Consumer Behavior; Consumer Expectations; Consumer Perceptions

1. Customers: The Focus
Consumer Behavior; Consumer
Expectations; Consumer
Perceptions

2. 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

3. 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

4. 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

5. 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

6. 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

7. Needs determined by
Internal influences
• Emotions
• Personality
• Motive
• Learning
• Memory
• Perception
• Life style- is a function of internal and
external influences

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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.

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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.

22. 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

23. 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

24. 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

25. 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

26. 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

27. Six Components of Customer
Value
3. 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

28. Six Components of Customer
Value
6. 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