CHAPTER 2

UNDERSTANDING SERVICE CONSUMERS

Learning Outcomes of the Chapter:

After completing this chapter, students will be able to:
LO1: Describe the three-stage process in the service customer buying journey
LO2: Summarize the ways to minimize perceived risks for service customers
LO3: Explain the criteria customers use to choose services in order to develop appropriate
influence strategies
LO4: Analyze the factors that affect customer expectations before purchasing a service
LO5: Explain why service businesses must provide solutions for managing customer waiting
LO6: Outline strategies for managing the influence customers have on each other during service
usage
LO7: Analyze the factors influencing customers' perceptions after service consumption
LO8: Explain the importance of customer loyalty in the service industry

2.1. The Buying Process of Service Customers

➢ LO1: Describe the three-stage process in the service customer buying journey

The consumption of any product inherently involves the acts of purchasing and using it. To develop
effective marketing decisions, it is essential to understand how customers make decisions to buy
and use a service/experience and how they ultimately evaluate it.

Fundamentally, service customers also begin their decision-making process by recognizing a need
that must be satisfied. The subsequent search for purchase alternatives serves as a bridge leading
to an evaluation phase in order to make the optimal choice. They will still need to interact with the
seller to obtain the service, experience it, and finally form an evaluation.

However, due to a key characteristic of services—the simultaneity of production and

consumption—in most cases, the service customer buying process is distinguished by a stage that
involves direct interaction between the customer and the service delivery system. The act of
purchasing and using the service often takes place in the same physical space. Therefore, Zeithaml,
Wirtz, Lovelock, and many other service marketing scholars have modeled this buying process
into three stages (applicable to individual customers—organizational customers follow a more
complex process).
2.1.1. Pre-Purchase Stage
At this stage, customers go through the steps of need recognition, information search, and
evaluation of purchase alternatives.
Need Recognition
The purchase of a service begins when the buyer recognizes a need that must be fulfilled (also seen
as a problem that needs to be solved). A need—essentially a sense of deprivation perceived by a
person and accompanied by a desire to fulfill it—creates a feeling of “tension” that pushes the
customer to seek service products. Needs can arise from subconscious internal stimuli, such as
hunger, thirst, sadness, emptiness, fatigue, etc. Needs can also stem from external stimuli such as
advertising, promotional activities by businesses, the vibrant setting of a business that a customer
passes by, or a suggestion from a friend.
→ At this stage, service marketers must investigate which needs related to their services are arising
when consumers become aware of a need, what causes these needs, and how these needs lead
consumers to the service.
→ For many services, demand is seasonal. Therefore, marketers need to study the timing of when
these needs typically arise in order to make appropriate marketing decisions.
Information Search
Generally, the need to make a sound purchase decision leads customers to seek information. A
consumer of tangible goods, after recognizing a need, may not feel the need to search for
information if they are already knowledgeable, trust a familiar choice, or are in a spontaneous
purchase situation where there is little time for research.
Once a need is triggered, a set of potential purchase options typically comes to the customer’s
mind. This set is known as the evoked set. These options may stem from previous purchase
experiences or from external sources, including marketing efforts by businesses. However,
customers typically do not include all these options in their decision-making process. They often
narrow down the evoked set based on considerations such as the specific purchase situation and
their available resources. The remaining alternatives that are seriously evaluated form the
consideration set.
→ The first objective of a company's communication efforts is to ensure that its service brand is
included in the customer's consideration set. However, businesses should also be aware that this
set not only includes service options from competing companies currently operating in the market
but may also include the customer’s self-service alternatives. This means that companies must
demonstrate—whether subtly or assertively—that they can satisfy customer needs more
effectively than not only their current competitors but also better than the way customers could
fulfill those needs on their own.
Evaluation of Service Alternatives
With a set of viable options in mind, the customer proceeds to evaluate them in order to choose
the optimal solution. The first thing customers do at this stage is to mentally establish criteria (and
possibly even standards) for evaluating and selecting a service. Then, based on their preferences,
available resources, and personal value system, customers assign different levels of importance to
these criteria or standards. This evaluation process may involve complex mental analysis to
determine which option best satisfies the selection criteria, or it may simply consist of repeating
the most recent choice out of habit.
→ At this stage, service marketers need to understand how well their service offerings align with
customers' selection criteria or standards. Marketers may also influence the perceived importance
of these criteria in the customer’s mind in ways that are more favorable to their own services. In
some cases, marketers can even steer customers by introducing new evaluation criteria or
standards.
2.1.2. Service Encounter Stage
The transaction stage is manifested through the actual interaction between the service provider and
the customer. This stage is also referred to as service interaction or service encounter, and it
typically includes both the act of purchasing and using the service.
To deliver services to customers, service providers must establish a service delivery system. In the
production of tangible goods, we find terms such as produce, production, and product. In the
context of service delivery, however, we only find two comparable terms: serve and service—but
there is no term that accurately reflects the process of creating the service itself (analogous to
production in goods manufacturing). For this reason, Pierre Eiglier and Eric Langeard (University
of Law, Economics and Science, Aix-Marseille, France) proposed a new term: servuction, to
describe the process of service creation, which is illustrated in the diagram below.

Wirtz & Lovelock (2022) define the service creation model as consisting of two main components:
The Technical Core: This is where inputs are processed and the components of the service product
are created. For example, in a restaurant setting, the kitchen represents the technical core of the
food service. Typically, the technical core refers to the back-stage or behind-the-scenes area.
The Service Delivery System: This is where the final “assembly” of service elements takes place
and the service product is delivered to the customer. It is usually the visible part of the service
system and includes facilities, equipment, frontline employees, and even other customers.
Based on this model, services can be classified into two types depending on the level of customer
contact:
(i) High-contact services: The customer either comes to the service provider or the provider visits
the customer. In such cases, emphasis is placed on the frontline employees and the physical
environment of the front stage.
(ii) Low-contact services: The customer can request service remotely through technological
means without needing to meet the provider in person. Interaction may occur through the
provider’s equipment or automated systems rather than through direct human contact.
Within this system, the behavior of both customers and frontline employees has a significant
impact on service quality. The service environment—including equipment, physical elements, and
overall atmosphere—also influences the customer’s perception of the service. Therefore, the
metaphor of a “theater” or “performance” is considered one of the most appropriate analogies for
describing services. In this metaphor:
• The physical facility acts as the stage
• The frontline employees act as the actors
• Role Theory: This refers to the set of behavior patterns learned through experience and
communication, performed by an individual within a specific social interaction to
effectively fulfill an objective. Both customers and service employees have their own
“roles” to play during the interaction.
• Script Theory: A service script specifies the expected behaviors of both employees and
customers during their interaction. However, not all services require strictly defined scripts.
→ A good service is like a well-executed play. Therefore, to deliver excellent and memorable
service, managers must write a good script, assign roles appropriately, design a compelling stage,
and carefully select and train the actors.
2.1.3. Post-Purchase Stage
After using a service, customers will either feel satisfied or dissatisfied. This post-purchase
behavior is something that service marketers must pay close attention to. If the service meets or
exceeds the customer's initial expectations, they will be satisfied. If the service fails to meet those
expectations, they will feel dissatisfied. The key issue is that these positive or negative evaluations
and emotions will drive customers to engage in either positive or negative word-of-mouth
communication about the service, and influence whether they intend to return in the future.

❖ Marketers must understand customer satisfaction levels after service consumption in order to
take appropriate actions. Post-consumption communication can sometimes be just as important as
pre-purchase communication when it comes to influencing customer behavior.
2.2. The Role of Perceived Risk, Evaluation Criteria, and Customer Expectations in the Pre-
Purchase Stage
2.2.1. Perceived Risk of Service Customers
➢ LO2: Summarize the ways to minimize perceived risks for service customers
Services are inherently intangible and are characterized by the simultaneity of production and
consumption. Service customers understand that they cannot see or try the service in advance
before making a purchase. The uncertainty about the service outcome leads them to perceive risks
associated with service consumption—commonly referred to as perceived risk.
In general, perceived risk refers to the potential losses or negative outcomes that customers
anticipate they might suffer when using a service. These perceived risks are often expressed in the
form of customer anxieties or concerns. Some of the typical types of perceived risks include:
It should be noted that when purchasing and using different services, customers may perceive
different types of risks. Even for the same type of risk (for example, financial risk when depositing
money in a savings account), the specific concerns may vary—such as fear of losing money if the
bank goes bankrupt, or worry that the interest rate at one bank may be lower than at another,
resulting in a financial disadvantage.
One certainty is that customers—with their diverse cultural, social, personal, and psychological
characteristics—will inevitably perceive risks differently (both in terms of risk type and the
specific form of anxiety they experience).
➔ Service marketers must be able to anticipate the perceived risks of specific target customer
segments—even in specific purchase situations—in order to propose appropriate
marketing solutions.
When faced with perceived risk, customers may employ various strategies to reduce their sense of
uncertainty or anxiety:
① Discontinue the purchase to avoid predicted losses. Clearly, this is a behavior that marketers do
not want to encourage.
② Seek information from trusted personal sources (family, friends, colleagues).

③ Compare the recommended service with similar services they are familiar with, or search for
independent reviews from multiple sources.
④ Rely on reputable companies, especially for high-value transactions.

⑤ Look for guarantees, such as company promises regarding compensation if the service does not
meet expectations, or purchase insurance.
⑥ Visit service facilities to assess tangible elements and physical evidence; try the service if trial
options are available.
⑦ Consult knowledgeable employees from competing service providers.
➔ Clearly, in order to minimize perceived risk, customers employ a variety of solutions—
most of which, at their core, involve seeking information from multiple sources to reshape
their perception of the risks associated with purchasing and using a service.
➔ In this context, the role of service marketers is to proactively prepare communication
strategies in all forms to influence customers’ minds and alter their perception of risk.
Companies can:
① Advertise using tangible messages; provide detailed information through various formats
(videos, brochures, etc.); encourage customers to visit the company’s website or fan page; and
maintain a 24/7 information portal.
② Inform customers of their rights and their ability to access real-time information online
regarding order status, booking status, etc.
③ Encourage customers to visit the company’s physical facilities or observe a service being
delivered to another customer.
④ Offer guarantees related to successful service delivery (e.g., how many customers have already
used the service, performance metrics, refund policies, or service redo guarantees).
⑤ Manage physical evidence by carefully designing and decorating service areas, ensuring the
appearance and demeanor of staff meet expectations, and displaying certificates or images that can
significantly influence customers' positive expectations.
⑥ Personally present or display various certificates and testimonials that validate the quality of
the service.
⑦ Encourage customers to try the service for free—for those services where this is feasible. In
essence, the concept of “trial” in services is actually a real experience offered for free.

2.2.2. Service Customers’ Selection Criteria/Standards

➢ LO3: Explain the criteria customers use to choose services in order to develop appropriate
influence strategies
Service/product selection standards are, in essence, the attributes of a service or product that
customers expect it to possess. Each service or product typically contains a combination of such
attributes, including:
Search Attributes: These are tangible features that customers can evaluate before experiencing
the service. Examples include assessing a restaurant based on the type of food offered, location,
parking availability, the restaurant’s positioning (fine dining, casual, family-style, upscale),
pricing, etc.
Experience Attributes: These are characteristics of the service that customers can only evaluate
during or after using the service themselves—for instance, delicious food, courteous and
enthusiastic service. In reality, many people assume these attributes can be known by reading
reviews or asking friends and family. However, such information is often unreliable since the same
service expression may be interpreted differently by different individuals.
Credence Attributes: These are features that customers find difficult to assess even after using
the service. Customers accept the service outcome primarily based on trust in the provider.
Examples include the accuracy of advice (in the case of consulting services) or whether food has
been hygienically prepared (in the case of dining services).
The ease or difficulty of evaluating a service depends on the nature of its attributes. Because
services are intangible and consumption often occurs simultaneously with their production,
experience and credence attributes tend to dominate. This makes evaluating services more
challenging than evaluating physical products. These attributes are closely tied to service
experience, making personal information sources more trustworthy to customers. Furthermore,
due to the difficulty of evaluating such criteria, emotions and mood also significantly influence
customers’ evaluations.
➔ Strive to satisfy current customers effectively, and skillfully leverage customer reviews as
trustworthy sources of personal information.
➔ Create a positive emotional impression, especially through a team of professional and
enthusiastic staff.
2.2.3. Service Customers’ Expectations
➔ LO4: Analyze the factors that influence customer expectations prior to purchasing a service
Expectations are commonly understood as a benchmark for comparison, and are used in two main
senses: they represent what customers believe will happen or want to happen.
The significance of expectations:
• They serve as a basis for evaluating and selecting service alternatives
• They form the foundation for assessing the service after consumption
The Structure of Expectations
Customer expectations of services exist at two distinct levels: desired and adequate.
• Desired service level (or ideal expectations): This reflects the customer's wants—the
service they hope to receive. It is idealistic and represents the upper boundary of
expectations. Desired expectations are generally similar across different service types.
• Adequate service level (or minimum acceptable expectations): This is the lowest threshold
of service that customers are willing to accept without dissatisfaction. Customers recognize
that it may be difficult for a company to deliver perfect service every time. Adequate
expectations tend to vary from brand to brand.
 • Zone of Tolerance:
The Zone of Tolerance refers to the range of variation between the desired and adequate levels of
expectations that customers recognize and are willing to accept. It is bounded by the desired level
(upper limit) and the adequate level (lower limit).
➢ Example:
At the check-in counter of Airline A, a customer expects the waiting time to be between 5 and 10
minutes—with 5 minutes representing the desired level, and 10 minutes the adequate level. If the
check-in procedure takes between 5 and 10 minutes, it falls within the customer’s zone of
tolerance, and they may not pay much attention to the waiting time. If the check-in only takes 2
minutes, the customer will feel extremely satisfied with the service. However, if it takes 15 to 20
minutes, the customer will likely feel very disappointed.
The zone of tolerance may also vary from one customer to another. For example, in the same
check-in situation, a customer who is in a hurry because their flight is about to depart will have a
very narrow zone of tolerance. Every minute feels longer, and the adequate level will shift
upward—meaning the number of acceptable minutes becomes lower. On the other hand, a
customer who arrives well in advance for check-in will have a wider zone of tolerance and is less
likely to be bothered by waiting.
Even for the same customer, the zone of tolerance can vary depending on different service
attributes, or between the first-time and repeat transactions. This variation can be illustrated by the
two diagrams below.
Factors Influencing Service Customers’ Expectations
Factors affecting the “desired” level – the ideal service:

• Personal needs: Each arising need shapes a corresponding level of desired service. For
example, a person visiting a restaurant simply to have a filling meal will have a different
desired service level compared to someone visiting the restaurant seeking a culturally
authentic dining experience.
• Beliefs about service performance: Customers’ beliefs about what a service provider is
capable of delivering shape their aspirations for what they hope to receive.
• Company communications: Corporate messages, in the form of promises; past
consumption experiences; and word-of-mouth recommendations from acquaintances all
contribute to the customer’s mental image of the level of service they expect to receive in
the current interaction.
Factors Affecting the “Adequate” Level – Minimum Acceptable Service:

• Alternative service options: These are other service providers from whom the customer
could obtain the same service. If customers have many providers to choose from—or if
they are able to provide the service themselves—their adequate level of expectation will
be higher than when there are few or no alternatives available.
• Urgency of the service: This refers to emergency or time-sensitive situations in which the
service is required urgently—for example, a car accident creating an immediate need for
auto insurance. In such cases, the adequate level increases because the service becomes
more critical.
• Situational factors: These are service delivery conditions beyond the provider’s control.
For instance, a natural disaster like an earthquake may affect a large number of people at
once. Customers may lower their adequate expectations for an insurance service in such
cases, knowing there is high demand and pressure on the provider.
• Predicted service: This is the level of service that the customer expects to receive based on
prior impressions. It directly influences the adequate level—the more positively a service
is predicted, the higher the customer’s minimum acceptable standard will be. Conversely,
if the predicted service is poor, the adequate level will be lower.
Example 1: Ba Na Hills Cable Car Service
A Japanese tourist visited Ba Na Hills on September 2nd—a national holiday in Vietnam. It was a
hot day and the site was crowded with tourists from across the country. In order to board the cable
car, visitors had to queue for 20–30 minutes. This Japanese guest had expected excellent service,
having read that the cable car system was modern and held a Guinness World Record. However,
upon arrival, he was forced to wait in line and became very frustrated. As a result, just 10 minutes
later, he canceled his cable car ride and chose to visit another destination instead, finding the wait
time unacceptable.
In contrast, most Vietnamese visitors were willing to wait for the cable car. Their predicted service
level was not as high as that of the Japanese tourist, and in addition, they had heard word-of-mouth
reviews and had prior experience with queueing, which helped lower their adequate expectations
compared to the Japanese guest.
Example 2: Watching the Da Nang Fireworks Festival
On a slightly rainy day, you may expect to see more people watching the fireworks than on a sunny
day. As a result, having to queue for ticket checking for 20 minutes in the rain might feel more
acceptable—or even enjoyable—than it would on a hot, sunny day.

➔ Service providers can proactively shape customer expectations through marketing

communication efforts, and by managing customer reviews. However, it is crucial that
these communications remain authentic and realistic to avoid creating misleading
expectations.
2.3. Out-of-Stock Situations and Customer-to-Customer Influence During the Service
Interaction Stage
2.3.1. Service “Out-of-Stock” Situations
➢ LO5: Explain why service businesses must implement strategies to manage customer
waiting
When a customer approaches an ATM at 9:00 AM to withdraw cash, it indicates a need to use the
service at that exact time. However, this need may not be fulfilled as expected if the ATM is out of
cash or currently being used by another customer. This situation is referred to as a service "out-of-
stock" condition.
An out-of-stock situation in service delivery occurs when a business’s service capacity—used to
deliver a specific service—cannot serve an additional customer at a given time when they require
the service. This phenomenon is quite common in service industries due to two inherent reasons:

• Customer demand is highly unpredictable, and

• Services cannot be stored, so businesses cannot rely on inventory systems to flexibly match
supply to demand.
When facing an out-of-stock situation—such as an ATM being out of cash or already in use—
customers typically exhibit one of two behaviors:
Leave (with or without the intention of returning), or
Wait.
When a customer chooses to wait, they are essentially postponing their need for the company’s
service from the desired time to a near-future point. For instance, instead of withdrawing money
precisely at 9:00 AM, they may choose to do so at 9:10 AM.
➔ If a business wants customers to wait and be satisfied while doing so, it must address the
situation on two fronts:
• On one hand, the company should look into improving service processes to make delivery
faster and reduce waiting time.
• On the other hand, it should design a pleasant waiting experience, by creating a comfortable
waiting environment and providing supportive amenities—in other words, implementing
effective waiting management solutions.
2.3.2. Customer-to-Customer Interaction
➔ LO6: Outline strategies for managing customer-to-customer influence during service
use/interactions
Due to the simultaneous nature of service production and consumption in terms of both time and
space, many services—especially high-contact services—often involve multiple customers present
in the service environment at the same time. In such cases, customer-to-customer interaction may
arise in either a positive or negative direction.
For example, customers gather at a coffee shop to watch the final match of the men’s football
tournament at the 31st SEA Games. The murmurs, the cheering when Vietnam’s U23 team scores
a goal—all contribute to enhancing the collective joy. In this scenario, the presence of other
customers watching the match increases the enjoyment for everyone, making the coffee shop
experience more appealing because of the crowd.
Conversely, that same lively atmosphere can negatively affect another customer who came to the
café hoping to work quietly while enjoying coffee. This negative interaction during the service
experience may lead that customer to leave. The more diverse the needs, motives, preferences,
interests, or self-image among customers, the greater the risk of negative influence.
➔ Customer-to-customer influence during service use can be either positive or negative.
Positive influence enhances customer satisfaction and adds attractiveness to the service.
Negative influence reduces satisfaction, creates psychological discomfort, and may even cause
customers to refuse to use the service altogether.
➔ Marketers must anticipate the types of customer-to-customer influences and assess their
potential impact on service usage behavior in order to design appropriate customer
grouping strategies. In principle:
Customers who positively influence one another should be served in the same space and time.
Customers who may negatively affect each other should be separated into different service
environments or time slots.
2.4. Customer Perception and Loyalty After Service Use
2.4.1. Customer Perception
➢ LO7: Analyze the factors influencing service customer perception after service use
How do customers evaluate whether they have experienced a quality service, whether they are
satisfied with that service, and whether they have received good value for what they paid? These
questions can be addressed by analyzing the customer’s perception of the service.
Structure of Service Perception

• Perception is the customer’s cognitive state regarding the service throughout the
consumption process.
• During the actual consumption of a service, customers will form perceptions of the service
quality, the value they receive, and ultimately, whether or not they feel satisfied with the
service.
• Customer perception is typically examined in relation to their expectations.

Service Quality

Perceived
Service

Service Price Satisfaction

 • Service Experiences:
✓ Occur at the “moment of truth” when the customer has actual interaction with the
service provider.
✓ A single service may include multiple experiences.
✓ These experiences affect customer perception in different ways, depending on the
importance of the experience, the type of contact, the factors that generate satisfaction
during the experience, and overall service behavior.
• Service Evidence:
✓ These are the elements that customers can see or feel, which help them tangibilize the
service. Specifically, service evidence includes three key components:
✓ People: frontline staff, the customer themselves, and other customers.
✓ Physical evidence: equipment, physical environment, documents, etc.
✓ Process: steps in the service process, degree of standardization or flexibility, and
whether it is mainly machine-driven or human-driven.
• Corporate Image:
✓ Refers to customer perceptions of the company, as reflected in associations stored in
memory.
✓ These associations may be either concrete or abstract.
✓ A company with multiple levels of service organization or multiple brands may also
have multiple layers of image.
• Price: Represents a relatively tangible portion of the cost that the customer pays to use the
service. It has a significant impact on the customer’s perception of the value received.
➔ To ensure customers perceive satisfaction with the service, businesses should:
• Provide appropriate and unique experiences
• Effectively manage service evidence elements
• Conduct strong brand communications to shape corporate image
• Use pricing strategically and tactically to influence value perception.
2.4.2. Customer Loyalty
➔ LO8: Explain the importance of customer loyalty in the service industry
Loyalty is understood as the willingness to remain committed to a business over the long term.
Loyalty goes beyond a mere behavioral concept, as it also encompasses preference, emotional
attachment, and future intentions. Today, the term "customer engagement" is increasingly used to
describe loyal behaviors that are not necessarily tied to repurchase, such as referrals, providing
feedback, or writing positive reviews. Loyalty is a positive outcome of customer satisfaction,
particularly among those who trust that the service quality of a company is superior. Loyalty not
only directs customers toward repeat usage, but more importantly, it generates positive influence
on the behaviors of potential or future customers. Customers do not become loyal on their own—
businesses must give them reasons to be loyal. Service customers often tend to develop loyalty
early, due to the high perceived risk associated with switching providers. This represents both an
opportunity and a challenge for different service businesses.