AJAI.K.G SM Zephdyut Module - II

Customer as a Decision Maker
 Every business exists to satisfy needs and wants of

the target customers.
 Goods companies on this account are in

advantageous position because knowledge about
customer behaviour with regard to goods is highly
developed and accessible.
 The area of service customer behaviour is not fully

explored yet.
Customer as a Decision Maker…
 Still less is known as to how a service customer
cognitively and behaviourally acts, and
 how he or she copes with the challenges that stem

out from service characteristics.
 The managers therefore need to understand how

customers think and behave at the pre-purchase,
purchase and post-purchase stages of the buying
cycle.
Marketing Success and Failure
Depend Upon Consumer Response
The Decision Making Perspective
 The following factors dictate the perceived
importance of making a correct purchase decision
and
 accordingly force a customer to get involved in

decision making process.
 Ego relationship: in such situation, one would be

very careful in choosing product or service that is
consistent with his/her self image.
The Decision Making Perspective…
 Perceived risk: exposure to risk or degree of loss
(amount at stake) that may happen due to negative
consequences of an incorrect purchase decision.
 Social sanctions: when the social acceptance of the

customer affects the product choice.
 Significance: the item of purchase assumes

importance when it offers a significant ability to
provide sensory or hedonic pleasure.
Customer Purchases Involve Risk
 Perceived risk is likely to be greater in a buying
decision when,
 the customer has little information about the product

category,
 the product is new,
 the product is technologically complex,
 the customer has little self confidence in evaluating

brands (low buyer knowledge),
Customer Purchases Involve Risk…
 there are variations in quality between brands (lack of
standardization or uniformity of products),
 the price is high and the purchase is important to the

customer.
 The customer uses his or her decision making ability

to minimize the perceived risk by proper product
choice.
 So the process that is employed to make purchases

must be thoroughly understood by the marketer.
Different Types of Risks
 Performance risk: the purchased motorbike may
not give stated mileage, or security deposit in a bank
may yield stated return.
 Social risk: the suit stitched from the tailor may not
be liked by friends, or visiting a night club will not be
appreciated by close friends.
 Psychological risk: the product or service may be

inconsistent with the self concept.
 Eg: this new hairstyle does not convey the kind of

person I am.
Different Types of Risks…
 Financial risk: refers to the risk of loss of money
due to a wrong purchase.
 Eg: the dinner in this hotel is not worth the money
paid.
 Obsolescence risk: the cell phone may get quickly
outdated by newer versions.
 Time loss risk: refers to loss of time when the
promised service is not performed.
 Eg: a customer waits of his dentist in clinic for 2
hours, and dentist does not show up.
Different Types of Risks…
 Opportunity risk: it is concerned with the lost
opportunity due to the use of a service.
 Eg: a customer may lose the opportunity to watch

cricket when he chooses to watch a movie.
 The service characteristics of intangibility, variability,

inseparability and perishability,
 are likely to create different situation for customers

and would alter risk and uncertainty perceptions.
Service Characteristics and
Perceived Risk
Intangibility:
 Services are not tangible hence cannot be seen,

touched, smelled, heard, or tasted prior to purchase.
 Enhances risk perception because it is not possible to

know (uncertainty) the service product prior to
purchase.
Variability:
 Service quality is not standardized and service

products vary in their quality.
Perceived Risk…
 It happens due to variations in service personnel
performance, customer involvement in production
process and other situational factors.
 This enhances the perceived risk as the customer is
not sure of quality delivery.
Inseparability:
 This implies customer involvement and presence
when the service is produced.
 Eg: in a beauty salon, the consultant performs a facial
for the customer, the latter receives it then and there.
Perceived Risk…
 Customer’s presence in the service system exposes
the customer to physical, psychological and social
risk.
Perishability:
 Services are non inventorial, that is it cannot stored.
 That is they are produced and consumed

simultaneously.
 This affects performance risk involved in service

usage.
Search, Experience and Credence
Attributes
 Search quality is the one that a customer can
determine prior to the purchasing a product.
 This quality would include attributes such as colour,

style, fit, price, smell, hardness and design.
 These qualities can be searched in advance before the

purchase.
 The experience quality on the other hand can only

be determined after the experience of an entity.
Search, Experience and Credence
Attributes…
 Service products like vacation or airline can be
known only when they are experienced.
 Credence attributes are those that are difficult to
evaluate even after the purchase and consumption.
 The customer’s inability to evaluate the outcome of a
purchase and the use of a product stems from his or
her incompetence in doing so, and
 knowledge or expertise required to evaluate is not
held by the customer.
 Eg: doctor’s advise and treatment is high on credence.
Market Entity Character and
Evaluation Difficulty
Consumer Decision Process
 There are seven stages involved in consumer decision
process:
Need recognition:
 It is recognized when a customer perceives a
mismatch between the existing state and the desired
state.
Information search:
 In order to solve the buying problem, once the need
is recognized customer begins to search information
about the available solutions.
Consumer Decision Process…
Pre purchase evaluation:
 It involves judging the alternatives on the evaluative
criteria that customer has.
Purchase:
 This involves first of all choosing the seller or retailer
of product or service and secondly, making in store
choices.
 Sometimes the initially selected store is not where
actual purchase is done, and also the chosen brand
may not be bought because of in store influences.
Consumption:
 After the purchase, consumer gets the possession of
the product and then the consumption begins.
 Where consumption takes place and whether it
occurs immediately or later have important
marketing implications.
Post purchase evaluation:
 After the product’s use, customer develops feeling of
satisfaction or dissatisfaction on the basis of the
product’s delivery on the evaluative criteria.
 That is, whether it falls short of expectations or
exceeds them.
Divestment:
 How customer divests the product comes at the last

stage.
 The options include outright disposal, recycling or

remarketing.
Customer Expectations
 Four types of service expectations can be
distinguished: ideal, desired, adequate, and predicted.
 Ideal service: ideal service level is wishful and may

not be grounded in reality.
 Eg: a new jacket damaged by a dry cleaner is ideally

replaced by the same item.
 Desired service: this level is moderated by the

reality of life.
Customer Expectations…
 The customer in our previous example may desire
the dry cleaner to replace the jacket with the new
one but that is not possible,
 therefore he may hope and want to get a

replacement closer to the one damaged.
 Adequate service: this level implies minimum

acceptable level of service without causing customer
dissatisfaction.
 It is the minimum that customer can tolerate and

accept.
 Eg: the damaged jacket, customer may be willing to
accept darned jacket which is unnoticeable by
anybody.
 Predicted service: this level is customer’s

prediction about the level of service that a firm is
likely to provide.
 This may differ from country to country depending

upon the industry practices and customs.
 The customer in our jacket example may actually

predict that,
 his jacket will be darned given the impossibility of
replacement of the same piece and finding a
substitute.
 The managerial implications that flow from this

analysis of expected service levels are,
 that managers must measure these levels and then

develop service offerings.That is:
 What is the ideal service level that customer expect

in this industry?
 What is ideal service level made up of?
 What is the desired service level?
 What is this desired service level made up of?
 What is adequate service level?
 What components it is made up of?

Different Levels of Consumer
Expectations
Zone of Tolerance
 The difference between desired and adequate service
level is called zone to tolerance.
 Zethaml, Berry and Parasuraman have proposed a

model of customer expectations,
 which describes the zone of tolerance as a gap

between the two levels on a continuum on which,
 the top is represented by desired and the bottom

level is adequate service level.
Zone of Tolerance
(Acceptable Level of Performance)
Zone of Tolerance…
 It is important for the service marketer to know and
understand these two levels or zone of tolerance.
 If the performance is maintained in the zone of

tolerance level,
 the service is likely to be acceptable to the

customers.
Customer Delight and Frustration
Narrow and Wide Zone of Tolerance
and Customer Types
Width of Zone of Tolerance and
Customer Differences
 Narrow zone of tolerance suggests that customer is
less prone to accepting and tolerating the service
performance.
 The firm has to exercise strict control on its

performance so that actual delivery does not fall
outside the limits.
 Marketer must first of all find out the answer to the

question as to what is it that customer sensitive
about.
Customer Differences…
 The concerned areas could be time, hygiene,
employee behaviour, ambience or competence and
the like.
 Customers with narrow zone of tolerance are more

prone to dissatisfaction compare to the ones with
wide zone of tolerance.
Service Dimension Importance
 An important issue for success in marketing a service
is to discover the width or spread of zone of
tolerance for different service dimensions.
 For example, air travel service may include

dimensions like punctuality, entertainment, food and
beverage, price, customer service, seating comfort,
and safety.
 For example, would the zone of tolerance is likely to

be similar for airline safety and entertainment.
Service Dimension Importance…
 No customer can afford to travel in unsafe airline,
however, one can compromise on entertainment
service.
 So safety would have narrow zone of tolerance

compared to entertainment.
 The width of zone of tolerance in way indicates the

importance of service dimension.
 Narrowness of zone of tolerance implies customer is

highly sensitive to performance and less open to
deviations.
Service Dimension Importance
Service Dimension Importance…
 The critical challenge of service marketer is to
prioritize the resource allocation in such a manner
that delivery on important service dimensions is not
compromised up on.
 Dimensions with narrow zone of tolerance should

form first management priority because of high
customer sensitivity.
 The service dimension importance is likely to vary

from segment to segment and service to service.
Determinants/Influencers of
Customer Expectations
 The zone of tolerance concept is based on two levels
of service expectations: desired and the adequate
levels.
 It is important for the marketer to develop an

understanding of factors that influence and determine
these expectations.
Desired Service:
 A customer desired service expectations are

influenced by two factors: personal needs and
enduring service intensifiers.
 Personal needs: are connected to a person’s
physical, social and psychological well being.
 Desired service expectations are directly influenced

by the needs that dominate or have powerful
influence in a given situation.
 Eg: a customer who has got late for the office, his or
her desired service from a taxi operator is about
speed with which he or she can be taken to
destination (functional).
 Enduring intensifiers: two factors that lead to
increased sensitivity to service are derived service
expectations and personal philosophy.
 Sometimes customer expectations are driven by

other person as it may be a case when one wants to
hold a business meeting to forge a collaboration with
outside company.
 Here, the service expectations of the customer are

likely to affect by expectations of outside delegates
and business partners.
 Personal philosophy refers to a customer’s very
personal ideas or attitude about service.
 A customer may have a philosophy that people

should always be treated with dignity and respect, and
 hence his or her service expectations would be

driven this personal conceptualization.
Adequate Service:
 Five factors are proposed to influence adequate

service expectations:
 transitory service intensifiers,
 perceived alternatives,
 self perceived role,
 situational factors and
 predicted service.
 Transitory factors: are short term factors which
influence adequate service level.
 Eg: in emergencies like ambulance service when

someone suffers from heart stroke etc.,
 In this situation customer would be less tolerant to a

deviation from the expected level (lower ZOT),
 because the adequate service levels moves up closer

to desired service level.
 Perceived alternatives: substitute’s availability is
likely to influence adequate service level (up and
down).
 In the absence of substitutes, customer’s adequate

service level is likely to go down and they accept
poor quality.
 Eg: customers were used to accept poor quality in

airlines and telecommunication when the industries
were not liberalized.
 Self perceived role: customers play role in service
creation such as patient’s participation in
physiotherapy.
 When such role is performed well by the customer,

then adequate service level is likely to be move up,
and
 the customer is likely to be less tolerant of failures

(narrow ZOT) than when fails to perform their role.
 Eg: a serious attentive student (well performed role)

in the class compared to inattentive, non serious
student (shoddy role performance).
 Situational factors: situations which are perceived
to be outside the control of service provider like
natural disasters or
 other emergencies can pull down adequate service

level and increase zone of tolerance.
 Eg: passengers become tolerant of delays caused by

fog compared to situations when delays stem from
controllable factors.
 Predicted service: this implies some kind of
predictions that customer makes about a service
based on some objective calculation of anticipated
level of service.
 Predicted service influences adequate service level.
 Good predicted service level is likely to more

adequate service level higher.
Service Decision Process
 According to Zeithaml, the service’s unique
characteristics necessitate consumers to approach
choice and evaluation process differently when
compared to goods.
 The service characteristics of intangibility,

heterogeneity, perishability and inseparability is likely
to alter the perception of buying situation for the
customers and
 accordingly may warrant a change in customer

decision process such that optimal choices are made.
Service Decision Process…
 In order to uncover the decision process that a
customer is likely to employ to solve a service buying
problem,
 it is essential to consider the factors that affect the

decision making or problem solving process.
 The extent of problem solving process that a

consumer would undergo in dealing with a buying
situation depends on four factors.
Factors Affecting a Purchase
Decision Process
Decision Process…
Degree of Involvement:
 When a product or service is perceived to be
important by a customer, the customer is likely to
take the buying process seriously.
 That is, he or she is going to be involved in buying
decision.
 There are various factors that determine the level or
degree of involvement.
 These include personal factors, product factors and
situational factors.
Decision Process…
 Personal factors imply when a product or service is
personally meaningful for a customer it affects the
person directly.
 The personal relevance stems for the value of

product in affecting the self image, health, beauty or
physical condition of the customer.
 Product factors include risk involved in buying and

using a product or service.
 A product may expose a customer to different types

of risks like,
Decision Process…
 physical harm, psychological discomfort, performance
loss and finally the financial loss.
 The type of situation involved in buying of the

product affects the level of involvement.
 Eg: whether the product is bought for self

consumption or for gift purposes, or whether it likely
be used privately or publicly.
Decision Process…
Perceived Product Differentiation:
 When the products or brands or alternatives are
perceived to be differentiated,
 then the level of involvement of the customer is likely
to be higher because there exists the possibility of
making a wrong choice.
 But when the alternatives are perceived to be similar,
 the level of involvement is likely to be low because all
the alternatives tend to have similar satisfaction
potential.
Decision Process…
Time Pressure:
 When a customer has no time constraint, he or she

can take time for searching for information and
evaluation.
 If a product purchase has to be made right away and

decision has to be taken quickly,
 the involvement level may come down for the paucity

of time.
Decision Process…
 Eg: people shopping at the railway stations and air
ports tend to be less involved in the decision for the
time pressure that force them cut short the decision
making.
Mood States:
 The mood state of the consumer also affects the
purchase decision.
 When in good mood or positive state, a consumer is
likely to pass through the decision process slowly
spending more time and deliberations.
 On the other hand, negative mood states propel
customers to hasten the decision process.
Impact of Service Characteristics on
Decision Involvement
 Depending up on the amount of information search
and extensiveness of the alternative evaluations that a
customer does in making a purchase decision,
 three types of decision strategies are identified. That

is,
 Routine: it is a situation when the customer does

not need any new information in making a purchase.
 Limited: in these situations, the buying problem is

solved using limited information search and
alternative evaluations.
 The limited problem solving happens when the
customer is engaged in the purchase of non complex
and limited risk product and
 the customer is familiar with the product or service

class.
 Extensive: the extensive problem solving is

characterized by extensive information search and
rigorous alternative evaluation.
 This happens when the product or service in

consideration is bought for the first time.
Decision Making Types
 The key elements of dissonance reduction model are,
 First, the product differences are not known or

apparent before purchase, therefore, the selection or
choice is based on perceptually similar alternatives.
 Second, the customer learns and evaluates (attitude

formation) the product during the consumption stage
and experience.
 Third, this use of experience makes customer
sensitive about category, and consequently this
increases the customer’s openness about the other
brands in the category.
 Fourth, the customer is likely to experience post

purchase dissonance because he or she may notice
certain negative aspects related to the purchase and
certain attractive attributes in the rejected options.
 Fifth, the customer would ignore or suppress
information that enhances his or her dissonance (i.e.
good aspects of rejected brand) and
 pay attention to alternative messages supporting his

or her choice (by paying attention to negative aspects
of the rejected alternatives and concentrating more
on positive aspects of the chosen brand).
Need for New Services
 New services would be less communicable
(intangibility), compatible, trialable, and more
complex.
 Intangibility makes the service difficult to be

demonstrated and customers find it difficult to grasp
them mentally.
 The customers are likely to be less inclined to try

new services because of the risk associated with
them.
Need for New Services…
 For example it is impossible to sample services like
legal service, surgery, cosmetic surgery or education.
 Customer resistance is also enhanced because bought

or experienced service cannot be returned in some
cases like a trial beauty treatment.
 Services are often lost with one experience.
 This perception of complexity also contributes to the

confusion in understanding a new service idea.
Information Search Process
 For making a sound buying decision, it is essential that
a complete knowledge about the available alternatives
and
 what each one of them offers in terms of the
attributes and benefits is built.
 But getting information about services is difficult
before the purchase.
 In such situations, a customer may obtain experiential
information by making a pre purchase trial and
 learning from the experience of others by
observation.
Impact of Intangibility of
Information Search
Information Search Process…
 The lack of objective information obtainable through
search attributes pushes the customer to take refuge
in subjective experiences of others.
 The word of mouth communication from previous

users assumes great significance.
 That’s why some marketers actually encourage their

satisfied customers to spread a positive word around
to attract business.
Pre Purchase Comparisons
 The next step after the information search comprises
of making comparisons of alternatives and choices.
 Only a few of the available alternatives are considered

by the customers in the process of making a choice,
and this set of alternatives is called evoked set or
consideration set.
 The size of evoked set in services is likely to be

smaller than that in the goods, this may be due to,
Pre Purchase Comparisons…
 the number of companies or suppliers in a product
category is likely to be more in goods than in
services.
 A goods company tend to have a multiple brands in a

product category,
 taken together all brands of all suppliers in a category,

the size becomes very big.
 The extensive use of mass media and promotions

allows customers to have greater exposure to brands
in the category.
 The method of goods retailing through effective
merchandizing brings a number of brands in close
proximity to each other that demonstrates a number
of alternatives to a customer.
 Services on the other hand are not merchandized in

the same fashion rather customers gets exposed to
usually only one brand.
 Goods companies tend to operate beyond the local
limits, national, international or global; hence, there
tends to be wider exposure to brands.
 While services tend to have localized operations

preventing the exposure to wider set of service
brands.
 Lastly, the difficulties associated with getting

information about services before the purchase (lack
of search attributes) also contributes to make the
size of evoked set in services smaller.
 In services the attributes of provision are intangible,
and these cannot be determined prior to purchase or
service experience.
 These are also not common to all customers.
 The service attributes are adjusted to customer

needs or requirements in the services delivery
process when the customers gets involved.
 The services are heterogeneous or non standardized,
each service and encounter tends to be unique.
 Therefore, the comparison between two service

options is like comparing the non comparables.
 In services the customer is likely to move to reverse

form of abstraction where services are compared on
material or tangible criteria like equipments or
service provider’s appearance or building,
 because the services being intangible tend to be

abstract and difficult to understand.
Service Evaluations
 Once a product or service is purchased and
consumed, the next stage in the buying behaviour
process is its evaluation or forming quality
judgements.
 The customer is able to judge the performance of the

product or service on the objective and subjective
criteria,
 Objective quality: refers to the technical

superiority or excellence of a product against the
measurable and verifiable standard.
Service Evaluations…
 Eg: a goods colour, shape, or size can be objectively
measured against a predetermined standard.
 Perceived quality: in service context, the quality

cannot be measured objectively because the services
are not tangible.
 It is customers perception of superiority and or

inferiority, and this perception rests entirely on the
prospects mind.
 According to Gronroos, two quality dimensions in
services:
 Technical quality: comprises of the core benefit

that is expected by the customers.
 It is what customer expects and what the service

firm delivers.
 Eg: a dry cleaner at the fundamental level is expected

to clean the clothes without damage.
 Functional quality: the quality of interactions
between customers and the providers, system
elements and other customers impacts the perceived
quality of service on the technical dimension.
 It is often the case that a service customer evaluates

‘What’ has been delivered through and the ‘how’ it
has been delivered.
 This is especially true when the customer does not

have expertise to evaluate a service for the want of
prior experience and knowledge.
 Moods and emotions that are evoked in the service
environment can influence the perceived quality of
service.
 Moods: are transient feelings states that occur in

specific situations and specific times.
 Emotions: are also feelings states expect that these

are more intense and stable.
 Moods and emotion have the potential of adding bias

to the customer’s evaluation of a service experience.
Post Purchase Behaviour
 The sharing of service responsibility between the
provider and the customer may alter the service
evaluation process.
 The service delivery outcome of satisfaction or
dissatisfaction cannot be entirely put on the producer
as done in goods,
 where the producer role of the company is clearly
demarcated.
 The potential outcome of this sharing of
responsibility is on attribution and complaining
behaviour.
Post Purchase Behaviour…
 Attribution of dissatisfaction: the attribution
theory attempts to explain how people assign
causality to events in terms of either their own
behaviour or the behaviour of others.
 In the process of making inferences about one’s own
behaviour or another’s behaviour,
 customers make internal attributions (this cake is
good because I made it) or
 external attributions (this cake is good because of the
cake mix or my friend supervised its making).
Post Purchase Behaviour…
 Complaining behaviour: in services, where
customer is an important input to the whole process
of service creation and experience,
 he or she is less likely to be open and aggressive in
complaining behaviour.
 If a service firm does not hear complaints, it would be
a great mistake to assume that their marketing is free
of faults.
 Instead, a proactive approach should be adopted to
learn from the customers about their experiences.
Segmentation, Targeting and
Positioning
Segmenting Service Markets:
 Service firms vary widely in their ability to serve

different types of customers.
 Each firm should adopt a strategy of market

segmentation, identifying those parts, or segments, of
the market that it can serve best.
 There are many ways to segment a market, i.e.,
 demographic segmentation: based on age, gender,

and income.
Positioning…
 Psychographic segmentation: it reflects people’s
lifestyles, attitudes, and aspirations.
 Behavioral segmentation: it focuses on
observable behaviors, such as people being non users,
light users, or heavy users.
 Needs based segmentation: focuses on what
customers truly want in a service and maps closely to
the multi attribute decision models.
 Often people have different needs and their decision
making criteria vary according to:
Positioning…
 The purpose of using the service.
 Who makes the decision.
 The timing of use (time of day/week/season).
 Whether the individual is using the service alone or

with a group, and if the latter, the composition of that
group.
Positioning…
 Eg: consider the criteria we might use when choosing
a restaurant for lunch when we are,
 on vacation with friends or family,
 meeting with a prospective business client, or
 going for a quick meal with a coworker.
 It is therefore important to be quite specific about

the occasion and context a service is purchased for.
Positioning…
 Nowadays companies especially service based
companies are using big data and marketing analytics
to collect accurate and detailed information at the
individual consumer level,
 allowing for a very narrow and specific segmentation

analyses.
Important versus Determinant Service

Attributes:
 It is important to select the right needs and their

corresponding service attributes for segmentation.
Positioning…
 Eg: many travelers rank safety as a very important
attribute in their choice of an airline and
 avoid traveling on airlines with a poor safety

reputation.
 Determinant attributes: they are the attributes

where customers see significant differences among
competing alternatives.
 Eg: convenience of departure and arrival times,

Positioning…
 availability of frequent flyer miles and related loyalty
privileges,
 quality of in flight service, or the ease of making

reservations,
 might be determinant characteristics for business

travelers when selecting an airline.
 For budget conscious vacation travelers, on the other

hand, price might assume primary importance.
Positioning…
 Segmentation Based on Service Levels:
customers often can be segmented according to their
willingness to give up some level of service for a
lower price.
 Price intensive customers are willing to pay a

relatively high price to obtain higher levels of service
on each of the attributes important to them.
 While, price sensitive customers will look for an

inexpensive service that offers a relatively low level of
performance on many key attributes.
Positioning…
Targeting service markets through four focused
strategies:
 Fully focused: a fully focused organization provides a

limited range of services to a narrow and specific
market segment.
 Eg: private jet charter services may focus on the high

net worth individuals or corporations.
 There are risks associated with pursuing the fully

focused strategy,
Positioning…
 the market may be too small to get the volume of
business needed for financial success, and
 the firm is vulnerable should new alternative products

or technologies substitute their own.
 Market focused: in a market focused strategy, a

company offers a range of services to a defined target
segment.
 Here, managers need to be sure their firms are

capable of doing an excellent job of delivering each of
the different services selected.
Positioning…
 Service focused: firms offer a narrow range of
services to a fairly broad market.
 Eg: Starbucks coffee shops follow this strategy, serving

a broad customer base with a largely standardized
product.
 However, as new segments are added, the firms needs

to develop expertise in serving each segment.
 This strategy is likely to require a broader sales effort

and greater investment in marketing communication.
Positioning…
 Unfocused: many service providers fall into the
unfocused category, because they try to serve broad
markets and provide a wide range of services.
 The danger with this strategy is that unfocused firms

often are jack of all trades and master of none.
 A few departmental stores followed this strategy, and

Positioning…
 as a result, have been struggling against more focused
competitors (eg: hypermarkets and specialty stores).
 It is recommended that firms have some sort of
focus, whether on market segments or on services.
Principles of Positioning Services:
 Positioning strategy is concerned with creating,
communicating, and maintaining distinctive differences
that will be noticed and
 valued by those customers the firm would like to
develop a long term relationship with.
Positioning…
 According to Jack Trout the essence of positioning
are:
 A company must establish a position in the minds of
its targeted customers.
 The position should be singular, providing one simple
and consistent message.
 The position must set a company apart from its
competitors.
 A company cannot be all things to all people, it must
focus its efforts.
Positioning…
 The concept of positioning offers valuable insights by
forcing service managers to analyze their firm’s
existing offerings and
 to provide specific answers to the following six

questions:
1. What does our firm currently stand for in the

minds of current and potential customers?
2. What customers do we serve now, and which ones

would we like to target in the future?
Positioning…
3. What is the value proposition for each of our
current service offerings, and what market segments
is each one targeted at?
4. How does each of our service products differ from
those of our competitors?
5. How well do customers in the chosen target
segments perceive our service offerings as meeting
their needs?
6. What changes do we need to make to our service
offerings in order to strengthen our competitive
position within our target segment (s)?
Positioning…
 One of the challenges in developing a viable
positioning strategy is to avoid the trap of investing
too much in points of difference that can easily be
copied.
 The nature of services introduces a number of

distinctive possibilities for competitive differentiation,
 going beyond price and physical product features to

include :
Positioning…
 location and scheduling,
 performance levels such as speed of service delivery

and
 the caliber of service personnel, and
 a range of options for customer involvement in the

production process.
Service Strategy
 Service firms often have tough challenge of directing
operations and marketing as one function.
 It means developing connect between the internal

aspect of the business that exists in the form of
operations and
 the outside logic that exists in the form of market.
 This calls of the development of strategic service

vision, consists of four elements:
Service Strategy…
 Identification of target market segment,
 development of a service concept to address the

needs of the customers in the target market,
 codification of an operating strategy to execute

service concept and finally,
 design of service delivery system to support the

operating strategy.
Service Strategy…
Market Segmentation:
 Precise knowledge of the customers who would form

the foundation of all marketing efforts is the starting
point for the development of an effective marketing
strategy.
 Service providers answer the following questions to

identify the target market segment:
 What are the common characteristics of important

market segments?
Service Strategy…
 What dimensions (demographic or psychographics)
can be used to segment the market?
 How important are various segments?
 What needs does each of them have?
 How well are these needs being served?
 In what manner?
 By whom?
Service Strategy…
Target Market:
 All the segments revealed by the segmentation

exercise may be equally attractive.
 The segments need to be prioritized on the basis of

their relative attractiveness of the firm.
 Once the relative attractiveness of the segments has

been found, it is possible to make a proper selection
of target for marketing.
Service Strategy…
 The most desirable target would be the one that is
structurally attractive and the firm’s competitive
position is strong.
 However, a combination of high market attractiveness

and strong competitive position may not be available.
 In such case, a target can be chosen where it is

strongly positive on at least any of these two
dimensions.
Service Strategy…
 Once the strategic choice of the target market is
made,
 the next challenge for the firm is to develop a service

product that meets the customer expectations better
than the competition.
Service Concept:
 Once the target market is chosen, the next task on

the strategy agenda concerns with the articulation of
the product or service concept.
Service Strategy…
 The product or services offered by various players in
a segment are likely to share commonality.
 Eg: Airlines targeting the business class segment do

not differ from one another in meaningful ways.
 Their packages have a great deal of commonality in

terms of various aspects of core and supplementary
services.
 Customers do not buy product or services, rather

they buy product or service concepts.
Service Strategy…
 Developing a concept involves answering questions
like, Who is the intended customer?
 Is the airline aimed at leisure traveller, business
traveller, economy or luxury traveller, short or long
distance traveller, and frequent or occasional service
users?
 What are the core benefits this airline would offer to
its customers:
 entertainment, speed, economy, connections, package,
fun, frequency, esteem, and control?
Service Strategy…
 What kind of technology would this airline use in
bookings, aircrafts, air traffic, landing and takeoff?
 What would be its scope of operations: within

country, a few countries, region, continent or the
whole globe?
 A marketer can form several airline concepts by

creatively answering these questions.
 An out of the box thinking in concept development

often leads to service innovations.
Service Strategy…
Operating Strategy:
 Operating strategies are internal matters to a

company.
 Customers rarely come into contact with functional

policies and strategies in goods.
 What may at best be of interest to customers in

goods is marketing policies and strategies especially
concerning issues like availability, post sale care,
replacement and warranties, installation, and
education.
Service Strategy…
 In services, the simultaneity of production, marketing
and consumption brings the customer into the
service system.
 The customer contact with the service delivery

system makes it necessary that it is built in line with
the rest of the elements of strategic service vision.
 In the development of operating strategy, the

following questions must be answered to achieve a
strategic service vision.
Service Strategy…
 What are the important elements of the strategy in
the functional areas like operations, finance,
marketing, human resources and control?
 In which area will the most efforts be concentrated?
 Where will investments be made?
 How will the quality and cost be controlled?
 What specific measures, incentives and rewards will

be used?
Service Strategy…
 What results will be expected in regard to
competition in terms of quality of service, cost
profile, productivity, employee morale and loyalty of
services?
Service Delivery System:
 The target market, service concept, operating

strategy must dictate the design of the service
delivery system.
Service Strategy…
 The value embodied in the service concept cannot be
created unless the delivery system is designed to
attend the priority dictates of the concept.
 The system components and operations that happen

therein constitute the integral part of the service
concept.
 Delivery system is equivalent of plants in goods

marketing.
 It is where the service is created, marketed and often

consumed.
Service Strategy…
 Goods customers do not usually enter in
manufacturing plant, however, in services they do.
 This highlights the importance of creating consistent

delivery system.
 Eg: the delivery system and mechanism for a bank

that targets very high net worth individuals ought to
radically different from the bank that targets its
services to ordinary customers.
Service Strategy…
 There are many issues that must be resolved in
developing a service delivery system:
 What are the important features of the service

delivery system considering the service concept?
 What role people, technology, equipment, facilities,

layout and procedures are likely to play?
 What capacity the service system is geared to

provide: normally and at its peak levels?
Service Strategy…
 To what extent the service system helps to provide
quality standards?
 To what extent does it differentiate the service from

competitors?
 To what extent the service system provides barriers

to entry by competitors?
 All the essential ingredients of strategic service vision

must be integrated into a cohesive whole so that they
will mutually reinforce each other.
The Service Capacity
 The concept of service capacity can be understood
with the help of an example of a beauty salon, that is,
 the service capacity implies the total number of

customers that could be given beauty treatment at
any given point in time.
 Most of the services have limited or fixed capacity,

i.e.,
 Passenger bus: limited number of seats,

The Service Capacity…
 Airplane,Theatre: seating capacity,
 Education or school: number of seats,
 Restaurants: number of tables,
 Hospitals: fixed number of beds, etc.
 Accordingly, the concept of capacity needs to be

broken down into its constituent elements such that,
 their true nature is understood and methods are

devised to manage them effectively.
 Eg: the total capacity of the beauty saloon is likely to
be made up of elements like:
 the physical facilities (include building, equipments and

tools needed to perform beauty treatment);
 the human resources or personnel who are needed

for performing either technical tasks or support
activities (the beauty specialists and support staff).
 Time is a capacity component in two ways:

 First, by changing the mix between two time periods
or shifting the output to another time period, the
capacity may be altered.
 Second, increasing the time period of service

availability increases the total capacity.
 The importance of capacity component is that for a

well designed and managed service operation, the
capacity of these components must be matched.
Service Capacity is Embedded in
Resources Needed for Service Creation
 Since service provision involves performance of
operations in sequence,
 the capacity at every process level should be matched

to ensure smooth flow of operations.
 In the absence of such harmonization of capabilities

of different service components, the bottlenecks are
likely to emerge,
 creating crowding and idling of subprocess in different

parts of the chain.
 Customers are often subjected to slower service
because of these bottlenecks.
 These become one of the most irritating aspects of

service delivery.
 Eg: in Big Bazaar, shoppers often are made to wait for

more than their acceptable time at the checkout
counters on the weekends.
 Lack of human resource and or equipments creates

bottleneck and thereby increases the waiting period.
 If services are visualized as involving sequential
performance of operations as they happen in
assembly line, the service capacity needs to be
managed vertically along all these stages.
 Eg: in a hospital where a patient may have to pass

through a linear sequence of service delivery process
involving steps like,
 registration, payment of fees, preliminary investigation,

specialists examination, radio diagnosis, medicine, etc.
 In such a situation, capacity at each encounter level
must be matched and fine tuned considering the
capacity at the previous and succeeding stages.
 Service capacity should also be aligned horizontally.
 At a particular level of service delivery, different types

of resources may be needed such as equipments and
personnel.
 Any mismatch between the resources would affect

the service performance at that level.
 Eg: radio diagnosis section may be housed in a cramp
room not enough for people to perform their job at
the required speed.
Fixed Capacity No Inventory:
 Service business cannot run like goods counterparts.
 They cannot maintain steady utilization of capacity

irrespective of demand fluctuations.
 When goods production exceeds the demand, they
can be stored to meet the situations when demand
goes in excess of capacity.
 Eg: manufacturers of durables like televisions,

refrigerators and audio equipments maintain
inventory to meet very high demand for their
products during festival seasons in India.
 Service firms on the other hand is not possible to

maintain stocks of services to cater to the excess
demand when it arises.
Demand for Services
 In contrast to the fixed nature of capacity, the
demand for service usually has a tendency to
fluctuate.
 Eg: service capacity of any Restaurant is fixed in terms

of the number of customers that could be
accommodated at any point in time.
 But the demand for breakfast services or lunch or

evening snacks or dinner varies.
Demand for Services…
 Capacity is an internal resource based issue, and is
determined by and large by the conscious planning of
the manager.
 The demand is something that is not directly in

control of the manager, and
 it is something thrust up on the firm by the external

environmental forces.
 Given this fixed nature of service capacity and

variable nature of demand,
 service firms are faced with a challenge to harmonize
the two such that the loss arising out of unused
capacity and un served customer is minimized.
Predictable and Unpredictable Demand:
 Predictable variation in demand exposes the firm to

lesser risk arising out of demand supply imbalance.
 Eg: Public transportation (high demand during

morning and evening),
 Restaurants (high demand during lunch and dinner
services), etc.
 If the demand is going to be high, the manager can

devise ways and means to capitalize on high demand.
 Service system can be prepared in advance to cope

with the rush.
 System can be geared not to allow the quality of

services to go down during peak hours.
 On the other hand, when demand is expected to be
less than the capacity, the loss minimizing strategies
could be employed.
 Sometimes the causes of demand variation cannot be

predicted in advance.
 Eg: a sudden thunderstorm or a fog may affect the

demand for public transportation, etc.
 Unpredictable variations in demand can bring both
the fortune and misfortune depending upon how the
marketer is prepared to cope with the situation, i.e.,
 A rumour or bomb trik decreasing the demand for

theaters,
 Natural calamity increasing the demand for hospital

services, etc.
Predictable and Unpredictable Changes in Demand in
Airlines (Demand for Airline Service may Plummet as a
Result of a Sudden Terrorist Attack)
Demand and Capacity Interfaces:
 A service marketer may experience different types of
situations arising out of an interaction between the
capacity and demand.
 Situation I: here the demand for the services is
lower than the optimum capacity.
 The productive resources employed by the firm are
underutilized.
 It may be frustrating situation for both the servers
and customers.
 The servers who look forward to providing service
and interacting with customers may have to remain
idle in the absence of enough takers.
 They might experience that their abilities and

capacities are not fully utilized.
 Customers on the other hand may develop self doubt

about their choice of the service firm.
 It can also make them doubtful about the

effectiveness of the firm in providing quality services.
 Eg: staying in a hotel with a number of rooms
unoccupied below a subjective threshold or
 eating out in a restaurant with empty tables.
 Situation II: in many services total capacity is not

the same as optimum capacity.
 The capacity at which services can be offered to the

satisfaction of both the providers and the customers
tends to be slightly lower than the total capacity.
 When demand moves up to reach the total capacity
level, service quality begins to suffer in a slight fashion.
 Service quality in broad sense can be maintained, but

overall customer experience is influenced by the
stress with which the service is provided.
 A service firm operating at this level is likely to fail in

delighting the customers.
 Eg: when an occupancy in a hotel or a restaurant
reached 100 percent, the service quality suffers in a
very slight way.
 This situation is a very happy one as revenue

generation is concerned, and there is no idling of
resources and capacity is fully utilized.
 Situation III: demand for services sometimes can

exceed the total capacity for which the firm is
designed to operate.
 When the firm operates at the extended level,
adhering to quality standards becomes difficult.
 The quality is likely to suffer in these situations and

the employees may experience burnout and stress.
 Eg: restaurants sometimes add tables to meet rush

during peaks,
 but a hotel cannot add rooms temporarily.

 In the short run, with these kinds of capacity
enhancements, the revenue is surely increased but it
may come at invisible costs.
 Situation IV: when the demand for services are
much more than the maximum stretchable capacity,
then nothing can be done to take care of demand.
 The inability to meet demand does not mean the
opportunity is lost forever.
 A good marketer can try to shift this unsatisfied
demand to a service cycle when the capacity tends to
be higher than the demand.
 But this depends on a number of factors like the
availability of capacity on the firm’s side and
 the possibility of a postponement of satisfaction on

the customer’s side.
 Eg: in the case of a restaurant, instead of turning away

the excess customers,
 persuade some of them to postpone or prepone

their lunch time by devising strategies to alter their
behaviour using incentives.
 The inability to meet demand for services when it
arises has both long and short term consequences for
business.
 The immediate effect of not being able to supply

services when demanded means loss of revenue.
 But much more damaging than the immediate

financial effect are,
 the effects that the firm is likely to suffer when

customers are refused services when needed.
Demand and Capacity for a
Family Restaurant
References
 Harsh V. Varma – Services Marketing – Text & Cases – 2nd Ed. –
Pearson
 K. Rama Mohana Rao. Services Marketing, 2013. – 2nd Ed. – Pearson
 Ramaswamy, Namakumari. Marketing Management – Indian Context.
Global Perspective. 2018. – 6th Ed. – SAGE
 Christopher Lovelock, JochenWirtz, Jayanta Chatterjee – Services
Marketing: People,Technology, Strategy – 8th Ed. – Pearson
 Marie J. Bitner, Valarie A. Zeithaml – Services Marketing – Tata
McGraw Hill
 Helen Woodruffe – Services Marketing – Longmen Group
 Adrian Payne – The Essence of Services Marketing – Prentice Hall
India.
MACFAST
Thank You…
Dr. Ajai Krishnan G

AJAI.K.G SM Zephdyut Module - II

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

AJAI.K.G SM Zephdyut Module - II

Загружено:

Авторское право:

Доступные форматы

Customer as a Decision Maker

 Every business exists to satisfy needs and wants of

 Goods companies on this account are in

 The area of service customer behaviour is not fully

 how he or she copes with the challenges that stem

 The managers therefore need to understand how

 accordingly force a customer to get involved in

 Ego relationship: in such situation, one would be

 Social sanctions: when the social acceptance of the

 Significance: the item of purchase assumes

 the customer has little information about the product

 the product is new,

 the product is technologically complex,

 the customer has little self confidence in evaluating

 the price is high and the purchase is important to the

 The customer uses his or her decision making ability

 So the process that is employed to make purchases

 Psychological risk: the product or service may be

 Eg: this new hairstyle does not convey the kind of

 Eg: a customer may lose the opportunity to watch

 The service characteristics of intangibility, variability,

 are likely to create different situation for customers

 Services are not tangible hence cannot be seen,

 Enhances risk perception because it is not possible to

 Service quality is not standardized and service

 Services are non inventorial, that is it cannot stored.

 That is they are produced and consumed

 This affects performance risk involved in service

 This quality would include attributes such as colour,

 These qualities can be searched in advance before the

 The experience quality on the other hand can only

 How customer divests the product comes at the last

 The options include outright disposal, recycling or

 Ideal service: ideal service level is wishful and may

 Eg: a new jacket damaged by a dry cleaner is ideally

 Desired service: this level is moderated by the

 therefore he may hope and want to get a

 Adequate service: this level implies minimum

 It is the minimum that customer can tolerate and

 Predicted service: this level is customer’s

 This may differ from country to country depending

 The customer in our jacket example may actually

 The managerial implications that flow from this

 that managers must measure these levels and then

 What is the ideal service level that customer expect

 What is the desired service level?

 What is this desired service level made up of?

 What is adequate service level?

 What components it is made up of?

 Zethaml, Berry and Parasuraman have proposed a

 which describes the zone of tolerance as a gap

 the top is represented by desired and the bottom

 If the performance is maintained in the zone of

 the service is likely to be acceptable to the

 The firm has to exercise strict control on its

 Marketer must first of all find out the answer to the

 Customers with narrow zone of tolerance are more

 For example, air travel service may include

 For example, would the zone of tolerance is likely to

 So safety would have narrow zone of tolerance

 The width of zone of tolerance in way indicates the

 Narrowness of zone of tolerance implies customer is

 Dimensions with narrow zone of tolerance should

 The service dimension importance is likely to vary