Understand the 3 stage model of service consumption Learn how consumers evaluate and choose between alternatives services offerings and why they have difficulty in making those evaluations Know the perceived risks that customer face in purchasing services and the strategies firms can use to reduce consumers risks perception Understand how customers form service expectations and the components of these expectations Contrast how customers experience and evaluate high and low contact services Be familiar with servuction model and understand the interactions that together the services experience Obtain insights from viewing service encounter and from of theater Know how role and script theory contribute to a better understanding of services experiences Know how costumers evaluate services and what determines their satisfaction

1. Marketing of Infrastructure Services and Utilities
Customer Behavior and Customer
Relationship Management
Module 3

2. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
Learning Objectives
1.
Understand the 3 stage model of service consumption
2.
Learn how consumers evaluate and choose between alternatives services offerings and
why they have difficulty in making those evaluations
3.
Know the perceived risks that customer face in purchasing services and the strategies
firms can use to reduce consumers risks perception
4.
Understand how customers form service expectations and the components of these
expectations
5.
Contrast how customers experience and evaluate high and low contact services
6.
Be familiar with servuction model and understand the interactions that together the
services experience
7.
Obtain insights from viewing service encounter and from of theater
8.
Know how role and script theory contribute to a better understanding of services
experiences
2

3. Marketing of Infrastructure Services and Utilities
Module 3

4. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
Consumer Behavior
• What consumers buy?
• Where consumers buy?
• When consumers buy?
• How consumers buy?
• What consumers buy?
We study these behaviors
4

5. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
Consumers buying vegetables
•
•
•
•
•
•
•
Most consumers
Buy „fresh‟ vegetables
Roadside vendors
Freshness concept
In touch with air
It might have been washed with dirty water
Do consumers buy Safal frozen vegetables from Mother
Diary? Very few buy. A feeling that is not ‘FRESH’
5

6. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
COMPARED TO GOODS SERVICES ARE
– More difficult to choose
– More difficult to evaluate
– Intangibility
– Non-standardized
– Production and consumption together
6

7. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
BENEFITS – UNDERSTANDING CONSUMER BEHAVIOR
• Low chances of product failure
• Products acceptability higher
• Helps us to make right distribution strategies
• Right promotional strategies
7

8. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
Consumer decision making process Five steps
• Need recognition
• Information search
• Evaluation of alternatives
• Purchase
• Post purchase evaluation
8

9. Marketing of Infrastructure Services and Utilities
The 3 stage model of service
composition
• Pre-purchase stage
• Service encounter stage
• Post encounter stage
Module 3

10. Marketing of Infrastructure Services and Utilities
Pre Purchase stage
• Need Awareness
– Uncurious minds (e.g personal identity and aspiration)
– Physical conditions (e.g. if u r hunger drove o to Burger stall)
– External Sources (e.g. a service firm‟s marketing activities)
• Information Search
• Evaluation of alternatives
– Service attributes
– Perceived Risk
– Service expectations
Module 3

11. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
1. Information Search
–
In services
–
Rely more on personal resources
Example
•
Legal services
•
Not advertised on the mass media
•
How to choose a lawyer?
•
Speak to friends, relatives
•
Word of mouth, relatives
11

12. Module 3
Marketing of Infrastructure Services and Utilities
Evaluation of alternatives:
Search attributes
Most
Goods
Most
Services
Difficult to evaluate
High in search
qualities
High in experience
qualities
High in credence
qualities
12

13. Marketing of Infrastructure Services and Utilities
Module 3
Evaluation of alternatives: Perceived
Risk
Type of Risk
Examples of Customer Concern
Functional Risk
(Unsatisfactory
performance outcome)
• will this training course give me the skill to get better job
• will this credit card be accepted wherever I want to make purchase
• will the dry cleaner able to remove the stain from this jacket
Financial (monetary loss,
unexpected costs)
• will I loose money if I make the investment recommended by the stock broker
• could my identify be stolen if I make this purchase on the internet
• will I incur a lot of unanticipated expenses if I go on this vacation ?
Temporal (wasting time,
consequences delays)
• will I have to wait in queue before getting into the exhibition
• will service @ this restaurant will be so slow, that I will be late for my afternoon meeting
• will the renovation work of our bathroom be completed before e our friends come stay with us
Physical (personnel injury
or damage possession)
• will I get hurt if I go skiing @ this resort
• will the contents of this postage get damaged in the mail?
• will I fall sick if I travel abroad on vocation
Psychological (Personal
Fear & emotions)
• How can I be sure that this aircraft will not crash
• will the consultant make me feel stupid?
•Will the doctor‟s diagnosis upset me?
Social ( How others think
& react)
• what will my friends think of me if they learnt that I stayed @ this cheap motel
• will my relative approve the resonant I have chosen for the family reunion
• will my college's disapprove of my selection of an unknown law firm
Sensory (unwanted
effects on any of the five
senses)
• will I get view of the parking lot rather than beach from my restaurant table
• will the hotel bed is uncomfortable
• will I be kept awake by noise from the guests in the room next door
• will any room smell of state of cigarette smoke
• will the coffee @ breakfast taste disgusting

14. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
2. EVALUATION OF SERVICE ALTERNATIVES
– Lesser alternatives in services than goods
– For goods, you go to retail shops
– All brands are displayed
– Choose any one out of competing brands
– In services
– Fewer options
– Go to one bank at a time
Very little display of simultaneous brands
14

15. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
EMOTION AND MOOD
– Customer in “bad mood”
– Enters service establishment
– Service interpretation „NEGATIVE‟
– Customer in good “mood”
– Service interpretation „POSTIVE‟
– Behavior of other customers
15

16. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
Example- AIR – INDIA
•
•
•
•
•
•
•
Traveling from Delhi to London
Fellow companion passenger
Misbehaving
Though Air India Service is good
What do you feel
Bad experience
A feeling that Air-India cannot control
misbehavior of passengers
• May decide not to travel again
16

17. Module 3
Marketing of Infrastructure Services and Utilities
Evaluation of alternatives: Service
Expectation
• Desired services
• Adequate services
• Predicted services
• Zone of tolerance
Purchase
Decision

18. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
SERVICE PURCHASE
• Conformance to “script” important
• Script
• Logical sequence of events expected by the customer
Example
•
•
•
•
•
•
•
Meeting reputed cardiologist at Apollo hospital
Patient enters the hospital
Observes other patients are waiting
Cardiologist comes
Talks to you
Examines you
Gives you feedback
18

19. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
Example
• If the above script happens you are comfortable
• But if.
- no patients in hospital
- Cardiologist sends his junior to examine you
- Refuses to meet you due to lack of time
• You feel that service is not up to the
expectations
Don’t change the expected script
19

20. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
CUSTOMER COMPATIBILITY
•
When you are visiting hospital, airlines, restaurant or a
bank
•
How do you feel when there is overcrowding
•
Misbehavior of neighboring customers
•
Dissatisfied
Compatibility of customers is critical
20

21. Marketing of Infrastructure Services and Utilities
Module 3
2. Service Encounter Stage
• Service encounters are “ Moments of Truth”
• Service encounters range from High contact to Low
contact
• The Servuction system
• Theater as Metaphor for services Delivery: An integrated
perspective

22. Module 3
Marketing of Infrastructure Services and Utilities
Emphasizes
encounters with
service personnel
High
• Nursing Home
• Good Restaurant
• Airline Travel
• Hair Cut
•Management Consulting
•Four Star Hotel
• Telephone Banking
• Retail Banking
• Insurance
• Car Repair
• Fast Food
• Budget Hotel
• Dry Cleaning
• Movie Theater
• Metro
• Cable TV
• Internet Banking
• Mail Based Repairs
•Internet Based Services
Low
Emphasizes
encounters with physical
service elements
Fig : Level of Customer Contact with Service Organizations

23. Module 3
Marketing of Infrastructure Services and Utilities
The servuction Model
Service Delivery System
Service Operations System
Inanimate
Environment
Customer A
Technical Core
Contact
Personnel
Back Stage
( Invisible)
Front Stage
( visible)
Customer B

24. Marketing of Infrastructure Services and Utilities
Theater as Metaphor for services
Delivery: An integrated perspective
• Services Facilities
• Personnel
• Role and script theories
– Role theory
– Script theory
– Role and script theory complements each other
Module 3

25. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
4. POST-PURCHASE EVALUATION
–
–
–
–
–
–
–
You go for haircut
Not up to your expectations
Reasons
Poor skills of hairstylist
Blame yourself for choosing wrong hairstylist
Not communicating what you wanted
Quality of services depends on customer
feedback
– A doctor‟s diagnosis depends on customer
feedback
25

26. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
A. Diffusion of innovation
• As services are intangible
• Sometimes impossible to test, taste before purchase
• Difficult to introduce innovations
Example
• Blocked heart arteries
• Bypass surgery is the traditional diagnosis
• Now Stents
• Resist such innovations
• Not sure of the outcome
• Resist innovation
Consumers adopt innovations in services more slowly than they
adopt innovations in goods
26

27. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
B. BRAND LOYALTY
•
•
•
•
•
Brand switching is less frequent in services than goods
When you change brands
Risk, uncertainty
Costs may be associated
It is higher in services
Example
Changing your Family doctor
• If you choose a new cardiologist
• Insist on new tests
• New medical reports
Switching cost are high. If perceived risks are high, consumers are
unlikely to change brands.
27

28. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
IMPLICATIONS FOR SERVICE MARKETERS
• StanChart Credit card division
• Convincing Citibank credit card customers to switch to
Stanchart credit cards.
• How?
• Membership fees waived off
• Lower interest rate on outstanding/overdue payments
• Free saving bank account in StanChart Bank
• Stan Chart trying to making switching cost lower
Marketers need to lower switching costs to
shift brand loyalty
28

29. Marketing of Infrastructure Services and Utilities
Module 3
CONSUMER BEHAVIOR IN
SERVICES
CUSTOMER COMPATIBILITY CRITICAL : Singapore Airlines
– Seating plan
– Vegetarian customers
– Sit together
– Smokers sit together
– Customers with similar taste and preferences are
made to sit together
Affects customer satisfaction
29

30. Marketing of Infrastructure Services and Utilities
RELATIONSHIP MARKETING IN
SERVICES
Module 3

31. Marketing of Infrastructure Services and Utilities
Module 3
Learning Objectives
1.
Recognize the important role of customer loyalty plays in driving a service forms
profitability.
2. Calculate the life time value (LTV) of a loyal customer
3. Understand why customers are loyal to a particular service firm
4. Explain the different types of marketing relationship to the customer firm relationship
and understand how membership can be created
5. Know the core strategies of the Wheel of loyalty that explain how to develop a loyal
customer base
6. Appreciate why it is so important for service firms to target the “right” customers
7. Use service tiering to manage the customer base and build loyalty
8. Understand the relationship between customer satisfaction and loyalty
9. Know how to deepen the relationship though cross selling and budlning
10. Understand the role of financial and non financial rewards in enhancing customer
loyalty.
11. Appreciate the power of social, customization, and structural bonds in enhancing
loyalty
12. Understand what factors cause customers to switch to a competitors and how to
reduce such switching

32. Marketing of Infrastructure Services and Utilities
Module 3
The Search for Customer loyalty
• Why is customer loyalty important to a firms profitability?
• Assessing the value to the loyal Customer
• The Gap between Actual and Potential Customer Value
• Why are the customer loyal?

33. Marketing of Infrastructure Services and Utilities
Understanding the Customer – Firm
Relationship
• Transactional Marketing
• Relationship Marketing
• DATABASE marketing
• Interaction marketing
• Network Marketing
• Creating “ Membership” Relationships
Module 3

34. Module 3
Marketing of Infrastructure Services and Utilities
The Wheel Of loyalty
3. Reduce
Churn Drivers
Enabled
through:
• Frontline staff
• Account
managers
• Loyalty
programs
• CRM Systems
• Conduct Churn diagnostic and
monitor declining / churning
customers
1. Build a
Foundation for
loyalty
* Segment the market to match
customer needs and firm capabilities.
• Address key churn drivers:
-Proactive retention measures
- Reactive retention measures (e.g.
save teams)
• Put effective complaint handling and
service recovery process in place
* Be selective: Acquire only customers
who fit the core value proposition
Customer
Loyalty
* Manage t customer base via
effective tiering of service.
* Deliver quality service
• Increase switching costs
2. Create Loyalty Bonds
• Building higherlevel bonds:
Social
Customization
Structural
• Give Loyalty rewards
• financial
•Non financial
• Higher tier service levels
• Recognition and appreciation
• Deepen the
relationship Via :
• Cross Selling
• Bundling

35. Marketing of Infrastructure Services and Utilities
Module 3
Building a foundation for Loyalty
• Targeting the right Customers
• Searching for value, not just volume
• Managing the customer base though effective tiering of
service
• Customer satisfaction and service quality are
prerequisites for loyalty

36. Marketing of Infrastructure Services and Utilities
Module 3
Strategies for developing loyalty bonds
with customers
• Deeping the Relationship
• Encouraging loyalty though financial and non financial
rewards
– Financial rewards
– Non financial rewards
• Building higher – Level Bonds
– Social Bonds
– Customization Bonds

37. Marketing of Infrastructure Services and Utilities
Strategies for reducing Customer
Defections
• Analyze customer defections and monitor declining
accounts
• Address key churn drivers
• Implement effective complaint handling and service
recovery procedures
• Increase switching costs
Module 3

38. Marketing of Infrastructure Services and Utilities
CRM : Customer Relationship
Management
• Common objective of CRM systems
• Common CRM applications
– Data Collection
– Data analysis
– Sales force automation
– Marketing automation
– Call center automation
Module 3

39. Marketing of Infrastructure Services and Utilities
What doest a Comprehensive CRM
strategy Encompass?
1. Strategy Development
2. Value creation
3. Multichannel integration
4. Information Management
5. Performance assessment
Module 3

40. Marketing of Infrastructure Services and Utilities
Common Failures in CRM
Implementation
• Viewing CRM as a technology initiative
• Lack of customer focus
• Insufficient appreciation of customer lifetime value (LTV)
• Inadequate support from top management
• Failing to re-engineer business process
• Underestimating the challenges in data integration
Module 3

41. Marketing of Infrastructure Services and Utilities
How to get CRM implementation
Right
Module 3