SERVICES MARKETING: INTEGRATING PEOPLE,

TECHNOLOGY, STRATEGY
MODULE - 4

DR. ZILLUR RAHMAN

PROFESSOR
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE

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 Understanding Service Products, Consumers, and Markets
Module 1, 2, & 3: New Perspectives on Marketing in the Service Economy
Module 4, 5, & 6: Consumer Behavior in the Service Context
Module 7 & 8: Positioning Services in Competitive Markets

Applying the 4 Ps of Marketing to

Services
Managing the Customer Interface
Module 9, 10, & 11: Developing
Module 20 & 21: Designing and
Service Products Developing Customer
Managing Service Processes
Module 12 & 13: Distributing Relationships
Module 22, 23, & 24: Balancing
Services through Physical and Module 30, 31, & 32: Managing
Demand and Productive Capacity
Electronic Channels Relationships and Building Loyalty
Module 25 & 26: Crafting Service
Module 14, 15, & 16: Setting Module 33, 34, & 35: Complaint
Environment
Prices and Implementing Revenue Handling and Service Recovery
Module 27, 28, & 29: Managing
Management
People for Service Advantage
Module 17, 18, & 19: Promoting
Services and Educating Customers

Striving for Service Excellence

Module 36, 37, & 38: Improving Service Quality and Productivity
Module 39 & 40: Striving for Service Leadership & Creating the Seamless Service Firms
CONSUMER BEHAVIOR IN THE SERVICE CONTEXT
MODULE - 4

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 MODULE OVERVIEW

1. Understanding the three-stage model of service consumption.

2. Using the multi-attribute model to understand how consumers
evaluate and choose between alternative service offerings.
3. Learning why consumers often have difficulties evaluating services,
especially those with many experience and credence attributes.
4. Knowing the perceived risks customers face in
purchasing services and the strategies firms
can use to reduce consumer risk perceptions.

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 INTRODUCTION

• In marketing, it is very important to understand why customers

behave the way they do.
• How do they make decisions about buying and using a service?
• What determines their satisfaction with it after consumption?
• Without this understanding, no firm can hope to create and deliver
services that will result in satisfied customers who
will buy again.

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THE THREE-STAGE MODEL OF SERVICE CONSUMPTION

• Service consumption can be divided into three main stages:

– Pre-purchase Stage
– Service Encounter Stage
– Post-encounter Stage
• Table (next slide) shows that each stage consists of several steps.

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THE THREE-STAGE MODEL OF SERVICE CONSUMPTION

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 PRE-PURCHASE STAGE

• The pre-purchase stage begins with need-awareness and continues

through to information search and evaluation of alternatives to
deciding whether or not to buy a particular service.

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 NEED AWARENESS

• Decision to buy or use a service is triggered by need arousal

• Triggers of need:
– Unconscious minds (e.g., personal identity and aspirations)
– Physical conditions (e.g., hunger )
– External sources (e.g., a service firm’s marketing
activities)

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 NEED AWARENESS

• When a need is recognized, people are likely to be motivated to

take action to resolve it.
• Needs and wants are continuously developing.
• For example, the need for increasingly novel and innovative service
experiences in extreme sports, such as guided mountain climbing,
paragliding, white-water rafting, mountain biking,
and bungee jumping.

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 INFORMATION SEARCH
• Once a need has been recognized, customers are motivated to search
for solutions to satisfy that need.
• Several alternatives may come to mind, and these form the evoked set.
• Evoked set: A set of products and brands that a consumer considers
during the decision-making process – that is derived from past
experiences or external sources such as social media, online reviews,
retail displays, advertising, and recommendations
from service personnel, friends, and family.

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 INFORMATION SEARCH

• However, a consumer is unlikely to use all the alternatives in the

evoked set for decision-making.
• The consumer is likely to narrow it down to a few alternatives to
seriously consider, and these alternatives form the consideration
set.
• During the search process, consumers also learn
about service attributes they should consider and
form expectations of how firms in consideration
set perform on those attributes.

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 EVALUATION OF ALTERNATIVE SERVICES
(MULTI-ATTRIBUTE MODEL)
• Once the consideration set and key attributes are understood, the
consumer typically makes a purchase decision.
• In marketing, we often use multi-attribute models to simulate
consumer decision-making.
• Multi-attribute Model: This model holds that consumers use
service attributes important to them to evaluate
and compare alternative offerings in their
consideration set.

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 EVALUATION OF ALTERNATIVE SERVICES
(MULTI-ATTRIBUTE MODEL)
• Each attribute has an importance weight.
• A higher weight means the attribute is more important.
Current Dry Campus Dry New Dry Importance
Cleaner Cleaner Cleaner Weight Table: Modeling Consumer Choice – For choosing a Dry
Cleaner
Quality of Dry Cleaning 9 10 10 30%

Convenience of Location 10 8 9 25%

Price 8 10 8 20%
Opening Hours 6 10 9 10%
Reliability of On-time Delivery 2 9 9 5%
Friendliness of Staff 2 8 8 5%
Design of Shop 2 7 8 5%
Total Score 7.7 9.2 9.0 100%

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 EVALUATION OF ALTERNATIVE SERVICES
(MULTI-ATTRIBUTE MODEL)
• Service providers who understand the decision-making process of
their target customers can then try to influence that decision-
making process in a number of ways to enhance their chance of
being the chosen provider:
– First, firms need to ensure that their service is in the consideration set,
as without being considered, a firm cannot be chosen.
This can be done through advertising or viral
marketing.

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 EVALUATION OF ALTERNATIVE SERVICES
(MULTI-ATTRIBUTE MODEL)
― Next, firms can change and correct consumer perceptions (e.g., if a clinic
has superior performance on personalized and special care offered by
their doctors but customers do not see this, it can focus its
communications on correcting customer perceptions).
― They can also shift importance weights (e.g., communicate messages that
increase weights of attributes the firm excels in, and de-emphasize those
the firm is not so strong at).
― Firms can even introduce new attributes such as
what Hertz did when advertising its environmental-
Friendly car.
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 EVALUATION OF ALTERNATIVE SERVICES
(SERVICE ATTRIBUTES)
• The multi-attribute model assumes that consumers can evaluate all
important attributes before purchase.
• However, this is often not the case as some attributes are harder to
evaluate than others.
• There are three types of attributes.
– Search attributes
– Experience attributes
– Credence attributes

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 EVALUATION OF ALTERNATIVE SERVICES
(SERVICE ATTRIBUTES)
• Search attributes: They are tangible characteristics that customers
can evaluate before purchase.
– For example, search attributes for a restaurant include type of food,
location, type of restaurant (e.g., fine dining, casual or family-friendly),
and price.
• These tangible search attributes help customers
better understand and evaluate a service, hence
reducing the sense of uncertainty/risk associated
with the purchase.
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 EVALUATION OF ALTERNATIVE SERVICES
(SERVICE ATTRIBUTES)
• Experience attributes: They cannot be evaluated before purchase.
• Customers must “experience” the service before they can assess
attributes such as reliability, ease-of-use, and customer support.
– In our restaurant example, you won’t know how much you actually like
the food, the service provided by your waiter, and the atmosphere in the
restaurant until you are actually using the service.

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 EVALUATION OF ALTERNATIVE SERVICES
(SERVICE ATTRIBUTES)
• Credence attributes: They are characteristics that customers find
hard to evaluate even after consumption.
• Here, the customer is forced to believe or trust that certain tasks
have been performed at the promised level of quality.
– In our restaurant example, credence attributes include the hygiene
conditions in the kitchen, the nutritional quality
and the freshness of ingredients used.

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EVALUATION OF ALTERNATIVE SERVICES
(SERVICE ATTRIBUTES)
• All products can be placed on a
continuum ranging from “easy
to evaluate” to “difficult to
evaluate,” depending on
whether they are high in
search, experience, or
credence attributes.

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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• The harder it is to evaluate a service, the higher is the perceived risk
associated with that decision.
• If you buy a physical good that is unsatisfactory, you can usually
return or replace it. With services, this option may not be possible.
• Perceived risk is usually greater for services that are high in
experience and credence attributes, and first-time
users are likely to face greater uncertainty.

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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• Think about how you felt the first time you had to make a decision
about an unfamiliar service, especially one with important
consequences such as choosing a college or a health insurance plan.
• It is likely that you were worried about the possibility of not making
the best choice, or not even a good choice.
• The worse the possible consequences and the
higher likelihood of these negative consequences
happening, the higher the perception of risk.

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EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)

Table: 7 categories of
perceived risks in purchasing
and using services.

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EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)

Table: 7 categories of
perceived risks in purchasing
and using services.

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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• How might consumers handle perceived risk?
• People usually feel uncomfortable with perceived risks and use a
variety of methods to reduce them, including:
– Seeking information from trusted and respected personal sources such
as family, friends, and peers.
– Using the Internet to compare service offerings, to
search for independent reviews and ratings, and to
explore discussions on social media.
– Relying on a firm that has a good reputation.

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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• How might consumers handle perceived risk?
– Looking for guarantees and warranties.
– Visiting service facilities or trying aspects of the service before
purchasing, and examining tangible cues or other physical evidence
such as the feel and look of the service setting or looking out for
awards won by the firm.
– Asking knowledgeable employees about competing
services to learn about what to look out for when
making this decision.

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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• Strategic responses to managing customer perceptions of risk
• Customers are risk-averse and — all else being equal — will choose
the service with the lower perceived risk.
• Therefore, firms need to proactively work on reducing customer
risk perceptions.
• Suitable strategies vary according to the nature of
the service and may include all or some of the
following strategies:

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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• Strategic responses to managing customer perceptions of risk
– Encourage prospective customers to preview the service through their
company websites and videos.
– Encourage prospective customers to visit the service facilities before
purchase.
– Offer free trials suitable for services with high
experience attributes.
(Many caterers & restaurants allow potential wedding
customers to have free food tasting sessions before
making a booking for their wedding banquet.)

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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• Strategic responses to managing customer perceptions of risk
– For services with high credence qualities and high customer
involvement, advertising helps to communicate the benefits, usage,
and how consumers can enjoy the best results.
– Display credentials.
(Professionals such as doctors, architects, and lawyers often display their degrees and
other certifications because they want customers to “see” they
are qualified to provide expert service).

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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• Strategic responses to managing customer perceptions of risk
– Use evidence management, an organized approach where customers
are presented with coherent evidence of the company’s targeted image
and its value proposition.
(This includes the appearance of furnishings, equipment and facilities; and employees’
dress and behavior).
– Have visible safety procedures that build confidence
and trust.
– Give customers access to online information about
the status of an order or procedure. (e.g., FedEx)
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 EVALUATION OF ALTERNATIVE SERVICES
(PERCEIVED RISK)
• Strategic responses to managing customer perceptions of risk
– Offer service guarantees such as money-back guarantees and
performance warranties.
• When a company does a good job in managing potential customers’ risk
perceptions, uncertainty is reduced, thereby increasing the chances of
them being the chosen service provider.

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 CONCLUSION

• We started this module by introducing three-stage model of service

consumption.
• The first stage, i.e., pre-purchase stage is divided into four steps: (1)
need awareness, (2) information search, (3) evaluation of alternative
solutions and suppliers, and (4) making a purchase decision.
• Out of these four steps, we understood need
awareness and information search.
• Evaluation of alternatives, has also been started &
we’ll continue with it in the next module as well.

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 REFERENCES

• Wirtz, J., Lovelock, C., & Chatterjee, J. (2017) Services Marketing:

People Technology Strategy, Pearson Education, Eighth Edition.
• Zeithaml, V. A., Bitner, M. J., Gremler, D. D., and Pandit, A. (2009)
Services Marketing: Integrating customer focus across the firm, Tata
McGraw-Hill Education Pvt. Ltd., Fourth Edition.
• Hoffman, K. D., & Bateson, J. E. G. (2007) Services
Marketing : Concepts, strategies, & cases, Thomson
Publication, Third Edition.

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Thank You

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