Customers: The Focus

Consumer Behavior; Consumer

Expectations; Consumer

Perceptions

The Customers

• The customers are the most valuable

assets to a company

• People who are happy and satisfied come

back and pay once again

• Excellent companies know customer’s

needs and requirements

The ‘service’ customer

• Service is sold to a customer who shows emotions, may be happy or angry and cannot be easily ignored

• The service provider should therefore know the customer and his needs

• This information is needed to:

1. Design effective and efficient services

2. Design delivery systems

3. Position and market services effectively

4. Forecast and manage demand

Consumer Behavior in Services: A

Consumer Behavior Model

Consumer decision-making process goes

through steps of:

1.Need Recognition

2.Information search

3.Evaluation and Selection

4.Purchase

5.Post-Purchase processes

Consumer Behavior

1.Needs Recognition

• Need recognition: Maslow’s theory of needs

refers to:

1. Physiological needs: food, water, clothing,

shelter

2. Safety needs: physical security from natural

forces, disease

3. Social needs; love, friendship

4. Esteem needs: Independence, importance

5. Self- actualization needs- self-fulfillment

2.Needs determined by

External Influences

• Culture: personality of the society which influence a consumer and defines boundaries within which most people act

• Values: widely held beliefs, which can be self-oriented, others oriented or environment oriented

• Demographics

• Social status

• Households, social groups

Needs determined by

Internal influences

• Emotions

• Personality

• Motive

• Learning

• Memory

• Perception

• Life style- is a function of internal and external influences

Consumer Behavior

3.Information Search

• Information on existing services

• Information on developing criteria for decision making

Sources of information:

• Memory

• Personal sources-friends

• Independent sources-consumer groups

• Marketing sources- media

• Experiential sources- inspection or trial use

Consumer Behavior

4.Evaluation and Selection

• Evoked set- groups of products/services, a consumer considers acceptable options.

• Technology

• Choice between self-provision or hiring someone to perform

• Strategies to reduce risk as more risk is involved in services because of non-standardization and intangibles

• Qualitative assessment- normally after the experience

Consumer Behavior

4.Purchase

• Moods (transient) and emotions (stable) influence

• Delivery of service can be conceived as drama- the skills, dress, behavior of service providers count

• Physical setting of service, like the stage is important for desired impression

• Changing of brands is less often as awareness of alternatives is limited

5.Post Evaluation

• Real evaluation of services is after the

purchase,

• Dissatisfaction is partly on account of

customer himself as he has been actively

involved in decisions. However, service

provider can play an important role

through empathy to reduce the impact

Customers and/or their assets as

inputs• People processing: Directed at customers’

body as surgery, travel,

• Possession processing: Directed at goods/possessions such as car repairs

• Mental stimulus processing; Directed at customers’ mind such as TV, education. Service providers performance and behavior determines customers perception

• Information processing: Directed at the customers' intangible assets as banking over email, ATM

Customer as an Employee

Customers perform a variety of roles in service delivery system:

1. Service specifier: exteriors design, dresses, decorations, food selection, travel instructions

2. Quality inspector: restaurants, satisfaction values, patients recovery, applause in a theatre

3. Co-producers: They become a part of the ‘atmosphere for other customers in a restaurant or theatre; self service

Benefits of customer involvement

• Inclusion: An increased sense of loyalty develops

• Resource productivity: Self service restaurants save on manpower

• Customer control: Customers feel that they have more personal control over what happens. Internet based services are popular for this reason as the customers have a control to switch on or off.

Customer management issues

• Defining customer competence: Who is the customer- educated, young, entrepreneur?

• Customer selection: Hotels, clubs do so

• Customer training: customers may not be aware of the use of some service component-security alarm

• Customer motivation: Rewards for good customers

• Customer removal: important in social situations. Drunk passengers in an airlines or theatre

Issues because of Customer

presence• Safety

• Signposting: customers should know where to go

• Layout: Ease of access/ car parking

• Décor: Décor influences the atmosphere

• Manner of delivery: employee filling a form

• No-pretest: Hair dresser has to be first time correct

• Unpredictability: Customers do not behave always as expected

Customer presence: Contd.

• Customer as unpaid employee: self service ATM

• Labour intensive: productivity may vary from person to person in delivery of service

• High levels of personal judgment is needed; Customer requires on spot decisions from people attending him

• Numerous outlets are needed: nearness to the customers is the criteria

• Distribution: services are also sometimes delivered at customer’s place

• Quality control is limited to process control; ‘Right first time’ is essential

Customer presence: Contd.

• Customer as unpaid employee: self service ATM

• Labour intensive: productivity may vary from person to person in delivery of service

• High levels of personal judgment is needed; Customer requires on spot decisions from people attending him

• Numerous outlets are needed: nearness to the customers is the criteria

• Distribution: services are also sometimes delivered at customer’s place

• Quality control is limited to process control; ‘Right first time’ is essential

Customer types : Operations view

Focus on marketing approach and design facilities

accordingly. Examples for a restaurant:

• A family restaurant will call for easy to clean and

adustability to large seating arrangement

• Romantic restaurant will call for different

furnishing depending on the type of customers

• Upbeat music for younger couples as evening

progresses

• Fast food will call for self service

Customer types

• The Ally: Positive frame of mind and willing to

provide positive feedback. Other customers infer

that service must be good, if ‘ally’ is happy

• The Hostage: bound to the suppliers for

service, as in case of service during warrantee;

difficult when service deteriorates

• The Anarchist: Does not like rules and systems.

Creates problems for other customers who

follow rules

Customer types

• The Patient: Locked in to service, such as a patient in a hospital or a student. Can become an Anarchist or Hostage with too many restrictions

• The Tolerant: Passive and waiting type. Very often they become invisible and get ignored. Goodwill can be lost

• The Intolerant: Seldom passive or patient and cause problems and stress service for themselves first.

Customer types

• The Victim: Victims react by blowing up incidents or resign to their fate.

• The Terrorist: Mounts a damaging attack when you least expect it

• The Incompetent: Confused by procedures; first time users; may not come back if they find bad experience. Need training

• The Champion: Helpful in all possible ways and provide positive word-of –mouth support. Ideal for all services

Aims and Objectives

• Create Allies through information,

communication, explanation, involvement

in process

• Bottom left require counseling and support

• Anarchist and Terrorists are the most

difficult to handle. ‘Removal’ is one way

out. Use of their negative energy through

personal involvement is another approach

Customer Retention

• Valued Customers: ( Allies and Champions)

• Valuable Customers: who generate high lifetime values. These depend on current and potential annual spend, duration of relationship, profitability of customer and contacts with customer. Firms deploy:

1. CRM

2. Product relationship: buy loyalty through future discounts

3. Personal relationship: build loyalty and social bond

4. Key Account Management: for small strategic customers

Value to a customer

• Porter: what buyers are willing to pay. Superior value stems from offering lower prices than competitors

• Marshall: Value is the equilibrium price formed when the marginal cost equaled the marginal utility. Exchange value is thus determined not by usefulness of a good but the last unit of it that is consumed. Thus the value is not only the marginal use for a customer but also the marginal cost of producing the last unit.

• Value is the ability of a good or service to satisfy a need or provide a benefit to a customer

Six Components of Customer Value

1. Perceived Quality: Quality exists in the eyes of the customer. Customer is satisfied if the perceptions of what he receives matches or exceeds expectations of service. Higher the perceived quality, higher the perceived value

2. Intrinsic Attributes: Benefits provided to the customers.

• Core service- without these services are impossible; such as air transport

• Supplementary service- for delivery of core service; such as seats, food, pillows

More value is created by increasing supplement. services

Six Components of Customer

Value3. Extrinsic Attributes: Psychological

benefits. Created attributes where service organization has no direct control over them. ‘Best’ restaurant

4. Monetary price: Sum of all expenses incurred by a customer to get a service

5. Non-monetary price: Any perceived sacrifice such as time spent, risk, anxiety, stress, pain in treatment

Six Components of Customer

Value6. Time: This can appear in three ways

• Time needed to use the service- Less the time required to use a service, higher is the value of service to the customer. Time and service quality are interrelated

• Service as a time –saving alternative to another service, such as air travel, air mail

• Time horizon within which the service provides benefits-value varies for different lengths of time

- Value now for a short duration, such as hotel stay

- Value now over indefinite duration, as telephone service

- Value in future over limited period, as elementary school

- Value in future over indefinite duration, as education