Services Marketing:

People, Technology, Strategy

CHAPTER 2
Understanding Service Consumers

1
 Learning Objectives (1 of 2)
By the end of this chapter, the reader should be able to:
• Understand the three-stage model of service consumption.
• Use the multi-attribute model to understand how consumers
evaluate and choose between alternative service offerings.
• Learn why consumers often have difficulties evaluating
services, especially those with many experience and credence
attributes.
• Know the perceived risks customers face in purchasing
services and the strategies firms can use to reduce consumer
risk perceptions.
• Understand how customers form service expectations and the
components of these expectations.
• Know the moment-of-truth metaphor.
2
 Learning Objectives (2 of 2)
• Contrast how customers experience and evaluate high- versus
low-contact services.
• Be familiar with the servuction model and understand the
interactions that together create the service experience.
• Obtain insights from viewing the service encounter as a form
of theater.
• Know how role, script and perceived control theories
contribute to a better understanding of service encounters.
• Describe how customers evaluate services and what
determines their satisfaction.
• Understand service quality, its dimensions and measurement,
and how quality relates to customer loyalty.

3
 Three Stage Model
Stages of Service Consumption Key Concepts
Awareness of need Need arousal
• Information search Evoked set
• Clarify needs Consideration set
• Explore solutions
• Identify alternative service products and suppliers
Evaluation of alternatives (solutions and suppliers) Multi-attribute model
Pre-pur • Review supplier information Search, experience, and credence attributes
(e.g. advertising, brochures, websites) Perceived risk
chase • Review information from third parties
Stage (e.g. published reviews, ratings, comments on web, blogs,
complaints to public agencies, satisfaction ratings, awards)
• Discuss options with service personnel
• Get advice and feedback from third-party advisors and
other customers
Make decisions on service purchase and often make Formation of expectations: desired service level, predicted
reservations service level, adequate service level, zone of tolerance
Request service from a chosen supplier or initiate Moments of truth
Service self-service (payment may be upfront or billed later) Service encounters
Encoun Servuction system
Service delivery by personnel or self-service Theater as a metaphor
ter
Stage Role and script theories
Perceived control theory
Evaluation of service performance Confirmation/ Disconfirmation of expectations
Post-en Dissatisfaction, satisfaction and delight
Future intentions Service Quality
counter Word-of-mouth
Stage Repurchase
Loyalty
4
(#1 of The Three Stage Model)

Pre-purchase Stage

5
 Need Arousal
• Decision to buy or use a service is triggered by
need arousal
• Triggers of need:
– Unconscious minds (e.g., personal identity and
aspirations)
– Physical conditions (e.g., hunger )
– External sources (e.g., a service firm’s marketing
activities)
• Consumers are then motivated to find a solution
for their need

6
 Information Search
• Need arousal leads to attempts to find a
solution
• Evoked set – a set of products and brands that
a consumer considers during the
decision-making process – that is derived from
past experiences or external sources
• Alternatives then need to be evaluated before
a final decision is made

7
 Evaluating Alternatives –
Service Attributes
• 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 they 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

8
How Product Characteristics Affect
Ease Of Evaluation

Adapted from Valarie A. Zeithaml, “How Consumer Evaluation Processes Differ Between Goods and Services,” in J. H. Donnelly 9
and W. R. George, Marketing of Services (Chicago: American Marketing Association, 1981).
 Multi-Attribute Model
Current Dry Campus Dry New Dry Importance
Cleaner Cleaner Cleaner Weight
Quality of Dry 9 10 10 30%
Cleaning
Convenience of 10 8 9 25%
Location
Price 8 10 8 20%
Opening Hours 6 10 9 10%
Reliability of 2 9 9 5%
On-time Delivery
Friendliness of 2 8 8 5%
Staff
Design of Shop 2 7 8 5%
Total Score 7.7 9.2 9.0 100%

Table 2.1 Modeling Consumer Choice – Susan Munro’s

Multiattribute Model for Choosing a Dry Cleaner

10
Perceived Risks of Purchasing and Using Services

11
 How Might Consumers Handle
Perceived Risk?
• Seeking information from trusted and respected personal
sources such as family, friends and peers.
• Using the Internet to compare service offerings, to search for
independent reviews and ratings, and to explore discussions
on social media.
• Relying on a firm that has a good reputation.
• Looking for guarantees and warranties.
• Visiting service facilities or trying aspects of the service before
purchasing, and examining tangible cues or other physical
evidence.
• Asking knowledgeable employees about competing services
to learn about what to look out for when making this decision.

12
 Strategic Responses to Managing
Customer Perceptions of Risk (1 of 2)
• Encourage prospective customers to preview the
service through their company websites and videos.
• Encourage prospective customers to visit the service
facilities before purchase.
• Offer free trials suitable for services with high
experience attributes.
• For services with high credence qualities and high
customer involvement, advertising helps to
communicate the benefits, usage and how
consumers can enjoy the best results.
13
 Strategic Responses to Managing
Customer Perceptions of Risk (2 of 2)
• Display credentials
• Use evidence management, an organized approach where
customers are presented with coherent evidence of the
company’s targeted image and its value proposition
• Have visible safety procedures that build confidence and
trust
• Give customers access to online information about the
status of an order or procedure.
• Offer service guarantees such as money-back guarantees
and performance warranties

14
Factors Influencing Customer Expectations
of Service

Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman (1993), “The
Nature and Determinants of Customer Expectations of Service,” Journal of the Academy of 15
Marketing Science, Vol. 21, No. 1, pp. 1–12.
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
• Acceptable range of variations in service delivery

16
 Purchase Decision
• 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

17
(#2 of The Three Stage Model)

Service Encounter Stage (1 of 2)

18
 Service Encounter Stage (2 of 2)
• 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 touch
points
2. High/low contact model – extent and nature of contact
points
3. Servuction model – variations of interactions
4. Theater metaphor – “staging” service performances

19
 Moments of Truth
[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

20
 Distinctions between High-Contact
and Low-Contact Services

• High-Contact Services
– Customers visit service facility and remain
throughout service delivery
– Active contact
– Includes most people-processing services

• Low-Contact Services
21
– Little or no physical contact
The Servuction System (1 of 2)

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

22
 The Servuction System (2 of 2)

The Servuction System consists of:

• Technical core — where inputs are
processed and service elements created
• Service delivery system—where the final
“assembly” takes place and the product is
delivered to the customer.

23
 Theatrical Metaphor:
An Integrative Perspective
Service facilities Personnel
• Stage on which drama • Front stage personnel
unfolds are like members of a
• This may change from cast
one act to another • Backstage personnel
are support production
team
Roles Scripts
• Like actors, employees • Specifies the
have roles to play and sequences of behavior
behave in specific ways for customers and
employees
24
 Perceived Control Theory:
The New Dimension
Control is a major driving force of their behavior
and satisfaction
• Behavioral control means that the customer can change the
situation and ask for customization beyond what the firm
typically offers
• Decisional control means that the customer can choose
between two or more standardized options, but without
changing either option
• Cognitive control refers to the customer understanding why
something happens

25
(#3 of The Three Stage Model)

Post-Encounter Stage (1 of 2)

26
 Post-Encounter Stage (2 of 2)
The last stage of service consumption
is the post-encounter stage which
involves consumers’ attitudinal and
behavioral responses to the service
experience

27
 Customer Satisfaction
In the post-encounter stage, customers evaluate
the service performance they have
experienced and compare it with their prior
expectations.
The Expectancy-Disconfirmation Model of
Satisfaction
– Satisfaction is a judgment following a series
of consumer product interactions.

28
The Expectancy-Disconfirmation
Model of Satisfaction

In the model shown above,

confirmation or disconfirmation of
pre-consumption expectations is the
essential determinant of satisfaction.

Adapted from Richard L. Oliver (1997), Satisfaction: A Behavioral Perspective on the

Consumer, (New York: McGraw-Hill) 110. 29
 Are Expectations Always the Right
Comparison Standard?

• Comparing performance to expectations works well

in reasonably competitive markets
• In uncompetitive markets or in situations in which
customers do not have free , there are risks to
defining customer satisfaction relative to their prior
expectations.
• The Expectancy-Disconfirmation Model works very
well for search and experience attributes but less for
credence attributes.
30
 How is Customer Delight Different
from Satisfaction?
• 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)
• Achieving a customer’s delight requires focusing on
what is currently unexpected.
• Once a customer is delighted, it has a strong impact
on a customer’s loyalty

31
 Service Quality
Excellent service quality is a high standard
of performance that consistently meets or
exceeds customer expectations.

Consumers’ repurchase intentions are influenced by

their general beliefs about the service quality of the
firm at the time of their next purchase decision.

32
 Customer Satisfaction
versus
Service Quality
• Customer satisfaction is an evaluation of a
single consumption experience, a fleeting
judgment, and a direct and immediate
response to that experience.
• Service quality refers to relatively stable
attitudes and beliefs about a firm, which can
differ significantly from satisfaction.

33
Dimensions of Service Quality

34
 Measuring Service Quality
• Valarie Zeithaml and her colleagues developed a
survey instrument called SERVQUAL
• SERVQUAL is seen as a generic measurement tool
that can be applied across a broad spectrum of
service industries.
• Respondents answer 21 questions measuring their
expectations of companies in a particular industry on
a wide array of specific service characteristics
• Can be customized to suit different service situations

35
 The SERVQUAL Scale (1 of 2)
• The SERVQUAL scale includes five dimensions -- Tangibles, Reliability,
Responsiveness, Assurance and Empathy.
Within each dimension, several items are measured. There are many
different formats in use, and we show the most basic 21 items for
ideal perceptions below. The statements are accompanied by a
seven-point scale, ranging from “strongly disagree = 1” to “strongly
agree = 7”.
• The firm’s performance is measured by rewording the same items
(e.g., for item 1 in the table below: “XYZ firm has modern-looking
equipment”). The difference between the scores for each item,
dimension and for overall service quality is the computed and used as
an indicator of a firm’s level of service quality.
• If measuring both ideal (or expected) and actual performance
perceptions is not possible due to time constraints during the
interview, both measures can also be combined by using the same 21
items (e.g., “modern looking equipment”) and scale anchors “Lower
than my desired service level”, “The same as my desired service level”,
and “Higher than my desired service level”.
36
The SERVQUAL Scale (2 of 2)

37
 Customer Loyalty
• Loyalty is a customer’s willingness to continue
patronizing a firm over the long-term
• Customer loyalty extends beyond behavior and
includes preference, liking, and future intentions.
• Loyalty is an important outcome of satisfied
customers who believe that the firm delivers great
service.
• The opposite of loyalty is defection, which is used to
describe customers who drop off a company's radar
screen and transfer their loyalty to another supplier

38