Consumer Behavior in Service Encounters: Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

Chapter 2
Consumer Behavior in
Service Encounters
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2- 1
Where Does the Customer Fit in a
Service Organization? (Fig. 2.1)
 Consumers rarely involved in manufacture of goods but

often participate in service creation and delivery
 Challenge for service marketers is to understand how
customers interact with service operations
 Flowcharting clarifies how customer involvement in service
encounters varies with type of process - see Fig. 2-1:
 People processing (e.g., motel stay): customer is physically involved
throughout entire process
 Possession processing (e.g., DVD repair): involvement may be limited to
drop off of physical item/description of problem and subsequent pick up
 Mental stimulus processing (e.g., weather forecast): involvement is
mental, not physical; here customer simply receives output and acts on it
 Information processing (e.g., health insurance): involvement is mental -
specify information upfront and later receive documentation of coverage
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. Web) help reduce contact levels
Levels of Customer Contact with Service
Organizations (Fig. 2.2)
Emphasizes encounters
High with service personnel
N ur sing Hom e
HairCut
4 - Star Hote l
Ma na g e me nt Con sulting
Go od Re sta ura nt
Tele ph one Ba nking
Airlin e Tra ve l (Econ.)
Re ta il Ba nking Car Re pa ir
Motel In sura nce
Dry Clea ning
Fa st Food
Movie Theater
Ca bl e TV
Subway
• Internet Banking
Mail Based Repairs
Emphasizes encounters
with equipment
Internet-based
Services
Low
Managing Service Encounters--1
 Service encounter: A period of time during which customers

interact directly with a service
 Moments of truth: Defining points in service delivery where

customers interact with employees or equipment
 Critical incidents: specific encounters that result in

especially satisfying/dissatisfying outcomes for either
customers or service employees
Managing Service Encounters--2
 Service success often rests on performance of junior

contact personnel
 Must train, coach, role model desired behavior
 Thoughtless or badly behaved customers can cause
problems for service personnel (and other customers)
 Must educate customers, clarify what is expected, manage
behavior
The Purchase Process for Services
(Adapted from Fig. 2-3)
Prepurchase Stage
 Awareness of need
 Information search
 Evaluation of alternative service suppliers
Service Encounter Stage
 Request service from chosen supplier
 Service delivery
Postpurchase Stage
 Evaluation of service performance
 Future intentions
Perceived Risks in
Purchasing and Using Services (Table 2.1)
 Functional – unsatisfactory performance outcomes
 Financial – monetary loss, unexpected extra costs
 Temporal – wasted time, delays lead to problems
 Physical – personal injury, damage to possessions
 Psychological – fears and negative emotions
 Social – how others may think and react
 Sensory – unwanted impacts to any of five senses
Factors that Influence
Customer Expectations of Services (Fig. 2.4)
Explicit & Implicit

Personal Needs Service Promises
Word-of-Mouth
Desired Service Past Experience
Beliefs about
What Is Possible
ZONE
OF
TOLERANCE
Perceived Service
Alterations
Adequate Service Predicted Service
Situational Factors
Source: Adapted from Zeithaml, Parasuraman & Berry
Components of Customer Expectations
 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: range within which customers are

willing to accept variations in service delivery
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 10
Intangible Attributes, Variability, and Quality
Control Problems Make Services Hard to Evaluate
 Search attributes – Tangible characteristics that allow

customers to evaluate a product before purchase
 Experience attributes – Characteristics that can be
experienced when actually using the service
 Credence attributes – Characteristics that are difficult to
evaluate confidently even after consumption
 Goods tend to be higher in search attributes, services tend
to be higher in experience and credence attributes
 Credence attributes force customers to trust that desired
benefits have been delivered
How Product Attributes Affect
Ease of Evaluation) (Fig. 2.5)
Most Goods Most Services
Easy Difficult
to evaluate to evaluate
Restaurant meals
Clothing
Computer repair
Legal services
Complex surgery
Motor vehicle
Haircut
Foods
Chair
Education
Lawn fertilizer
Entertainment
High in search High in experience High in credence

attributes attributes attributes
Source: Adapted from Zeithaml
Customer Satisfaction is Central to the
Marketing Concept
 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
 Research shows links between customer satisfaction and a
firm’s financial performance
Customer Delight:
Going Beyond Satisfaction
 Research shows that delight is a function of 3 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?
 Progressive Insurance has found ways to positively surprise

customers with customer-friendly innovations and
extraordinary customer service
A Service Business is a System Comprising
Three Overlapping Subsystems
Service Operations (front stage and backstage)

 Where inputs are processed and service elements created.
 Includes facilities, equipment, and personnel
Service Delivery (front stage)
 Where “final assembly” of service elements takes place
and service is delivered to customers
 Includes customer interactions with operations and other
customers
Service Marketing (front stage)
 Includes service delivery (as above) and all other contacts
between service firm and customers
Service Marketing System:
(1) High Contact Service--e.g., Hotel (Fig. 2.7)
Service Marketing System

Service Delivery System Other Contact Points
Advertising
Service Operations System Other
Customers Sales Calls
Interior & Exterior Market Research
Facilities Surveys
Billing / Statements
Technical Equipment The
Core Customer Miscellaneous Mail,
Phone Calls, Faxes, etc.
Service People Random Exposure to
Facilities / Vehicles
Other Chance Encounters
Backstage Front Stage with Service Personnel
(invisible) (visible) Customers
Word of Mouth
Service Marketing System:
(2) Low Contact Service--e.g., Credit Card (Fig. 2.8)
Service Marketing System

Service Delivery System Other Contact Points
Service Operations System
Advertising
Mail
Market Research
The Surveys
Technical Self Service
Core Equipment Customer Random Exposures
Facilities, Personnel
Phone, Fax,
Web site etc. Word of Mouth
Front Stage
Backstage (visible)
(invisible)
Service as Theater
“ 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
The Dramaturgy of Service Delivery
 Service dramas unfold on a “stage”--settings may change as

performance unfolds
 Many service dramas are tightly scripted, others improvised

 Front-stage personnel are like members of a cast
 Like actors, employees have roles, may wear special
costumes, speak required lines, behave in specific ways
 Support comes from a backstage production team

 Customers are the audience—depending on type of
performance, may be passive or active
Role and Script Theories
 Role: A set of behavior patterns learned through

experience and communication
 Role congruence: In service encounters, employees and

customers must act out defined roles for good outcomes
 Script: A sequence of behavior to be followed by employees

and customers during service delivery
 Some scripts (e.g. teeth cleaning) are routinized, others flexible
 Technology change may require a revised script
 Managers should reexamine existing scripts to find ways to improve
delivery, increase productivity, enhance experiences
Chapter 4
Creating the
Service Product
Key Steps in Service Planning:
Matching Opportunities to Resources
 Must relate marketing opportunities to firm’s resources

(physical, financial, technological, human)
 Identify, evaluate firm’s marketing assets
 Customer portfolio/lifetime value (customer equity)
 Market knowledge
 Marketing implementation skill
 Product line
 Competitive positioning strategies
 Brand reputation (brand equity)
 Identify, evaluate firm’s operating assets

 Physical facilities, equipment
 Technology and systems (especially IT)
 Human resources (numbers, skills, productivity)
 Leverage through alliances and partnerships
 Potential for customer self service
 Cost structure
Service Design Involves Matching Marketing
Concept with Operations Concept (Fig. 4.1)
Corporate Objectives
and Resources
Marketing Assets Operating Assets

(Customer Base, Mkt. Knowledge, (Facilities/Equipment, IT Systems,
Implementation Skills, Brand Reput.) People, Op. Skills, Cost Structure)
Service Marketing Concept

Service Operations Concept
•Benefits to customer from core/
supplementary elements, style, •Nature of processes
service level, accessibility •Geographic scope of ops
•Scheduling
•User costs/outlays incurred •Facilities design/layout
•Price/other monetary costs •HR (numbers, skills)
•Time •Leverage (partners, self-service)
•Mental and physical effort •Task allocation: front/backstage
•Neg. sensory experiences staff; customers as co-producers
Service Delivery
Process
Understanding the
Components of the
Augmented Service Product
Shostack’s Molecular Model of a Total Market
Entity - Passenger Airline Service (Fig. 4-2)
Distribution
Price
Vehicle
Service
frequency
Transport In-flight
service
Pre- and
post-flight Food
service and
drink
KEY
Tangible elements
Intangible elements
Marketing Positioning
(Weighted toward evidence) Source: Shostack
Core Products and Supplementary Services
 Most firms offer customers a package of benefits:

 core product (a good or a service)
 supplementary services that add value to the core
 In mature industries, core products often become

commodities
 Supplementary services help to differentiate core products

and create competitive advantage by:
 facilitating use of the core service
 enhancing the value and appeal of the core
Core and Supplementary Product Design:
What Do We Offer and How Do We Create and Deliver
It?
Supplementary Delivery Concept

services offered For Core Product
and how created Scheduling Process
and delivered
Core
Service Customer
Level Role
What Should Be the Core and Supplementary
Elements of Our Service Product?
 How is our core product defined and what supplementary
elements currently augment this core?
 What product benefits create the most value for customers?

 Is our service package differentiated from the competition in
ways that are meaningful to target customers?
 What are current levels of service on the core product and

each of the supplementary elements?
 Can we charge more for higher service levels on key

attributes (e.g., faster response, better physical amenities,
easier access, more staff, superior caliber personnel)?
 Alternatively, should we cut service levels and charge less?

Core and Supplementary Services in a Luxury Hotel
(Offering Guests Much More than a Cheap Motel!)
R e s e r v a t io n
C a s h ie r V a le t
P a r k in g
B u s in e s s
C e n te r R e c e p t io n
A B e d fo r th e
Ro o m N ig h t in a n Ba gga g e
S e r v ic e E le g a n t P r iv a t e S e r v ic e
R o o m w it h a
B a th ro o m
W a ke -u p C o c k t a il
C a ll Ba r
Te le p h o n e R e s ta u ra n t
E n te r ta in m e n t /
S p o r t s / E x e r c is e
What Happens, When, and in What Sequence?
The Time Dimension in the Augmented Service Product
Reservation
Parking Get car
Check in Check out

USE ROOM Phone
USE GUESTROOM OVERNIGHT
Porter
Pay TV Room service

Meal
Pre Time Frame of an Overnight Hotel Stay

Visit (real-time service use)
The Flower of Service:
Categorizing Supplementary Services (Fig. 4-5)
Information
Payment Consultation
Billing Core Order-Taking
Exceptions Hospitality
KEY:
Facilitating elements Safekeeping
Enhancing elements
Facilitating Services - Information
(Table 4.1)
Customers often require

information about how to
obtain and use a product or
Core service. They may also
need reminders and
documentation
Facilitating Services - Order-Taking
(Table 4.2)
Many goods and services

must be ordered or reserved
in advance. Customers need
Core
to know what is available and
may want to secure
commitment to delivery
Facilitating Services - Billing
(Table 4.3)
“How much do I owe you?”

Customers deserve clear,
Core
accurate and intelligible
bills and statements
Facilitating Services - Payment
(Table 4.4)
Customers may pay faster

and more cheerfully if you
Core
make transactions simple
and convenient for them
Enhancing Services - Consultation
(Table 4.5)
Value can be added to

goods and services by
offering advice and
Core
consultation tailored to
each customer’s
needs and situation
Enhancing Services - Hospitality
(Table 4.6)
Customers who invest time

and effort in visiting a
business and using its
Core services deserve to be
treated as welcome guests
(after all, marketing invited
them there!)
Enhancing Services - Safekeeping
(Table 4.7)
Customers prefer not to

worry about looking after
the personal possessions
that they bring with them
Core
to a service site.
They may also want delivery
and after-sales services for
goods that they purchase
or rent
Enhancing Services - Exceptions
(Table 4.8)
Customers appreciate some

flexibility in a business
when they make special
Core requests. They expect it
when not everything goes
according to plan
Branding
Service Products
Service Branding:
Clarifying Distinctive Service Offerings
 Marriott Hotel Brands  British Airways Brands

 Marriott Hotels Intercontinental
 Marriott Resorts  First
 Club World
 Courtyard by Marriott
 World Traveller Plus
 Fairfield Inns  World Traveller
 Residence Inns
European
 SpringHill Suites  Club Europe
 TownePlace Suites  Euro-Traveller
 Marriott Vacation Clubs UK Domestic
International  Shuttle
Branding a High-Tech, B2B Product Line:
A Family of Brands at Sun Microsystems
 Corporate umbrella brand

 Sun Microsystems
 Product line brand (system support services)

 Sun Spectrum Support
 Sub-brands (4 levels of support service programs)

» Platinum
» Gold
» Silver
» Bronze
Sun Spectrum Support:
Sub-branding Highlights Four Service Levels
Sub-branding clarifies service levels offered at different fees

 Platinum: “Mission Critical”
On-site service 24/7, two-hour response;
telephone support 24/7, onsite parts replacement;
additional services available
 Gold: “Business Critical”
Onsite service Mon-Fri 8am-8pm, four-hour response;
telephone support 24/7; onsite parts replacement
 Silver: “Basic Support”
Onsite service Mon-Fri 8am-5pm, four-hour response;
telephone support Mon-Fri 8am-8pm; onsite parts replacement
 Bronze: “Self Support”
Phone support Mon-Fri 8am-5pm; parts replacement by courier
New Service
Development
New Service Development:
A Hierarchy of New Service Categories
 Major service innovations--new core products for previously

undefined markets
 Major process innovations--using new processes to

deliver existing products and offer extra benefits
 Product line extensions--additions to current product lines

 Process line extensions--alternative delivery procedures
 Supplementary service innovations--adding new or
improved facilitating or enhancing elements
 Style changes--visible changes in service design or scripts
New Service Development:
Physical Goods as Source of Service Ideas
 Customers can rent goods—use and return for a fee—

instead of purchasing them
 Customers can hire personnel to operate their own or
rented equipment
 Any new durable product may create need for after-sales
services (possession processing)
 Shipping
 Installation
 Problem-solving and consulting advice
 Cleaning
 Maintenance
 Repair
 Upgrading
 Disposal
Creating Services as Substitutes for
Owning and/or Using Goods (Fig. 4-7)
Own a Physical Good Rent the Use

of a Physical Good
• Drive own car • Rent car and drive it

Perform the
• Type on own word processor • Rent word processor and type
Work Oneself
Hire Someone • Hire chauffeur to drive car •• Hire a taxi or limousine

to Do the Work • Hire typist to use word processor •• Send work to secretarial service
Service Development through Delivery Options:
Alternative Meal Service Formats (Fig. 4-8)
Fast-Food
Restaurant See sign Park and Order meal, Pick up Find table Clear table
(Eat In) enter and pay meal and eat and leave
Drive-In See sign Stop car at Order via Get meal at Drive away,
Restaurant order point microphone pickup, pay eat later
(Take Out)
Home Telephone Order food, Driver rings Pay driver,

Delivery take food Eat
Restaurant give address doorbell
Home Arrange to Plan meal, Food and Meal is Staff cleans

Catering meet caterer pay deposit staff arrive prepared Eat up; pay
and served
Elements of a Hotel Offering:
Trading off Room Price vs. Features/Services
 External building design

and features
 Room features
 Food-related services
 Lounge facilities
 Services (e.g., reception)
 Leisure facilities
 Security—people/systems
Success Factors in New Service Development
 Market synergy
 Good fit between new product and firm’s image/resources
 Advantage vs. competition in meeting customers’ needs
 Strong support from firm during/after launch
 Firm understands customer purchase decision behavior
 Organizational factors
 Strong interfunctional cooperation and coordination
 Internal marketing to educate staff on new product and its
competition
 Employees understand importance of new services to firm
 Market research factors

 Scientific studies conducted early in development process
 Product concept well defined before undertaking field studies

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Chapter 2

 Consumers rarely involved in manufacture of goods but

High Contact Services

 Service encounter: A period of time during which customers

 Moments of truth: Defining points in service delivery where

 Critical incidents: specific encounters that result in

 Service success often rests on performance of junior

 Functional – unsatisfactory performance outcomes

 Financial – monetary loss, unexpected extra costs

 Temporal – wasted time, delays lead to problems

 Physical – personal injury, damage to possessions

 Psychological – fears and negative emotions

 Social – how others may think and react

 Sensory – unwanted impacts to any of five senses

Explicit & Implicit

Source: Adapted from Zeithaml, Parasuraman & Berry

 Desired Service Level: wished-for level of service quality

 Adequate Service Level: minimum acceptable level of

 Predicted Service Level: service level that customer

 Zone of Tolerance: range within which customers are

 Search attributes – Tangible characteristics that allow

Most Goods Most Services

High in search High in experience High in credence

Source: Adapted from Zeithaml

 Satisfaction defined as attitude-like judgment following a

 Satisfaction reflects perceived service quality, price/quality

 Research shows that delight is a function of 3 components

 Is it possible for customers to be delighted by very

 Progressive Insurance has found ways to positively surprise

Service Operations (front stage and backstage)

Service Marketing System

Service Marketing System

“ All the world’s a stage and all

 Service dramas unfold on a “stage”--settings may change as

 Many service dramas are tightly scripted, others improvised

 Support comes from a backstage production team

 Role: A set of behavior patterns learned through

 Role congruence: In service encounters, employees and

 Script: A sequence of behavior to be followed by employees

 Must relate marketing opportunities to firm’s resources

 Identify, evaluate firm’s operating assets

Marketing Assets Operating Assets

Service Marketing Concept

 Most firms offer customers a package of benefits:

 In mature industries, core products often become

 Supplementary services help to differentiate core products

Supplementary Delivery Concept

 What product benefits create the most value for customers?

 What are current levels of service on the core product and

 Can we charge more for higher service levels on key

 Alternatively, should we cut service levels and charge less?

Check in Check out

USE GUESTROOM OVERNIGHT

Pay TV Room service

Pre Time Frame of an Overnight Hotel Stay

Billing Core Order-Taking

Customers often require

Many goods and services

“How much do I owe you?”

Customers may pay faster

Value can be added to

Customers who invest time

Customers prefer not to