1. Revision for Graduation Exam Marketing for Tourism and Destination Tran Tuan Anh

2. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 2 Details l Chapter 3 & 11 l “Services Marketing” by Lovelock et al

3. Chapter 3 Customer Behaviour in Service Settings

4. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 4 Chapter 3 Objectives l Examine the typical CB process for buying and consuming services l Explore key differences between Eastern & Western cultures that impact services l Examine the impact of mood states, role, script and control theory l Understand customers’ intrinsic needs

5. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 5 The Consumer’s Decision Making Process The Decision making process is influenced by our cultural values and norms and comprises three stages: l The pre-purchase stage l The service encounter stage l The post-purchase stage

6. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 6 The Pre-purchase Stage l Recognition of needs l Information search l Evaluation of alternatives

7. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 7 The Service Encounter Stage l Understanding customer’s intrinsic needs and values l Mood states l Role theory l Script theory l Communication Style

8. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 8 The Post –purchase Stage l This stage will be covered in Chapter 4.

9. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 9 Culture ‘Human beings draw close to one another by their common nature, but habits and customs keep them apart’ (Confucian saying).

10. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 10 Hoftstede’s Cultural Dimensions l Collectivism Vs. Individualism: Do people rely on themselves or depend on and respect the group? l Power distance: Does society value equality or inequality in interpersonal interactions?

11. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 11 Hoftstede’s Cultural Dimensions l Uncertainty avoidance: What is the attitude towards risk in society? How does this affect consumption patterns? l Masculinity Vs. femininity: To what extent and at whose expense should the weaker members of society be cared for?

12. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 12 Types of Risk l Functional: this is a concern about performance outcomes e.g. ‘How can I be sure my car will be properly serviced?’ l Financial: this reflects financial risks and unexpected costs e.g. ‘Will I incur extra expenses?’ l Temporal: this is about wasting time or unexpected delays e.g. ‘Will the service be too slow?’

13. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 13 Types of Risk l Psychological: personal fears and other ‘negative’ emotions e.g. ‘Will the service make me feel good?’ l Social: how others think and react e.g. ‘Will my friends approve or admire me?’ l Sensory: these are unwanted impacts on the five senses e.g. ‘Will the restaurant be too noisy?’

14. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 14 Strategies for Risk Reduction l Provide information l Firm’s reputation l Provide guarantees/warrantees l Standardise the service l Internet search l Seek tangible cues

15. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 15 Factors Influencing the Consumer’s Service Evaluation l Mood states l Role theory l Script theory l Control theory  Behavioural control  Cognitive control

16. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 16 Factors Influencing the Consumer’s Service Evaluation l Mood States- moods are part of the affective domain, they may include: boredom, aggression, joy, enthusiasm, disgust, interest etc. Moods alter but can vary in duration. l Role Theory- this implies that consumers are often acting a role-there may be a pattern of behaviour, responses and attitudes that are learned and applied to different situations

17. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 17 Factors Influencing a Consumer’s Service Evaluation l Script Theory- Scripts are cognitive structures that provide a framework for service delivery. They may vary in scope and intensity. l Control Theory- there are two main modes of control-behavioural and cognitive. This theory looks at the correlation between the consumer’s feeling of control, behaviour and judgement of service provision

18. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 18 Consumers’ Needs in a Service Setting l Security: this includes serious physiological issues as well as safety needs such as our need for protection and stability. Security needs may include avoidance of physical and/or financial risks.

19. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 19 Consumers’ Needs in a Service Setting l Respect: a fundamental, higher-level human need. l Esteem: the individual’s self concept, or self identity Is the service level provided congruent with the consumer’s respect and esteem needs?

20. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 20 Consumers’ Needs in a Service Setting l Face: this represents dignity based on a correct relationship between a person and the groups to which they belong i.e. all interpersonal relationships. l ‘Face’ incorporates personal pride, a high sensitivity to shame and dislike of open conflict.

21. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 21 Consumers’ Needs in a Service Setting l Fairness / Equity: this is about how people feel they are treated in terms of fairness, justice or equity. l Distributional fairness: perceived fairness of the outcome or decision l Procedural fairness: the perception of whether the procedures used to arrive at the outcome or decision are fair.

22. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 22 Issues of Fairness and Equity l Keeping promises l Inequity of waiting lines or queues l Discrimination

23. Chapter 11 Managing Capacity and Demand

24. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 24 Chapter 11 Objectives l Explain and use capacity management techniques to meet variations in demand l Explain the patterns and determinants of demand l Formulate demand management strategies and techniques

25. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 25 Managing Capacity: The Challenge Productive capacity may concern: l Physical facilities such as hotels, medical clinics, entertainment facilities, and transport l Service provision equipment such as telephones, hairdryers, scanners, and cash registers l People processing services in which the capacity to serve is constrained by the number, experience and expertise of personnel employed

26. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 26 Meeting the Challenge Two measures of capacity are: l The percentage of total time facilities and equipment are in use l The percentage of the physical space e.g. seats or cubic freight capacity l Labour constraints may include inadequate levels of staffing which may lead to overworked, unhappy staff l The capacity of the facility, supporting equipment and service personnel must be in balance

27. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 27 Creating Flexible Capacity l Provide for additional capacity : some capacity has an elastic ability to absorb extra demand l Increase the number of casual and part- time employees: hire extra staff during busy seasons such as Christmas l Outsource facilities: rent facilities & equipment

28. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 28 Managing Capacity l Create flexibility in what is offered: review what is offered at different times and consider what might be gained by offering more or less at those times l Review the hours of business: consider extending or shortening hours

29. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 29 Managing Capacity l Schedule downtime in periods of low demand: carry out data-processing, repair and maintenance activities when demand is expected to be low l Cross-train employees: employees who can perform several functions can be moved to bottle neck points when needed

30. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 30 Understanding the patterns and determinants of demand 1. Does the level of demand for the service follow a predictable cycle? Does the cycle duration vary by the hour, day, week, month or season? 2. What are the underlying causes of these cyclical variations? Employment schedules, payment dates, school holidays, public holidays, natural cycles?

31. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 31 Understanding the patterns and determinants of demand 3. Do demand patterns seem to change randomly? Are the underlying causes due to weather patterns, health events, accidents, a force majeur? 4. Can continual demand for a particular service be disaggregated by market segments to reflect such components as use patterns by a particular type of customer for a particular purpose or variations in net profitability of each completed transaction

32. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 32 Weekday Weekend Morning peak Midday Afternoon peak Evening/Night Off-peakShoulde r Peak Season of year Day of week Time of day Figure 11.1 Identifying variations in demand by time period

33. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 33 Demand Conditions l Demand exceeds maximum available capacity so that potential business may be lost l Demand exceeds the optimum capacity level, no one is turned away but there is a reduction in perceived service quality l Demand and supply are balanced at the level of optimum capacity l Demand is below optimum capacity and productive resources are underused posing a risk of customer disappoint or doubt about viability

34. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 34 Time cycle 1Time cycle 2 Volume demanded Figure 11.2 Implications of variations in demand relative to capacity Optimum capacity use (demand and supply are well balanced) Demand exceeds capacity (business is lost) Demand exceeds optimum capacity (service quality declines) Low use (may send bad signal) Excess capacity Wasted resources) Maximum available capacity

35. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 35 The Main Approaches to Managing Demand l Take no action and leave demand to find its own level through experience and WOM l Reduce demand in peak periods through pricing, incentives and marketing communications l Increase demand through pricing incentives, special offers and the creation of additional service offerings l Control inventory demand through creating queuing systems and offering access to capacity at different times

36. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 36 Using the Marketing Mix Elements to Shape Demand Patterns l Product variations: offering varying ‘packages’ or ‘bundles’ of product benefits at different times l Modifying the timing and location of delivery involving three basic options: 1. No change 2. Varying the times when the service is available 3. Offering the service to customers at a new location

37. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 37 Using the Marketing Mix Elements to Shape Demand Patterns l Pricing strategies: effective pricing depends on the marketing manager having an understanding of how the demand responds to increases or decreases in the price per unit l Communication efforts: advertising, signage, publicity and sales messages to encourage increased use in off-peak times

38. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 38 Inventorying Demand l Ask customers to wait in line on a first- come, first-served basis l Offer the opportunity of reserving booking space in advance

39. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 39 Managing Customer Behaviour Through Queuing Systems l Waiting lines occur when the number of arrivals exceeds the capacity of the system to process them l Queue management requires the collection of extensive data on arrival patterns (some predictable, some random) l Solutions to queuing problems need to tackle the root causes l Service delays are often caused by multiple factors requiring multiple solutions

40. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 40 Using Market Segmentation to Design Queuing Strategies l Urgency of job: such as in hospital emergency units l Duration of service transaction: supermarket express lanes and banking services l Payment of a premium price: airport check- ins, aircraft boarding l Importance of the customer: priority treatment according to expenditure or usage

41. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 41 The Psychology of Waiting 1. Unoccupied time feels longer 2. Preprocess waits feel longer than in-process 3. Anxiety makes waits seem longer 4. Uncertain waits are longer than known, finite waiting 5. Unexplained waits seems longer

42. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 42 The Psychology of Waiting 6. Unfair waits are longer than equitable waiting 7. People will wait longer for more valuable services 8. Waiting alone feels longer than in groups 9. Physically uncomfortable waiting feels longer 10. Waiting seems longer to new or occasional users

43. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 43 Reservations/bookings l Booking systems may smooth people- processing: hotels, airlines, hairdressers, doctors l Booking systems may help with financial projections and management l Booking system operational problems may be managed through deposit taking, option periods, paying compensation for over-bookings

44. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 44 Information Needed for Demand and Capacity Management Strategies l Historical data on demand level and composition, noting responses to marketing variables l Demand forecasts by segment under specified conditions l Fixed and variable cost data, profitability of incremental sales

45. Lovelock, Patterson, Walker: Services Marketing 3e © 2004 Pearson Education Australia 45 Information Needed for Demand and Capacity Management Strategies l Site-by-site demand variations l Customer attitudes towards queuing l Customer evaluations of quality at different levels of capacity utilisation