LESSON: 4 - CONSUMER NEEDS AND EXPECTATIONS

OBJECTIVES

After going through this lesson, you will be able:

➢         To understand why it is important to have a proper knowledge of the consumer

➢         To identify the kinds of role that is played in purchase process.

➢         To know the factors influencing consumer behavior.

➢         To explain the consumer decision making process.

 

INTRODUCTION

The  primary  objective  of  service  producers  and  marketers  is  identical  to  that  of  all marketers: to develop and provide offerings that satisfy consumer needs and expectations, thereby ensuring their own economic survival. In other words, service marketers need to be able to close the customer gap between expectations and perceptions. To achieve this objective, service providers need to understand how consumers choose and evaluate their service offerings. Unfortunately, most of what is known about consumer evaluation processes pertains specifically to goods. The assumption appears to be that services, if not identical to goods, are at least similar enough in the consumer’s mind that they are chosen and evaluated in the same manner.

This chapter challenges that assumption and shows that services’ unique characteristics necessitate different consumer evaluation process from those used in assessing goods. Recognizing these differences and thoroughly understanding consumer evaluation processes are critical for the customer focus on which effective services marketing is based. Consumers have a more difficult time evaluating and choosing services than goods, partly because services are intangible and non-standardized and partly because consumption is so closely intertwined with production. These characteristics lead to differences in consumer evaluation processes for goods and services in all stages of buying process.

 

CUSTOMER NEEDS AND EXPECTATIONS

Customers buy goods and services to met specific needs, and they evaluate the outcomes of their purchases based on what they expect to receive. Needs are deeply rooted in people unconscious minds and concern long-term existence and identity issues. When people feel a need, they are motivated to take action to fulfill it. Abraham Maslow identified five categories of human needs- physiological, safety, love, esteem and self-actualization- and proposed that basic needs such as food and shelter must be met before others can be fulfilled. Greater prosperity means that increasing numbers of individuals are seeking to satisfy social and self-actualization needs, which create demand for more sophisticated goods and services. For instance, travel and leisure services have been a major beneficiary of  increased  disposable  income,  leading  many  firms  to  develop  a  variety  of  enticing vacation packages. However, as customer needs and preferences continue to evolve, the leisure industry needs to adapt its offerings accordingly.

The shift in consumer behavior and attitudes provides opportunities for service companies that understand and meet changing needs, continuing to adapt their offerings over time as needs evolve. Customers’ expectations about what constitutes good service vary from one business to another. Expectations are also likely to vary in relation to differently positioned service providers in the same industry.

When individual customers or corporate purchasing departments evaluate the quality of a service, they may be judging it against some internal standard that existed prior to the service experience. Perceived service quality results from customers comparing the service ‘they perceive they have received’ against what ‘they expected to receive’. People’s expectations about services tend to be strongly influenced by their own prior experience as customers-with a particular service provider, with competing services in the same industry, or with related services in different industries. If they have no relevant prior experience, customers may base their pre-purchase expectations on factors such as word-of-mouth comments, news stories, or the firm’s marketing efforts.

Customer expectations embrace several different elements, including desired service, adequate service, predicted service, and a zone of tolerance that falls between the desired and adequate service levels.

Desired and adequate service levels-Desired service is the type of service customers hope to receive. It is a wished-for level of service-a combination of what customers believe can be and should be delivered in the context of their personal needs. However, most customers are realistic and understand that companies can’t always deliver the level of service they would prefer; hence, they also have a threshold level of expectations, termed adequate service, which is defined as the minimum level of service customers will accept without being dissatisfied.

Predicted service-The level of service customers actually anticipate receiving is known as predicted service and directly affects how they define adequate service on any given occasion. If good service is predicted, the adequate level will be higher than if poorer service is predicted. Customers predictions of service may be situation specific.

Zone of tolerance-The inherent nature of services makes consistent service delivery difficult across employees in the same company and even by the same service employee from one day to another. The extent to which customers are willing to accept this variation is called the ‘zone of tolerance’. A performance that falls below the adequate service level will cause frustration and dissatisfaction, whereas one that exceeds the desired service level will both please and surprise customers, creating what is sometimes referred to as customer delight. Another way of looking at the zone of tolerance is to think of it as the range of service within which customers don’t pay explicit attention to service performance. By contract, when service falls outside the range, customers will react either positively or negatively.

The zone of tolerance for individual customers depending on factors such as competition, price, or importance of specific service attributes.

DECISION MAKING ROLES

In the buying decision process, at times, other people also influence the buying decision and these people have a definite role to play. In the purchase of any particular service, six distinct roles are played. These are:

Initiator-The person who has a specific need, and proposes to buy a particular service.

Influencer-The person or the group of people who advise the decision maker. These could be reference groups, both primary and secondary. It could be even secondary reference group like word of mouth or media, which can influence the decision maker.

Gatekeeper-The person or organization or promotional material which acts as a filter on the range of service which enter the decision choice set.

Decider-The person who makes the buying decision. Irrespective of whether they execute the purchase themselves or not, they may instruct others to execute. It has been observed, at times, more typically in household or family or individual related services that one member of the family may dominate in the purchase decision.

Buyer-The person who makes the actual purchase or makes bookings for a services like our lives travel, hotel room, hospital, bed diagnostic lab, etc.

User-The person who actually uses or consumes the product. It can be someone other than the buyer. In a number of services it has been observed that users are also the influencers.

 

FACTORS INFLUENCING CONSUMER BEHAVIOUR

There are a number of factors or variables which affect buying behaviour.

Situational factors

The situational factors influencing the buying behaviour are- the influence of time pressure in service and brand choice, the atmosphere of the service outlet, occasion of purchase, etc. For example, if you are traveling, then demand for lodging and boarding will obviously be there.

Socio-cultural factors

Buyers or consumers do not take buying decisions or the decision not to buy, in a vacuum. Rather, they are strongly influenced by cultural and social factors.

Cultural factors

Children acquire from their environment a set of beliefs values and customs which constitute culture. These beliefs, values and customs go deeper and deeper as a person grows. Therefore, it is sometimes said that culture is learned as a part of social experience. The various sub-categories within a culture can be identified based on religion, age, gender, occupation, social class, geographical location, etc.

Reference groups

There are certain groups to which people look to guide their behaviour. These reference groups may guide the choice of a product but not necessarily the brand. Peer group and peer pressure has generally been observed to play an important role in the purchase of credit cards, cell phones, etc. The knowledge of reference group behaviour helps in not only offering substitutes but also in pricing and positioning them.

Family

The family is another major influence on consumer behaviour. Family consumption behaviour, to a large extent, depends on the family life cycle. The stages in family life cycle include bachelorhood, newly married, parenthood with growing or grown up children, post-parenthood and dissolution. Knowledge of these stages helps greatly in knowing the buying process. Often family members play a significant role in the purchase of a particular service.

Psychological Factors

Perception-It is the process by which buyers select, organize and interpret information into a meaningful impression in their minds. Perception is also selective when only a small part is perceived out of the total of what is perceptible. Buyer’s perception of a particular service greatly influences buying behaviour.

Attitude-An attitude is a learned predisposition to respond in a consistently favourable or unfavourable manner with respect to a market offer (i.e., a brand, a particular shop or retail outlet, an advertisement, etc.). Attitude is a dispositional term indicating that attitudes manifest themselves in behaviour only under certain conditions. Knowing a buyer’s attitude towards a product without knowing the personal goals is not likely to give a clear prediction of his behaviour.

Motivation- Motivation is the driving force within individuals that compels them to action. This driving force is subconscious and the outcome of certain unfulfilled needs. Needs are basically of two types- first, the ‘innate needs’ are those needs with which an individual is born and they are mainly physiological. They include all the factors required to sustain physical life e.g., food, water, shelter, clothing, etc. Secondly, the ‘acquired needs’ are those which a person acquires as he/she grows and these needs are mainly psychological, like love, fear, esteem, acceptance, etc.

Personal factors

Personality- Personality can be described as the psychological characteristics that determine how an individual will react to his or her environment.

Life style-Life style as distinct from social class or personality is nothing but a person’s pattern of living and is generally expressed in his/ her activities, interests and opinions. Life style suggests differences in the way people opt to spend on different products or services differently.

Demographic factors-Buyers demographic factors like age, gender, education, occupation, etc., also influence his/her purchase behaviour. In sum, knowledge on all such dimensions of the consumer will help in understanding his needs and wants and also help in integrating all these elements in service offer which the consumer wants.

SERVICE DECISION-MAKING PROCESS

Consumer decision-making process have four main categories: (1) information search, (2) evaluation of alternatives, (3) purchase and consumption, and (4) post-purchase evaluation.

In purchase of services, these categories do not occur in a linear sequence the way they most often do in the purchase of goods.

(a)          Information search

Use of personal sources- Consumers obtain information about products and services for personal sources (e.g., friends or experts) and from non-personal sources (e.g., mass or selective media). When purchasing goods consumers make generous use of both personal and non-personal sources because both effectively convey information about search qualities. When purchasing services, on the other hand, consumers seek and rely to a greater extent on personal sources.

Perceived risk-While some degree of perceived risk probably accompanies all purchase transactions, more risk would appear to be involved in the purchase of services than in he purchase of goods because services are intangible, non-standardized, and usually sold without guarantees or warranties.

First, the intangible nature of services and their high level of experience qualities imply that services generally must be selected on the basis of less pre-purchase information than is the case for products. Second, because services are non-standardized, there will always be uncertainty about the outcome and consequences each time a service is purchased. Third, service purchases may involve more perceived risk than product purchases because, with few exceptions, services are not accompanies by warranties or guarantees. The dissatisfied service purchaser can rarely “return” a service; he or she has already consumed it by the time he or she realizes his or her dissatisfaction.

(b)      Evaluation of service alternatives

Evoked set-The evoked set of alternatives-that group of products a consumer considers acceptable options in a given product category- is likely to be smaller with services than with goods. One reason involves differences in retailing between goods and services. To purchase goods, consumers generally shop in retail stores that display competing products in close proximity, clearly demonstrating the possible alternatives. To purchase services, on the other hand, the consumer visits an establishment (e.g., a bank, a dry cleaner, or a hair salon) that almost always offers only a single “brand” for sale. A second reason for the smaller evoked set is that consumers are unlikely to find more than one or two businesses providing the same services in a given geographic area, whereas they may find numerous retail stores carrying the identical manufacturer’s product. A third reason for a smaller evoked set is the difficulty of obtaining adequate pre-purchase information about services. Emotion and mood-Emotion and mood are feeling states that influence people’s (and therefore  customers’)  perceptions  and  evaluations  of  their  experiences.  Moods  are distinguished from emotions in that moods refer to transient feeling states that occur at specific times and in specific situations, whereas emotions are more intense, stable, and pervasive.

Because services are experiences, moods and emotions are critical factors that shape the perceived effectiveness of service encounters. If a service customer is in a “bad mood” when he enters a service establishment, service provision will likely be interpreted more negatively than if he were in a buoyant, positive mood. Similarly, if a service provider is irritable or sullen; his interaction with customers will likely be colored by that mood. Furthermore, when another customer in a service establishment is cranky or frustrated, whether from problems with the service or from existing emotions unrelated to the service, his or her mood affects the provisions of service for all customers who sense the negative mood. In sum, any service characterized by human interaction is strongly dependent on the moods and emotions of the service provider, the service customer and other customers receiving the service at the same time.

(c)      Service purchase and consumption

Service provision as drama-Researchers and managers of service businesses have compared service provision with drama, observing that both aim to create and maintain a desirable impression before an audience, and both recognize that the way to accomplish this is by carefully managing the actors and the physical setting of their behaviour. In fact, the service marketer must play many drama-related roles (including director, choreographer, and writer) to be sure the performances of the actors are pleasing to the audience.

The skill of the service “actors” in performing their routines, the way they appear, and their commitment to the “show” are all pivotal to service delivery. While service actors are present in most service performances, their importance increases when the degree of direct personal contact increases (such as in a hospital, resort, or restaurant), when the services involve repeat contact, and when the contact personnel as actors have discretion in determining the nature of the service and how it is delivered (as in education, medical services, and legal services).

Services roles and scripts-If we think of service performances as drama, we can view each players as having a role to perform. Roles have been defined as combinations of social cues that guide ad direct behaviour in a given setting. The success of any service performance depends in part on how well the “role set” or players- both service employees and customers- act out their roles. Service employees need to perform their roles according to expectations of the customer; if they do not, the customer may be frustrated and disappointed.

One of the factors that most influences the effectiveness of role performance is a script- a “coherent sequence of events expected by the individual, involving them either as a participant or as an observer”. Service scripts consist of a set of ordered actions, actors, and objects that, through repeated involvement, define what the customer expects. Con- formance to scripts is satisfying to the customer, while deviations from the script lead to confusion and dissatisfaction.

(d)           Post purchase evaluation

Attribution of dissatisfaction- When consumers are disappointed with purchases-because the products did not fulfill the intended needs, did not perform satisfactorily, or were no worth their price- they may attribute their dissatisfaction to a number of different sources, among them the producers, the retailers, or themselves. Because consumers participate to a greater extent in the definition and production of services, they may feel more responsible for their dissatisfaction when they purchase services than when they purchase goods. As an example, consider a female consumer purchasing a haircut; receiving the cut the desires depends in part upon her clear specifications of her needs to the stylist. If disappointed, she may blame either the stylist (for lack of skill) or herself (for choosing the wrong stylist or for not communicating her own needs clearly).

Innovation diffusion- The rate of diffusion of an innovation depends on consumers’ perceptions of the innovation with regard to five characteristics: relative advantage, compatibility, communicability, divisibility, and complexity. An offering that has a relative advantage over existing or competing products; that is compatible with existing norms, values, and behaviours; that is communicable; and that is divisible (i.e., that can be tried or tested on a limited basis) diffuses more quickly than others. An offering that is complex, that is, difficult to understand or use, diffuses more slowly than others.

Brand loyalty- The degree to which consumers are committed to particular brands of goods or services depends on a number of factors: the cost of changing brands (switching cost), the availability of substitutes, the perceived risk associated with the purchase, and the degree to which they have obtained satisfaction in the past. Because it may be more costly to change brands of services, because they may have more difficulty being aware of the availability of substitutes, and because higher risks may accompany services, consumers are more likely to remain customers of particular companies with services than with goods. Greater search costs and monetary costs may be involved in changing brands of services than in changing brands of goods. Because of the difficulty of obtaining information about services, consumers may be unaware of alternatives or substitutes for their brands, or may be uncertain about the ability of alternatives to increase satisfaction over present brands.

 

PURCHASE PROCESS FOR SERVICES

When customers decide to buy a service to meet an unfilled need, they go through what is often a complex purchase process. This process has three separate stages-the pre-purchase stage, the service encounter stage, and post-purchase stage.

Pre-purchase stage

The decision to buy and use a service is made in the pre-purchase stage. Individual needs and expectations are very important here because they influence what alternatives customers will consider. If the purchase is routine and relatively low risk, customers may move quickly to selecting and using a specific service provider. But when more is at stake or a service is about to be used for the first time, they may conduct an intensive information search. The next step is to identify potential suppliers and then weigh the benefits and risks of each option before making a final decision.

 

Service encounter stage

After deciding to purchase a specific service, customers experience one or more contacts with their chosen service provider. Contacts may take the form of personal exchanges between customers and service employees or impersonal interactions with machines or computers. In high-contact services, such as restaurants, health care, hotels, and public transportation, customers may experience a variety of elements during service delivery, each of which has the potential to provide clues to service quality.

Service environments include all of the tangible characteristics to which customers are exposed. The appearance of building exteriors and interiors; the nature of furnishings and equipment; the presence or absence of dirt, odor, or noise; and the appearance and behavior of other customers can all serve to shape expectations and perceptions of service quality.

Post-purchase stage

During the post-purchase stage, customers continue a process they began in the service encounter stage- evaluating service quality and their satisfaction or dissatisfaction with the service experience. The outcome of this process will affect their future intentions, such as whether to remain loyal to the provider that delivered service and whether to pass on positive or negative recommendations to family members and other associates.

Customers evaluate service quality by comparing what they expected with what they perceive they received. If their expectations are met or exceeded, they believe they have received high-quality service. If the price-quality relationship is acceptable and other situational and personal factors are positive, then these customers are likely to be satisfied. As a result, they are more likely to make repeat purchases and become loyal customers. However, if the service experience does not meet customers’ expectations, they may complain about poor service quality, suffer in silence, or switch providers in the future.

SUMMARY

Gaining a better understanding of how customers evaluate, select, use, and occasionally abuse services should lie at the heart of strategies for service design and delivery. In this chapter, we discovered that several of the unique characteristics of services mean that customer evaluation processes often differ from those involved in evaluating physical goods and thus present unique challenges for services management.

 

KEYWORDS

Culture: A set of beliefs, norms, values and customs.

Perception: It is the process by which buyers select, organize and interpret information into a meaningful impression in their minds.

Attitude: It is a learned predisposition to respond in a consistently favourable or unfavourable manner with respect to an object.

Motivation: It the driving force within individuals that impels them to act in a particular direction.

Personality: It can be described as the psychological characteristics that determine how an individual will react to his or her environment.

Life style: It is a person’s distinct pattern of living and is generally expressed in his/ her activities, interests and opinions.

 

 

SELF ASSESSMENT QUESTIONS

1.      Discuss the three stages in the purchase process for services.

2.      Elaborate the various steps involved in consumer decision making process for services.

3.      Identify the kinds of role that are played in services purchase process. Also write important factors influencing consumer behavior.