UNIT 3

Consumer Behavior
in Service Encounter
• Customers rarely involve in manufacturing of
Goods but participate in service creation to
some extent.
• Customers often find it difficult to evaluate
services in advance of purchase, but they do
form certain expectations.
• Once a customer has purchased a service,
marketer need to examine usage behavior.
• Challenges for service marketers is to
understand how customers interact with service
operations.
 Customer’s involvement in service encounter
varies with the type of the process-

• People processing: customer is physically involved

throughout entire process. (e.g. Hotel stay)

• Possession processing: involvement may be limited

to drop off of physical item/description of problem and
subsequent pick-up. (e.g. DVD system)

• Mental stimulus processing: involvement is mental

not physical; here customer simply receives output
and acts on it. (e.g. weather forecast)

• Information processing: involvement is mental

with specific idea and information's. (e.g. Health
insurance)
 High contact and Low contact
services

• High contact services: Customer visit service

facility and remain throughout service delivery.
Active contact between service personnel and
customer.
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 channel.
New technology (e.g. web) help reduce contact levels.
 Service encounter

• Service encounter is a period of time

during which customer interact directly with a
services.
• Some Service encounters are very brief and
involves just few discrete steps, other may
extend to a large duration and involves multiple
steps.
• It is difficult to improve service quality and
productivity without full understanding of the
customer’s involvementt in a service
environment.
 Types of service encounters

• A service encounter occurs every time a

customer interacts with the service
organization.
There are 3 types of service encounter-
• Remote encounter
• Phone encounter
• Face-to-face encounter
 Remote encounter
• Encounter can occur without any human contact;
such as when a customer interacts with a bank
through the ATM system, interact with a retailer
through website or direct mail.
• Although there is no direct human contact in such
encounters, It represents an opportunity for the
firm to reinforce or establish quality perceptions.
• In remote encounters the tangible evidence of
the service and the quality of the technical
process become the primary bases for judging
quality.
 Phone encounter
• In many organizations the most frequent
type of encounter occurs between an end
customer and the firm over the
telephone. (e.g. insurance Cos., utilities,
telecommunications etc.)
• Almost all firms rely on phone encounters
in the form of customers service, general
enquiry, or order-taking functions.
• The judgment of quality in phone-
encounter differs from remote-encounter
because there is greater potential
variability in the interaction. ( e.g.
employee knowledge, tone of voice,
effectiveness in handling customers etc.)
 Face-to-face encounter
• It is the most critical type of encounter which
occurs between an employee and a customer in
direct contact. (e.g. banks, entertainment spots,
business centers, consultancies etc.).
• Deterring an understanding service quality issues
in face-to-face contexts is most complex of all as
both verbal and nonverbal behaviors, tangible
cues (employee appearance, information brochure,
equipments, physical evidence) are important
determinants of quality.
• In face-to-face encounters the customer also plays
a role in creating quality service for himself
through his own behavior during the interaction.
 The purchase process for
service
• Prepurchase Stage
1.Awareness of need
2.Information search
3. Evaluation of Alternative service suppliers
• Service Encounter Stage
4.Request service from chosen supplier
5. Service delivery
• Post purchase Stage
6.Evaluation of service performance
7.Future Intensions
Perceived risk in purchasing
and Using Services
• Functional Risk (Unsatisfactory performance outcome)
• Financial Risk( Monetory Loss)

• Temporal Risk( Wasting Time)

• Physical Risk (Personal injury, damage to

possession)
• Psychological Risk( Personal Fear and Emotion)
• Social Risk( How other things react)
• Sensory Risk ( impacts on 5 senses)
 Customer Expectation and
its components
• Desired and adequate Service Levels:
The services that customers hopes to receive is
termed as Desired Service Levels. (Wished-for
service)
Threshold level of expectation is called Adequate
Service Level
• Predicted Service Level: The level of
service that customer anticipate receiving
is known as predicted service.
• Zone of tolerance: The extent to which
customer are willing to accept this
variation.
 Product attributes affecting
Ease of Evaluation
• Search attribute: attributes of product that
allows the customer to evaluate product before
purchase.
E.g. Style,texture,taste,sound are the feature
that allows the customer try out.
• Experience attribute: when attributes can not
be evaluated prior to purchase, Customer
experience the service to know they are getting.
E.g. Hotel, Entertainment ,Restaurant.
• Credence attribute: Product characteristics that
customer finds impossible to evaluate after
purchase and consumption are known as credence
attributes.
E.g. Patient can not evaluate how well the dentist
performed complex dental Procedures.
 Strategic responses to
difficulty in evaluating
services
• Intangibility of service performances:
Marketers whose products are high in
experience characteristics often try to
provide more search attribute for their
customer
E.g. 1. Trail offer: Telecom Companies Low
cost pre-paid connection Post-paid contract
2. Advertising helps to visualize the benefit.
E.g. Credit card companies, Insurance
Companies.
3. Doctors, Lawyers, Architect display their
degrees.
• Variability and Quality control problems:
Quality control for physical products is much
easier as the element of production can be more
closely monitored and failure can be spotted
before product reaches the customer.
Quality Control for services that fall in
experience and credence range is complicated
by customer involvement in production.
Evaluation of such services may be affected by
customer interaction with the physical setting of
the business, employee and even other employee.
E.g. Hair Cut in Salon
 Customer Satisfaction

• Quality and satisfaction are sometimes

used interchangeably.
• Perceived service quality is one of the
component of customer satisfaction
which reflect price/quality trade off,
personal and situational factor as well
 Definition: Customer
Satisfaction

• Consumer’s fulfillment response

• It is judgment that a product or service
feature or the product or service itself
provides a pleasurable level of consumption
related fulfillment.
• Customer evaluation of product or service in
terms of whether the product or services met
the customer’s needs and expectation. Failure
to meet the expectation is assumed to be
results in dissatsfaction.
• Apart from sense of fulfillment, customer
satisfaction can also be related to other types
of feelings depending on types of service.
• 1. can be viewed as contentment
• 2. feeling of pleasure that makes the customer
feel good
• 3. satisfaction may mean Delight
• 4.Sense of relief from negative aspect of
service
• 5. feeling of ambivalence : mix of positive and
negative experiences
 What determines the
customer satisfaction
• 1.Product and Service Feature
E.g. Resort Hotel
• 2.Customer Emotions
E.g. Vacation
• 3.Attribution for services: Perceived cause of the
event
E.g. Weight-loss company( Physical fitness)
• 4.Perceptions of equity or fairness
(have I been treated fairly?, Did I Pay fair price? will I treated
well in exchange of money and efforts I expended?)
• 5. Other consumers, Family Members and Coworkers
E.g. Reaction and expressions by Family members and other
customers
 Fig: Customer perception of quality
and customer satisfaction

Reliability
Situational
Responsiveness Factor
Assurance Service
Quality
Empathy
Tangibles

Product Customer Customer

Quality Satisfaction Loyalty

Price Personal
Factor
 Managing demand and
capacity

• Why do service organization lack the capability

to inventory their services?
• What are the types of constraints facing service
businesses?
• What are the basic strategies for matching
supply and demand?
Managing demand and capacity can be seasonal, weekly
and even daily challenge.

Tax consultants and Air-conditioning maintenance services

face seasonal demand fluctuations. whereas services such
as commuter trains and restaurant face weekly and even
hourly variation in customer demand.
The Underlying Issue: Lack of Inventory
Capability

• Inventory and demand don’t match

• Capacity is often fixed - service
perishability, simultaneous production
and consumption
• Demand often can’t be controlled or
predicted
• Result: Lost business or wasted capacity
• Can’t ever be regained or resold
 Combination of demand and
capacity

• Excess Demand:- The level of demand exceeds maximum

available capacity with the result that some customer are
denied service & business is lost
• Demand exceeds the Optimum capacity:- No one is being
turned away, quality of service may suffer
• Demand and supply are well balanced- This is the level of
optimum capacity staff & facilities are busy without being
overworked & customer receive good service.
• Excess capacity:- demand is below the capacity, underutilized
staff and facilities, receive better services at an individual
level.
Demand versus Supply
 Capacity Constraints and Demand
Patterns

Capacity Constraints Demand Patterns

• Time, labour, • Charting demand

equipment, and patterns
facilities • Predictable cycles
• Optimal versus • Random demand
maximum use of fluctuations
capacity
• Demand patterns by
market segment
 Strategies for Matching
Capacity and Demand

Two Approaches:
• 1. Smooth the demand fluctuation by
shifting the demand to match existing
capacity
• 2. Adjust the capacity to match demand
fluctuation.
 I. Shifting demand to match
capacity
Vary the service offering
Communicate with customers
Modify timing and location of service
delivery
Differentiate on price
 Strategies for Shifting Demand to Match
Capacity
Demand Too High Shift Demand Demand Too Low
• Use sales and advertising
• Use signage to communicate to increase business from
busy days and times.
current market
• Offer incentives to segments.
customers for usage during
nonpeak times. • Modify the service
• Take care of loyal or offering to appeal to new
“regular” customers first. market segments.
• Advertise peak usage times • Offer discounts or price
and benefits of nonpeak use.
reductions.
• Charge full price for the • Modify hours of
service—no discounts.
operation.
• Bring the service to the
customer.
 II. Adjusting capacity to
meet demand
• Stretch existing • Use part-time
employees
capacity
• Outsourcing
• Stretch time • Rent or share facility or
• Stretch labour equipments
• Schedule downtime
• Stretch facility during Low demand
• Stretch equipments • Cross-train employees
• Align capacity with • Modify or move facilities
and equipments
demand fluctuations
 Strategies for Adjusting
Capacity to Match Demand
Demand Too High Adjust Capacity Demand Too Low
• Perform maintenance,
• Stretch time, labour, facilities and
equipment. renovations.
• Cross-train employees. • Schedule vacations.
• Hire part-time employees. • Schedule employee training.
• Request overtime work from employees. • Lay off employees.
• Rent or share facilities.
• Rent or share equipment.
• Subcontract or outsource activities.