Prof. S P Bansal Vice Chancellor Maharaja Agrasen University, Baddi

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1 1 Paper: 10, Services Marketing Module: 10, Customer Expectation and Perception of Services Principal Investigator Co-Principal Investigator Paper Co- Content Writer Prof. S P Bansal Vice Chancellor Maharaja Agrasen University, Baddi Prof YoginderVerma Pro Vice Chancellor Central University of Himachal Pradesh. Kangra. H.P. Dr. Jasveen Kaur University Business School (UBS), Guru Nanak Dev University, Amritsar Dr. Jasveen Kaur University Business School (UBS), Guru Nanak Dev University, Amritsar

2 2 Items Subject Name Paper Name Module Title Module Id Pre- Requisites Objectives Keywords Description of Module Management Services Marketing Customer Expectation and Perception of Services Module no.-10 Basic Knowledge of Customer Desires and Experiences in Services Delivery To UnderstandExpectation and Satisfaction of Service Customers Customers, Expectation, Perception, Satisfaction, Service Quality QUADRANT-I TEXT Customer Expectation and Perception of Services Introduction SERVICE EXPECTATION Expectations are formed during the research and decision making process, and they are heavily shaped by information search and evaluation of attributes. If you have no relevant prior experience, you may base your pre-purchase expectation on word-of-mouth commends, news stories, or the firm s on marketing efforts. Expectations change over time, too, and are influenced by supplier controlled factors- such as advertising, pricing, new technologies, and

3 3 service innovation-as well as social trends, advocacy by consumer organizations, and increased access to information through the media and the internet (Christopher.Lovelock) Expectations are reference points against which service delivery is compared.the level of expectation varies from the types of reference points customers hold. Customer service is all about expectations. Service is thus praised or criticized because of expectations. (Valarie A. Zeithaml) Possible Levels of Customer Expectation ( How Do Consumers Develop Expectations Consumers have different types of expectations from a service. The knowledge of customer expectations helps marketers design comprehensive service packages capable of delivering satisfaction. Companies should meet all customer expectations to survive in the competitive environment. (K.Rama Mohana Rao). Types of Expectations

4 4 ( 1. Desired Service- The type of service which customers hope to receive is termed as desired service. It s a wished for level- a combination of what customers believe can and should be delivered in the context of their personal needs. 2. Adequate Service- the minimum level of service a customer will accept without being dissatisfied. The difference between desired and adequate service level expectation is known as the zone of tolerance. (Christopher Lovelock) Factors that Influence Customer Expectations of Service As expectations play such a critical role in customer evaluation of services, marketers need to understand the factors that shape them. A) Sources of Desired Service Expectations 1. Personal Needs: Personal Needs are those states or conditions essential to the physical or psychological well-being of the customer and are pivotal factors that shape what customers desire in the service. Personal needs can fall into many categories, including physical, psychological, social and functional. A customer with high social and dependency needs may

5 5 have relatively high expectations for hotel s ancillary services, hoping, for example, that hotel has a bar with live music and dancing. (Valarie A Zeithaml) 2. Personal Service Philosophy: A consumer s expectations are also affected by his personal philosophy concerning delivery of services. Some consumers, by nature, have high standards concerning the quality of service delivery and very little tolerance for deviation.(david L. Kurtz) Other consumers have lower standards and tend to be more tolerant of service deviation. If you have ever been employed as a waitperson in a restaurant, you are likely to have standards for restaurant service that have been shaped by your training and experience in that role. You might, for example, believe that waiter should not keep customers waiting longer than fifteen minutes to take their orders.(valarie A Zeithmal). Individuals develop their service philosophy through a combination of two inputs: Hereditary and past experience. (David L. Kurtz) 3. Derived Service Expectations: This influence occurs when a customer expectations are driven by other persons or a group of people. A niece from a big family who is planning a 90 th birthday party for a favorite aunt is representing a entire family in selecting a restaurant for a successful celebration. Her needs are driven in part by expectations derived from the other family members. (Valarie A Zeithaml) B) Sources of Adequate Service Expectations A different set of determinants affects adequate service, the level of service the customer finds acceptable. In general, these influences are short term and tend to fluctuate more than factors that influence desired service. The three factors which influence adequate service are: 1. Perceived Service Alternatives: These alternatives are other providers from whom the customers can obtain the service. If the customers believe they have multiple service providers to choose from, or if they can provide the service for themselves, their levels of adequate service are higher than those of customers who believe it is not possible to get better service elsewhere. The customer s perception that service alternatives exist raises the level of adequate service. (Valarie A Zeithaml) 2. Situational Factors: Customer expectations of service are affected by such situational factors as reason for the purchase, the consumer s mood, the weather, time constraints and whether the service is an emergency. These factors are temporary changes in the normal state

6 6 of things which impact what consumers expect from a service.(david L. Kurtz) One type of the situational factor is uncontrollable situational factors, which include service performance conditions that customer view as beyond the control of the service provider. For example, catastrophes that affect a large number of people at one time may lower service expectations from insurance customers in other geographic locations because they recognize that insurers are inundated with demand for the services. Other type of situational factor is a personal situational factor which consists of short term individual factors that make a customer aware of need for service. (Valarie A Zeithaml) 3. Predicted Service: It is the level of service that customers believe that they are likely to get. If customers predict good service, their level of adequate service are likely to be higher than if they predict poor service. It is typically an estimate or the calculation of the service that a customer will receive in an individual transaction rather than in the overall relationship with service provider. (Valarie A Zeithaml) C) Sources of Both Desired and Predicted Service Expectations When consumers are interested in purchasing services, they are likely to seek or take in information from several different sources. For example, they may call a store, ask a friend or track newspaper advertisement to find the needed service at a lowest price. There are four factors that influence both desired and predicted service expectations which are as follows: 1. Explicit Service Promises: These are personal and non-personal statements about the service made by the organization to customers. Statements are personal when they are communicated by firm s sales people; they are non-personal when they come from company s web pages, brochures and other written publications. All the type of explicit service promises have direct effect on desired service expectations. 2. Implicit Service Promises: These are service related cues that lead to inferences about what the service should and will be. These quality cues are dominated by price and tangibles associated with the service. In general, the higher the price and the more impressive the tangibles, the more the customer will expect from the service. (Valarie A Zeithaml) 3. Word- of- Mouth Communication: It is the strongest source of information used by consumers in forming expectations. The consumers will often seek the opinion of others before purchasing a service. For the service with which consumer have little knowledge or

7 7 experience, this communication can be used to establish the desired and ideal levels of service. (David L. Kurtz). 4. Past Experience: The most important factor affecting consumer expectation of a service is consumers past experience. It includes with particular service vendors, experience with other vendor within the same industry, and experience with related service. For example, you probably compare each stay in a particular hotel with all previous stays in that hotel. But past experience with the focal hotel is likely to be very limited view of your past experience. You may also compare each stay with your experiences in other hotels and hotel chains. Strategies used by Service Marketers to influence Customers Expectation Different strategies are used for influencing different sources or factors of customers expectation which are as follows:- Factors Possible Influencing Strategies Explicit service promises Make realistic and accurate promises that reflect the service actually delivered rather than an idealized version of the service. Ask contact people for feedback on the accuracy of promises made in advertising and personal selling. Avoid engaging in price or advertising wars with competitors because they take the focus off customers and escalate promises beyond the level at which they can be met. Formalize service promises through a service guarantee that focuses company employees on the promise and that provides feedback on the number of times promises are not fulfilled.

8 8 Implicit service promises Ensure that service tangibles accurately reflect the type and level of service provided. Ensure that price premiums can be justified by higher levels of performance by the company on important customer attributes. Lasting service intensifiers Use market research to determine sources of derived service expectations and their requirements. Use market research to profile personal service philosophies of customers and use this information in designing and delivering services. Personal needs Educate customers on ways the service addresses their needs. Temporary service intensifiers Increase service delivery during peak periods or in emergencies. Perceived service Be fully aware of competitive offerings, and where alternatives possible and appropriate, match them. Self-perceived service Educate customers to understand their roles and perform role them better. Word-of-mouth Simulate word of mouth in advertising by using communications testimonials and opinion leaders. Identify influencers and opinion leaders for the service and concentrate marketing efforts on them. Use incentives with existing customers to encourage them

9 9 to say positive things about the service. Past experience Use marketing research to profile customers previous experience with similar services. Situational factors Use service guarantees to assure customers about service recovery regardless of the situational factors that occur. Predicted service Tell customers when service provision is higher than what can normally be expected, so that predictions of future service encounters will not be inflated. CUSTOMER PERCEPTION Service marketers must find out whether customers are satisfied with quality of service. The evaluation of services differs from person to person, culture to culture and situation to situation. There are important factors that influence service perception of customers which are as follow-: 1. Service Encounters- Service encounter is movement of truth. Service encounter is a situation where the customer interacts with service providers. The most important impression of the service occurs to customer in a service encounter. For example, Behavior of service contact employee, service processes quality of service, service environment. There are three types of service encounters such as-: remote encounters, technology- mediated encounters, and face- to- face encounters. 2. Evidence of Service- The evidence of service another major factor that influences consumers perceptions. The intangible nature of a service creates doubts in a mind of consumers so they search for evidence of their interactions with organizations. For example, when the customer deposits money in the bank, they find the evidence of the transaction either form of receipt and password entry or access to online verification of deposit

10 10 3. Image- The image of an organization influences the perceptions of consumers; it communicates expectations. A positive image makes people more open to favorable word- of - mouth communication. A neutral image may not cause harm, but a negative image certainly affects business of the organization. 4. Price- Consumers frequently rely on price as indicator to develop expectations and perceptions of service because services are intangible. Generally, a high price indicates a high- expectation, and a low price indicates low quality offerings. Thus, the service quality expectations of economic class passengers of air transport services differ significantly from that of business class passengers. (K.Rama Mohana Rao) Customer Satisfaction Customer satisfaction is defined as the number of customers, or percentage of total customers whose reported an experience with a firm, its products, or its services exceeds specified satisfaction goals. Satisfaction is the customer s fulfillment response. It is a judgment that a product or service feature, or product or service itself, provides a pleasurable level of consumption- related fulfillment. Customer satisfaction is important because it provides marketers and business owners with a metric that they can use to manage and improve their businesses. Customer satisfaction is based on the customers perceptions of service. Determinants of Customer Satisfaction Customer satisfaction is influenced by specific product or service features, perceptions of product and service quality, and price. 1. Product and service features- Customer satisfaction with the product or service is influenced significantly by the customer evaluation of a product or service feature. For a service such as a resort hotel, important features might include the pool area, restaurants, room comfort and privacy, the helpfulness and courtesy of staff and room price. Most firms determine through some means what the important features and attributes are for their service and then measure perceptions of those features as well as overall satisfaction. 2. Customer emotions- Customers emotions can also affect their perception of satisfaction with products and services. These emotions can be stable, preexisting emotions- for example,

11 11 mood state of life satisfaction. Specific emotions may also be induced by the consumption experience itself, influencing a customers satisfaction with the service. 3. Attributions for service success or failure- Attributions- the perceived cause of eventsinfluence perception of satisfaction as well. When customers have been surprised by the outcome, they tend to look for reasons, and their assessments of the reasons can influence their satisfaction. 4. Perceptions of equity or fairness- Customer satisfaction is also influenced by equity and fairness. Customers ask themselves: Have been treated fairly compared with other customers? Notions of fairness are central to customers perceptions of satisfaction with products and services, particularly in service recovery situations. 5. Other customers, family members, and coworkers- In addition to product and service features and one s on feelings and beliefs, customer satisfaction is often influenced by other people. For example, family decisions about a vacations destination.(valarie A Zeithmal) Service Quality Service quality is a critical element of customer perceptions. Quality means Conformance to Standards and Fitness for Use. Service Quality Dimensions Customers do not perceive quality in a one-dimensional way, but rather judge quality based on multiple factors. The dimensions represent how consumer organizes information about service quality in their minds. The dimensions are also applicable to retail and business services. There are five dimensions which are explained as follows-: 1. Reliability: Delivering on Promises It is defined as the ability to perform promised service dependably and accurately. Customers want to do business with companies that keep their promises, particularly their promises about their service outcomes and core service attributes. 2. Responsiveness: Being Willing to Help

12 12 Responsiveness is the willingness to help customers and to provide prompt service. This dimension emphasis attentiveness and promptness in dealing with customer request, questions, complaints, and problems. Responsiveness is communicated to customers by length of time they have to wait for assistance, answers to questions, or attentions to problems. 3. Assurance: Inspiring Trust and Confidence Assurance is defined as employees knowledge and courtesy and ability of the firm and its employee to inspire customer trust and confidence. This dimension is more important for services that customers perceive as high risk or for services of which they feel uncertain about their ability to evaluate outcomes- for example, banking, insurance, medical and legal service. 4. Empathy: Treating Customers as Individuals Empathy is defined as the caring, individualized attention that firm provides to its customers. The essence of empathy is conveying, through personalized service, that customers are unique and special and that their needs are understood. 5. Tangibles: Representing Service Physically Tangibles are defined as the appearance of physical facilities, equipment, personnel and communication materials. Tangibles provide physical representation or images of the service that customers, particularly new customers, will use to evaluate quality.(valarie A Zeithmal) Model of Service Quality To evaluate the quality of service, consumer will compare the service they receive, with the service they expected. The gap model of quality defines various gaps, their causes and proposed strategies to fill them such that consistent delivery of goods service quality is made possible. The model identifies the following gap Gap1- Knowledge Gap- It is the difference between what customer expects from a service and what a management believes customer expect from the service. This gap occurs due to provision of wrong facilities, hiring of wrong staff, wrong training. To close this gap, it

13 13 requires a detailed knowledge of what customer desire and then a response is to be built through service operating system. Gap 2- Standards Gap- It is difference between management perception of consumer expectation of service and service quality specifications. This situation can be caused by three factors such as resource constraints, market conditions or management indifference. To reduce this gap, service firms must have the commitment of top management. Gap 3- Delivery Gap- It is difference between service quality specifications for service and the delivery of those specifications by the service provider. Primary causes of this group are the variable and inseparable nature of services. To reduce this gap team work should be created in the organization. Gap 4- Communication Gap- It is the difference between the service that was delivered and the external communication of the firm. It is influenced by overpromise and horizontal communication. To reduce this gap there must be communication between the sales people and the personnel performing the service. (R. Srinivasan) Strategies for influencing for Customer Perception When a company knows how to influence people effectively the business can reach to the next level. Building a strong perception is a key to influence marketer. Various strategies are as follows-: Social Media Social Advertising Media Buying Press Releases Follow Ups and Marketing Success Stories Conclusion The study of consumer expectation is important to know the level of service desired by consumers. Using a conceptual framework of the nature and determinants of customer expectations of service, we showed in this topic that customers hold different types of service

14 14 expectations: (1) desired service, which reflects what customers want; (2) adequate service, or what customers are willing to accept; and (3) predicted service, or what customers believe they are likely to get. These different levels of service are reflected within the customer s zone of tolerance, which establishes the variability in the service delivery that the customer is willing to accept. Customer expectations and tolerance levels are influenced by a variety of factors. The types and sources of these are the same for end consumers and business customers, for pure service and product-related service, and for experienced customers and inexperienced customers. In today s competitive world customer perception and customer satisfaction is a key ingredient to success of a business firm. Presently organizations are attempting to obtain increased customer satisfaction by focusing on the quality of their products and the service provided. Customer perceptions of service are described through two critical concepts: customer satisfaction and service quality. The critical customer perception is discussed in terms of factors that influence each of them. Customer satisfaction is a broad perception influenced by features and attributes of the product as well as by customers emotional responses, their attributes and perceptions of fairness. Service quality, the customers perception of the service component of a product, is also a critical determinant of satisfaction. Service encounters are the building blocks for both satisfaction and quality.