POM: Session 7 Introduction to Consumer Behaviour

Marketing deals with maintaining profitable customer relationships. 

Hence all marketing strategies are designed keeping in mind what the consumers wants, when do they want and how do they want. Study of consumer behaviour helps marketer in understanding different needs and wants and acts as an important basis for segmentation.

Consumer buyer behaviour is defined as the behaviour that consumers display in searching, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs.

The study of consumer behaviour is very important for planning marketing strategy. Not all consumers have same approach towards buying. We have already discussed about different types and levels of needs. These differences results in different buying approaches. 

There can be number of different ways to analyse and study different consumer behaviour. Broadly classified, it can be categorized as 

• Individual buying behaviour—individuals and households who buy goods and services for personal consumption and 
• Business buying behaviour – Firms that buy for the purpose of reproduction.

Factors Affecting Consumer Behaviour

Consumers buying perspective is affected by variety of factors. As individuals, they have different income, tastes, preferences, needs, situations, cultures and beliefs. Thus, it is imperative for marketers to study and identify factors that constitute and influence buying behaviour as they offer product and services to these individuals. These factors are:

• Cultural factors
• Social factors
• Personal factors
• Psychological factors

Cultural Factors

Culture

It is the most basic cause of a person’s wants and behaviour. Culture is the set of basic values, perceptions, wants, and behaviour from family and other important institutions. These are the norms and values carried forward by generations and are distinctive from one entity to the other. 

Culture is an outcome learned norms and beliefs, but it is affected by a person’s exposure with outside world. In today’s world internet and mobile communication has made culture very dynamic and fraternised. It is dynamic because it is highly influenced by others and fraternise because it is hobnob and accommodating. For example - adaptation of fast food culture in India.

Subcultures 

These are groups of people with shared value systems based on common life experiences and situations. Some of the important bases of subcultures are different religions and locations. In a country like India, where there are number of religions, many products, especially those linked with religious rituals and festivals are targeted at these subcultures. For example, sale during holy month of Ramadan, special offers during Diwali and so on. Geographic regions also give rise to distinctive subcultures. Thus, Bengali, Gujarati, and Punjabi people (to name a few) form apparent subcultures in India. Several products are offered to cater to the needs of individual subcultures. Rural-urban differences are also immense in India. 

Like India, there are several such diverse pre-dominant religious subcultures around the world. 

Social Classes

These are society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviours. Social class is determined by combination of occupation, income, education, wealth, and other variables. 

Social Factors

Groups and Social Networks

A person’s behaviour is influenced by many small groups. These groups may be formal or informal.

Membership groups have a direct influence and to which a person belongs. For example, a student is a member of a college, a class and a club or association that he or she joins.

Aspirational groups are groups to which an individual wishes to belong. These are sought for associations. Marketers closely observe these longings and create products and services that can help them achieve those memberships. Many coaching classes use aspirations of students who desire to join IIT or IIMs.

Reference groups are groups that form a comparison or reference in forming attitudes or behaviour. These are the strong source of influence in buying behaviour. Opinion leaders are people within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert social influence on others. Internet and social networking sites are online spaces where people socialize or exchange information and opinions. 

Family 

It is the most important consumer buying organization in society. In a family, buying roles change with evolving consumer lifestyles. In India, the wife traditionally has been the main purchasing influence for the family in the areas of food, household products, and clothing. But with more and more women holding jobs outside the home and the willingness of husbands to do more of the family’s purchasing, all this is changing. These changing trends are even more extreme in the West. Children may also have a strong influence on family’s buying decisions.

Roles and Status

A role consists of the activities people are expected to perform. Each role carries a status reflecting the general esteem given to it by society. 

Personal Factors

Age and Life-Cycle Stage

People change the goods and services they buy over their lifetimes. Marketers are increasingly catering to a growing number of alternative, nontraditional stages such as unmarried couples, singles marrying later in life, childless couples, same-sex couples, single parents, extended parents (those with young adult children returning home), and others.

RBC (Royal Bank) has identified five life-stage segments. 

1. The youth segment includes customers younger than 18. 
2. Getting started consists of customers aged 18 to 35 who are going through first experiences. 
3. Builders, customers aged 35 to 50, are in their peak earning years. 
4. Accumulators, aged 50 to 60, worry about saving for retirement and investing wisely. 
5. Preservers, customers over 60, want to maximize their retirement income to maintain a desired lifestyle. 

 Occupation

A person’s occupation affects the goods and services bought. Students buy more of casuals whereas working professionals have more of formals.

Economic Situation

A person’s economic situation will affect product choice. Consumer low on resources will buy more basic product. As resources increase, consumers look for value addition and more frills.

Lifestyle

Lifestyle is a person’s pattern of living as expressed in his or her psychographics. Lifestyles are determined by AIO statement. AIO dimensions are activities (work, hobbies, shopping, sports, social events), interests (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products).

Personality and Self-Concept

Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. One of noted theory of personality proposed by Sigmund Freud, says that individuals have three distinctive forces determining personality; Id, superego and ego.

The basic self-concept premise is that people’s possessions contribute to and reflect their identities; that is, “we are what we have.”

Psychological Factors

SM: Session5 Service Product

Planning and Creating Service Product

Services are mostly intangible. Service performances are experiences rather than owned. Some service though have substantial physical elements, but significant portion of price is paid for the service elements.  A service product comprises of all elements of service performance, both tangible and intangible that create value for customers. 

Service products are designed keeping in mind these tangible and intangible elements. The basic decision is to identify the core service and then augment it with number of supplementary service. Since the service product is mostly service delivery, the process of delivery completes both core and supplementary services. 

Core Product - This is the central component that supplies the principal, problem-solving benefits that customers seek. This is usually described by the industry it serves. For example food and beverages, transportation, accommodation and so on.

Supplementary Services:  These are the service elements that augments the core product, facilitating its use and enhancing its value and appeal. Supplementary services are value points for marketers. They also function as point of differences. The creativity and novelty seeking service provider add more number of services and brings them to highest standards.

Delivery Processes: The processes used to deliver both the core product and each of the supplementary services. For each service element, delivery of service must address the following issues:

• Nature of Processes: How the different service components are delivered to the customer
• Customer’s role: The nature of the customer’s role in those processes
• Scheduling: How long delivery lasts
• Service Level: The recommended level and style of service to be offered

Documenting the Delivery Sequence Overtime:

The blueprint of the service delivery is very crucial as it gives guideline to decide the sequence or flow of service delivery. The prerequisites are -

1.  All inclusions and exclusions in the service package and its sequence.
2. The time element of each aspect including the customer waiting time,
3. The amount of customer information needed and available. 

The Flower of Service

This concept was first introduced by Christopher Lovelock in 1992. In his paper "Cultivating the Flower of Service: New Ways of Looking at Core and Supplementary Services", he has elaborated the range of service elements that can be added to a services products as:

1. The elements that are important in service delivery or aid to the delivery of core product. They are Facilitating Service.
2. The elements that add extra value to the core product. They are termed as Enhancing Services.

Though there can be number of facilitating and enhancing services, Christopher Lovelock has classified them in eight clusters. According to this model these eight service elements are petals surrounding the center of the flower which is represented by the core product called the Flower of service. They consists of information, consultation, order-taking, hospitality, safekeeping, exceptions, billing and payments. 

The order of the elements in the service flower is designed keeping in mind the flow of service and the order in which they happen. Information, order taking, billing and payments describes facilitating elements, and consultations, hospitality, safekeeping and exceptions brings up enhancing service elements.

The facilitating and enhancing services aids the delivery of core service product. They are present in services with variations as not everyone aims at the highest level of service. Also the sequence of service differs in different industries - for example in some cases like online travel bookings, customers may not visit the service providers office at all. Facilitating services are also determined by the role of customer in the delivery process (people processing vs possession processing) and the waiting and delivery time associated with the delivery.

Information

Information is a very strong element in facilitating core service. Good service provider’s aims to create good impression by keep an updated and informative website, which helps providing all necessary information to the customer. The customer may seek following Information:

Directions to service site: 

Service providers can use SEO to enable online search. On the company's website all the information including product information, reservations and FAQs guides the customer. It also provides location help to the customers.

Novotel hotel in Venice, Italy provides all the useful information on it's website.

On the physical location there is an information counter or reception provides the information. They are the people who guides the customer to appropriate service factory.

Schedules/service hours:

Airlines provide information regarding flight timings and duration, Hotels put up check-in and check-out timings, doctors display their visiting hours to provide customers with the schedules.

Prices: 

Most customers seek information regarding prices of the service package. They also look for information regarding inclusions in the given offer and prices for add-ons.

Reminders & Offers: 

Most airlines sends messages to its customers regarding schedules and delay, banks provide its customer with the updated account information and beauty saloons sends message its customers for service reminders. Tours and travel companies send messages to its customers regarding offers and schemes.

Warnings and Conditions: 

All disclaimers, cancellation policies, possible changes in fares and prices are informed to the customers. Special conditions are mentioned if required. For example, a hair spa would ask the customer to wash the hair before treatment. 

This tour and travel companies indicates current prices with warnings that it is subject to change as seats are full. They would also notify the change in itinerary, timings and packages are informed. 

Documentation: 

Customer may need information regarding their previous services that is made available if documented. Confirmation of reservations can be provided online or offline through a message or a voucher. Receipts and tickets are a proof of bookings and payments an offline or online voucher or ticket is provided.Banks and financial institutions provides summaries of account activities that are updated and accurate. 

Consultation

After seeking all the general information, the customers will look for the suggestions and recommendations that best suits their specific needs. The service providers tries to answer all possible queries of customers. In an academic institution, students asks faculty members regarding choice of course. In a restaurants, patrons ask captain to suggest what dish to order, In a beauty saloon, customers ask experts to guide them regarding what facial or haircut will suit them. Consultation is an enhancing service which may not be offered by basic service providers. Some of the consultation services includes:

Customized advice:

Tours and travel companies provide customized advice to its customers regarding personal counseling, tutoring/training in product use and management or technical consulting.

Norwegian cruise liners have personal consultants for guide customers booking the right cruise and packages.

Order taking

Once a customer is satisfied with all the information and counseling, the order is placed. In services order placing may happen before counseling, after counseling or simultaneously as well.  Ordertaking is a facilitating element and essential in all service. In basic services order is taken on the basis of what is available and very less or no counseling is given to the customers. 

The customer may place the order online through the reservation portals. Many service providers like beauty saloons, spas, hotels and restaurants book reservations online.

Many rental companies like taxi services, car rentals or equipment rentals also provide online booking services. Bookmyshow app provides online booking of tickets for movies, concert, sports events and plays.

Some services like memberships in clubs, admissions in schools and universities and subscription services requires the customer to fill an application. In such cases, there are many applicants for one seat and the service provider selects the customer on the basis of certain criteria.

Hospitality

Hospitality is an enhancing element. Its starts at the moment customer enters a service factory. This elements is the most important parameter of service quality and very essential in people processing high contact services. Many services providers excels in hospitality. Major hotel chains and restaurants have positioned themselves on their exceptional hospitality services.

  

As per Christopher Lovelock, the hospitality element is defined by the following:  

Greeting:

Being the first contact point or moment of truth, service providers makes sure that the customer is greeted properly upon entering the service facility. The main entrance security, parking assistants, and the people at reception greets the customer. At HDFC bank branches, the customer is greeted by a security personnel at the entrance and guided towards the right counter.

Food and beverages:

A very important aspect of hospitality s the food and beverages offered to the customer, not only for the hotel and restaurant services but for all the people processing services. In a beauty saloon, consultancy services, complimentary refreshments are offered to the customers waiting and availing the services.In some other service, like retail stores, cinema halls and concerts, refreshments are made available on paid basis.

Airlines also emphasize on quality of food served. Low cost airlines serve food on payment (pre or onspot). Luxury airlines serve liquor and food to its customers.

Other hospitality elements includes, neat and clean toilets and washrooms, comfortable waiting facilities with basic amenities like air-conditioner and water dispenser. Service providers also offers lounges, waiting areas with wi-fi facility, comfortable seating. Changi airport in Singapore provides massage chairs in the waiting lounge. Waiting lounges also keep magazines, televisions, newspapers for the customers.

Service providers also provides weather protection from sun, rains and snow is provided to the customers and the customer's vehicles.

Good hotels also provide airport transfers and sight seeing tours.

Safekeeping

Safekeeping is also an enhancing element. It includes:

• Caring for customer possessions child care, pet care, parking for vehicles, valet parking, coat rooms, baggage handling,   storage space, safe deposit boxes and security personnel
• Caring for goods purchased like providing packaging, pickup, free transportation and delivery, installation, inspection and diagnosis of malfunctioned products, cleaning, refueling, annual maintenance repair and renovation.

Exceptions

Exceptions is an enhancing element of service product. At time service providers have to deal with special requests from the customers regarding their personal needs for example, children’s needs, dietary requirements, medical or disability needs or religious observances. For hotels, customer may request for early check-in or late checkout.

Service providers also excel in handling complaints, compliments and suggestions. In case of complaints they try to recover the service, if not possible they provide adequate compensation. For example, if a customer is not satisfied with a haircut, the saloon may not charge the customer. In case the customer is delighted with the experience and compliments service provider, the service provider rewards the customers with some freebies to retain the patronage. Customer suggestions are invited for improvements.

Services providers may provide exception in handling and solving problem situations. They may offer service warranties and guarantees like home repair and painting companies offers. They may assist customer using a product or may assist customers mers who have suffered an accident or a medical emergency

In case of service failure due to any reason, the service provider may restitute by offering refunds and compensation. They may also offer free repair of defective goods.

Billing

Billing is a facilitating element of service product. Whatever level of service offered or availed, billed with great care and accuracy. It includes, invoices for individual transactions, verbal statements of amount due or machine display of amount due. At times customers may create the bill themselves. Many hotels offers express check-ins.

Payments

The final and most important supplementary service is the payment facility. These days there are many options available for payment. Customer can pay online using payment gateway, using credit card or debit cards. They may pay through mobile network or third party, like paytm. Some housing and personal finance companies deduct directly from customer's bank account. The option to pay at service provider site is also available.

Reference: Services Marketing: People, Technology, Strategy - Lovelock, Wirtz & Chatterjee & Service Marketing - Zeithmal, Bitner, Gremler & Pandit

SM: Session 4 Consumer Behaviour in a Service Context

In daily life, a consumer use number of services. Some are chosen with lot of planning, some at random and some as compulsion. Service consumption may vary as services may be more or less tangible (or intangible). However, it can be categorized as three different stages:

Stage I: Pre-purchase Stage

This is the stage where the customer is making up his/her mind about a service purchase. It involves all the groundwork and research before going to the service factory. This stage is similar to consumer decision making process for goods where the production is already completed. It comprises of the following:

1. Need Arousal

A person may feel need for a service due to several factors. Some services are necessary, for example, basic education and health. Service can fulfil personal needs like massage or spa. Some services cater to aspirations, so we have coaching, tuitions and specialized courses. Someone aspiring to become a cricketer will need the services of a cricket coach. An aspiring model may need services of a beautician, or may be a cosmetic surgeon!

Consumers use number of services as a part of their routine, like banking, laundry and retail services. Some services are needed to socialize. Restaurants and holidays are largely catering to such needs. Need for experience is related to adventure trips and very popular among young generation. 

Sometimes consumers act on marketing activities, i.e., promotions, offers and discounts. The need to avail service is related to the attractiveness of the marketing activity.

2. Information Search

Once a need is recognized, customers are motivated to search for services (providers) to satisfy the need. The consumer may search on internet or may visit service provider to know more about the need fulfilment process. The desired need may be fulfilled by number of service options. Depending upon the need, when a customer search for the information,  all of them may not be consider all of them. Consumer will search for only few select one for which they have positive feelings. These options form the evoked set or consideration set.

For example, when a consumer wants to go out to a restaurant for dinner, he/she will consider only few restaurants and not all of them. Similarly, there are several movies running, but not all are considered.

3. Evaluating Alternatives

After searching for more information regarding few services options, few are evaluated for final decision. The evaluation approaches may contains be different for different services as services vary in terms of their attributes, perceived risk and expectations.

Service Attributes

Due to inseparability of services, it is difficult to evaluate service before purchase. Hence following service attributes provides an important distinction:

(a) Search Attributes: Service attributes are the tangible characteristics of the product that a customer can evaluate before a purchase. Search attributes are applicable to most products and the services where some amount of tangibility is present. In such cases, customers can minimize the risk by physical inspection of the service factory. For example, in restaurants and hotels, the customer can relate the quality of food with the ambience.

(b) Experience Attributes: In such services experiencing the service is a must to assess the attributes like ease of use, reliability and customer service. The customers can rely on their own past experience or recommendations from friends. 

Service providers may provide the experiences by putting up testimonials, reviews and videos on their website.

(c) Credence Attributes: Consumer may find it very difficult to evaluate some services even after receiving them. They have to simply trust the skills of the service provider. For example, it will be complex to understand quality of repair for a car service. 

Perceived Risk

Services that are highly intangible and the performance are likely to be evaluated on experience or credence attributes, customer perceives a high amount of risk entering the service.  The risks are;

• Functional: The service may not be performed to satisfaction
• Financial: The service may prove to be costly or may result in monetary loss.
• Temporal: The time given for the service may go waste or service may not fulfil time criteria.
• Physical: The service may cause in some health issues.
• Psychological: The fear of entering into an unknown service environment.
• Social: The brand image of the service provider.
• Sensory: Services effect of any of five senses.

Perceived Risk is a problem for both, service providers as well as customers. Customers may go to reputed service providers, use available information and reviews, examine the facility physically or look for guarantees and warranties to minimize the risk.

Services providers may include the practice of previews through websites or brochures, providing physical inspection and trials, advertise the value, display credentials, and provide evidences, informing about order status and service guarantees to hell the customer minimize risk.

Service Expectations

Customer expectation of a service outcome is formed during information search or due to past experiences or also because of marketing efforts. Customer expects the different service quality from different providers. It can change due to situations.

A customer may go with different expectations to different restaurant. Consider this: A group of friends decided to go out for dinner. There were different preferences of food amongst them and they wanted quality of service. Thus, they decided to go to a multi-cuisine restaurant, which is known for its service and ambiance. It was a Saturday and there was no reservation. The desired level of expectations was the quality of service and ambiance. They were also looking forward to restaurant’s happy hours offer on select drinks. Hence they predicted that they might avail that offer fruitfully if there is no rush. So within the circumstances, they were ready to wait.  

There expectations from the services were defined as:

Desired Service: Usually consumers have an expectation of desired level of service with a service provider. These expectations are formed due to personal needs and beliefs about a service provider. Group of friends desired to have a nice time with other and they also wanted to enjoy food and drinks.

Adequate Service: This level of service expectation is the customer’s alterations to service expectations due to situational factors. Expecting some waiting due to weekend or because of no prior reservations is what the customer is okay with even though it is not desired.

Predicted Service: The definition of service quality expectation that generate due to promises made by service providers.

Zone of tolerance: The gap between desired service and adequate service is known as zone of tolerance. Since adequate service is defined by predicted level of service, zone of tolerance is large if service provider promises reasonably. If service provider increase level of predicted service expectations, zone of tolerance will be a very less.

4. Purchase Decision

After the evaluation of alternatives, the consumer is ready to avail the service. At this point the consumer may decide:

• Whether or not to avail service – In the situations where no service provider is expected to provide adequate service, the consumer may postpone the service purchase.
• Which service provider – the decision is easy if there are less number of service providers, each one is significant different in terms of expectation and purchase is frequent.
• When to avail service – the customer may require deciding on time- price-quality trade off.

Stage II: Service Encounter Stage

The important point of discussion here are:

• Moments of Truth
• High contact Vs Low Contact Services
• The Service-Production or Servuction System

Service encounter stage is the stage where the customer moves on avail the service. To avail the service, customer enters the service factory and interacts with the service providers. In this very interaction customer carry its expectations from the service provider. Service encounter is a period of time during which customer interacts directly with a service provider.

Each such number of encounter are moment of truths. A Swedish management consultant Richard Normann, relates the concept of moment of truth to bullfighting. According to him, "Moment of Truth" is " .....when the service provider and service customer confront one another in the arena. At that moment they are very much on their own......It is the skill, the motivation, and the tools employed by the firm's representative and the expectations and behaviour of the client which together will create the service delivery process."

Services also vary in terms to contact with the customer. There are services that last few seconds (a phone call) to several numbers of years (enrolment in a university for a four year course).  High contact services are the services have long committed customer-employee interactions. All the elements of services work together in production of services and most of these services are people processing services.

Low contact services are majorly possession processing. There is little or no contact between customer and provider. Most of the internet services are low contact services.

The Servuction system or service- production system is the whole service process. It is made of three subsystems, the Service Delivery System, Service Operating System and Service Marketing System. The Service Delivery System or the service factory is the part of the system where the customer contacts the provider.  It consists of the people, equipment, interior and exterior facility and other customers. The service operating system or the technical core is the backend operations of the service provider. The service marketing system is the promotional activities of the company.

Stage III: Post Encounter Stage

After the service delivery customers evaluate the service and compare it with their expectations. There is a possibility of three outcomes:

• Services were lower than expectations – negative disconfirmation in case expectations were low and dissatisfaction to the extent of feeling of being cheated.
• Services were same as expectations – in case of low expectations the customers are contended with low quality and less price, whereas in case of high expectations same level of performance confirms brand loyalty
• Services were better than expectation – positive disconfirmation as the performance is more than what is expected. In case of low expectation customer feel valued for the money that they pay and in case of high expectation customers are delighted are they spread good word of mouth about the service firm.

Expectations	Performance
	Low	Same	High
Low	Negative Disconfirmation – Economy Services	Confirmation – Low quality	Positive Disconfirmation -  Value for money
High	Dissatisfaction – Feels cheated	Confirmation – Brand Loyalty	Positive Disconfirmation – Customer Delight

Reference: Services Marketing: People, Technology, Strategy - Lovelock, Wirtz & Chatterjee & Service Marketing - Zeithmal, Bitner, Gremler & Pandit