Chapter 2:

Customer Behavior in
Service Marketing
Understanding Customer Needs, Decision Making,
and Behavior in Service Encounters

Building the Service Model

Managing the Customer Interface

Implementing Profitable Service Strategies

 How consumers seek, choose, purchase,
experience and evaluate services
 Two most important influences- consumers
life stage and the generation in which he/she
was born
 Consumer Decision Making: The Three-Stage
Buying cycle
– Pre-purchase Stage
– Service Encounter Stage
– Post-purchase Stage
 Consumers are rarely involved in the manufacture of
goods but often participate in service creation and
delivery
 Challenge for service marketers is to understand
how customers interact with service operations
 Based on differences in nature of service act
(tangible/intangible) and who or what is direct
recipient of service (people/possessions), there are
four categories of services:
◦ People processing
◦ Possession processing
◦ Mental stimulus processing
◦ Information processing
 People Processing

 Possession processing

 Mental stimulus processing

 Information processing
 Who or What Is the Direct Recipient of the Service?
Nature of the Service Act People Possessions
Tangible Actions People processing Possession processing

(services directed at (services directed at

people’s bodies): physical possessions):

 Barbers  Refueling

 Health care  Repair/ maintenance

Intangible Actions Mental stimulus Information processing
processing
(services directed at
(services directed at intangible assets):
people’s minds):
 Accounting
 Education
 Banking
 Advertising
 Customer must be physically
enter the service system.
 Health care
 Beauty saloon
 Barber
 Restaurant/bars
People Processing
 Customers must:
◦ Physically enter the service
factory
◦ Co-operate actively with the
service operation
 Managers should think about
process and output from
customer’s perspective
◦ To identify benefits created
and non-financial costs:
 Time, mental, physical effort
 Customer ask to provide
tangible treatment
 Repair/ maintenance
 Refueling
 Laundry
 Gardening
Possession Processing

 Customers are less physically

involved compared to people
processing services

 Involvement is limited

 Production and consumption

are separable
 Directed at people’s mind or
anything that touches
people mind and influence
behavior
 Education
 News/information
 Music concert
 religion
Mental Stimulus Processing

 Ethical standards required when

customers who depend on such
services can potentially be
manipulated by suppliers

 Physical presence of recipients

not required

 Core content of services is

information-based
 Can be “inventoried”
 Accounting
 Banking
 Legal services
 Securities investment
Information Processing

 Information is the most

intangible form of service
output

 But may be transformed into

enduring forms of service
output
Pre purchase

Service Encounter

Post Purchase
 The decision to buy and use a service is made
in the pre purchase stage.
 Awareness of Need

Information Search

Evaluation of Alternatives
Service attributes, Perceived risk, Service expectations

Purchase
Decision
Awareness of Need
 Seek solution to aroused needs
• A service purchase is triggered by an
underlying need (need arousal)
• Needs may be due to:
– People’s unconscious minds (e.g., aspirations)
– Physical conditions (e.g., chronic back pain)
– External sources (e.g., marketing activities)
• When a need is recognized, people are likely
take action to resolve it
Information search
 When a need is recognized, people will search for solutions.
 Information may be collected from Internal sources or
External sources.
 Internal sources include information retrieved by the
customer from his memory, related to his previous
experience of buying of services.
 External sources include personal and nonpersonal sources.
 Personal sources- Family, neighbor, Friends etc.
 Nonpersonal sources- Advertising, Dealers, Television,
Newspapers, radio etc.
 Clarifying between the 2 options

o
r
 Evaluation of Alternatives
 Service Attributes
 The ‘Search’, ‘Experience’ and ‘Credence’ are some of
the factors which create difference between service
and goods.
 Search attribute- Attributes which can be evaluated
before purchase are called Search attributes & it help
customers evaluate a product (Physical Goods) before
purchase like- style, color, texture, taste, sound are
feature.
 Experience attribute- Consumer can determine or
evaluated only after the purchase—must “experience”
the service to know what they are getting. Like-
Holidays, sporting events, medical procedure.
 Credence attribute- Attributes that customers find
impossible to evaluate confidently even after
purchase and consumption. Like- hygiene of a
kitchen in a restaurant, Quality of repair and
maintenance work
Goods / Services Characteristics

Goods High on Search Attributes

Services High on Experience & Credence

Attributes
Perceived Risks
A perceived risk is the uncertainty faced by consumers when they
can’t asses the post purchase consequences before purchasing
the product & it is involved in all customer decision.
• Functional Risk – Risk faced by customer that product which
customer purchased may fail to function according to his
expectations or unsatisfactory performance outcomes.
• Financial Risk – Risk faced by consumers when he needs to pay
for the service like- monetary loss, unexpected extra costs
• Physical Risk – It involve the risk to the physical safety of the
customer by using the products/ services. personal injury etc.
• Psychological Risk – It is the risk of causing harm to one’s self
image by making a poor service. Like- fears and negative
emotions
• Social Risk – This is the risk of having to face social
embarrassment as a result of make a poor service choice.
• Time Risk- This is the risk that time spent to search and locate
a service prior to purchase may have been wasted, if service
does not confirm to the customer’s expectations.
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• When possible alternatives have been
compared and evaluated, the best option
is selected
• Can be quite simple if perceived risks are
low and alternatives are clear
• Price is often a key factor in the purchase
decision

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Service encounter Stage
 A service encounter is a period of time during
which you as a customer interact directly with
the service provider.
 It begins with submitting an application,
requesting a reservation, or placing an order.
 High Contact
Service
 Customer’s exposure
takes on a physical and
tangible nature
 Eg. Hotels, Restaurants,
 Healthcare, public
transportation etc.
 Low Contact
Service
 Little, if any physical
contact between customer
and service provider
 Ex. Telephone based
service delivery etc.
Customers evaluate service quality & their satisfaction/ Dissatisfaction
with the service experience. The outcome of this process will affect
their future intentions, such as whether or not to remain loyal to the
provider that deliver service.

Evaluation of service performance

Future intentions
Satisfaction: attitude like judgment following a purchase act

 Negative  Positive
disconfirmation- confirmation-
Service worse than service better than
expected expected
 Customer evaluate service quality by comparing
what they expected with what they received.
 If their expectations are met or exceeded, they
believe they have received high quality service
and customer is satisfied.
 If the service experience does not meet
customers’ expectations, they may complain
about poor service quality, suffer in silence, or
switch providers in the futures.
 After purchasing a service, the customer
evaluates it by comparing its performance with
his expectation.

Brand Switcher Post- Purchase Evaluation Brand Loyal

-ve +ve

 A satisfied customer becomes brand loyal,

gives positive feedback to others about the
service.
 Delight- The product’s performance is exceeds
the buyer’s expectations.
 Satisfaction- The product’s performance
matches the buyer’s expectation.
 Dissatisfaction- The product’s is performance
does not match the buyer’s expectation.
 Cognitive Dissonance (Post- purchase Doubt)-
The buyer is unsure of the product performance
relative to his or her expectations.