1. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 1 Chapter 2 Consumer Behavior in Service Encounters

2. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 2 Where Does the Customer Fit in a Service Organization? (Fig. 2.1)  Consumers rarely involved in manufacture of goods but often participate in service creation and delivery  Challenge for service marketers is to understand how customers interact with service operations  Flowcharting clarifies how customer involvement in service encounters varies with type of process - see Fig. 2-1:  People processing (e.g., motel stay): customer is physically involved throughout entire process  Possession processing (e.g., DVD repair): involvement may be limited to drop off of physical item/description of problem and subsequent pick up  Mental stimulus processing (e.g., weather forecast): involvement is mental, not physical; here customer simply receives output and acts on it  Information processing (e.g., health insurance): involvement is mental - specify information upfront and later receive documentation of coverage

3. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 3 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. Web) help reduce contact levels

4. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 4 Levels of Customer Contact with Service Organizations (Fig. 2.2) Emphasizes encounters with service personnel Emphasizes encounters with equipment High Low Internet Banking Subway

5. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 5 Managing Service Encounters--1  Service encounter: A period of time during which customers interact directly with a service  Moments of truth: Defining points in service delivery where customers interact with employees or equipment  Critical incidents: specific encounters that result in especially satisfying/dissatisfying outcomes for either customers or service employees

6. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 6 Managing Service Encounters--2  Service success often rests on performance of junior contact personnel  Must train, coach, role model desired behavior  Thoughtless or badly behaved customers can cause problems for service personnel (and other customers)  Must educate customers, clarify what is expected, manage behavior

7. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 7 The Purchase Process for Services (Adapted from Fig. 2-3) Prepurchase Stage  Awareness of need  Information search  Evaluation of alternative service suppliers Service Encounter Stage  Request service from chosen supplier  Service delivery Postpurchase Stage  Evaluation of service performance  Future intentions

8. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 8 Perceived Risks in Purchasing and Using Services (Table 2.1)  Functional – unsatisfactory performance outcomes  Financial – monetary loss, unexpected extra costs  Temporal – wasted time, delays lead to problems  Physical – personal injury, damage to possessions  Psychological – fears and negative emotions  Social – how others may think and react  Sensory – unwanted impacts to any of five senses

9. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 9 Factors that Influence Customer Expectations of Services (Fig. 2.4) Predicted Service Explicit & Implicit Service Promises Word-of-Mouth Past Experience Desired Service ZONE OF TOLERANCE Adequate Service Personal Needs Beliefs about What Is Possible Perceived Service Alterations Situational Factors Source: Adapted from Zeithaml, Parasuraman & Berry

10. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 10 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

11. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 11 Intangible Attributes, Variability, and Quality Control Problems Make Services Hard to Evaluate  Search attributes – Tangible characteristics that allow customers to evaluate a product before purchase  Experience attributes – Characteristics that can be experienced when actually using the service  Credence attributes – Characteristics that are difficult to evaluate confidently even after consumption  Goods tend to be higher in search attributes, services tend to be higher in experience and credence attributes  Credence attributes force customers to trust that desired benefits have been delivered

12. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 12 How Product Attributes Affect Ease of Evaluation ) (Fig. 2.5) Source: Adapted from Zeithaml Most Goods High in search attributes High in experience attributes High in credence attributes Difficult to evaluate Easy to evaluate Most Services Clothing Chair Motor vehicle Foods Restaurant meals Lawn fertilizer Haircut Entertainment Computer repair Legal services Complex surgery Education

13. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 13 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

14. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 14 Customer Delight: Going Beyond Satisfaction  Research shows that delight is a function of 3 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?  Progressive Insurance has found ways to positively surprise customers with customer-friendly innovations and extraordinary customer service

15. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 15 A Service Business is a System Comprising Three Overlapping Subsystems 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

16. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 16 Service Marketing System: (1) High Contact Service--e.g., Hotel (Fig. 2.7) Service Operations System Backstage (invisible) Front Stage (visible) Service Delivery System Other Contact Points Service Marketing System

17. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 17 Service Marketing System: (2) Low Contact Service--e.g., Credit Card (Fig. 2.8) Technical Core Mail Self Service Equipment Phone, Fax, Web site etc. The Customer Service Operations System Service Delivery SystemOther Contact Points Backstage (invisible) Front Stage (visible) Advertising Market Research Surveys Random Exposures Facilities, Personnel Word of Mouth Service Marketing System

18. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 18 Service as Theater “ 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

19. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 19 The Dramaturgy of Service Delivery  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

20. Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 2 - 20 Role and Script Theories  Role: A set of behavior patterns learned through experience and communication  Role congruence: In service encounters, employees and customers must act out defined roles for good outcomes  Script: A sequence of behavior to be followed by employees and customers during service delivery  Some scripts (e.g. teeth cleaning) are routinized, others flexible  Technology change may require a revised script  Managers should reexamine existing scripts to find ways to improve delivery, increase productivity, enhance experiences