Services Marketing:

People, Technology, Strategy

CHAPTER 2
Understanding Service Consumers

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 Learning Objectives
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.
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 Learning Objectives
• 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.

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 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
Pre-purchase Stage

Evaluation of alternatives (solutions and suppliers) Multi-attribute model

• Review supplier information Search, experience, and credence attributes
(e.g. advertising, brochures, websites) Perceived risk
• Review information from third parties
(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 reservations Formation of expectations: desired service level, predicted
service level, adequate service level, zone of tolerance
Request service from a chosen supplier or initiate self-service Moments of truth
ost-encounter Stage Service Encounter Stage

(payment may be upfront or billed later) Service encounters

Servuction system
Service delivery by personnel or self-service Theater as a metaphor
Role and script theories
Perceived control theory

Evaluation of service performance Confirmation/ Disconfirmation of expectations

Dissatisfaction, satisfaction and delight
Future intentions Service Quality
Word-of-mouth
Repurchase
Loyalty

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(#1 of The Three Stage Model)

Pre-purchase Stage

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 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

Courtesy of Masterfile Corporation

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 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

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 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
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How Product Characteristics Affect Ease Of
Evaluation

Adapted from Valarie A. Zeithaml, “How Consumer Evaluation Processes Differ Between Goods and 9
Services,” in J. H. Donnelly 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 On- 2 9 9 5%
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

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Perceived Risks of Purchasing and Using Services

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 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.

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 Strategic Responses to Managing Customer
Perceptions of Risk
• 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.
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 Strategic Responses to Managing Customer
Perceptions of Risk
• 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

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Factors Influencing Customer Expectations
of Service

Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A.

Parasuraman (1993), “The Nature and Determinants of Customer 15
Expectations of Service,” Journal of the Academy of 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

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 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

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(#2 of The Three Stage Model)

Service Encounter Stage

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 Service Encounter Stage
• 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

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 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
Richard Normann
delivery process.

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 Distinctions between High-Contact and Low-
Contact Services

• High-Contact Services
– Customers visit service • Low-Contact Services
facility and remain
throughout service – Little or no physical
delivery contact
– Active contact – Contact usually at
arm’s length through
– Includes most people- electronic or physical
processing services distribution channels
– Facilitated by new
technologies
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The Servuction System

Adapted and expanded from an original concept by Eric Langeard and

Pierre Eiglier

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 The Servuction System
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.

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 Theatrical Metaphor:
An Integrative Perspective
Service facilities Personnel
• Stage on which drama • Front stage personnel are
unfolds like members of a cast
• This may change from • Backstage personnel are
one act to another support production team

Roles Scripts
• Like actors, employees • Specifies the sequences
have roles to play and of behavior for customers
behave in specific ways and employees

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 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

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(#3 of The Three Stage Model)

Post-Encounter Stage

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

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 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.

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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.
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 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

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 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.

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 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.

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Dimensions of Service Quality

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 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

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 The SERVQUAL Scale
• 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”.

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The SERVQUAL Scale

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 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

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