Chapter 2:

Customer Behavior
in
Service
Encounters
Overview Of Chapter 2

 How Differences among Services Affect

Customer Behavior

 Customer Decision Making: The Three Stage

Model of Service Consumption
 Prepurchase Stage
 Service Encounter Stage
 Post-Encounter Stage
A Framework for Developing
Effective Service Marketing
Strategies
Understanding Customer Needs, Decision Making,
and Behavior in Service Encounters
Part I: Chapter 2

Building the Service Model

Part II: Chapters 3-7

Managing the Customer Interface

Part III: Chapters 8-11

Implementing Profitable Service Strategies

Part IV: Chapters 12-15
A Framework for Developing Effective
Service Marketing Strategies
Two Key Themes in Part I of the
Services Marketing Strategy Framework:
Differences among Services Affect
Customer Behavior
Three-Stage Model of Service Consumption

Prepurchase Stage: Service Encounter Stage:

Search, evaluation of Role in high-contact vs.
alternatives, decision low-contact delivery

Post-Encounter Stage:
Evaluation against
expectations, future
intentions
 How Differences among
Services Affect Customer
Behavior
Differences among Services Affect
Customer Behavior

 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
Four Categories Of Services (Fig 2.1)

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  Freight Transportation

 Fitness Center  Laundry,Dry Cleaning

Intangible Actions Mental stimulus Information processing
processing
(services directed at
(services directed at
intangible assets):
people’s minds):

 Education
 Software Consulting

 Advertising/PR
 Data Transmission
Four Categories Of Services

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
Possession Processing

Possession Processing

 Customers are less

physically involved
compared to people
processing services

 Involvement is limited

 Production and
consumption are
separable
Mental Stimulus Processing

Mental Stimulus Processing

 Ethical standards required

when customers who depend
on such services can
potentially be manipulated by
suppliers. Ex Consulting
services – Advise given on
strategy

 Physical presence of recipients

not required – Ex TV Shows
are created elsewhere and
transmitted to the consumer

 Core content of services is

information-based
 Can be “inventoried” – Record
Prog.
Information Processing

Information Processing

 Information is the most

intangible form of service
output

 But may be transformed

into tangible forms viz
books, CD’s

 Line between information

processing and mental
stimulus processing may
be blurred.
Customer Decision Making:
Three-Stage Model of
Service Consumption
The Purchase Process for
Services

Prepurchase Stage

Service Encounter Stage

Post-Encounter Stage
Prepurchase Stage
Prepurchase Stage: Overview

 Customers seek solutions to

Prepurchase Stage aroused needs
 Evaluating a service may be
difficult
 Uncertainty about outcomes
increases perceived risk
Service Encounter Stage  What risk reduction strategies can
service suppliers develop?
 Understanding customers’ service
expectations
 Components of customer
expectations
Post-Encounter Stage
 Making a service purchase
decision
 Customers Seek Solutions to Aroused
Needs
 People buy goods and
services to meet specific
needs/wants

 External sources may

stimulate the awareness
of a need

 Companies may seek

opportunities by
monitoring consumer
attitudes and behavior
Evaluating a Service May Be Difficult

 Search attributes help customers evaluate a

product before purchase
 Style, color, texture, taste, sound

 Experience attributes cannot be evaluated

before purchase—must “experience” product
to know it
 Vacations, sporting events, medical procedures

 Credence attributes are product characteristics

that customers find impossible to evaluate
confidently even after purchase and
consumption
 Quality of repair and maintenance work
 How Product Attributes Affect
Ease of Evaluation
Most Goods Most Services

Easy Difficult
to evaluate to evaluate*
Clothing Restaurant meals Computer repair
Chair Education
Haircut
Motor vehicle Legal services
Entertainment
Foods Complex surgery

High in search High in experience High in credence

attributes attributes attributes
*NOTE: Difficulty of evaluation tends to decrease with broad exposure Source:
to a service category and frequency of use of a specific supplier Adapted from Zeithaml
Perceived Risks in Purchasing and
Using Services

 Functional—unsatisfactory performance outcomes. Ex .

Will training course enhance my skills?

 Financial—monetary loss, unexpected extra costs . Ex.

Will I lose money if I invest in this stock, as recommended by
my broker

 Temporal—wasted time, delays leading to problems. Ex.

How long will I have to wait to get the movie ticket?

 Physical—personal injury, damage to possessions. Ex.

Will I get hurt if I go for diving at resort.
 Psychological—fears and negative emotions. Ex. Will
the doctor’s diagnosis be effective?
 Social—how others may think and react

 Sensory—unwanted impact on any of five senses. Ex.

Will the hotel bed be uncomfortable?
How Might Consumers Handle
Perceived Risk?

 Seeking information from respected personal sources

 Relying on a firm that has a good reputation

 Looking for guarantees and warranties

 Visiting service facilities or trying aspects of service

before purchasing

 Asking knowledgeable employees about competing

services

 Examining tangible cues or other physical evidence

 Using the Internet to compare service offerings and

search for independent reviews and ratings
 Strategic Responses to Managing
Customer Perceptions of Risk
 Offer performance warranties, guarantees to
protect against fears of monetary loss

 For products where customers worry about

performance, sensory risks:
 Offer previews, free trials (provides experience)
 Advertising (helps to visualize)

 For products where customers perceive

physical or psychological risks:
 Institute visible safety procedures. Ex. Airline – O2 bags.
 Deliver automated messages about anticipated problems
 Websites offering FAQs and more detailed background
 Train staff members to be respectful and empathetic
Understanding Customers’ Service
Expectations
 Customers evaluate service quality by
comparing what they expect against what
they perceive they have received (service
experience)

 Expectations of good service vary from one

business to another, and among differently
positioned service providers in the same
industry. Ex Airline- low cost provider should
have different service from that of a complete
service airline
 Expectations change over time depending on
innovation, price, advertisement etc.
 Factors Influencing Customer
Expectations of Service (Fig 2.8)

Explicit & Implicit

Personal Needs Service Promises
Word-of-Mouth
Desired Service Past Experience
Beliefs about
What Is Possible(
wrt personal needs) ZONE
OF
TOLERANCE
Perceived Service
Alterations (Based
on past experience)
Adequate Service Predicted Service

Situational Factors

Source: Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, “The Nature and Determinants of Customer
Expectations of Service,” Journal of the Academy of Marketing Science 21, no. 1 (1993): 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:
 Range within which customers are
willing to accept variations in service
delivery
Service Encounter Stage
Service Encounter Stage: Overview

 Service encounters range from

Prepurchase Stage high- to low-contact

 Understanding the servuction

system

 Service marketing systems:

high-contact and low-contact
Service Encounter Stage
 Role and script theories

 Theater as a metaphor for

service delivery: An
integrative perspective

 Implications for customer

Post-Encounter Stage participation in service
creation and delivery
Service Encounters Range from
High-Contact to Low-Contact (Fig 2.9)

Figure 2.9
Levels of Customer Contact
with Service Organizations
Distinctions between 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. the Web) help reduce contact levels

 Medium-Contact Services Lie in between These

Two
The Servuction System:
Service Production and
Delivery
 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 for a
High-Contact Service (Fig 2.10)
SERVICE MARKETING SYSTEM
Service Delivery System Other Contact Points

Advertising
Service Operations System Other
Customers Sales Calls
Interior & Exterior
Market Research Surveys
Facilities
Billing/Statements
Technical The
Equipment Misc. Mail, Phone Calls,
Core Customer E-mails, Faxes, etc.
Website
Service People Random Exposure to
Facilities/Vehicles

Backstage Front Stage Other Chance Encounters with

Service Personnel
(invisible) (visible) Customers
Word of Mouth
Service Marketing System for a
Low-Contact Service (Fig 2.11)

Service Operations SERVICE MARKETING SYSTEM

System
Service Delivery System Other Contact Points

Mail Advertising
Market Research
Surveys
Technical Self The
Core Service Billing/Statements
Equipment Customer
Random Exposure
Phone, to Facilities/Vehicles
Fax, Web-
site, etc. Word of Mouth

Front Stage
Backstage (visible)
(invisible)
Theater as a Metaphor for Service
Delivery

“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
Theatrical Metaphor: An Integrative
Perspective
 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 participants
Implications of Customer Participation in
Service Delivery

 Greater need for

information/training to
help customers to
perform well, get
desired results

 Customers should be
given a realistic service
preview in advance of
service delivery, so they
Figure 2.13: Tourists Appreciate Easy-to-
have a clear picture of Understand Instructions When Traveling
their expected role
Post-Encounter Stage
Post-Encounter Stage: Overview

Prepurchase Stage

 Evaluation of
service
Service Encounter Stage performance
 Future intentions

Post-Encounter Stage
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 three 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?
 Strategic links exist between customer
satisfaction and corporate
performance.
 Getting feedback during service
delivery help to boost customer
loyalty
 Progressive Insurance seeks to delight
customers through exceptional
customer service (Best Practice in Action
2.1)
 Summary of Chapter 2:
Customer Behavior in Service
Encounters (1)

 Four broad categories of services

 People processing, possession processing, mental stimulus
processing, information processing
 Based on differences in nature of service act (tangible or
intangible), and who or what is direct recipient of service
(people or possessions)
 Each poses distinctive service management challenges

 Three-Stage Model of service consumption

helps us to understand and better manage
customer behavior
 Summary :
Customer Behavior in Service
Encounters (2)
Prepurchase stage
 Customers seek solutions to aroused needs
 Evaluation alternatives are more difficult when a service
involves experience and credence attributes
 Customers face a variety of perceived risks in selecting,
purchasing and using services
 Steps taken to reduce customers’ risk perceptions, include:
(1) guarantees and warranties, (2) previews of service and
visits to service facilities, (3) employee training, (4)
instituting visible safety procedures, (5) easy access to
information, and (6) advance notice of problems or delays
 Customer expectations of service range from “desired” to
“adequate” with a zone of tolerance in between; if actual
service is perceived as less than adequate, customers will
be dissatisfied
 Summary :
Customer Behavior in Service
Encounters (3)
 Service encounter stage
 Service encounters range from high contact to low contact
 Servuction system differs by level of contact:
― High-contact services: Most parts of operations, service delivery,
and marketing systems are exposed to customers
― Low-contact services: Some parts of systems are invisible to
customers
 Role and script theories help us understand and manage customer
behavior during encounters
 Theatrical view of service delivery offers insights for design, stage-
managing performances, and relationships with customer “audience”
 Post-encounter stage
 In evaluating service performance, customers can have expectations
positively disconfirmed, confirmed, or negatively disconfirmed
 Unexpectedly high levels of performance, arousal and positive affect
are likely to lead to delight