Low-Contact
Services
Key Concepts
1. Pre-purchase Stage
Awareness of Need
Information search
Clarify needs
Explore solutions
Identify alternative service products and
suppliers
Evaluation of alternatives (solutions and
suppliers)
Primarily remote
contact
(web sites, blogs,
phone, e-mail,
publications, etc)
At physical site
(or remote reservation)
Remote
Remote
34
Need arousal
Evoked set
Perceived risk
Formation of expectation
- desired service level
- predicted service level
- adequate service level
- zone of tolerance
Moments of truth
Service encounters
Servuction system
Role and script theories
Theater as metaphor
Conrmation/
disconrmation of
expectations
Dissatisfaction,
satisfaction and delight
PART I
PRE-PURCHASE STAGE
Need Awareness
When a person or organization decides to buy or use a service, it is triggered by an
underlying need or need arousal. The awareness of a need will drive information
search and evaluation of alternatives before a decision is reached. Needs may be
triggered by:
u
Physical conditions (e.g. chronic back pain; e.g. Susan Lees hunger need
drove her to Burger King nally)
When people recognize a need, they are more likely to be motivated to take
action to resolve it. In the story of Susan Lee, her need for the services of a
hairdresser was triggered by her remembering that she had a job interview at
the end of the week. She wanted to look her best for the interview. In developed
economies, consumers now have a greater need to spend on more elaborate vacations,
entertainment and other service experiences. This shift in consumer behavior
and attitudes provides opportunities for those services that understand and meet
changing needs. For example, some service providers have taken advantage of the
increased interest in extreme sports by oering services such as guided mountain
climbs, paragliding, white-water rafting trips and mountain biking adventures (see
Figure 2.5). The idea of service experiences also extend to business and industrial
situations. A good example of this is modern trade shows, where exhibitors set out
to engage customers interest through interactive presentations and entertainment.2
Information Search
Once a need has been recognized, customers are motivated to search for solutions.
Several alternatives may come to mind and these form the evoked set, which is the
set of possible products or brands that a customer may consider
in the decision process. For Susan Lee, the rst choice
in her evoked set was a sandwich shop but
due to the queue, she chose the second
choice in her evoked set, Burger
35
King. The evoked set can be derived from past experience or external sources such
as advertising, retail displays, news stores and recommendations from service
personnel, friends and family. Once there is an evoked set, the dierent alternatives
need to be evaluated before a nal choice can be made.
LO 2
Evaluation of Alternatives
Service Attributes
When faced with several alternatives, customers need to compare and evaluate the
dierent service oerings. Many services however, are dicult to evaluate before
purchase. This is because of the nature of service attributes. Many goods and some
services are high in search attributes. More complex goods and most services are high
in experience attributes and some services are high in credence attributes.
36
PART I
When evaluating competing services, customers try and assess the likely performance
of each service on those dimensions (or service attributes) that are important to them
and choose the one that is seen to best meet their needs. It is therefore important
for service rms to be able to deliver and communicate superior performance on
attributes that matter to their target customers. For services with high credence
qualities and high customer involvement, rms should focus on what the key
service dimensions are, and provide tangible information about service performance
outcomes to attract customers. When customers have low involvement with those
services, rms should focus on more emotional appeals, and the service experience to
attract the customers.3
Perceived risk
Since services have more experience and credence attributes, they are harder to
evaluate before purchase, and rst-time users especially are likely to face greater
uncertainty about whether they will like the service. Susan Lee had not tried coloring
her hair before. Hence, when the hairdresser suggested that she lighten her hair color,
she was worried and declined. This uncertainty increases customers perceived risk.
Think about how you felt the rst time you had to make decisions about choosing an
unfamiliar service, especially one with important consequences. The risk perception
increases with the increasing possibility of negative consequences. Table 2.1 outlines
seven categories of perceived risks.
LO 3
Know the perceived risks that
customers face in purchasing
services and the strategies rms can
use to reduce these perceived risks.
Will this training course give me the skills I need to get a better job?
Will this credit card be accepted wherever and whenever I want to make a purchase?
Will the dry cleaner be able to remove the stains from this jacket?
What will my friends think of me if they learnt that I stayed at this cheap motel?
Will my relatives approve of the restaurant I have chosen for the family reunion dinner?
Willl my business colleagues disapprove of my selection of an unknown law rm?
Will I get a view of the parking lot rather than the beach from my restaurant table?
Will the hotel bed be uncomfortable?
Will I be kept awake by noise from the guests in the room next door?
Will my room smell of stale cigarette smoke?
Will the coffee at breakfast taste disgusting?
37
People typically feel uncomfortable with perceived risks during the pre-purchase
stage and use a variety of methods to reduce them, including:
u
Using the Internet to compare service oerings and search for independent
reviews and ratings.
Visiting service facilities or trying aspects of the service before purchasing. They
examine tangible cues or physical evidence such as the feel and look of the
service setting or awards won by the rm or its employees (Figure 2.9).
Customers are risk averse, and everything else being equal, they will choose the
service with the lower risk perception. Therefore, rms need to proactively work to
reduce customer risk perceptions. Suitable strategies vary according to the nature of
the service, and may include all or some of the following:
Figure 2.9 Winning awards is a
tangible cue for service excellence.
Free trial. This is suitable for services with high experience attributes (see
Figure 2.10).
38
PART I
Figure 2.12 Zurich shows customers what they can do for them.
occasions and / or instances of how the consumer can enjoy the tangible product,
thus stimulating awareness, interest and preference of the product. The example
in Figure 2.11 illustrates how MasterCard is the Card of choice, and can be used
while visiting cities such as Rome, Italy. Insurance companies might also nd
it hard to communicate what they are selling and Zurich helps customers to
understand what they do in a very interesting advertisement (Figure 2.12).
u
Using evidence management, an organized approach where customers are presented with coherent evidence of the company. This includes the appearance of
furnishings, equipment and facilities; and employees dress and behavior.4 For
example, the bright and trendy decor at the hairdressing salon that Susan Lee
visited may have helped her to choose this particular salon at her rst visit and
now probably also contributed to her feeling satised in the end, even though
she had to wait for 20 minutes for her cutter (Figure 2.14).
39
When companies manage the risk perceptions of their customers well, customers
uncertainty is reduced, which increases the chance of being the service provider
chosen. Another way to increase the chance of providing customers with an enhanced
service experience is to manage their expectations.
Service Expectations
LO 4
Understand how customers form
expectations and the components
of these expectations.
Customers assess attributes and risks related to a service oering. In the process, they
develop expectations about how the service they choose will perform. Expectations
can be very rm if they are related to attributes that were important in the choice
process. For example, if a customer paid a premium of $350 for a direct ight rather
than one that has a stopover to save four hours on a journey, then the customer
will not take it lightly if there is a six-hour ight delay. A customer will also have
high expectations if he paid a premium for high quality service, and will be deeply
disappointed when the service fails to deliver. We will discuss expectations again
as part of the post-purchase satisfaction process. Here, we will now focus on the
formation and types of expectations.
Expectations are formed during the search and decision making process. They can be
situation specic. For example, if it is a peak period, expectations of service delivery
timing will be lower than when it is a non-peak period. Expectations also change
over time. They can be inuenced by factors controlled by the service provider, such
as advertising, pricing, new technologies or service innovation. Social trends, like
increased access through the Internet can also change expectations. For example,
health care consumers are now better informed and often want to participate more
in decisions relating to medical treatment. Service Insights 2.1 describes a new
assertiveness among parents of children with serious illnesses.
What are the components of customer expectations? Figure 2.15 shows the factors
that inuence the dierent levels of customer expectations.5
Personal Needs
Desired Service
Belief about
What is Possible
ZONE OF TOLERANCE
Perceived Service
Alterations
Adequate Service
Situational Factors
Figure 2.15 Factors inuencing customer expectations of service.
40
Predicted Service
PART I
Source
Lovelock, C. & Gregory (2003), New Haven, CT: Yale School of Management, (case).
41
Desired service. Wished for level of service. Customers hope that they
will get service based on their personal needs and what they think is possible.
Desired service could also be inuenced by explicit and implicit promises made
by service providers, word of mouth, and past experience. However, it may not
always be possible to have the wished for level of service and most customers are realistic. Hence, they also have a minimum level of expectation, called
adequate service and predicted service level.
Adequate service. The minimum level of service that customers will accept,
without being dissatised.
Predicted service. This is the level of service that the customers actually
anticipate receiving. Predicted service can also be aected by service provider
promises, word of mouth and past experiences (see Figure 2.16). The level of
predicted service that customers anticipate aects how they dene adequate
service on that occasion. If good service is predicted, the level of adequate service
will be higher, than if poorer service is predicted.
42
PART I
the dry cleaner was high, as she did not have any other alternatives to choose
from at that time. However, for food, her zone of tolerance for waiting was low
as she had many other alternatives to choose from.
Purchase Decision
When consumers have evaluated possible alternatives, including
comparing the performance of important attributes of competing
service oerings, the perceived risk associated with each oering,
and developed their desired, adequate and predicted service
level expectations, they will now select the option they like
best. Sometimes, the purchase decision process can be quite
simple. This is especially so if the perceived risks are low and
the alternatives are clear. In many instances however, purchase
decisions involve trade-os. Price is often the key factor. For
example, is it worth paying for a better seat in a theater so that
you can be located closer to the performers? (Figure 2.17)
Some decisions are more complex and may involve a
number of trade-os. For example, when choosing an
airline, convenience of schedules, reliability, seat comfort,
attentiveness of cabin crew and availability of meals may vary
among the carriers. Once the decision has been made, the
consumer is ready to move to the service encounter stage.
43
LO 5
Know how reducing or increasing the
level of customers contact with a
service organization affects the nature
of their service experiences.
44
Nursing Home
Haircut
Four-Star Hotel
Good Restaurant
Management Consulting
Airline Travel
Retail Banking
Motel
Fast Food
Dry Cleaning
Emphasizes
encounters
with service personnel
PART I
High
Telephone Banking
Car Repair
Movie Theater
Insurance
Subway
Emphasizes
encounters
with physical
service elements
Internet Banking
Mail-Based Repairs
Cable TV
Three levels of customer contact
Internet-Based Services
Low
Figure 2.20 Levels of customer
contact with service organizations.
In Figure 2.20, we group services into three levels of customer contact. These represent
the extent of interaction with service personnel, physical service elements or both.
We recognize that the level of customer contact covers a spectrum. However, it is
useful to examine the dierences between organizations at the high and low ends.
u
45
LO 6
Servuction System
Consumers purchase a service for its bundle of benets or value. Very often, the
value of a service is derived from the experience that is created for the customer.
The servuction system (short for service production system) in Figure 2.22 shows
all the interactions that together make up a typical customer experience in a high
contact service.
Customers interact with the service environment, service employees and even other
customers who are present during the service encounter.10 Each type of interaction
can create value (e.g. a pleasant environment, friendly and competent employees,
and other customers who are interesting to observe) or destroy value (e.g. another
customer speaking loudly on a cell phone in a movie theater). Firms have to coordinate all interactions to make sure that the customers get the service experience
that they came for.
Dierent levels of contact also have an impact on the servuction system. There are
many more interactions, or moments of truth, that have to be managed in a highcontact service. The servuction system consists of a technical core which is invisible
to the customer, and the service delivery system.
u
Service operations system: The technical core where inputs are processed and
the elements of the service product are created. This technical core is typically in
the back-stage and invisible to the customer. Like in a theatrical play, the visible
components can be termed front stage, while the invisible components can
Service Delivery System
Customer A
Technical Core
Contact
Personnel
Back Stage
(Invisible)
Customer B
Front Stage
(Visible)
Source
Adapted from Pierre Eiglier and Eric Langeard, Services as Systems: Marketing Implications, in Pierre Eiglier, Eric Langeard,
Christopher H. Lovelock, John E. G. Bateson and Robert F. Young, Marketing Consumer Services: New Insights. Cambridge,
MA: Marketing Science Institute, Report #77-115, November 1977.
46
PART I
be termed backstage.11 The front stage relates to the actors (service personnel)
and the backstage relates to the stage set (physical facilities, equipment and
other tangibles). What goes on backstage is usually not of interest to customers.
However, if what goes on backstage aects the quality of the front stage activities, customers will notice. For example, if a spa customer
nds that they have been billed for services that they did
not receive, they are likely to be upset. The proportion of
the overall service operation that is visible to the customers depends on the level of contact. High-contact services
involve the physical person of the customer. Therefore, the
visible component of the service operations element tends
to be more substantial. Low-contact services usually have
most of the service operations system backstage, and this
could be remotely located (Figure 2.23).
u
Other contact points: These consist of all points of contact with the customer.
Examples include, advertising communications, sales calls, billing, market
research surveys, web site, random exposures to facilities and vehicles, and
word of mouth.
LO 7
The theater is a good metaphor for services and their creation through the servuction
system. This is because service delivery consists of a series of events that customers
experience as a performance.12 This metaphor is particularly useful for high-contact
service providers such as physicians, educators, and for businesses that serve many
people at the same time. Examples of such businesses are professional sports, hospitals
and entertainment (Figure 2.24).
47
LO 8
Know how role and script theory
contribute to a better understanding
of service experiences.
Service facilities: This is the stage on which the drama unfolds. Sometimes,
there may be a need to change the sets from one act to another. For example,
when airline passengers move from the check-in stations to the boarding lounge,
the physical environment is dierent. Some stages have minimal props, like
in bed and breakfast motels for instance. In contrast, other stages have more
elaborate props, like resort hotels that have elaborate architecture, interior
design and landscaping.
Personnel: The front stage personnel are like the members of a cast, playing
roles as actors in a drama. The actor in this case, the assistant at the dry cleaners
store in our Susan Lee story, did not play her role well. She was unfriendly and
unhelpful. The backstage personnel are the support production team in the
play. In such cases, front stage personnel are expected to wear special costumes
when on stage (such as those plain and light colored gowns worn by hospital
sta, the fanciful uniforms worn by hotel doormen or the basic uniforms worn
by UPS drivers) (Figure 2.25).
The actors in a theater need to know what roles they are playing and need to be
familiar with the script. Similarly, in service encounters, knowledge of role and script
theories can help organizations to understand, design and manage both employee
and customer behaviors during service encounters.
u
Scripts: Like a movie script, a service script species the sequences of behavior
that employees and customers are expected to follow during service delivery.
Employees receive formal training. Customers learn scripts through experience,
education and communication with others. Any deviations from the known
script may frustrate both customers and employees, and lead to dissatisfaction.
If a company decides to change a service script (for example, by using technology
to transform a high-contact service into a low-contact one), service personnel
and customers need to be educated about the new approach and the benets
that it provides. Some services are tightly scripted (like ight attendants scripts
for economy class). This reduces variability and ensures uniform quality. On the
other hand, some scripts may be more exible (like ight attendants scripts for
rst class). This allows for customization. Figure 2.26 shows a script for teeth
cleaning and a simple dental examination. It involves three parties, namely the
patient, the receptionist and the dental hygienist. Each has a specic role to play
and a script to follow.
48
PART I
Patient
Receptionist
Dental Hygienist
49
LO 9
Know how customers evaluate
services and what determines
their satisfaction.
50
POST-PURCHASE STAGE
fter the service encounter stage, the next stage is the post-encounter stage.
During the post-encounter stage, customers evaluate the service performance
they have received and compare it with their prior expectations. The physical
environment and even more so, the service provided by service personnel, inuence
quality perceptions.15 If expectations are met or exceeded, customers believe that they
have received high-quality service. If other situational and personal factors are also
positive, then customers are likely to be satised, make repeat purchases, and remain
loyal. On the other hand, if their expectations have not been met, they are likely to
be dissatised. They may complain, suer in silence or switch service providers.16
In highly competitive service markets, customers are increasingly expecting service
providers to anticipate and meet their needs.17 Let us explore how expectations relate
to customer satisfaction and future intentions.
u
PART I
Source
Henkoff, R. (1994, June 27). Service is Everybodys Business. Fortune, p. 50; Hammer, M. (2004) Deep change:
How operational innovation can transform your company. Harvard Business Review 82 (April), pp. 8495;
www.progressive.com, accessed June, 2008.
51
CHAPTER SUMMARY
LO 1 u Service consumption can be divided into three
stages consisting of the pre-purchase stage, service
encounter stage and post-purchase stage.
LO 6
LO 4
LO 5
52
LO 1 1. Evaluation of alternatives
31. Performance
2. Evoked set
3. Pre-purchase stage
33. Theatre
4. Post-purchase stage
6. Information search
7. Need awareness
LO 8 34. Roles
35. Scripts
LO 9 36. Satisfaction
8. Need arousal
37. Conrmation
LO 6 23. Backstage
LO 2 9. Credence attributes
10. Search attributes
38. Delight
24. Factory
LO 7 30. Actors
How well do
you know
the language
of services
marketing? Quiz
yourself!
SCORE
08
9 16
17 24
25 31
32 39
39 40
53
2.
3.
4.
5.
7.
8.
9.
4.
5.
6.
7.
2.
3.
54
ENDNOTES
1
10
11
12
13
14
15
16
17
18
19
20
55