9/15/2018

Service Marketing

Session-2

Prof. Ravi Shekhar Kumar

XLRI- Xavier School of Management, Jamshedpur
ravishekhar@xlri.ac.in

Discussion:

• Do differences among Services affect

Consumer behavior & if so, then how?

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Consumer Behavior: Service

 Based on differences in nature of service act (tangible/intangible) &
who or what is direct recipient of service (people/possessions)

Who or What is Direct Recipient of Service?

Nature of Service Act People Possessions

Tangible Actions People processing Possession processing

(services directed at (services directed at

people’s bodies) physical possessions)

Intangible Actions Mental stimulus Information Processing

processing
(services directed at
(services directed at intangible assets)
people’s minds)
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Purchase Process

Service Post-
Prepurchase Stage Encounter Stage Encounter Stage

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Prepurchase Stage: Overview

 Customers seek solutions to

aroused needs
Prepurchase Stage
 Evaluating a service may be
difficult
 Uncertainty about outcomes
increases perceived risk
 What risk reduction strategies
Service Encounter Stage can service suppliers develop?
 Understanding customers’
service expectations
 Components of customer
expectations
 Making a service purchase
Post-Encounter Stage decision

Understanding Risk Perception

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Perceived Risks in Purchasing Services

Functional Financial Temporal

Unsatisfactory Monetary loss, Wasted time, delays
performance unexpected extra leading to problems.
outcomes costs .

Physical Psychological Social

Personal injury,
Fears & negative How others may
damage to
emotions. think & react
possessions.

Sensory
Unwanted impact on
any of five senses.
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Perceived Risks: examples

 Functional—Will training course enhance my skills?
 Financial—Will I lose money if I invest in this stock, as
recommended by my broker
 Temporal—How long will I have to wait to get the movie
ticket?
 Physical—Will I get hurt if I go for diving at resort.
 Psychological—Will the doctor’s diagnosis be effective?
 Social—how others may think & react
 Sensory—Will the hotel bed be uncomfortable?

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How Consumer can handle Perceived Risk?

 Seeking information from respected personal sources
 Using Internet to compare service offerings & search for
independent reviews & ratings
 Visiting service facilities or trying aspects of service before
purchasing
 Asking knowledgeable employees about competing
services
 Relying on a firm that has a good reputation
 Looking for guarantees & warranties
 Examining tangible cues or other physical evidence

Marketing Action to Manage Risk Perceptions

 To protect against Financial and Performance risk
– Offer performance warranties & guarantees
 To protect against Performance and Sensory risk
– Offer previews, free trials (provides experience)
– Advertising (helps to visualize)
 To protect against physical or psychological risks:
– Institute visible safety procedures. Ex. Airline – O2 bags.
– Deliver automated messages about anticipated problems
– Websites offering FAQs & more detailed background
– Train staff members to be respectful & empathetic

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Customer Expectation
 Customer expectations are beliefs about service delivery
that function as standards or reference points against which
performance is judged.
– Customers evaluate service quality by comparing what they expect
against what they perceive they have received (service experience)

 When usually Expectation gets formed?

– Search & decision making;
– Shaped by information search & evaluation of attributes

Discussion:

• Is Customer Expectation constant or evolving?

• Evolving & Dynamic

• Expectations vary from one business to another, and
among differently positioned service providers in the same
industry.
• Expectations change over time depending on innovation,
price, advertisement etc.
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Levels of Customer Expectations

 Desired Service Level:
– Wished-for level of service quality that customer believes can & 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

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Customer Expectation

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Zone of Tolerance for Different Service

Desired Service
Level of Expectation

Zone of
Tolerance Desired Service

Adequate Service

Zone of
Tolerance

Adequate Service

5 Star Restaurant Street Side Food Outlet

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Zone of Tolerance for Different Dimensions

Desired Service
Level of Expectation

Zone of
Tolerance Desired Service

Adequate Service

Zone of
Tolerance

Adequate Service

Most Important Factors Least Important Factors

(McDonald’s Burger quality) (McDonald’s Seating Space)
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Zones of Tolerance for

First-Time vs. Recovery Service
First-Time Service

Outcome

Process

Recovery Service

Outcome

Process

LOW HIGH
Expectations

Source: Parasuraman, Berry and Zeithaml (1991)

Factors: Desired Expectation

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Factors: Desired Expectation

• Derived expectation
• Personal Service philosophies

Factors: Adequate Expectation

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Factors: Adequate Expectation

• Emergencies
• Service Problem

• Bad Weather
• Catastrophe
• Random Overdemand

Factors: Desired & Predicted Expectation

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• Advertising
Factors: Desired & Predicted Expectation
•
•
Personal selling
Contracts
• Other Communication

• Tangibles
• Price

• Personal
• Expert Review

Personal Needs

Explicit Service
Lasting Service
Promises
Intensifiers

Implicit Service
Temporary Service Promises
Intensifiers

Desired Service Word-of-Mouth

Perceived Service
Alternatives
Zone
Past Experience
of
Tolerance
Self-Perceived
Service Role Predicted
Adequate Service Service

Situational
Factors

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Service Encounter Stage: Overview

Prepurchase Stage
 Service encounters range
from high- to low-contact

 Role in high-contact vs. low-

Service Encounter contact delivery
Stage
 Moment of Truth

 Customer Experience

Post-Encounter Stage

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High-Contact Service: Marketing System

Most parts of operations, service delivery, & marketing systems are
exposed to customers
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
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Low-Contact Service: Marketing System

Some parts of systems are invisible to customers
Service Operations
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)
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Service Encounter:
High-Contact vs Low-Contact

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Post-Encounter Stage: Overview

Prepurchase Stage

 Evaluation of service
performance
Service Encounter Stage
 Future intentions

Post-Encounter Stage

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Evaluation of service performance

Service Failure

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Customer Satisfaction
 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 & situational factors

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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)
 Getting feedback during service delivery help to boost customer
loyalty

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Service Failure

Service Failure

Service Failure: Customer Response

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Service Failure: Understanding Customer

Responses
• What proportion of unhappy customers complain?
• Why don’t unhappy customers complain?

• Why do customers complain?

– Obtain compensation
– Vent their anger
– Help to improve the service
– Altruistic reasons
• What do customers expect from the firm once they have
made a complaint?

Perceived Fairness in Service Recovery

Complaint Handling & Service

Recovery Process

Justice Dimensions of the Service Recovery Process

Procedural Interactive Outcome

Justice Justice Justice

Customer Satisfaction with

Service Recovery

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Service Recovery
 Designing appropriate recovery mechanisms depends on
the type of service, the type of customer relationship, and
the target customer segment that are the focus of a service
firm.
 Transaction based service (e.g., airline- front people should
address concern) vs Relationship based service ( e.g.,
hospital- Only doctor should address the concern)

Service Recovery: Paradox

 A good recovery can turn angry, frustrated customers into
loyal ones. ..can, in fact, create more goodwill than if
things had gone smoothly in the first place. (Hart et al. 1990)

 HOWEVER,
–Only a small percent of customers complain
–Service recovery must be SUPERLATIVE
–Service recovery is expensive
–If second service failure occurs, the paradox disappears

Best Strategy: Do it Right the First Time

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Further Reading
 Chapter- 2 & 3
 Article titled “The nature and Determinant of Customer
Expectation of Service”

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