INTRODUCTION
Services dominate most developed economies, representing significantly more than the half of these countries’ gross domestic product (GDP). For example in the United States, 75% of the GDP is attributed to services. Countries such as Germany, the United Kingdom and Japan also have a significant proportion of their GDP represented by services. Conversely, many lesser developed nations have turned to services as a way to expand and stimulate their economic growth and development without the significant cash infusion often associated with a manufacturing-based economy.
Consistent with the economic growth has been a growth in services employment. Currently, more than 75% of the workforce in the United States is employed is services jobs, and the projected job growth for the rest of the 1990’s and into the 21st century is overwhelmingly dominated by services. It is no wonder that the study of services marketing has enjoyed the same growth and development.
Over the last three decades, services marketing and management (also known as services marketing and/or services management) has blossomed into a thriving field of inquiry and academic investigation cutting across the boarder of disciplines of marketing and management, including human resources and operations. Much of the initial discussion and attention in the 1970’s and early 1980’s centered on the questions of”if” and “how” services differed from goods. From this work came some of the classic distinctions between goods and services, most notably inseparability (simultaneous production and consumption) , intangibility, perishability, heterogeneity (in product) (Shostack 1977). This line of inquiry was followed by questions regarding the marketing and managerial implications of these differences. Over the years, these implications have been and continue to be refined as scholars and practitioners alike moved from more broad generalizations and propositions to testable hypotheses and theories.
Further evidence of mushrooming in the area of services is reported by Iacobucci (1998). Her electronic search under just two keywords, “services marketing,” resulted in approximately 1,000 references for the time period between 1986 and 1997. This is without the inclusion of the articles from “services management” or articles from sources not represented in the electronic databases employed.
Given the growth in services research, along with the dominance of services in the economy, the time seems ripe for a “handbook” on services marketing and management. There was no one book that could serve as a guide for researchers and practitioners, highlighting the latest in theory and turning it into the latest in practice. Such is the goal of the Handbook of Services Marketing and Management: to present the latest critical thinking in the foundations of services, while simultaneously challenging and expanding current services practices.
To this end, we invited contributed chapters from stellar cast- the premier academics studying any aspect of services marketing and management. Readers familiar with the area will recognize that we were enormously successful in doing so: Our list of contributing authors is a most impressive group, an extraordinary and electric bunch. We expect that readers will be informed and challenged by the authors’ presentations and impressed with the variety of issues tackled within these pages. The majority of our contributors are U.S. scholars, but we attempted to include some of our international colleagues. In addition, the majority of authors are also highly experienced, having contributed to the field of services marketing for extended careers. We also attempted to include some of the up-and-coming scholars who will carry in the traditions of the strong research in the field. We are grateful to all of our contributing authors for their superb efforts.
The primary target markets for the handbooks are academics and graduate and executive students desiring a strong foundation in the critical areas of services. A key secondary market is the informed practitioner who is seeking the latest thinking in order to turn it into practice. These practitioners may be lifelong careerists in service sectors seeking new paradigms and tools with which to approach daily management needs, or their roles within their organizations or even their organizations may be changing. For example, numerous middle-level managers new seek career challenges by moving up the corporate ladder, but they may be confronting services marketing issues more frequently than they had previously. Higher-level managers increasingly find themselves overseeing new divisions as their responsibilities cumulate, and they may find supervision of customer service departments bewildering. Top-level management in many industries not traditionally thought of as service providers are finding their customers expecting better service, and they see their competitors beginning to rise to their occasion. As a result senior management also seeks to understand services marketing and management with greater acuity in an effort to provide greater added value to the customer, and in an attempt to develop competitive advantages. Our contributing authors were informed of these intended targets audiences and asked to write accordingly. We think they have been successful in doing so, and we hope the reader will find the Handbook useful in providing chapters that are conceptual but not esoteric.
Definitions
Stated simply, Services Marketing refers to the marketing of services as against tangible products. Services are inherently intangible, are consumed simultaneously at the time of their production, cannot be stored, saved or resold once they have been used and service offerings are unique and cannot be exactly repeated even by the same service provider.
A services marketing is a sub field of marketing, which can be split into the two main areas of goods marketing (which includes the marketing of fast moving consumer goods (FMCG) and durables) and services marketing. Services marketing typically refers to both business to consumer (B2C) and business to business (B2B) services, and includes marketing of services like telecommunications services, financial services, all types of hospitality services, car rental services, air travel, health care services and professional services. The range of approaches and expressions of a marketing idea developed with the hope that it be effective in conveying the ideas to the diverse population of people who receive it.
Service marketing is the promotion of economic activities offered by a business to its clients. It might include the process of selling telecommunications, health treatment, financial, hospitality, car rental, air travel, and professional services.
Services dominate most developed economies, representing significantly more than the half of these countries’ gross domestic product (GDP). For example in the United States, 75% of the GDP is attributed to services. Countries such as Germany, the United Kingdom and Japan also have a significant proportion of their GDP represented by services. Conversely, many lesser developed nations have turned to services as a way to expand and stimulate their economic growth and development without the significant cash infusion often associated with a manufacturing-based economy.
Consistent with the economic growth has been a growth in services employment. Currently, more than 75% of the workforce in the United States is employed is services jobs, and the projected job growth for the rest of the 1990’s and into the 21st century is overwhelmingly dominated by services. It is no wonder that the study of services marketing has enjoyed the same growth and development.
Over the last three decades, services marketing and management (also known as services marketing and/or services management) has blossomed into a thriving field of inquiry and academic investigation cutting across the boarder of disciplines of marketing and management, including human resources and operations. Much of the initial discussion and attention in the 1970’s and early 1980’s centered on the questions of”if” and “how” services differed from goods. From this work came some of the classic distinctions between goods and services, most notably inseparability (simultaneous production and consumption) , intangibility, perishability, heterogeneity (in product) (Shostack 1977). This line of inquiry was followed by questions regarding the marketing and managerial implications of these differences. Over the years, these implications have been and continue to be refined as scholars and practitioners alike moved from more broad generalizations and propositions to testable hypotheses and theories.
Further evidence of mushrooming in the area of services is reported by Iacobucci (1998). Her electronic search under just two keywords, “services marketing,” resulted in approximately 1,000 references for the time period between 1986 and 1997. This is without the inclusion of the articles from “services management” or articles from sources not represented in the electronic databases employed.
Given the growth in services research, along with the dominance of services in the economy, the time seems ripe for a “handbook” on services marketing and management. There was no one book that could serve as a guide for researchers and practitioners, highlighting the latest in theory and turning it into the latest in practice. Such is the goal of the Handbook of Services Marketing and Management: to present the latest critical thinking in the foundations of services, while simultaneously challenging and expanding current services practices.
To this end, we invited contributed chapters from stellar cast- the premier academics studying any aspect of services marketing and management. Readers familiar with the area will recognize that we were enormously successful in doing so: Our list of contributing authors is a most impressive group, an extraordinary and electric bunch. We expect that readers will be informed and challenged by the authors’ presentations and impressed with the variety of issues tackled within these pages. The majority of our contributors are U.S. scholars, but we attempted to include some of our international colleagues. In addition, the majority of authors are also highly experienced, having contributed to the field of services marketing for extended careers. We also attempted to include some of the up-and-coming scholars who will carry in the traditions of the strong research in the field. We are grateful to all of our contributing authors for their superb efforts.
The primary target markets for the handbooks are academics and graduate and executive students desiring a strong foundation in the critical areas of services. A key secondary market is the informed practitioner who is seeking the latest thinking in order to turn it into practice. These practitioners may be lifelong careerists in service sectors seeking new paradigms and tools with which to approach daily management needs, or their roles within their organizations or even their organizations may be changing. For example, numerous middle-level managers new seek career challenges by moving up the corporate ladder, but they may be confronting services marketing issues more frequently than they had previously. Higher-level managers increasingly find themselves overseeing new divisions as their responsibilities cumulate, and they may find supervision of customer service departments bewildering. Top-level management in many industries not traditionally thought of as service providers are finding their customers expecting better service, and they see their competitors beginning to rise to their occasion. As a result senior management also seeks to understand services marketing and management with greater acuity in an effort to provide greater added value to the customer, and in an attempt to develop competitive advantages. Our contributing authors were informed of these intended targets audiences and asked to write accordingly. We think they have been successful in doing so, and we hope the reader will find the Handbook useful in providing chapters that are conceptual but not esoteric.
Definitions
Stated simply, Services Marketing refers to the marketing of services as against tangible products. Services are inherently intangible, are consumed simultaneously at the time of their production, cannot be stored, saved or resold once they have been used and service offerings are unique and cannot be exactly repeated even by the same service provider.
A services marketing is a sub field of marketing, which can be split into the two main areas of goods marketing (which includes the marketing of fast moving consumer goods (FMCG) and durables) and services marketing. Services marketing typically refers to both business to consumer (B2C) and business to business (B2B) services, and includes marketing of services like telecommunications services, financial services, all types of hospitality services, car rental services, air travel, health care services and professional services. The range of approaches and expressions of a marketing idea developed with the hope that it be effective in conveying the ideas to the diverse population of people who receive it.
Service marketing is the promotion of economic activities offered by a business to its clients. It might include the process of selling telecommunications, health treatment, financial, hospitality, car rental, air travel, and professional services.
Unique Characteristics of Services
Ø Intangibility – Unlike a physical, product, a service cannot be seen, tasted, felt, heard, or smelled prior to purchase. As a result, to reduce risks, buyers will look for proof of service quality. For example, the buyer of production support for an open source offering will draw conclusions from the employees they interact with, marketing communications, community reputation, and price. Given that, a marketer’s challenge is to “manage the proof” by crafting targeted messages that make the service more tangible for the buyer.
Ø Inseparability – Services are created and consumed simultaneously. Moreover, the client is present when the service is created, and both the provider and the client contribute to the service outcome. The provider-client interaction cannot be severed from the service offering. As a result, the provider-client interaction is a key marketing feature for any service. Marketing’s challenge is to determine how best to differentiate the provider-client interaction from those of their competitors.
Ø Variability – Because service quality is tied to who provides the service and when and where the services are provided, services are highly variable. Buyers are aware of this variability and will typically seek input from peers or a third-party reviewer before making a purchase. Marketing’s challenge is to limit the perceived variability thru training, standardized processes, and customer monitoring.
Ø Perishability – Unlike a physical product, a service cannot be stored on a shelf. The perishability of services can create challenges for marketing when demand for the service fluctuates. Marketing’s challenge is to manage its people resources efficiently to handle demand changes and to create demand during slow periods.
Ø Intangibility – Unlike a physical, product, a service cannot be seen, tasted, felt, heard, or smelled prior to purchase. As a result, to reduce risks, buyers will look for proof of service quality. For example, the buyer of production support for an open source offering will draw conclusions from the employees they interact with, marketing communications, community reputation, and price. Given that, a marketer’s challenge is to “manage the proof” by crafting targeted messages that make the service more tangible for the buyer.
Ø Inseparability – Services are created and consumed simultaneously. Moreover, the client is present when the service is created, and both the provider and the client contribute to the service outcome. The provider-client interaction cannot be severed from the service offering. As a result, the provider-client interaction is a key marketing feature for any service. Marketing’s challenge is to determine how best to differentiate the provider-client interaction from those of their competitors.
Ø Variability – Because service quality is tied to who provides the service and when and where the services are provided, services are highly variable. Buyers are aware of this variability and will typically seek input from peers or a third-party reviewer before making a purchase. Marketing’s challenge is to limit the perceived variability thru training, standardized processes, and customer monitoring.
Ø Perishability – Unlike a physical product, a service cannot be stored on a shelf. The perishability of services can create challenges for marketing when demand for the service fluctuates. Marketing’s challenge is to manage its people resources efficiently to handle demand changes and to create demand during slow periods.
Types of Services
1. Core Services- A service that is the primary purpose of the transaction. For example, services offered by a barber.
2. Augmented Services- Services that are rendered as a collolary to the sale of a tangible product. For example, product warranty offered to a customer.
1. Core Services- A service that is the primary purpose of the transaction. For example, services offered by a barber.
2. Augmented Services- Services that are rendered as a collolary to the sale of a tangible product. For example, product warranty offered to a customer.
The Service Industry/Service Sectors
Service sector The service sector consists of the "soft" parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability, what is termed affective labor. The basic characteristic of this sector is the production of services instead of end products. Services (also known as "intangible goods") include attention, advice, access, experience, and discussion. The production of information is generally also regarded as a service, but some economists now attribute it to a fourth sector, the quaternary sector.
The tertiary sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to a consumer, as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. However, the focus is on people interacting with people and serving the customer rather than transforming physical goods.
Transport or transportation is the movement of people, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations. Transport is important because it enables trade between persons, which is essential for the development of civilizations.
Transport infrastructure consists of the fixed installations including roads, railways, airways, waterways, canals and pipelines and terminals such as airports, railway stations, bus stations, warehouses, trucking terminals, refueling depots (including fueling docks and fuel stations) and seaports. Terminals may be used both for interchange of passengers and cargo and for maintenance.
Distribution in economics refers to the way total output, income, or wealth is distributed among individuals or among the factors of production (such as labour, land, and capital). In general theory and the national income and product accounts, each unit of output corresponds to a unit of income. One use of national accounts is for classifying factor incomes and measuring their respective shares, as in National Income. But, where focus is on income of persons or households, adjustments to the national accounts or other data sources are frequently used. Here, interest is often on the fraction of income going to the top (or bottom) x percent of households, the next y percent, and so forth (say in quintiles), and on the factors that might affect them (globalization, tax policy, technology, etc.).
Service sector The service sector consists of the "soft" parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability, what is termed affective labor. The basic characteristic of this sector is the production of services instead of end products. Services (also known as "intangible goods") include attention, advice, access, experience, and discussion. The production of information is generally also regarded as a service, but some economists now attribute it to a fourth sector, the quaternary sector.
The tertiary sector of industry involves the provision of services to other businesses as well as final consumers. Services may involve the transport, distribution and sale of goods from producer to a consumer, as may happen in wholesaling and retailing, or may involve the provision of a service, such as in pest control or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. However, the focus is on people interacting with people and serving the customer rather than transforming physical goods.
- Transportation/Distribution
Transport or transportation is the movement of people, animals and goods from one location to another. Modes of transport include air, rail, road, water, cable, pipeline and space. The field can be divided into infrastructure, vehicles and operations. Transport is important because it enables trade between persons, which is essential for the development of civilizations.
Transport infrastructure consists of the fixed installations including roads, railways, airways, waterways, canals and pipelines and terminals such as airports, railway stations, bus stations, warehouses, trucking terminals, refueling depots (including fueling docks and fuel stations) and seaports. Terminals may be used both for interchange of passengers and cargo and for maintenance.
Distribution in economics refers to the way total output, income, or wealth is distributed among individuals or among the factors of production (such as labour, land, and capital). In general theory and the national income and product accounts, each unit of output corresponds to a unit of income. One use of national accounts is for classifying factor incomes and measuring their respective shares, as in National Income. But, where focus is on income of persons or households, adjustments to the national accounts or other data sources are frequently used. Here, interest is often on the fraction of income going to the top (or bottom) x percent of households, the next y percent, and so forth (say in quintiles), and on the factors that might affect them (globalization, tax policy, technology, etc.).
- Wholesaling/Retailing
Wholesaling, jobbing, or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional, or other professional business users; or to other wholesalers and related subordinated services. In general, it is the sale of goods to anyone other than a standard consumer. In the United Kingdom, the Cash and Carry is a term used to describe a wholesale warehouse, particularly those that are open to the general public on payment of a subscription.
Retail is the process of selling consumer goods and/or services to customers through multiple channels of distribution to earn a profit. Demand is created through diverse target markets and promotional tactics, satisfying consumers' wants and needs through a lean supply chain. In the 2000s, an increasing amount of retailing is done online using electronic payment and delivery via a courier or postal mail. Retailing includes subordinated services, such as delivery. The term "retailer" is also applied where a service provider services the needs of a large number of individuals, such as for the public. Shops may be on residential streets, streets with few or no houses, or in a shopping mall. Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order, are forms of non-shop retailing.
- Entertainment
Entertainment is a form of activity that holds the attention and interest of an audience, or gives pleasure and delight. It can be an idea or a task, but is more likely to be one of the activities or events that have developed over thousands of years specifically for the purpose of keeping an audience's attention. Although people's attention is held by different things, because individuals have different preferences in entertainment, most forms are recognizable and familiar. Storytelling, music, drama, dance, and different kinds of performance exist in all cultures, were supported in royal courts, developed into sophisticated forms and over time became available to all citizens. The process has been accelerated in modern times by an entertainment industry which records and sells entertainment products. Entertainment evolves and can be adapted to suit any scale, ranging from an individual who chooses a private entertainment from a now enormous array of pre-recorded products; to a banquet adapted for two; to any size or type of party, with appropriate music and dance; to performances intended for thousands; and even for a global audience.
- Financial Services
Financial services are the economic services provided by the finance industry, which encompasses a broad range of organizations that manage money, including credit unions, banks, credit card companies, insurance companies, accountancy companies, consumer finance companies, stock brokerages, investment funds, real estate funds and some government sponsored enterprises.
- Agricultural Services
Agriculture is the cultivation of animals, plants, fungi, and other life forms for food, fiber, biofuel, medicinals and other products used to sustain and enhance human life. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the development of civilization.
- Manufacturing
Manufacturing is the production of merchandise for use or sale using labour and machines, tools, chemical and biological processing, or formulation. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale. Such finished goods may be used for manufacturing other, more complex products, such as aircraft, household appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell them to end users – the "consumers".
- Health Care
Health care (or healthcare) is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in human beings. Health care is delivered by practitioners in allied health, dentistry, midwifery (obstetrics), medicine, nursing, optometry, pharmacy, psychology and other health professions. It refers to the work done in providing primary care, secondary care, and tertiary care, as well as in public health.
- Educational Services
Education in its general sense is a form of learning in which the knowledge, skills, values, beliefs and habits of a group of people are transferred from one generation to the next through storytelling, discussion, teaching, training, and or research. Education may also include informal transmission of such information from one human being to another. Education frequently takes place under the guidance of others, but learners may also educate themselves (autodidactic learning). Any experience that has a formative effect on the way one thinks, feels, or acts may be considered educational.
- Legal Services
Legal advice is the giving of a professional or formal opinion regarding the substance or procedure of the law.
- Hotel and Restaurant Services
A restaurant is a business which prepares and serves food and drinks to customers in exchange for money, either paid before the meal, after the meal, or with an open account. Meals are generally served and eaten on premises, but many restaurants also offer take-out and food delivery services. Restaurants vary greatly in appearance and offerings, including a wide variety of the main chef's cuisines and service models.
- Automotive Services
A motor vehicle service is a series of maintenance procedures carried out at a set time interval or after the vehicle has travelled a certain distance. The service intervals are specified by the vehicle manufacturer in a service schedule and some modern cars display the due date for the next service electronically on the instrument panel.
Differences between Goods and Services
• Customers do not obtain ownership of services.
• Service products are intangible performances.
• There is greater involvement of customers in the production process.
• Other people may form part of the product.
• There is greater variability in operational inputs and outputs.
• Many services are difficult for customers to evaluate.
• There is typically an absence of inventories.
• The time factor is relatively more important.
• Delivery systems may involve both electronic and physical channels.
Ø Customers Do Not Obtain Ownership of Services
Perhaps the key distinction between goods and services lies in the fact that customers usually derive value from services without obtaining permanent ownership of any tangible elements.
In many instances, service marketers offer customers the opportunity to rent the use of a physical object like a car or hotel room, or to hire for a short period of time the labor and expertise of people whose skills range from brain surgery to knowing how to check customers into a hotel. As a purchaser of services yourself, you know that while your main interest is in the final output, the way in which you are treated during service delivery can also have an important impact on your satisfaction.
Ø Service Products as Intangible Performances
Although services often include tangible elements – such as sitting in an airline seat, eating a meal or getting damaged equipment repaired – the service performance itself is basically an intangible. The benefits of owning and using a manufactured product come from its physical characteristics (although brand image may convey benefits, too). In services, the benefits come from the nature of the performance. The notion of service as a performance that cannot be touched or wrapped up and taken away leads to the use of a theatrical metaphor for service management, visualising service delivery as like the staging of a play, with service personnel as the actors and customers as the audience. (We’ll discuss the managerial implications of this metaphor in Module 10.)
Rental services include a physical object like a car or a power tool. But marketing a car hire performance is very different from attempting to market the sale (or long-term lease) of the physical object on its own. For instance, when hiring a car for a short period which might range from just one day to a couple of weeks, customers usually reserve a particular category of vehicle, rather than a specific brand and model. Instead of worrying about colours and upholstery, customers focus on such elements as price, the location and appearance of pickup and delivery facilities, extent of insurance coverage, cleanliness and maintenance of vehicles, provision of free shuttle buses at airports, availability of 24-hour reservations service; hours when rental offices are staffed, and quality of service provided by customer-contact personnel.
By contrast, the core benefit derived from owning a physical good normally comes specifically from its tangible elements, even though it may also provide intangible benefits, too. An interesting way to distinguish between goods and services is to place them on a scale from tangible dominant to intangible dominant.
Ø Customer Involvement in the Production Process
Performing a service involves assembling and delivering the output of a mix of physical facilities and mental or physical labour. Often customers are actively involved in helping to create the service product – either by serving themselves (as in using a launderette or withdrawing money from an automated cash machine (ATM)) or by cooperating with service personnel in settings such as hairdressers, hotels, colleges or hospitals. Under such circumstances, service firms have much to gain from trying to educate their customers so as to make them more competent. As we shall see in Module 2, services can be categorized according to the extent of contact that the customer has with the service organization. Changing the nature of the production process often affects the role that customers are asked to play in that process.
Ø People as Part of the Product
In high-contact services, customers not only come into contact with service personnel, but they may also rub shoulders with other customers (literally so, if they travel by bus or train during the rush hour). The difference between service businesses often lies in the quality of employees serving customers. It can be a challenging task to manage service encounters between customers and service personnel in ways that will create a satisfactory experience.
Similarly, the type of customers who patronise a particular service business helps to define the nature of the service experience. If you go to a soccer match, the behaviour of the fans can be a big bonus and add to the excitement of the game if they are enthusiastic but wellbehaved.
But if some of them become rowdy and abusive, it can detract from the enjoyment of other spectators at the stadium. For good or ill, other customers become part of the product in many services.
Ø Greater Variability in Operational Inputs and Outputs
The presence of personnel and other customers in the operational system makes it difficult to standardize and control variability in both service inputs and outputs. Manufactured goods can be produced under controlled conditions, designed to optimise both productivity and quality, and then checked for conformance with quality standards long before they reach the customer. (Of course, their subsequent use by customers will vary widely, reflecting customer needs and skills, as well as the nature of the usage occasion.) But when services are consumed as they are produced, final ‘assembly’ must take place under real-time conditions, which may vary from customer to customer and even from one time of the day to another.
As a result, mistakes and shortcomings are both more likely and harder to conceal. These factors make it difficult for service organisations to improve productivity, control quality and offer a consistent product.
However, not all variations in service delivery are necessarily negative and modern service businesses are coming to recognise the value of customising at least some aspects of the service offering to the needs and expectations of individual customers. In fields such as healthcare.
Ø Harder for Customers to Evaluate
Most physical goods tend to be relatively high in ‘search properties’; these are characteristics of the product that a customer can determine prior to purchasing it, such as colour, style, shape, price, fit, feel, hardness or smell. Other goods and some services, by contrast, may emphasise ‘experience properties’ which can be discerned only after purchase or during consumption; as with taste, wearability, ease of handling, quietness and personal treatment.
Finally, there are ‘credence properties’ – characteristics that customers find hard to evaluate even after consumption. Examples include surgery, professional services such as accountancy, and technical repairs that are not readily apparent.
Ø No Stocks for Service Performances
Because a service is a deed or performance, rather than a tangible item that the customer keeps, it is ‘perishable’ and cannot be stocked for sale later. Of course, the necessary facilities, equipment and labour can be held in readiness to create the service, but these simply represent productive capacity, not the product itself. Thus an ATM at a bank has the potential to deliver service 24 hours a day, but it cannot create the desired performance of delivering a specified amount of cash from a designated account or accepting a deposit or making a transfer until a customer instructs it to do so. Similarly, the accident and emergency department at a hospital can be staffed with talented medical personnel and equipment, but it can’t provide medical care unless patients arrive who need treatment.
Having unused capacity in a service business is rather like running water into a sink without a plug. The flow is wasted unless customers (or possessions requiring service) are present to receive it. On the other hand, when demand exceeds capacity, customers may be kept waiting (unless they leave, feeling disappointed, in search of another provider). An important task for service marketers, therefore, is to find ways of smoothing demand levels to match capacity.
Ø Importance of the Time Factor
Many services are delivered in real time. Customers have to be physically present to receive service from organisations such as airlines, hospitals, hairdressers and restaurants. There are limits as to how long customers are willing to be kept waiting; further, service must be delivered quickly so that customers do not waste time receiving service. Even when service takes place in the back office, customers have expectations about how long a particular task should take to complete – whether it is repairing a machine, completing a research report, cleaning a suit or preparing a legal document. Today’s customers are increasingly time sensitive and speed is often a key element in good service.
Ø Different Distribution Channels
Unlike manufacturers, which require physical distribution channels to move goods from factory to customers, many service businesses either use electronic channels (as in broadcasting or electronic funds transfer) or combine the service factory, retail outlet and point of consumption at a single location. In the latter instance, service firms are responsible for managing customer-contact personnel. They may also have to manage the behaviour of customers in the service factory to ensure smoothly running operations and to avoid situations in which one person’s behaviour irritates other customers who are present at the same time.
• Customers do not obtain ownership of services.
• Service products are intangible performances.
• There is greater involvement of customers in the production process.
• Other people may form part of the product.
• There is greater variability in operational inputs and outputs.
• Many services are difficult for customers to evaluate.
• There is typically an absence of inventories.
• The time factor is relatively more important.
• Delivery systems may involve both electronic and physical channels.
Ø Customers Do Not Obtain Ownership of Services
Perhaps the key distinction between goods and services lies in the fact that customers usually derive value from services without obtaining permanent ownership of any tangible elements.
In many instances, service marketers offer customers the opportunity to rent the use of a physical object like a car or hotel room, or to hire for a short period of time the labor and expertise of people whose skills range from brain surgery to knowing how to check customers into a hotel. As a purchaser of services yourself, you know that while your main interest is in the final output, the way in which you are treated during service delivery can also have an important impact on your satisfaction.
Ø Service Products as Intangible Performances
Although services often include tangible elements – such as sitting in an airline seat, eating a meal or getting damaged equipment repaired – the service performance itself is basically an intangible. The benefits of owning and using a manufactured product come from its physical characteristics (although brand image may convey benefits, too). In services, the benefits come from the nature of the performance. The notion of service as a performance that cannot be touched or wrapped up and taken away leads to the use of a theatrical metaphor for service management, visualising service delivery as like the staging of a play, with service personnel as the actors and customers as the audience. (We’ll discuss the managerial implications of this metaphor in Module 10.)
Rental services include a physical object like a car or a power tool. But marketing a car hire performance is very different from attempting to market the sale (or long-term lease) of the physical object on its own. For instance, when hiring a car for a short period which might range from just one day to a couple of weeks, customers usually reserve a particular category of vehicle, rather than a specific brand and model. Instead of worrying about colours and upholstery, customers focus on such elements as price, the location and appearance of pickup and delivery facilities, extent of insurance coverage, cleanliness and maintenance of vehicles, provision of free shuttle buses at airports, availability of 24-hour reservations service; hours when rental offices are staffed, and quality of service provided by customer-contact personnel.
By contrast, the core benefit derived from owning a physical good normally comes specifically from its tangible elements, even though it may also provide intangible benefits, too. An interesting way to distinguish between goods and services is to place them on a scale from tangible dominant to intangible dominant.
Ø Customer Involvement in the Production Process
Performing a service involves assembling and delivering the output of a mix of physical facilities and mental or physical labour. Often customers are actively involved in helping to create the service product – either by serving themselves (as in using a launderette or withdrawing money from an automated cash machine (ATM)) or by cooperating with service personnel in settings such as hairdressers, hotels, colleges or hospitals. Under such circumstances, service firms have much to gain from trying to educate their customers so as to make them more competent. As we shall see in Module 2, services can be categorized according to the extent of contact that the customer has with the service organization. Changing the nature of the production process often affects the role that customers are asked to play in that process.
Ø People as Part of the Product
In high-contact services, customers not only come into contact with service personnel, but they may also rub shoulders with other customers (literally so, if they travel by bus or train during the rush hour). The difference between service businesses often lies in the quality of employees serving customers. It can be a challenging task to manage service encounters between customers and service personnel in ways that will create a satisfactory experience.
Similarly, the type of customers who patronise a particular service business helps to define the nature of the service experience. If you go to a soccer match, the behaviour of the fans can be a big bonus and add to the excitement of the game if they are enthusiastic but wellbehaved.
But if some of them become rowdy and abusive, it can detract from the enjoyment of other spectators at the stadium. For good or ill, other customers become part of the product in many services.
Ø Greater Variability in Operational Inputs and Outputs
The presence of personnel and other customers in the operational system makes it difficult to standardize and control variability in both service inputs and outputs. Manufactured goods can be produced under controlled conditions, designed to optimise both productivity and quality, and then checked for conformance with quality standards long before they reach the customer. (Of course, their subsequent use by customers will vary widely, reflecting customer needs and skills, as well as the nature of the usage occasion.) But when services are consumed as they are produced, final ‘assembly’ must take place under real-time conditions, which may vary from customer to customer and even from one time of the day to another.
As a result, mistakes and shortcomings are both more likely and harder to conceal. These factors make it difficult for service organisations to improve productivity, control quality and offer a consistent product.
However, not all variations in service delivery are necessarily negative and modern service businesses are coming to recognise the value of customising at least some aspects of the service offering to the needs and expectations of individual customers. In fields such as healthcare.
Ø Harder for Customers to Evaluate
Most physical goods tend to be relatively high in ‘search properties’; these are characteristics of the product that a customer can determine prior to purchasing it, such as colour, style, shape, price, fit, feel, hardness or smell. Other goods and some services, by contrast, may emphasise ‘experience properties’ which can be discerned only after purchase or during consumption; as with taste, wearability, ease of handling, quietness and personal treatment.
Finally, there are ‘credence properties’ – characteristics that customers find hard to evaluate even after consumption. Examples include surgery, professional services such as accountancy, and technical repairs that are not readily apparent.
Ø No Stocks for Service Performances
Because a service is a deed or performance, rather than a tangible item that the customer keeps, it is ‘perishable’ and cannot be stocked for sale later. Of course, the necessary facilities, equipment and labour can be held in readiness to create the service, but these simply represent productive capacity, not the product itself. Thus an ATM at a bank has the potential to deliver service 24 hours a day, but it cannot create the desired performance of delivering a specified amount of cash from a designated account or accepting a deposit or making a transfer until a customer instructs it to do so. Similarly, the accident and emergency department at a hospital can be staffed with talented medical personnel and equipment, but it can’t provide medical care unless patients arrive who need treatment.
Having unused capacity in a service business is rather like running water into a sink without a plug. The flow is wasted unless customers (or possessions requiring service) are present to receive it. On the other hand, when demand exceeds capacity, customers may be kept waiting (unless they leave, feeling disappointed, in search of another provider). An important task for service marketers, therefore, is to find ways of smoothing demand levels to match capacity.
Ø Importance of the Time Factor
Many services are delivered in real time. Customers have to be physically present to receive service from organisations such as airlines, hospitals, hairdressers and restaurants. There are limits as to how long customers are willing to be kept waiting; further, service must be delivered quickly so that customers do not waste time receiving service. Even when service takes place in the back office, customers have expectations about how long a particular task should take to complete – whether it is repairing a machine, completing a research report, cleaning a suit or preparing a legal document. Today’s customers are increasingly time sensitive and speed is often a key element in good service.
Ø Different Distribution Channels
Unlike manufacturers, which require physical distribution channels to move goods from factory to customers, many service businesses either use electronic channels (as in broadcasting or electronic funds transfer) or combine the service factory, retail outlet and point of consumption at a single location. In the latter instance, service firms are responsible for managing customer-contact personnel. They may also have to manage the behaviour of customers in the service factory to ensure smoothly running operations and to avoid situations in which one person’s behaviour irritates other customers who are present at the same time.
Services Marketing Triangle
The marketing and selling of services requires a special set of tactics and priorities compared with selling physical products. The service marketing triangle breaks the marketing tasks of your business down into three types. As a service business, you must market both to your employees so they understand the focus of your business and to your customers so they do more business with you.
Internal marketing is the side of the triangle between your organization and your employees who provide your services to customers. Marketing issues include adequate training on the services to be delivered and customer satisfaction service techniques. Internal marketing requires you to be involved with your employees and let them know the goals and even problems facing the business. Internal marketing also can include a performance rewards system for employees who deliver the highest level of customer service.
2. External Marketing
External marketing goes from your business organization out to customers and prospective customers. This is the traditional form of business marketing, showing customers how the services provided by your business benefit them. External marketing includes advertising, your website and your company's social media efforts. The purpose of external marketing is to fill the business pipeline with future business.
3. Interactive Marketing
The side of the triangle between your employees and customers is called interactive marketing. This form of marketing revolves around how your employees deliver the services your company provides. The goal is to have highly satisfied customers who become long-term, repeat customers. The effectiveness of the interactive marketing relates back to the internal marketing efforts of your business. Interactive marketing is also how your employees keep the promises made by your external marketing efforts.
The marketing and selling of services requires a special set of tactics and priorities compared with selling physical products. The service marketing triangle breaks the marketing tasks of your business down into three types. As a service business, you must market both to your employees so they understand the focus of your business and to your customers so they do more business with you.
- Points of the Triangle
Each side of the service marketing triangle represents a type of marketing, and the types interact between the entities on the points where the sides meet. At the top of the triangle sits your business organization. At each corner at the bottom of the triangle are your customers and your employees who interact with and provide the services to your customers.
Internal marketing is the side of the triangle between your organization and your employees who provide your services to customers. Marketing issues include adequate training on the services to be delivered and customer satisfaction service techniques. Internal marketing requires you to be involved with your employees and let them know the goals and even problems facing the business. Internal marketing also can include a performance rewards system for employees who deliver the highest level of customer service.
2. External Marketing
External marketing goes from your business organization out to customers and prospective customers. This is the traditional form of business marketing, showing customers how the services provided by your business benefit them. External marketing includes advertising, your website and your company's social media efforts. The purpose of external marketing is to fill the business pipeline with future business.
3. Interactive Marketing
The side of the triangle between your employees and customers is called interactive marketing. This form of marketing revolves around how your employees deliver the services your company provides. The goal is to have highly satisfied customers who become long-term, repeat customers. The effectiveness of the interactive marketing relates back to the internal marketing efforts of your business. Interactive marketing is also how your employees keep the promises made by your external marketing efforts.
Service Quality Gap Model
The gap model (also known as the "5 gaps model") of service quality is an important customer-satisfaction framework. In "A conceptual model of service quality and its implications for future research" (The Journal of Marketing, 1985), A. Parasuraman, VA Zeitham and LL Berry identify five major gaps that face organizations seeking to meet customer's expectations of the customer experience.
The Service Quality Model, also known as the GAP Model, was developed in 1985. It highlights the main requirements for delivering a high level of service quality by identifying five ‘gaps' that can lead to unsuccessful delivery of service.
The gap model (also known as the "5 gaps model") of service quality is an important customer-satisfaction framework. In "A conceptual model of service quality and its implications for future research" (The Journal of Marketing, 1985), A. Parasuraman, VA Zeitham and LL Berry identify five major gaps that face organizations seeking to meet customer's expectations of the customer experience.
The Service Quality Model, also known as the GAP Model, was developed in 1985. It highlights the main requirements for delivering a high level of service quality by identifying five ‘gaps' that can lead to unsuccessful delivery of service.
The diagram shows the different gaps in the model, including the Knowledge Gap discussed here.
Customers generally have a tendency to compare the service they 'experience' with the service they 'expect' to receive; thus, when the experience does not match the expectation, a gap arises.
GAP 1: Gap between consumer expectation and management perception: This gap arises when the management or service provider does not correctly perceive what the customer wants or needs. For instance – hotel administrators may think guests want better food or in-house restaurant facilities, but guests may be more concerned with the responsiveness of the staff or the cleanliness of their rooms.
Consumer Expectations
Hotel administrators may think guests want better food or in-house restaurant facilities, but guests may be more concerned with the responsiveness of the staff.
Factors that affect the size of the knowledge gap include:
Market Research
GAP 3: Gap between service quality specification and service delivery: This gap may arise in situations pertaining to the service personnel. It could happen due to poor training, incapability or unwillingness to meet the set service standard. An example would be when a doctor's office has very specific standards of hygiene communicated but the hired staff may have been poorly trained on the need to follow these strict protocols.
GAP 4 : Gap between service delivery and external communication: Consumer expectations are highly influenced by statements made by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of delivery of the service. For example – a hospital printed on its brochure may have clean and furnished rooms but in reality, it may be poorly maintained – in this case the patient's expectations are not met.
GAP 5: Gap between expected service and experienced service: This gap arises when the consumer misinterprets the service quality. The physician may keep visiting the patient to show and ensure care, but the patient may interpret this as an indication that something is really wrong.
Customers generally have a tendency to compare the service they 'experience' with the service they 'expect' to receive; thus, when the experience does not match the expectation, a gap arises.
GAP 1: Gap between consumer expectation and management perception: This gap arises when the management or service provider does not correctly perceive what the customer wants or needs. For instance – hotel administrators may think guests want better food or in-house restaurant facilities, but guests may be more concerned with the responsiveness of the staff or the cleanliness of their rooms.
Consumer Expectations
Hotel administrators may think guests want better food or in-house restaurant facilities, but guests may be more concerned with the responsiveness of the staff.
Factors that affect the size of the knowledge gap include:
Market Research
- Before introducing a new product or service into the market, a company must conduct market research to understand whether there would be any demand for the product, and what features should be incorporated. The better this process is conducted, the smaller the knowledge gap will be.
- There are methods of ensuring that customer desires are taken on board. These include: comprehensive studies, gauging satisfaction after individual transactions (surveys immediately after a purchase is made), customer panels and interviews, and through customer complaints.
- The fewer the layers between management and customer contact personnel, the more likely that customer preferences will be incorporated into higher-level decision making on the product.
GAP 3: Gap between service quality specification and service delivery: This gap may arise in situations pertaining to the service personnel. It could happen due to poor training, incapability or unwillingness to meet the set service standard. An example would be when a doctor's office has very specific standards of hygiene communicated but the hired staff may have been poorly trained on the need to follow these strict protocols.
GAP 4 : Gap between service delivery and external communication: Consumer expectations are highly influenced by statements made by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of delivery of the service. For example – a hospital printed on its brochure may have clean and furnished rooms but in reality, it may be poorly maintained – in this case the patient's expectations are not met.
GAP 5: Gap between expected service and experienced service: This gap arises when the consumer misinterprets the service quality. The physician may keep visiting the patient to show and ensure care, but the patient may interpret this as an indication that something is really wrong.
Consumer Behavior in Services Marketing
The Consumer Buying Decision Process
Engel, Blackwell and Kollat have developed in 1968 a model of consumer buying decision process in five steps: Problem/need recognition, information search, evaluation of alternatives to meet this need, purchase decision and post-purchase behavior.
I. Need recognition / Problem recognition:
The need recognition is the first and most important step in the buying process. If there is no need, there is no purchase. This recognition happens when there is a lag between the consumer’s actual situation and the ideal and desired one.
However, not all the needs end up as a buying behavior. It requires that the lag between the two situations is quite important. But the “way” (product price, ease of acquisition, etc.) to obtain this ideal situation has to be perceived as “acceptable” by the consumer based on the level of importance he attributes to the need.
For example, you have a pool and you would like someone to take care of regularly cleaning it instead of you (ideal situation) because it annoys you to do it yourself (actual situation). But you don’t judge the “way” to reach this ideal situation (pay $250 / month for a specialized company) as “acceptable” because its price to obtain it seems too high. Especially compared to the relatively low level of importance you attach to it. So you won’t have a purchase behavior in this situation.
On the other hand, the ability to be able to go to your work by car in 20 minutes every morning (ideal situation) rather than lose three hours in transit because you do not have a car and you live in the countryside (actual situation) is something that means a lot to you. So you will have a buying behavior to purchase a car. Even if the price is important.
In addition to a need resulting from a new element, the gap between the actual situation and the ideal situation may be due to three cases. The current situation has not changed, but the ideal situation has (a neighbor told you about the possibility – that you did not know – to clean the pool by a specialized company). Or, the ideal situation is still the same but it’s the actual situation has changed (you’re tired of cleaning your pool by yourself). Or finally, the two situations have changed.
The recognition of a need by a consumer can be caused in different ways. Different classifications are used:
Once the need is identified, it’s time for the consumer to seek information about possible solutions to the problem. He will search more or less information depending on the complexity of the choices to be made but also his level of involvement. (Buying pasta requires little information and involves fewer consumers than buying a car.)
Then the consumer will seek to make his opinion to guide his choice and his decision-making process with:
III. Alternative evaluation
Once the information collected, the consumer will be able to evaluate the different alternatives that offer to him, evaluate the most suitable to his needs and choose the one he think it’s best for him.
In order to do so, he will evaluate their attributes on two aspects. The objective characteristics (such as the features and functionality of the product) but also subjective (perception and perceived value of the brand by the consumer or its reputation).
Each consumer does not attribute the same importance to each attribute for his decision and his Consumer Buying Decision Process. And it varies from one shopper to another. Mr. Smith may prefer a product for the reputation of the brand X rather than a little more powerful but less known product. While Mrs. Johnson has a very bad perception of that same brand.
The consumer will then use the information previously collected and his perception or image of a brand to establish a set of evaluation criteria, desirable or wanted features, classify the different products available and evaluate which alternative has the most chance to satisfy him.
The process will then lead to what is called “evoked set”. “The evoked set” (aka “consideration set”) is the set of brands or products with a probability of being purchased by the consumer (because he has a good image of it or the information collected is positive).
On the other hand, “inept set” is the set of brands or products that have no chance of being purchased by the shopper (because he has a negative perception or has had a negative buying experience with the product in the past). While “inert set” is the set of brands or products for which the consumer has no specific opinion.
The higher the level of involvement of the consumer and the importance of the purchase are stronger, the higher the number of solutions the consumer will consider will be important. On the opposite, the number of considered solutions will be much smaller for an everyday product or a regular purchase.
IV. Purchase decision
Now that the consumer has evaluated the different solutions and products available for respond to his need, he will be able to choose the product or brand that seems most appropriate to his needs. Then proceed to the actual purchase itself.
His decision will depend on the information and the selection made in the previous step based on the perceived value, product’s features and capabilities that are important to him.
But his Consumer Buying Decision Process and his decision process may also depend or be affected by such things as the quality of his shopping experience or of the store (or online shopping website), the availability of a promotion, a return policy or good terms and conditions for the sale.
For example, a consumer committed to the idea of buying a stereo of a well-known brand could change his decision if he has an unpleasant experience with sellers in the store. While a promotion in a supermarket for a yogurt brand could tip the scale for this brand in the consumer’s mind who was hesitating between three brands of his “evoked set”.
V. Post-purchase behavior
Once the product is purchased and used, the consumer will evaluate the adequacy with his original needs (those who caused the buying behavior). And whether he has made the right choice in buying this product or not. He will feel either a sense of satisfaction for the product (and the choice). Or, on the contrary, a disappointment if the product has fallen far short of expectations.
An opinion that will influence his future decisions and buying behavior. If the product has brought satisfaction to the consumer, he will then minimize stages of information search and alternative evaluation for his next purchases in order to buy the same brand. Which will produce customer loyalty.
On the other hand, if the experience with the product was average or disappointing, the consumer is going to repeat the 5 stages of the Consumer Buying Decision Process during his next purchase but by excluding the brand from his “evoked set”.
The post-purchase evaluation may have important consequences for a brand. A satisfied customer is very likely to become a loyal and regular customer. Especially for everyday purchases with low level of involvement – such as Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG). A loyalty which is a major source of revenue for the brand when you combine all purchases made by customer throughout his entire life (called “lifetime customer value”). The “Holy Grail” that all brands in the industry are trying to achieve.
Positive or negative, consumers will also be able to share their opinion on the brand. Whether in their family or by word-of-mouth. Or on a much broader scale now with social networks or on consumer product review websites. A tendency not to be overlooked because now with the Internet, an unhappy customer can have a strong power to harm for a brand.
That’s why that’s important for companies to have awareness of that matter. In addition to optimizing the customer experience, a guarantee (for example, for a washing machine), an efficient customer service and a specific call center are some of the assets that can be developed to improve post-purchase behavior if there is any trouble with the product.
An example of Consumer Buying Decision Process Nothing like a real example to better understand the five stages of the Consumer Buying Decision Process. Maybe this situation sounds familiar to you.
Stage 1 – Need recognition: It’s sunday night. You’re hungry (internal physiological stimuli) and there is nothing in the fridge. You will order food (statement of need).
Stage 2 – Information search: You already have ordered to the Indian restaurant in your street last month (internal information). A friend recommended a pizzeria in your neighbourhood (external information from environment). And this morning you’ve found a flyer for a sushi restaurant in your mailbox (external information from advertising).
Stage 3 – Alternative evaluation: You have a bad opinion of the Indian restaurant since you’ve been sick the last time (inept set). The pizzeria is both recommended by your friend and also happens to be a well-known brand (positive perception – evoked set). As for the sushi restaurant, it got good reviews on Tripadvisor (positive perception – evoked set).
Stage 4 – Purchase decision: After evaluating the possibilities, you’ve decided to choose the well-known pizza delivery chain. In addition, a new episode of your favorite TV show is broadcasted tonight on TV.
Stage 5 – Post-purchase behavior: The pizza was good (positive review). But you know there was too many calories and you regret a little bit (mixed feelings about yourself). The next time you will choose the sushi restaurant. There is less fat in sushi than pizza (next purchase behavior)!
Understand the Consumer Buying Decision Process in order to adapt your marketing strategy By improving their knowledge of the Consumer Buying Decision Process, brands can improve their marketing strategy to effectively respond and be present with their customers at each stage of their buying behavior. And thus raise and create a need, strengthen their relationship with their customers and grow their sales.
It always starts with a recognition of a need! The start of the buying behavior of the consumer is the need recognition. If there is no need, there is no purchase! That’s why generate or reinforce a need in consumers’ mind to trigger the buying behavior has a fundamental importance for brands.
Steve Jobs had become a master in the area with Apple thanks to remarquable marketing campaigns by successfully creating a need for millions of consumers for products they had never thought before before. But have finally become an important part of their daily lives.
In a different field, TV infomercials are remarquable examples of how to create an unexpected need in a consumer’s mind for a new product. You probably never felt any difficulty to cook a salad, but while watching the introduction of this great infomercial for this new kitchen tool, you finally realize the difficulty of the task and the importance of this new product as a solution to this problem.
Brands must focus on the activation or recall of a need – whether physiological, functional, social or change-related – for the consumer through their advertising campaigns. An even stronger challenge for new products, those with new features or those on new segments that consumers ignore the need or interest.
Brand awareness for everyday purchases is crucial For everyday purchases with low level of involvement, consumers will consider only a limited number of brands when making their choice. Those that come in head first or they know at least by name. This is called “Top-of-mind awareness (TOPA)”.
For brands of the Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) industry, branding and brand awareness can therefore be a real factor of influence of the consumer buying decision process. Especially for products with a low level of differentiation.
Provide concrete information for the alternative evaluation During the “alternative evaluation” stage of the Consumer Buying Decision Process, consumers are looking for solid, reliable and tangible information that will allow them to make their choice. Especially for purchasing and products with high level of involvement.
The brand’s interest is to provide concrete information and proof of the product features, its added value compared to its competitors and how it will respond to their need in order to provide consumers with the information they need and positive influence in their decision making process.
Improve the shopping experience and customer relationships As we saw in previous section, the stage of post-purchase behavior can have important consequences for a brand. Positively or negatively.
To avoid reputation damage and to develop a lasting relationship with its customers, the brand’s interest is to multiply actions for optimizing the shopping experience in-store as well as the product experience. But also provide great customer service in case of dissatisfaction or issue with the product.
Factors Influencing Consumer Behavior
There are 4 main types of factors influencing consumer behavior: cultural factors, social factors, personal factors and psychological factors.
I. Cultural factors
Cultural factors are coming from the different components related to culture or cultural environment from which the consumer belongs.
Culture and societal environment: Culture is crucial when it comes to understanding the needs and behaviors of an individual.
Throughout his existence, an individual will be influenced by his family, his friends, his cultural environment or society that will “teach” him values, preferences as well as common behaviors to their own culture.
For a brand, it is important to understand and take into account the cultural factors inherent to each market or to each situation in order to adapt its product and its marketing strategy. As these will play a role in the perception, habits, behavior or expectations of consumers.
For example, in the West, it is common to invite colleagues or friends at home for a drink or dinner. In Japan, on the contrary, invite someone home does not usually fit into the local customs. It is preferable to do that this kind of outing with friends or colleagues in restaurant.
A significant specificity to take into account for the brands in markets such as savory snacking or sodas and alcoholic beverages. Usage and consumption moments are not the same in all regions of the world.
While if a Japanese offer you a gift, the courtesy is to offer him an equivalent gift in return.
McDonald’s is a brilliant example of adaptation to the specificities of each culture and each market. Well aware of the importance to have an offer with specific products to meet the needs and tastes of consumers from different cultures, the fast-food giant has for example: a McBaguette in France (with french baguette and Dijon mustard), a Chicken Maharaja Mac and a Masala Grill Chicken in India (with Indian spices) as well as a Mega Teriyaki Burger (with teriyaki sauce) or Gurakoro (with macaroni gratin and croquettes) in Japan.
While all the ingredients used by McDonald’s in arabic and muslim countries are certified halal. The fast food chain not offering, of course, any product with bacon or pork.
Sub-cultures: A society is composed of several sub-cultures in which people can identify. Subcultures are groups of people who share the same values based on a common experience or a similar lifestyle in general.
Subcultures are the nationalities, religions, ethnic groups, age groups, gender of the individual, etc..
The subcultures are often considered by the brands for the segmentation of a market in order to adapt a product or a communication strategy to the values or the specific needs of this segment.
For example in recent years, the segment of “ethnic” cosmetics has greatly expanded. These are products more suited to non-Caucasian populations and to types of skin pigmentation for african, arab or indian populations for example.
It’s a real brand positioning with a well-defined target in a sector that only offered makeup products to a caucasian target until now (with the exception of niche brands) and was then receiving critics from consumers of different origin.
Brands often communicate in different ways, sometimes even create specific products (sometimes without significant intrinsic difference) for the same type of product in order to specifically target an age group, a gender or a specific sub-culture.
Consumers are usually more receptive to products and marketing strategies that specifically target them.
Social classes: Social classes are defined as groups more or less homogenous and ranked against each other according to a form of social hierarchy. Even if it’s very large groups, we usually find similar values, lifestyles, interests and behaviors in individuals belonging to the same social class.
We often assume three general categories among social classes : lower class, middle class and upper class.
People from different social classes tend to have different desires and consumption patterns. Disparities resulting from the difference in their purchasing power, but not only. According to some researchers, behavior and buying habits would also be a way of identification and belonging to its social class.
Beyond a common foundation to the whole population and taking into account that many counterexample naturally exist, they usually do not always buy the same products, do not choose the same kind of vacation, do not always watch the same TV shows, do not always read the same magazines, do not have the same hobbies and do not always go in the same types of retailers and stores.
For example, consumers from the middle class and upper class generally consume more balanced and healthy food products than those from the lower class.
They don’t go in the same stores either. If some retailers are, of course, patronized by everyone, some are more specifically targeted to upper classes such as The Fresh Market, Whole Foods Market, Barneys New York or Nordstrom. While others, such as discount supermarkets, attract more consumers from the lower class.
Some studies have also suggested that the social perception of a brand or a retailer is playing a role in the behavior and purchasing decisions of consumers.
In addition, the consumer buying behavior may also change according to social class. A consumer from the lower class will be more focused on price. While a shopper from the upper class will be more attracted to elements such as quality, innovation, features, or even the “social benefit” that he can obtain from the product.
Cultural trends: Cultural trends or “Bandwagon effect” are defined as trends widely followed by people and which are amplified by their mere popularity and by conformity or compliance with social pressure. The more people follow a trend, the more others will want to follow it.
They affect behavior and shopping habits of consumers and may be related to the release of new products or become a source of innovation for brands.
By social pressure, desire to conformity or belonging to a group, desire to “follow fashion trends” or simply due to the high visibility provided by media, consumers will be influenced, consciously or unconsciously, by these trends.
For example, Facebook has become a cultural trend. The social network has widely grew to the point of becoming a must have, especially among young people.
It is the same with the growth of the tablet market. Tablets such as iPad or Galaxy Tab have become a global cultural trend leading many consumers to buy one. Even if they had never specially felt the need before.
For a brand, create a new cultural trend from scratch is not easy. Apple did it with the tablets with its iPad. But this is an exception. However, brands must remain attentive to the new trends and “bandwagon effects”. Whether to accompany it (create a page on Facebook) or to take part in the newly created market (create its own tablet).
II. Social factors
Social factors are among the factors influencing consumer behavior significantly. They fall into three categories: reference groups, family and social roles and status.
Reference groups and membership groups: The membership groups of an individual are social groups to which he belongs and which will influence him. The membership groups are usually related to its social origin, age, place of residence, work, hobbies, leisure, etc..
The influence level may vary depending on individuals and groups. But is generally observed common consumption trends among the members of a same group.
The understanding of the specific features (mindset, values, lifestyle, etc..) of each group allows brands to better target their advertising message.
More generally, reference groups are defined as those that provide to the individual some points of comparison more or less direct about his behavior, lifestyle, desires or consumer habits. They influence the image that the individual has of himself as well as his behavior. Whether it is a membership group or a non-membership group.
Because the individual can also be influenced by a group to which he doesn’t belong yet but wishes to be part of. This is called an aspirational group. This group will have a direct influence on the consumer who, wishing to belong to this group and look like its members, will try to buy the same products.
For example, even if he doesn’t need it yet, a surfing beginner may want to buy “advanced” brands or products used by experienced surfers (aspirational group) in order to get closer to this group. While a teen may want the shoe model or smartphone used by the group of “popular guys” from his high school (aspirational group) in order to be accepted by this group.
Some brands have understood this very well and communicate, implicitly or not, on the “social benefit” provided by their products.
Within a reference group that influence the consumer buying behavior, several roles have been identified:
Family: The family is maybe the most influencing factor for an individual. It forms an environment of socialization in which an individual will evolve, shape his personality, acquire values. But also develop attitudes and opinions on various subjects such as politics, society, social relations or himself and his desires.
But also on his consumer habits, his perception of brands and the products he buys.
We all kept, for many of us and for some products and brands, the same buying habits and consumption patterns that the ones we had known in our family.
Perceptions and family habits generally have a strong influence on the consumer buying behavior. People will tend to keep the same as those acquired with their families.
For example, if you have never drunk Coke during your childhood and your parents have described it as a product “full of sugar and not good for health”. There is far less chance that you are going to buy it when you will grow up that someone who drinks Coke since childhood.
For brands – especially for Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) – successfully “integrate” the family is both a real challenge and an opportunity to develop a strong consumer loyalty among all the family members.
That’s why it’s important for brands to be seen as a family brand in order to become a consumer habit for parents and children when they will become adults.
Social roles and status: The position of an individual within his family, his work, his country club, his group of friends, etc.. – All this can be defined in terms of role and social status.
A social role is a set of attitudes and activities that an individual is supposed to have and do according to his profession and his position at work, his position in the family, his gender, etc.. – and expectations of the people around him.
Social status meanwhile reflects the rank and the importance of this role in society or in social groups. Some are more valued than others.
The social role and status profoundly influences the consumer behavior and his purchasing decisions. Especially for all the “visible” products from other people.
For example, a consumer may buy a Ferrari or a Porsche for the quality of the car but also for the external signs of social success that this kind of cars represents. Moreover, it is likely that a CEO driving a small car like a Ford Fiesta or a Volkswagen Golf would be taken less seriously by its customers and business partners than if he is driving a german luxury car.
And this kind of behaviors and influences can be found at every level and for every role and social status.
Again, many brands have understood it by creating an image associated with their products reflecting an important social role or status.
III. Personal factors
Decisions and buying behavior are obviously also influenced by the characteristics of each consumer.
Age and way of life: A consumer does not buy the same products or services at 20 or 70 years. His lifestyle, values, environment, activities, hobbies and consumer habits evolve throughout his life.
For example, during his life, a consumer could change his diet from unhealthy products (fast food, ready meals, etc..) to a healthier diet, during mid-life with family before needing to follow a little later a low cholesterol diet to avoid health problems.
The factors influencing the buying decision process may also change. For example, the “social value” of a brand generally play a more important role in the decision for a consumer at 25 than at 65 years.
The family life cycle of the individual will also have an influence on his values, lifestyles and buying behavior depending whether he’s single, in a relationship, in a relationship with kids, etc.. As well as the region of the country and the kind of city where he lives (large city, small town, countryside, etc..).
For a brand or a retailer, it may be interesting to identify, understand, measure and analyze what are the criteria and personal factors that influence the shopping behavior of their customers in order to adapt.
For example, it is more than possible that consumers living in New York do not have the same behavior and purchasing habits than the ones in Nebraska. For a retailer, have a deep understanding and adapt to these differences will be a real asset to increase sales.
Purchasing power and revenue: The purchasing power of an individual will have, of course, a decisive influence on his behavior and purchasing decisions based on his income and his capital.
This obviously affects what he can afford, his perspective on money and the level of importance of price in his purchasing decisions. But it also plays a role in the kind of retailers where he goes or the kind of brands he buys.
As for social status, some consumers may also look for the “social value” of products they buy in order to show “external indications” of their incomes and their level of purchasing power..
Lifestyle: The lifestyle of an individual includes all of its activities, interests, values and opinions.
The lifestyle of a consumer will influence on his behavior and purchasing decisions. For example, a consumer with a healthy and balanced lifestyle will prefer to eat organic products and go to specific grocery stores, will do some jogging regularly (and therefore will buy shoes, clothes and specific products), etc..
Personality and self-concept: Personality is the set of traits and specific characteristics of each individual. It is the product of the interaction of psychological and physiological characteristics of the individual and results in constant behaviors.
It materializes into some traits such as confidence, sociability, autonomy, charisma, ambition, openness to others, shyness, curiosity, adaptability, etc..
While the self-concept is the image that the individual has – or would like to have – of him and he conveys to his entourage. These two concepts greatly influence the individual in his choices and his way of being in everyday life. And therefore also his shopping behavior and purchasing habits as consumer.
In order to attract more customers, many brands are trying to develop an image and a personality that conveys the traits and values - real or desired – of consumers they are targeting.
For example, since its launch, Apple cultivates an image of innovation, creativity, boldness and singularity which is able to attract consumers who identify to these values and who feel valued – in their self-concept – by buying a product from Apple.
Because consumers do not just buy products based on their needs or for their intrinsic features but they are also looking for products that are consistent and reinforce the image they have of themselves or they would like to have.
The more a product or brand can convey a positive and favorable self-image to the consumer, the more it will be appreciated and regularly purchased.
IV. Psychological factors
Among the factors factors influencing consumer behavior, psychological factors can be divided into 4 categories: motivation, perception, learning as well as beliefs and attitudes.
Motivation: Motivation is what will drive consumers to develop a purchasing behavior. It is the expression of a need is which became pressing enough to lead the consumer to want to satisfy it. It is usually working at a subconscious level and is often difficult to measure.
Motivation is directly related to the need and is expressed in the same type of classification as defined in the stages of the consumer buying decision process.
To increase sales and encourage consumers to purchase, brands should try to create, make conscious or reinforce a need in the consumer’s mind so that he develops a purchase motivation. He will be much more interested in considering and buy their products.
They must also, according to research, the type of product they sell and the consumers they target, pick out the motivation and the need to which their product respond in order to make them appear as the solution to the consumers’ need.
Perception: Perception is the process through which an individual selects, organizes and interprets the information he receives in order to do something that makes sense. The perception of a situation at a given time may decide if and how the person will act.
Depending to his experiences, beliefs and personal characteristics, an individual will have a different perception from another.
Each person faces every day tens of thousands of sensory stimuli (visual, auditory, kinesthetic, olfactory and gustatory). It would be impossible for the brain to process all consciously. That is why it focuses only on some of them.
The perception mechanism of an individual is organized around three processes:
The attention level also varies depending on the activity of the individual and the number of other stimuli in the environment. For example, an individual who is bored during a subway trip will be much more attentive to a new ad displayed in the tube. It is a new stimuli that breaks the trip routine for him.
Consumers will also be much more attentive to stimuli related to a need. For example, a consumer who wishes to buy a new car will pay more attention to car manufacturers’ ads. While neglecting those for computers.
Lastly, people are more likely to be attentive to stimuli that are new or out of the ordinary. For example, an innovative advertising or a marketing message (Unique Value Proposition) widely different from its competitors is more likely to be remembered by consumers.
Selective distortion often benefits to strong and popular brands. Studies have shown that the perception and brand image plays a key role in the way consumers perceived and judged the product.
Several experiments have shown that even if we give them the same product, consumers find that the product is or tastes better when they’ve been told that it’s from a brand they like than when they’ve been told it’s a generic brand. While it is exactly the same product!
Similarly, consumers will tend to appreciate even less a product if it comes from a brand for which they have a negative perception.
Selective retention is also what explains why brands and advertisers use so much repetition in their advertising campaigns and why they are so broadcasted. So that the selective retention can help the brand to become a “top of mind” brand in the consumer’s mind.
Learning: Learning is through action. When we act, we learn. It implies a change in the behavior resulting from the experience. The learning changes the behavior of an individual as he acquires information and experience.
For example, if you are sick after drinking milk, you had a negative experience, you associate the milk with this state of discomfort and you “learn” that you should not drink milk. Therefore, you don’t buy milk anymore.
Rather, if you had a good experience with the product, you will have much more desire to buy it again next time.
The learning theories can be used in marketing by brands. As the theory of operant conditioning which states that you can build a good image and high demand for a product by associating it with a positive reinforcement (or rather a bad image with a negative reinforcement).
Beliefs and attitudes: A belief is a conviction that an individual has on something. Through the experience he acquires, his learning and his external influences (family, friends, etc..), he will develop beliefs that will influence his buying behavior.
While an attitude can be defined as a feeling, an assessment of an object or idea and the predisposition to act in a certain way toward that object. Attitudes allow the individual to develop a coherent behavior against a class of similar objects or ideas.
Beliefs as well as attitudes are generally well-anchored in the individual’s mind and are difficult to change. For many people, their beliefs and attitudes are part of their personality and of who they are.
However, it is important to understand, identify and analyze the positive attitudes and beliefs but also the negative ones that consumers can have on a brand or product. To change the brand’s marketing message or adjust its positioning in order to get consumers to change their brand perception.
Many factors influencing consumer behavior As we have just seen, many factors, specificities and characteristics influence the individual in what he is and the consumer in his decision making process, shopping habits, purchasing behavior, the brands he buys or the retailers he goes.
A purchase decision is the result of each and every one of these factors. An individual and a consumer is led by his culture, his subculture, his social class, his membership groups, his family, his personality, his psychological factors, etc.. And is influenced by cultural trends as well as his social and societal environment.
By identifying and understanding the factors that influence their customers, brands have the opportunity to develop a strategy, a marketing message (Unique Value Proposition) and advertising campaigns more efficient and more in line with the needs and ways of thinking of their target consumers. A real asset to better meet the needs of its customers and increase sales.
Customer’s Expectations and Perception in Services
Importance of customer expectations
Customer expectations are beliefs about service delivery that serve as standards or reference points against which performance is judged. Because customers compare their perceptions of performance with these reference points when evaluating service quality, thorough knowledge about customer expectations is critical to services marketers. Knowing what the customer expects is the first and possibly most critical step in delivering good quality service. Being wrong about what customers want can mean losing a customer’s business when another company hits the target exactly. Being wrong can also mean expending money, time and other resources on things that do not count to the customer. Being wrong can even mean not surviving in a fiercely competitive market.
The Consumer Buying Decision Process
Engel, Blackwell and Kollat have developed in 1968 a model of consumer buying decision process in five steps: Problem/need recognition, information search, evaluation of alternatives to meet this need, purchase decision and post-purchase behavior.
I. Need recognition / Problem recognition:
The need recognition is the first and most important step in the buying process. If there is no need, there is no purchase. This recognition happens when there is a lag between the consumer’s actual situation and the ideal and desired one.
However, not all the needs end up as a buying behavior. It requires that the lag between the two situations is quite important. But the “way” (product price, ease of acquisition, etc.) to obtain this ideal situation has to be perceived as “acceptable” by the consumer based on the level of importance he attributes to the need.
For example, you have a pool and you would like someone to take care of regularly cleaning it instead of you (ideal situation) because it annoys you to do it yourself (actual situation). But you don’t judge the “way” to reach this ideal situation (pay $250 / month for a specialized company) as “acceptable” because its price to obtain it seems too high. Especially compared to the relatively low level of importance you attach to it. So you won’t have a purchase behavior in this situation.
On the other hand, the ability to be able to go to your work by car in 20 minutes every morning (ideal situation) rather than lose three hours in transit because you do not have a car and you live in the countryside (actual situation) is something that means a lot to you. So you will have a buying behavior to purchase a car. Even if the price is important.
In addition to a need resulting from a new element, the gap between the actual situation and the ideal situation may be due to three cases. The current situation has not changed, but the ideal situation has (a neighbor told you about the possibility – that you did not know – to clean the pool by a specialized company). Or, the ideal situation is still the same but it’s the actual situation has changed (you’re tired of cleaning your pool by yourself). Or finally, the two situations have changed.
The recognition of a need by a consumer can be caused in different ways. Different classifications are used:
- Internal stimuli (physiological need felt by the individual as hunger or thirst) which opposes the external stimuli such as exposure to an advertisement, the sight of a pretty dress in a shop window or the mouth-watering smell of a french “pain au chocolat” when passing by a bakery.
- Classification by type of needs:
- Functional need: the need is related to a feature or specific functions of the product or happens to be the answer to a functional problem. Like a computer with a more powerful video card to be able to play the latest video games or a washing machine that responds to the need to have clean clothes while avoiding having to do it by hand or go to the laundromat.
- Social need: the need comes from a desire for integration and belongingness in the social environment or for social recognition. Like buying a new fashionable bag to look good at school or choose a luxury car to “show” that you are successful in life.
- Need for change: the need has its origin in a desire from the consumer to change. This may result in the purchase of a new coat or new furniture to change the decoration of your apartment.
- The Maslow’s hierarchy of needs: Developed by the eponymous psychologist, this is one the best known and widely used classifications and representations for hierarchy of needs. It specifies that an individual is “guided” by certain needs that he wants to achieve before seeking to focus on the following ones:
- 1. Physiological needs
- 2. Safety needs
- 3. Need of love and belonging
- 4. Need of esteem (for oneself and from the others)
- 5. Need of self-actualization
Once the need is identified, it’s time for the consumer to seek information about possible solutions to the problem. He will search more or less information depending on the complexity of the choices to be made but also his level of involvement. (Buying pasta requires little information and involves fewer consumers than buying a car.)
Then the consumer will seek to make his opinion to guide his choice and his decision-making process with:
- Internal information: this information is already present in the consumer’s memory. It comes from previous experiences he had with a product or brand and the opinion he may have of the brand.
- External information: This is information on a product or brand received from and obtained by friends or family, by reviews from other consumers or from the press. Not to mention, of course, official business sources such as an advertising or a seller’s speech.
III. Alternative evaluation
Once the information collected, the consumer will be able to evaluate the different alternatives that offer to him, evaluate the most suitable to his needs and choose the one he think it’s best for him.
In order to do so, he will evaluate their attributes on two aspects. The objective characteristics (such as the features and functionality of the product) but also subjective (perception and perceived value of the brand by the consumer or its reputation).
Each consumer does not attribute the same importance to each attribute for his decision and his Consumer Buying Decision Process. And it varies from one shopper to another. Mr. Smith may prefer a product for the reputation of the brand X rather than a little more powerful but less known product. While Mrs. Johnson has a very bad perception of that same brand.
The consumer will then use the information previously collected and his perception or image of a brand to establish a set of evaluation criteria, desirable or wanted features, classify the different products available and evaluate which alternative has the most chance to satisfy him.
The process will then lead to what is called “evoked set”. “The evoked set” (aka “consideration set”) is the set of brands or products with a probability of being purchased by the consumer (because he has a good image of it or the information collected is positive).
On the other hand, “inept set” is the set of brands or products that have no chance of being purchased by the shopper (because he has a negative perception or has had a negative buying experience with the product in the past). While “inert set” is the set of brands or products for which the consumer has no specific opinion.
The higher the level of involvement of the consumer and the importance of the purchase are stronger, the higher the number of solutions the consumer will consider will be important. On the opposite, the number of considered solutions will be much smaller for an everyday product or a regular purchase.
IV. Purchase decision
Now that the consumer has evaluated the different solutions and products available for respond to his need, he will be able to choose the product or brand that seems most appropriate to his needs. Then proceed to the actual purchase itself.
His decision will depend on the information and the selection made in the previous step based on the perceived value, product’s features and capabilities that are important to him.
But his Consumer Buying Decision Process and his decision process may also depend or be affected by such things as the quality of his shopping experience or of the store (or online shopping website), the availability of a promotion, a return policy or good terms and conditions for the sale.
For example, a consumer committed to the idea of buying a stereo of a well-known brand could change his decision if he has an unpleasant experience with sellers in the store. While a promotion in a supermarket for a yogurt brand could tip the scale for this brand in the consumer’s mind who was hesitating between three brands of his “evoked set”.
V. Post-purchase behavior
Once the product is purchased and used, the consumer will evaluate the adequacy with his original needs (those who caused the buying behavior). And whether he has made the right choice in buying this product or not. He will feel either a sense of satisfaction for the product (and the choice). Or, on the contrary, a disappointment if the product has fallen far short of expectations.
An opinion that will influence his future decisions and buying behavior. If the product has brought satisfaction to the consumer, he will then minimize stages of information search and alternative evaluation for his next purchases in order to buy the same brand. Which will produce customer loyalty.
On the other hand, if the experience with the product was average or disappointing, the consumer is going to repeat the 5 stages of the Consumer Buying Decision Process during his next purchase but by excluding the brand from his “evoked set”.
The post-purchase evaluation may have important consequences for a brand. A satisfied customer is very likely to become a loyal and regular customer. Especially for everyday purchases with low level of involvement – such as Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG). A loyalty which is a major source of revenue for the brand when you combine all purchases made by customer throughout his entire life (called “lifetime customer value”). The “Holy Grail” that all brands in the industry are trying to achieve.
Positive or negative, consumers will also be able to share their opinion on the brand. Whether in their family or by word-of-mouth. Or on a much broader scale now with social networks or on consumer product review websites. A tendency not to be overlooked because now with the Internet, an unhappy customer can have a strong power to harm for a brand.
That’s why that’s important for companies to have awareness of that matter. In addition to optimizing the customer experience, a guarantee (for example, for a washing machine), an efficient customer service and a specific call center are some of the assets that can be developed to improve post-purchase behavior if there is any trouble with the product.
An example of Consumer Buying Decision Process Nothing like a real example to better understand the five stages of the Consumer Buying Decision Process. Maybe this situation sounds familiar to you.
Stage 1 – Need recognition: It’s sunday night. You’re hungry (internal physiological stimuli) and there is nothing in the fridge. You will order food (statement of need).
Stage 2 – Information search: You already have ordered to the Indian restaurant in your street last month (internal information). A friend recommended a pizzeria in your neighbourhood (external information from environment). And this morning you’ve found a flyer for a sushi restaurant in your mailbox (external information from advertising).
Stage 3 – Alternative evaluation: You have a bad opinion of the Indian restaurant since you’ve been sick the last time (inept set). The pizzeria is both recommended by your friend and also happens to be a well-known brand (positive perception – evoked set). As for the sushi restaurant, it got good reviews on Tripadvisor (positive perception – evoked set).
Stage 4 – Purchase decision: After evaluating the possibilities, you’ve decided to choose the well-known pizza delivery chain. In addition, a new episode of your favorite TV show is broadcasted tonight on TV.
Stage 5 – Post-purchase behavior: The pizza was good (positive review). But you know there was too many calories and you regret a little bit (mixed feelings about yourself). The next time you will choose the sushi restaurant. There is less fat in sushi than pizza (next purchase behavior)!
Understand the Consumer Buying Decision Process in order to adapt your marketing strategy By improving their knowledge of the Consumer Buying Decision Process, brands can improve their marketing strategy to effectively respond and be present with their customers at each stage of their buying behavior. And thus raise and create a need, strengthen their relationship with their customers and grow their sales.
It always starts with a recognition of a need! The start of the buying behavior of the consumer is the need recognition. If there is no need, there is no purchase! That’s why generate or reinforce a need in consumers’ mind to trigger the buying behavior has a fundamental importance for brands.
Steve Jobs had become a master in the area with Apple thanks to remarquable marketing campaigns by successfully creating a need for millions of consumers for products they had never thought before before. But have finally become an important part of their daily lives.
In a different field, TV infomercials are remarquable examples of how to create an unexpected need in a consumer’s mind for a new product. You probably never felt any difficulty to cook a salad, but while watching the introduction of this great infomercial for this new kitchen tool, you finally realize the difficulty of the task and the importance of this new product as a solution to this problem.
Brands must focus on the activation or recall of a need – whether physiological, functional, social or change-related – for the consumer through their advertising campaigns. An even stronger challenge for new products, those with new features or those on new segments that consumers ignore the need or interest.
Brand awareness for everyday purchases is crucial For everyday purchases with low level of involvement, consumers will consider only a limited number of brands when making their choice. Those that come in head first or they know at least by name. This is called “Top-of-mind awareness (TOPA)”.
For brands of the Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) industry, branding and brand awareness can therefore be a real factor of influence of the consumer buying decision process. Especially for products with a low level of differentiation.
Provide concrete information for the alternative evaluation During the “alternative evaluation” stage of the Consumer Buying Decision Process, consumers are looking for solid, reliable and tangible information that will allow them to make their choice. Especially for purchasing and products with high level of involvement.
The brand’s interest is to provide concrete information and proof of the product features, its added value compared to its competitors and how it will respond to their need in order to provide consumers with the information they need and positive influence in their decision making process.
Improve the shopping experience and customer relationships As we saw in previous section, the stage of post-purchase behavior can have important consequences for a brand. Positively or negatively.
To avoid reputation damage and to develop a lasting relationship with its customers, the brand’s interest is to multiply actions for optimizing the shopping experience in-store as well as the product experience. But also provide great customer service in case of dissatisfaction or issue with the product.
Factors Influencing Consumer Behavior
There are 4 main types of factors influencing consumer behavior: cultural factors, social factors, personal factors and psychological factors.
I. Cultural factors
Cultural factors are coming from the different components related to culture or cultural environment from which the consumer belongs.
Culture and societal environment: Culture is crucial when it comes to understanding the needs and behaviors of an individual.
Throughout his existence, an individual will be influenced by his family, his friends, his cultural environment or society that will “teach” him values, preferences as well as common behaviors to their own culture.
For a brand, it is important to understand and take into account the cultural factors inherent to each market or to each situation in order to adapt its product and its marketing strategy. As these will play a role in the perception, habits, behavior or expectations of consumers.
For example, in the West, it is common to invite colleagues or friends at home for a drink or dinner. In Japan, on the contrary, invite someone home does not usually fit into the local customs. It is preferable to do that this kind of outing with friends or colleagues in restaurant.
A significant specificity to take into account for the brands in markets such as savory snacking or sodas and alcoholic beverages. Usage and consumption moments are not the same in all regions of the world.
While if a Japanese offer you a gift, the courtesy is to offer him an equivalent gift in return.
McDonald’s is a brilliant example of adaptation to the specificities of each culture and each market. Well aware of the importance to have an offer with specific products to meet the needs and tastes of consumers from different cultures, the fast-food giant has for example: a McBaguette in France (with french baguette and Dijon mustard), a Chicken Maharaja Mac and a Masala Grill Chicken in India (with Indian spices) as well as a Mega Teriyaki Burger (with teriyaki sauce) or Gurakoro (with macaroni gratin and croquettes) in Japan.
While all the ingredients used by McDonald’s in arabic and muslim countries are certified halal. The fast food chain not offering, of course, any product with bacon or pork.
Sub-cultures: A society is composed of several sub-cultures in which people can identify. Subcultures are groups of people who share the same values based on a common experience or a similar lifestyle in general.
Subcultures are the nationalities, religions, ethnic groups, age groups, gender of the individual, etc..
The subcultures are often considered by the brands for the segmentation of a market in order to adapt a product or a communication strategy to the values or the specific needs of this segment.
For example in recent years, the segment of “ethnic” cosmetics has greatly expanded. These are products more suited to non-Caucasian populations and to types of skin pigmentation for african, arab or indian populations for example.
It’s a real brand positioning with a well-defined target in a sector that only offered makeup products to a caucasian target until now (with the exception of niche brands) and was then receiving critics from consumers of different origin.
Brands often communicate in different ways, sometimes even create specific products (sometimes without significant intrinsic difference) for the same type of product in order to specifically target an age group, a gender or a specific sub-culture.
Consumers are usually more receptive to products and marketing strategies that specifically target them.
Social classes: Social classes are defined as groups more or less homogenous and ranked against each other according to a form of social hierarchy. Even if it’s very large groups, we usually find similar values, lifestyles, interests and behaviors in individuals belonging to the same social class.
We often assume three general categories among social classes : lower class, middle class and upper class.
People from different social classes tend to have different desires and consumption patterns. Disparities resulting from the difference in their purchasing power, but not only. According to some researchers, behavior and buying habits would also be a way of identification and belonging to its social class.
Beyond a common foundation to the whole population and taking into account that many counterexample naturally exist, they usually do not always buy the same products, do not choose the same kind of vacation, do not always watch the same TV shows, do not always read the same magazines, do not have the same hobbies and do not always go in the same types of retailers and stores.
For example, consumers from the middle class and upper class generally consume more balanced and healthy food products than those from the lower class.
They don’t go in the same stores either. If some retailers are, of course, patronized by everyone, some are more specifically targeted to upper classes such as The Fresh Market, Whole Foods Market, Barneys New York or Nordstrom. While others, such as discount supermarkets, attract more consumers from the lower class.
Some studies have also suggested that the social perception of a brand or a retailer is playing a role in the behavior and purchasing decisions of consumers.
In addition, the consumer buying behavior may also change according to social class. A consumer from the lower class will be more focused on price. While a shopper from the upper class will be more attracted to elements such as quality, innovation, features, or even the “social benefit” that he can obtain from the product.
Cultural trends: Cultural trends or “Bandwagon effect” are defined as trends widely followed by people and which are amplified by their mere popularity and by conformity or compliance with social pressure. The more people follow a trend, the more others will want to follow it.
They affect behavior and shopping habits of consumers and may be related to the release of new products or become a source of innovation for brands.
By social pressure, desire to conformity or belonging to a group, desire to “follow fashion trends” or simply due to the high visibility provided by media, consumers will be influenced, consciously or unconsciously, by these trends.
For example, Facebook has become a cultural trend. The social network has widely grew to the point of becoming a must have, especially among young people.
It is the same with the growth of the tablet market. Tablets such as iPad or Galaxy Tab have become a global cultural trend leading many consumers to buy one. Even if they had never specially felt the need before.
For a brand, create a new cultural trend from scratch is not easy. Apple did it with the tablets with its iPad. But this is an exception. However, brands must remain attentive to the new trends and “bandwagon effects”. Whether to accompany it (create a page on Facebook) or to take part in the newly created market (create its own tablet).
II. Social factors
Social factors are among the factors influencing consumer behavior significantly. They fall into three categories: reference groups, family and social roles and status.
Reference groups and membership groups: The membership groups of an individual are social groups to which he belongs and which will influence him. The membership groups are usually related to its social origin, age, place of residence, work, hobbies, leisure, etc..
The influence level may vary depending on individuals and groups. But is generally observed common consumption trends among the members of a same group.
The understanding of the specific features (mindset, values, lifestyle, etc..) of each group allows brands to better target their advertising message.
More generally, reference groups are defined as those that provide to the individual some points of comparison more or less direct about his behavior, lifestyle, desires or consumer habits. They influence the image that the individual has of himself as well as his behavior. Whether it is a membership group or a non-membership group.
Because the individual can also be influenced by a group to which he doesn’t belong yet but wishes to be part of. This is called an aspirational group. This group will have a direct influence on the consumer who, wishing to belong to this group and look like its members, will try to buy the same products.
For example, even if he doesn’t need it yet, a surfing beginner may want to buy “advanced” brands or products used by experienced surfers (aspirational group) in order to get closer to this group. While a teen may want the shoe model or smartphone used by the group of “popular guys” from his high school (aspirational group) in order to be accepted by this group.
Some brands have understood this very well and communicate, implicitly or not, on the “social benefit” provided by their products.
Within a reference group that influence the consumer buying behavior, several roles have been identified:
- The initiator: the person who suggests buying a product or service
- The influencer: the person whose point of view or advice will influence the buying decision. It may be a person outside the group (singer, athlete, actor, etc..) but on which group members rely on.
- The decision-maker: the person who will choose which product to buy. In general, it’s the consumer but in some cases it may be another person. For example, the “leader” of a soccer supporters’ group (membership group) that will define, for the whole group, which supporter’s scarf buy and bear during the next game.
- The buyer: the person who will buy the product. Generally, this will be the final consumer.
Family: The family is maybe the most influencing factor for an individual. It forms an environment of socialization in which an individual will evolve, shape his personality, acquire values. But also develop attitudes and opinions on various subjects such as politics, society, social relations or himself and his desires.
But also on his consumer habits, his perception of brands and the products he buys.
We all kept, for many of us and for some products and brands, the same buying habits and consumption patterns that the ones we had known in our family.
Perceptions and family habits generally have a strong influence on the consumer buying behavior. People will tend to keep the same as those acquired with their families.
For example, if you have never drunk Coke during your childhood and your parents have described it as a product “full of sugar and not good for health”. There is far less chance that you are going to buy it when you will grow up that someone who drinks Coke since childhood.
For brands – especially for Fast-Moving Consumer Goods (FMCG) or Consumer Packaged Goods (CPG) – successfully “integrate” the family is both a real challenge and an opportunity to develop a strong consumer loyalty among all the family members.
That’s why it’s important for brands to be seen as a family brand in order to become a consumer habit for parents and children when they will become adults.
Social roles and status: The position of an individual within his family, his work, his country club, his group of friends, etc.. – All this can be defined in terms of role and social status.
A social role is a set of attitudes and activities that an individual is supposed to have and do according to his profession and his position at work, his position in the family, his gender, etc.. – and expectations of the people around him.
Social status meanwhile reflects the rank and the importance of this role in society or in social groups. Some are more valued than others.
The social role and status profoundly influences the consumer behavior and his purchasing decisions. Especially for all the “visible” products from other people.
For example, a consumer may buy a Ferrari or a Porsche for the quality of the car but also for the external signs of social success that this kind of cars represents. Moreover, it is likely that a CEO driving a small car like a Ford Fiesta or a Volkswagen Golf would be taken less seriously by its customers and business partners than if he is driving a german luxury car.
And this kind of behaviors and influences can be found at every level and for every role and social status.
Again, many brands have understood it by creating an image associated with their products reflecting an important social role or status.
III. Personal factors
Decisions and buying behavior are obviously also influenced by the characteristics of each consumer.
Age and way of life: A consumer does not buy the same products or services at 20 or 70 years. His lifestyle, values, environment, activities, hobbies and consumer habits evolve throughout his life.
For example, during his life, a consumer could change his diet from unhealthy products (fast food, ready meals, etc..) to a healthier diet, during mid-life with family before needing to follow a little later a low cholesterol diet to avoid health problems.
The factors influencing the buying decision process may also change. For example, the “social value” of a brand generally play a more important role in the decision for a consumer at 25 than at 65 years.
The family life cycle of the individual will also have an influence on his values, lifestyles and buying behavior depending whether he’s single, in a relationship, in a relationship with kids, etc.. As well as the region of the country and the kind of city where he lives (large city, small town, countryside, etc..).
For a brand or a retailer, it may be interesting to identify, understand, measure and analyze what are the criteria and personal factors that influence the shopping behavior of their customers in order to adapt.
For example, it is more than possible that consumers living in New York do not have the same behavior and purchasing habits than the ones in Nebraska. For a retailer, have a deep understanding and adapt to these differences will be a real asset to increase sales.
Purchasing power and revenue: The purchasing power of an individual will have, of course, a decisive influence on his behavior and purchasing decisions based on his income and his capital.
This obviously affects what he can afford, his perspective on money and the level of importance of price in his purchasing decisions. But it also plays a role in the kind of retailers where he goes or the kind of brands he buys.
As for social status, some consumers may also look for the “social value” of products they buy in order to show “external indications” of their incomes and their level of purchasing power..
Lifestyle: The lifestyle of an individual includes all of its activities, interests, values and opinions.
The lifestyle of a consumer will influence on his behavior and purchasing decisions. For example, a consumer with a healthy and balanced lifestyle will prefer to eat organic products and go to specific grocery stores, will do some jogging regularly (and therefore will buy shoes, clothes and specific products), etc..
Personality and self-concept: Personality is the set of traits and specific characteristics of each individual. It is the product of the interaction of psychological and physiological characteristics of the individual and results in constant behaviors.
It materializes into some traits such as confidence, sociability, autonomy, charisma, ambition, openness to others, shyness, curiosity, adaptability, etc..
While the self-concept is the image that the individual has – or would like to have – of him and he conveys to his entourage. These two concepts greatly influence the individual in his choices and his way of being in everyday life. And therefore also his shopping behavior and purchasing habits as consumer.
In order to attract more customers, many brands are trying to develop an image and a personality that conveys the traits and values - real or desired – of consumers they are targeting.
For example, since its launch, Apple cultivates an image of innovation, creativity, boldness and singularity which is able to attract consumers who identify to these values and who feel valued – in their self-concept – by buying a product from Apple.
Because consumers do not just buy products based on their needs or for their intrinsic features but they are also looking for products that are consistent and reinforce the image they have of themselves or they would like to have.
The more a product or brand can convey a positive and favorable self-image to the consumer, the more it will be appreciated and regularly purchased.
IV. Psychological factors
Among the factors factors influencing consumer behavior, psychological factors can be divided into 4 categories: motivation, perception, learning as well as beliefs and attitudes.
Motivation: Motivation is what will drive consumers to develop a purchasing behavior. It is the expression of a need is which became pressing enough to lead the consumer to want to satisfy it. It is usually working at a subconscious level and is often difficult to measure.
Motivation is directly related to the need and is expressed in the same type of classification as defined in the stages of the consumer buying decision process.
To increase sales and encourage consumers to purchase, brands should try to create, make conscious or reinforce a need in the consumer’s mind so that he develops a purchase motivation. He will be much more interested in considering and buy their products.
They must also, according to research, the type of product they sell and the consumers they target, pick out the motivation and the need to which their product respond in order to make them appear as the solution to the consumers’ need.
Perception: Perception is the process through which an individual selects, organizes and interprets the information he receives in order to do something that makes sense. The perception of a situation at a given time may decide if and how the person will act.
Depending to his experiences, beliefs and personal characteristics, an individual will have a different perception from another.
Each person faces every day tens of thousands of sensory stimuli (visual, auditory, kinesthetic, olfactory and gustatory). It would be impossible for the brain to process all consciously. That is why it focuses only on some of them.
The perception mechanism of an individual is organized around three processes:
- Selective Attention: The individual focuses only on a few details or stimulus to which he is subjected. The type of information or stimuli to which an individual is more sensitive depends on the person.
The attention level also varies depending on the activity of the individual and the number of other stimuli in the environment. For example, an individual who is bored during a subway trip will be much more attentive to a new ad displayed in the tube. It is a new stimuli that breaks the trip routine for him.
Consumers will also be much more attentive to stimuli related to a need. For example, a consumer who wishes to buy a new car will pay more attention to car manufacturers’ ads. While neglecting those for computers.
Lastly, people are more likely to be attentive to stimuli that are new or out of the ordinary. For example, an innovative advertising or a marketing message (Unique Value Proposition) widely different from its competitors is more likely to be remembered by consumers.
- Selective Distortion: In many situations, two people are not going to interpret an information or a stimulus in the same way. Each individual will have a different perception based on his experience, state of mind, beliefs and attitudes. Selective distortion leads people to interpret situations in order to make them consistent with their beliefs and values.
Selective distortion often benefits to strong and popular brands. Studies have shown that the perception and brand image plays a key role in the way consumers perceived and judged the product.
Several experiments have shown that even if we give them the same product, consumers find that the product is or tastes better when they’ve been told that it’s from a brand they like than when they’ve been told it’s a generic brand. While it is exactly the same product!
Similarly, consumers will tend to appreciate even less a product if it comes from a brand for which they have a negative perception.
- Selective Retention: People do not retain all the information and stimuli they have been exposed to. Selective retention means what the individual will store and retain from a given situation or a particular stimulus. As for selective distortion, individuals tend to memorize information that will fit with their existing beliefs and perceptions.
Selective retention is also what explains why brands and advertisers use so much repetition in their advertising campaigns and why they are so broadcasted. So that the selective retention can help the brand to become a “top of mind” brand in the consumer’s mind.
Learning: Learning is through action. When we act, we learn. It implies a change in the behavior resulting from the experience. The learning changes the behavior of an individual as he acquires information and experience.
For example, if you are sick after drinking milk, you had a negative experience, you associate the milk with this state of discomfort and you “learn” that you should not drink milk. Therefore, you don’t buy milk anymore.
Rather, if you had a good experience with the product, you will have much more desire to buy it again next time.
The learning theories can be used in marketing by brands. As the theory of operant conditioning which states that you can build a good image and high demand for a product by associating it with a positive reinforcement (or rather a bad image with a negative reinforcement).
Beliefs and attitudes: A belief is a conviction that an individual has on something. Through the experience he acquires, his learning and his external influences (family, friends, etc..), he will develop beliefs that will influence his buying behavior.
While an attitude can be defined as a feeling, an assessment of an object or idea and the predisposition to act in a certain way toward that object. Attitudes allow the individual to develop a coherent behavior against a class of similar objects or ideas.
Beliefs as well as attitudes are generally well-anchored in the individual’s mind and are difficult to change. For many people, their beliefs and attitudes are part of their personality and of who they are.
However, it is important to understand, identify and analyze the positive attitudes and beliefs but also the negative ones that consumers can have on a brand or product. To change the brand’s marketing message or adjust its positioning in order to get consumers to change their brand perception.
Many factors influencing consumer behavior As we have just seen, many factors, specificities and characteristics influence the individual in what he is and the consumer in his decision making process, shopping habits, purchasing behavior, the brands he buys or the retailers he goes.
A purchase decision is the result of each and every one of these factors. An individual and a consumer is led by his culture, his subculture, his social class, his membership groups, his family, his personality, his psychological factors, etc.. And is influenced by cultural trends as well as his social and societal environment.
By identifying and understanding the factors that influence their customers, brands have the opportunity to develop a strategy, a marketing message (Unique Value Proposition) and advertising campaigns more efficient and more in line with the needs and ways of thinking of their target consumers. A real asset to better meet the needs of its customers and increase sales.
Customer’s Expectations and Perception in Services
Importance of customer expectations
Customer expectations are beliefs about service delivery that serve as standards or reference points against which performance is judged. Because customers compare their perceptions of performance with these reference points when evaluating service quality, thorough knowledge about customer expectations is critical to services marketers. Knowing what the customer expects is the first and possibly most critical step in delivering good quality service. Being wrong about what customers want can mean losing a customer’s business when another company hits the target exactly. Being wrong can also mean expending money, time and other resources on things that do not count to the customer. Being wrong can even mean not surviving in a fiercely competitive market.
Expected service: levels of expectations
“Levels of expectation are why two organizations in the same business can offer far different levels of service and still keep customers happy. It is why McDonald’s can extend excellent industrialized service with few employees per customer and why an expensive restaurant with many tuxedoed waiters may be unable to do as well from the customer’s point of view.”
Zone of Tolerance
It seems that customers have two levels of expectation:
It seems that customers have two levels of expectation:
- adequate - what they find acceptable
- desired -what they hope to receive.
Factors that Influence the Desired and Adequate Service Expectations
Four factors that influence the desired and adequate service expectations are as follows: 1. Explicit service promises 2. Implicit service promises 3. Word-of-mouth communications 4. Past experience.
When consumers are interested in purchasing services, they are likely to seek or take in information from several different sources. For example, they may call a store, ask a friend, or deliberately track newspaper advertisements to find the needed service at the lowest price.
They may also receive service information by watching television or hearing an unsolicited comment from a colleague about a service that was performed well. In addition to these active and passive types of external search for information, consumers may conduct an internal search by reviewing the information held in memory about the service.
1. Explicit service promises
2. Implicit service promises
3. Word-of-mouth communications, and
4. Past experience.
1. Explicit service promises: Explicit service promises are personal and non-personal statements about the service made by the organization to customers. The statements are personal when they are communicated by salespeople or service or repair personnel; they are non-personal when they come from advertising, brochures, and other written publications. Explicit service promises are one of the few influences on expectations that are completely in the control of service provider.
Promising exactly what will ultimately be delivered would seem a logical and appropriate way to manage customer expectations and ensure that reality fits the promises. However, companies and the personnel who represent them often deliberately overpromise to obtain business or inadvertently overpromise by stating their best estimates about delivery of a service in the future.
Explicit service promises influence both the levels of desired service and predicted service: They shape what customers desire in general as well as what they predict will happen in the next service encounter from a particular service provider or in a certain service encounter.
2. Implicit service promises: Implicit service promises are service-related cues other than explicit promises that lead to inferences about what the service should and will be like. These quality cues are dominated by price and the tangibles associated with the service.
In general, the higher the price and the more impressive the tangibles, the more a customer will expect from the service. Consider a customer who shops for insurance, finding two firms charging radically different prices.
She may make the inference that the firm with the higher price should and will provide higher quality service and better coverage. Similarly, a customer who stays at a posh hotel is likely to desire and predict a higher standard of service than from a hotel with less impressive facilities.
3. The word-of-mouth communication: The importance of word-of-mouth communication is shaping expectations of service is well documented. These personal and sometimes non-personal statements made by parties other than the organization convey to customers what the service will be like and influence both predicted and desired service.
Word of mouth tends to be very important in services that are difficult to evaluate before purchase and direct experience of them. Experts (including consumer Reports, friends and family) are also word-of-mouth sources that can affect the levels of desired and predicted service.
4. Past experience: The customer’s previous exposure to service that is relevant to the focal service, is another force in shaping predictions and desires. The service relevant for prediction can be previous exposure to the focal firm’s service.
For example, you probably compare each stay in a particular hotel with all previous stays in that hotel. But past experience with the focal hotel is likely to be a very limited view of your past experience. You may also compare each stay with your experiences in the other hotels and hotel chains.
Customers also compare across industries: hospital patients, for example, compare hospital stays against the standards set by telephone service, one reason why cable service is often judged to be poor. In a general sense, past experience may incorporate previous experience with the focal brand, typical performance of a favorite brand, experience with the brand last purchased or the top-selling brand, as well as the average performance a customer believes represents a group of similar brands.
Four factors that influence the desired and adequate service expectations are as follows: 1. Explicit service promises 2. Implicit service promises 3. Word-of-mouth communications 4. Past experience.
When consumers are interested in purchasing services, they are likely to seek or take in information from several different sources. For example, they may call a store, ask a friend, or deliberately track newspaper advertisements to find the needed service at the lowest price.
They may also receive service information by watching television or hearing an unsolicited comment from a colleague about a service that was performed well. In addition to these active and passive types of external search for information, consumers may conduct an internal search by reviewing the information held in memory about the service.
1. Explicit service promises
2. Implicit service promises
3. Word-of-mouth communications, and
4. Past experience.
1. Explicit service promises: Explicit service promises are personal and non-personal statements about the service made by the organization to customers. The statements are personal when they are communicated by salespeople or service or repair personnel; they are non-personal when they come from advertising, brochures, and other written publications. Explicit service promises are one of the few influences on expectations that are completely in the control of service provider.
Promising exactly what will ultimately be delivered would seem a logical and appropriate way to manage customer expectations and ensure that reality fits the promises. However, companies and the personnel who represent them often deliberately overpromise to obtain business or inadvertently overpromise by stating their best estimates about delivery of a service in the future.
Explicit service promises influence both the levels of desired service and predicted service: They shape what customers desire in general as well as what they predict will happen in the next service encounter from a particular service provider or in a certain service encounter.
2. Implicit service promises: Implicit service promises are service-related cues other than explicit promises that lead to inferences about what the service should and will be like. These quality cues are dominated by price and the tangibles associated with the service.
In general, the higher the price and the more impressive the tangibles, the more a customer will expect from the service. Consider a customer who shops for insurance, finding two firms charging radically different prices.
She may make the inference that the firm with the higher price should and will provide higher quality service and better coverage. Similarly, a customer who stays at a posh hotel is likely to desire and predict a higher standard of service than from a hotel with less impressive facilities.
3. The word-of-mouth communication: The importance of word-of-mouth communication is shaping expectations of service is well documented. These personal and sometimes non-personal statements made by parties other than the organization convey to customers what the service will be like and influence both predicted and desired service.
Word of mouth tends to be very important in services that are difficult to evaluate before purchase and direct experience of them. Experts (including consumer Reports, friends and family) are also word-of-mouth sources that can affect the levels of desired and predicted service.
4. Past experience: The customer’s previous exposure to service that is relevant to the focal service, is another force in shaping predictions and desires. The service relevant for prediction can be previous exposure to the focal firm’s service.
For example, you probably compare each stay in a particular hotel with all previous stays in that hotel. But past experience with the focal hotel is likely to be a very limited view of your past experience. You may also compare each stay with your experiences in the other hotels and hotel chains.
Customers also compare across industries: hospital patients, for example, compare hospital stays against the standards set by telephone service, one reason why cable service is often judged to be poor. In a general sense, past experience may incorporate previous experience with the focal brand, typical performance of a favorite brand, experience with the brand last purchased or the top-selling brand, as well as the average performance a customer believes represents a group of similar brands.
7P's of Services Marketing
The first four elements in the services marketing mix are the same as those in the traditional marketing mix. However, given the unique nature of services, the implications of these are slightly different in case of services.
1. Product: In case of services, the ‘product’ is intangible, heterogeneous and perishable. Moreover, its production and consumption are inseparable. Hence, there is scope for customizing the offering as per customer requirements and the actual customer encounter therefore assumes particular significance. However, too much customization would compromise the standard delivery of the service and adversely affect its quality. Hence particular care has to be taken in designing the service offering
2. Pricing: Pricing of services is tougher than pricing of goods. While the latter can be priced easily by taking into account the raw material costs, in case of services attendant costs - such as labor and overhead costs - also need to be factored in. Thus a restaurant not only has to charge for the cost of the food served but also has to calculate a price for the ambience provided. The final price for the service is then arrived at by including a mark up for an adequate profit margin.
3. Place: Since service delivery is concurrent with its production and cannot be stored or transported, the location of the service product assumes importance. Service providers have to give special thought to where the service would be provided. Thus, a fine dine restaurant is better located in a busy, upscale market as against on the outskirts of a city. Similarly, a holiday resort is better situated in the countryside away from the rush and noise of a city.
4. Promotion: Since a service offering can be easily replicated promotion becomes crucial in differentiating a service offering in the mind of the consumer. Thus, service providers offering identical services such as airlines or banks and insurance companies invest heavily in advertising their services. This is crucial in attracting customers in a segment where the services providers have nearly identical offerings.
We now look at the 3 new elements of the services marketing mix - people, process and physical evidence - which are unique to the marketing of services.
5. People: People are a defining factor in a service delivery process, since a service is inseparable from the person providing it. Thus, a restaurant is known as much for its food as for the service provided by its staff. The same is true of banks and department stores. Consequently, customer service training for staff has become a top priority for many organizations today.
6. Process: The process of service delivery is crucial since it ensures that the same standard of service is repeatedly delivered to the customers. Therefore, most companies have a service blue print which provides the details of the service delivery process, often going down to even defining the service script and the greeting phrases to be used by the service staff.
7. Physical Evidence: Since services are intangible in nature most service providers strive to incorporate certain tangible elements into their offering to enhance customer experience. Thus, there are hair salons that have well designed waiting areas often with magazines and plush sofas for patrons to read and relax while they await their turn. Similarly, restaurants invest heavily in their interior design and decorations to offer a tangible and unique experience to their guests.