In order to create and deliver value through services marketing, we firstly need to identify the value that our consumers seek. We do this by having a comprehensive understanding of who our consumers are and what they want. Armed with a consumer mindset and a vivid insight into ‘who’ the customer is, service organisations can create offerings that meet their needs and communicate in a meaningful way. In the spirit of customer-centricity, it only makes sense that our next topic would delve into frameworks and concepts that help us better understand our customers and why they do what they do.
Welcome to Topic 2: Customer Behaviour, Culture and Service Encounters. In this topic, you will learn about:
- The three-stage model of service consumption
- The impact of culture upon consumer behaviour in service settings
- The relevance of perceived risk and information search at the pre-purchase stage of the buying process
- Why role and script theory and control theory are central to understanding customer behaviour in service settings
- Why it is necessary to understand customers’ psychological needs and values
- The basic mechanism that underpins the formation of post-purchase satisfaction evaluations.
Understanding the thoughts, decisions, and behaviours of customers is crucial to business success. If we can understand the likely journey customers take to purchase products or services, we can assist them at each point in the process by providing them relevant information and giving them confidence in making those decisions (hopefully steering them towards our offering!). In service settings, there are several factors that take greater priority within the decision-making process than what we would otherwise expect with purchasing goods. For example, culture has a heightened impact, due to services usually occurring within a social context. In addition, the service encounter - the moment in which the service is purchased and consumed - is central to the customer journey and the predominant basis of service evaluation. In this topic, we follow the customer decision-making journey, highlighting the unique factors for services, the importance of culture, and the role of the service encounter along the way.
These relate to the Subject Learning Outcomes:
- Discuss the key concepts, principles and unique challenges of services marketing in relation to the extended marketing mix.
- Explain the customer decision-making process in needs and demands for services and how this impacts on the marketing approach used.
Welcome to your pre-seminar learning tasks for this week. Please ensure you complete these prior to attending your scheduled seminar with your lecturer.
Click on each of the following headings to read more about what is required for each of your pre-seminar learning tasks.
Read Chapter 2 of the prescribed text - Lovelock et al. 2014, Marketing in the service economy, 6th edn., Pearson Australia.
Watch the following videos:
Read the two (2) case studies:
- 'Disney in China' on p. 40 of the prescribed text.
- 'Parents seek involvement in medical decisions affecting their children' on p. 44 of the prescribed text.
Read and watch the following content.
The customer decision-making process for services
If you have taken an introductory marketing or a consumer behaviour course, the concept of the customer-decision making process should not be new to you. Even if you have not taken these courses, this process is unlikely to be a foreign concept because we are all consumers. We all start with a need that we seek to fulfil or a problem we aim to solve through the purchase of a product or service. We go through some initial thoughts and evaluations to decide how best to fulfil our need/ solve our problem based on the various options available to us. We then purchase and consume, and afterwards we evaluate whether our choice turned out as anticipated. A lot of the considerations within the customer decision process equally applies to goods and services. However, the unique attributes of services introduce some added complexities to the decision-making process. Let us consider the customer decision process as comprising of three (3) stages:
Stage 1: Pre-purchase
- Need arousal
- Information search
- Perceived risk
- Evaluation of alternatives
- Evoked set.
Stage 2: service encounter (purchase and consumption)
- Script and roles
- Cognitive and behavioural control
- Critical incidents
- Consumers' psychological needs.
Stage 3: post-purchase
- Disconfirmed expectations
- Service quality
- Customer satisfaction.
We will go through each of the three (3) stages in turn, but first let us address the cultural norms and values surrounding the entire decision-making process.
The Impact of Culture on Services
It is impossible to properly understand consumers without the context of culture. Due to the inherent social nature of many services, cultural norms and values are even more vital to understand in a service context. But what is culture? Here is the definition in the text;
“Culture is the sum of learned beliefs, values and customs that create behavioural norms for a given society.” (Lovelock et al. 2014, p. 35).
Geert Hofstede - the pioneer of national and organisational culture - also has an excellent description of culture;
Simply said, culture is how you were raised. It developed while you grew up. With a computer metaphor, culture is the software of our minds. We need shared software in order to communicate. So culture is about what we share with those around us. In action in social life, culture constitutes the unwritten rules of the social game.(Hofstede, n.d.)
Hofstede’s cultural dimensions are the most well-known conceptualisation of cultural differences. Each dimension is used as a basis for evaluating a country’s cultural perspective – countries are given scores for each cultural dimension, which is used to express their perspective towards each attribute, as well as to identify what groups of countries have similar mindsets (for example there are usually strong similarities in cultural dimensions for Western versus Eastern countries). The prescribed text describes in detail the original four (4) cultural dimensions, but here are some alternate definitions:
| Cultural dimension | Definition |
|---|---|
| Individualism (versus collectivism) | Individualism is the extent to which people feel independent, as opposed to being interdependent as members of larger wholes. Individualism does not mean egoism. It means that individual choices and decisions are expected. Collectivism does not mean closeness. It means that one "knows one's place" in life, which is determined socially. |
| Power Distance (low versus high) | Power Distance is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. |
| Masculinity (versus femininity) | Masculinity is the extent to which the use of force is endorsed socially. In a masculine society, men are supposed to be tough. Men are supposed to be from Mars, women from Venus. Winning is important for both genders. Quantity is important and big is beautiful. In a feminine society, the genders are emotionally closer. Competing is not so openly endorsed, and there is sympathy for the underdog. This is NOT about individuals, but about expected emotional gender roles. Masculine societies are much more openly gendered than feminine societies. |
| Uncertainty Avoidance (low versus high) | Uncertainty avoidance deals with a society’s tolerance for uncertainty and ambiguity. Uncertainty avoidance has nothing to do with risk avoidance, nor with following rules. It has to do with anxiety and distrust in the face of the unknown, and conversely, with a wish to have fixed habits and rituals, and to know the truth. |
Over time, two (2) additional dimensions of culture have been identified:
| Cultural dimension | Definition |
|---|---|
| Long-term orientation (versus short-term orientation) | Long-term orientation deals with change. In a long-time-oriented culture, the basic notion about the world is that it is in flux, and preparing for the future is always needed. In a short-time-oriented culture, the world is essentially as it was created, so that the past provides a moral compass, and adhering to it is morally good. As you can imagine, this dimension predicts life philosophies, religiosity, and educational achievement. |
| Indulgence (versus restraint) | Indulgence is about the good things in life. In an indulgent culture it is good to be free. Doing what your impulses want you to do, is good. Friends are important and life makes sense. In a restrained culture, the feeling is that life is hard, and duty, not freedom, is the normal state of being. |
As these dimensions are not addressed to the same extent in the textbook, let us go into a little more detail on these dimensions now. And who better than to explain these cultural dimensions than the man himself – please watch the two (2) videos from Geert Hofstede:
Long versus Short Term Orientation
Indulgence versus Restraint
Cultural dimensions give us a great insight into what cultures prioritise, and how they interact with others.
In service settings, this is very important. For example, someone from a high power distance culture might prefer more formal interactions (or even limited interactions) with service staff, whereas in a low power distance culture, interactions with service employees can be quite informal and conversational.
As another example, the dimension of indulgence has major implications for high-end services. Take an example of a luxury hotel - someone from a high indulgence culture would see the value in a luxury hotel offering, they would not be deterred by paying a much higher price in return for a high quality and unique experience, and they would likely respond well to communications that emphasised the desire to treat yourself. Someone from a more restraint-oriented culture would likely find the luxury hotel offering and communications unnecessary, instead focusing on functional benefits. They would find the price of a luxury hotel exorbitant, and the concept of pampering oneself to be self-centred and wasteful.
Let us return our focus now to the decision-making process, keeping in mind that culture will influence customer preferences, approaches, behaviours, and evaluations.
Stage 1: Pre-purchase decision making
The pre-purchase decision making stage includes 5 key steps (Lovelock et al. 2014, p. 39):
- Need arousal
- Information search
- Risk perceptions
- Evaluation of alternatives
- Determining an evoked set (shortlist of brands).
The prescribed text has a great discussion of each of these steps, so instead let us focus here on some specific considerations unique for the service context.
Need arousal – a customer commences the decision making journey with need arousal or problem recognition. This is an important factor to remember, as marketers can often focus too closely on what they’re selling rather than why consumers are buying them. Harvard Business School Professor Theodore Levitt made this point in his famous quote:
People don’t want to buy a quarter-inch drill. They want a quarter-inch hole(Levitt, T n.d.)
This is true of all marketing, but particularly important to remember in the case of services, as customers are interested in the outcomes (need fulfilment) rather than necessarily acquiring a tangible product or means to fulfil those needs themselves. This also opens the door for innovation opportunities, as there could be various avenues for need fulfilment. Thinking about Levitt’s quote in a literal sense – if a customer wants a hole in their wall, there is more than one way for service organisations to fulfil this need: they could rent out a drill, they could run a DIY workshop to help the customer learn how to use the drill, they could hire a handyman to drill the hole for the customer.
Information search – Information search in many ways is the same for goods and services, although the nature of this information may differ. Due to the intangibility of services and an inability to inspect or trial a service in advance, customers instead need to use the service experiences and evaluations of others as part of their information search (Lovelock et al. 2014, p. 43).
Evaluation of alternatives – In the same way that services make information search more complicated, so too do they make evaluation more difficult. There are three (3) main types of attributes customers use to make evaluations (search attributes, experience attributes, and credence attributes: Lovelock et al. 2014, p. 43). While products generally include many search attributes – specific tangible features that are easy to identify and compare before purchase – services generally comprise of more experience attributes and credence attributes.
Take a massage treatment for example. This service involves a high level of experience attributes – you can only evaluate the attributes of this service as you purchase and consume them (Lovelock et al. 2014). You might check online reviews or ask a friend about their experience with the particular massage therapist to help make evaluations prior, however this is not a completely reliable basis for evaluation due to the inherent variability of service.
In some service contexts, it may be difficult to evaluate attributes of service even after it has been purchased and consumed – these are called credence attributes (Lovelock et al. 2014). Financial services are an excellent example of this. Most people consult a financial adviser because they do not have the financial competence or confidence to make financial decisions themselves. However, because of this, people also lack the financial ability to evaluate the quality of the financial adviser they have selected, and the quality of the advice they have received (not to mention the fact that the advice itself is subjective and can never be entirely failproof – financial advisers unfortunately cannot see into the future and must instead rely on market projections).
Risk perceptions – risk is the anticipation regarding the likelihood of negative outcomes, and the consequences of those outcomes. Unfortunately for services, given the limitations to information search and complexity in evaluating alternatives, perceived risk is often heightened. The types of risks are various (listed in the following table), and are exacerbated when services are highly intangible, complex, customised (rather than standardised) and when making that purchase is of particular importance to the customer (Lovelock et al. 2014).
| Risk type | Examples of customers' uncertainty |
|---|---|
|
Function risk (concern about performance outcomes) |
|
|
Financial risk (monetary loss, unexpected costs) |
|
|
Temporal risk (wasting time, consequences of delays) |
|
|
Psychological risk (personal fears and emotions) |
|
|
Social risk (how others think and react) |
|
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Sensory risk (unwanted impacts on any of the five senses) |
|
It is very important for service organisations to find ways to lessen the perceived risk for consumers involved in service purchase and consumption. Using the same two (2) examples from before, the massage therapist might consider the use of tangible cues or physical evidence for evaluation – an aesthetically pleasing store front, a professional website with high quality photos of facilities and information about the service give customers something on which to base their evaluations. Or perhaps they could focus on reputation and encourage current customers to share their service experience with friends or provide an online review. The financial adviser could communicate their professional credentials and articulate the specific knowledge and track record of their employees to demonstrate their financial capability.
Stage 2: Purchase and consumption – the service encounter
The service encounter is the moment where the customer and the service meet – where the customer interacts with the service employee (or the self-service technology) and the service is simultaneously purchased and consumed. It is the key moment in which the service experience is evaluated. After going through the pre-purchase stage of the customer decision-making journey, the customer selects their preferred service from alternatives, and arrives at the service encounter with some initial ideas and expectations of what the service will entail.
There are three (3) key elements of consumer expectations (Lovelock et al. 2014):
- Desired service – what customers hope for (believe can and should be delivered)
- Adequate service – minimum service accepted without dissatisfaction (as customers recognise variation and situational impacts)
- Predicted service – what is anticipated.
The area between the desired and adequate service is called ‘the zone of tolerance’. Predicted service falls in the zone of tolerance. A service experience that falls below the zone of tolerance will lead to customer dissatisfaction. There are several theories that help us understand how services are evaluated:
Role and script theory
Role and script theory equates the service encounter to a play, where service employees and customers are actors with designated roles (Lovelock et al. 2014). With these roles come expected behaviours and rules of engagement. When each actor plays their part correctly (role congruence), customers (and employees) are satisfied with the service encounter. In some service contexts, the idea of the ‘service encounter as a play’ even includes the use of scripts – “cognitive structures that guide services transactions” (Lovelock et al. 2014, p. 53). Flight attendants are a great example of this. You might be thinking that the script refers to the scripted safety announcement at the start of the flight, but it actually extends well beyond this. The script begins at the check-in desk as a customer arrives and concludes when they pick up their luggage at their destination. The script covers all of the necessary steps in the service encounter, and various interactions required between the customer and the flight staff throughout. It is essentially a roadmap of requirements, and also include contingencies and action plans for the multitude of problems that could arise (from notifying of a delayed flight to initiating an emergency evacuation).
Control theory
Control is another important element of the service encounter. “Service means empowering or giving a degree of control to the customer, thereby ensuring that they feel confident about what they are doing, so they won’t have second thoughts after the purchase” (Lovelock et al. 2014, p. 53). This can involve behavioural control, where the customer is given actual autonomy – for example, superannuation funds give fund members control over selecting the type of investment portfolio they prefer (balanced investments, aggressive investments, investments in renewable/ sustainable industries etc.). It can also involve cognitive control, where customers have perceived control or are empowered by information and knowledge of what is happening (rather than actual autonomy). For example, an electrical outage might be detected in your area, so your electricity company sends you an email or text notifying you of the cause of the outage and the likely duration of the issue. In this situation, you do not actually have any control over what is happening, but by providing this information you feel a heightened sense of control over the situation because you understand why the outage has occurred, and can behave and respond as you wish (perhaps visiting a friend after work or going to the pub for dinner because the power will still be out at home).
Psychological needs and values
The service encounter also needs to deliver on the customer’s fundamental psychological needs and values. Specific needs important to service settings include:
- Security: the need to feel secure and unthreatened by physical, psychological or even economic circumstances
- Respect: the need to be made to feel important and that one’s custom is valued
- Esteem (or ego involvement): the need to have one’s self-esteem and ego maintained or enhanced
- Fairness or equity: the need to be fairly and justly treated (Lovelock et al. 2014, p. 56).
Stage 3: Post-purchase
In stage 3, customers reflect and evaluate the service encounter (stage 2) in contrast to their needs and expectations (stage 1). This results in a level of customer satisfaction. If a service encounter falls within the zone of tolerance (previously mentioned), they will generally be satisfied. Customer satisfaction is important to achieve and maintain, as satisfaction can lead to repeat purchase, loyalty, and positive word of mouth and recommendations. We will go into more detail about customer satisfaction and service quality later in future topics.
Knowledge check
Complete the following five (5) tasks. Click the arrows to navigate between the tasks.
Key takeouts
Some key takeouts from Topic 2:
- The customer decision-making process encompasses three (3) main stages: pre-purchase, the service encounter, and post-purchase. The nature of services create complications, particularly in the pre-purchase stage where customers have difficulty in making preliminary evaluations, leading to a heightened perceived risk in purchase and consumption.
- It is impossible to properly understand consumers (and their decision-making) without the context of culture. Due to the inherent social nature of many services, cultural norms and values are even more vital to understand in a service context.
- Central to the decision-making process for service is the service encounter - is the key moment in which the service experience is evaluated. Customers arrive at the service encounter with initial expectations; the contrast between these expectations and actual experience determines their level of customer satisfaction.
Welcome to your seminar for this topic. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.
Click here to access your seminar.
The following learning tasks will be completed during the seminar with your lecturer. Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.
Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)
In-seminar learning tasks
The in-seminar learning tasks identified below will be completed during the scheduled seminar. Your lecturer will guide you through these tasks. Click on each of the following headings to read more about the requirements for each of your in-seminar learning tasks.
In a breakout room assigned by your lecturer, you will be given one (1) of the following questions to discuss. At the end of the discussion, you will share your responses with the class:
- Explain Hofstede’s cultural dimensions and show how they explain differences in consumer behaviour between Eastern and Western societies. What are some potential limitations of this model?
- Why does consumer perception of risk constitute an important aspect in selecting, purchasing and using services? How can organisations reduce consumer risk perceptions?
In a breakout room assigned by your lecturer, you will be given one (1) of the following case studies to discuss. At the end of the discussion, you will share your responses with the class:
- Parents seek involvement in medical decisions affecting their children (Lovelock et al. 2014, p. 44)
- What are the potential (1) benefits and (2) problems that could arise from parents being more informed, assertive and connected online?
- What strategies could doctors implement to help manage parent involvement?
- Disney in China (Lovelock et al. 2014, p. 40)
- What was the key mistake Disney made when opening in Hong Kong? Explain your answer using concepts introduced in chapter 2.
- Jay Rasulo, president of Disney’s parks and resorts is quoted in the case study as saying “People from the mainland don’t show up with the embedded Disney software [in their heads] like at other parks”. What do they mean by ‘embedded Disney software’, and what insights can other service firms take from this metaphor?
In a breakout room assigned by your lecturer, you will be given one (1) of the following questions to discuss. At the end of the discussion, you will share your responses with the class:
- Choose three (3) services, one high in search attributes, one high in experience attributes and one high in credence attributes. Specify what product characteristics make them easy or difficult for consumers to evaluate and suggest specific strategies that marketers can adopt in each case to allow pre-purchase evaluation and reduce perceived risk.
- Develop two (2) different customer scripts, one for a highly standardised service of your choice and one for a highly customised service. Map all key customer steps of this script across all three (3) stages of service consumption. What are the key differences between the standardised and customised service.
Welcome to your post-seminar learning tasks for this week. Please ensure you complete these after attending your scheduled seminar with your lecturer. Your lecturer will advise you if any of these are to be completed during your consultation session. Click on each of the following headings to read more about the requirements for each of your post-seminar learning tasks.
In your reflective journal, prepare a list of key terms and concepts from this topic that will be useful for your audit report. Find supporting references relevant to your chosen company in relation to these concepts.
You can access the reflective journal by clicking on ‘Journal’ in the navigation bar for this subject.
Familiarise yourself with the Banyan Tree organisation – conduct an online search for information on this organisation that you might use as supporting references in your assignment.
Conduct research to build a comprehensive understanding of your company (find key references, for example, company websites, industry insights on the market they compete within, who are their key competitors etc.).
Each week you will have a consultation session, which will be facilitated by your lecturer. You can join in and work with your peers on activities relating to this subject. These session times and activities will be communicated to you by your lecturer each week. Your lecturer will start a video stream during your scheduled class time. You can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then clicking 'Join' to enter the class.
Click here to access your consultation session.
Should you be unable to attend, you will be able to watch the recording, which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.
Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)
For those who want to go the extra mile, here are some additional useful resources:
- Bitner, MJ, Booms, BH & Tetreault, MS 1990, ‘The service encounter: diagnosing favorable and unfavorable incidents’, Journal of Marketing, 54(1):71-84.
- The Geert Hofstede website is a great resource explaining cultural dimensions and country scores: Hofstede, G n.d., The 6-D model of national culture, Geert Hofstede.
- Laroche, M, McDougall, GHG, Bergeron, J & Yang, Z 2004, ‘Exploring How Intangibility Affects Perceived Risk’, Journal of Service Research, 6(4):373-389.
- Yap, KB & Sweeney, JC 2007, ‘Zone‐of‐tolerance moderates the service quality‐outcome relationship’, Journal of Services Marketing, 21(2):137-148.
- Watch this video on the psychology of culture.
References
- 10 minutes presentations 2015, 10 minutes with Geert Hofstede on indulgence versus restraint 01032015, streaming video, YouTube, https://www.youtube.com/watch?v=V0YgGdzmFtA
- 10 minutes with 2015, 10 minutes with Geert Hofstede on long versus short Term Orientation 01032015, streaming video, YouTube, https://www.youtube.com/watch?v=H8ygYIGsIQ4
- Big Think, Identifying customer needs, streaming video, YouTube, https://www.youtube.com/watch?v=yVCZ-7xSsCw
- Boccuzzi, J 2018, I was seduced by exceptional customer service, streaming video, TEDxBRYANTU, https://www.youtube.com/watch?v=GH1TXfQSwUQ
- Christensen, CM, Cook, S & Hall, T 2006, What customers want from your products, Harvard Business School Working Knowledge: Business Research for Business Leaders, https://hbswk.hbs.edu/item/what-customers-want-from-your-products
- Hofstede, G n.d., The 6-D model of national culture, Geert Hofstede, https://geerthofstede.com/culture-geert-hofstede-gert-jan-hofstede/6d-model-of-national-culture/
- Lanzer, F 2015, The psychology of culture, streaming video, TEDxAUBG, https://www.youtube.com/watch?v=rgdRzyCO5Zo
- Lovelock, C, Patterson, P & Wirtz, J 2014, Services marketing, 6th edn., Pearson Australia.
