The customer focus

Consumer Behavior; Consumer Expectations; Consumer Perceptions

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

2. The Customers The customers are the most valuable assets to a company People who are happy and satisfied come back and pay once again Excellent companies know customer’s needs and requirements

3. The ‘service’ customer Service is sold to a customer who shows emotions, may be happy or angry and cannot be easily ignored The service provider should therefore know the customer and his needs This information is needed to: Design effective and efficient services Design delivery systems Position and market services effectively Forecast and manage demand

4. Consumer Behavior in Services: A Consumer Behavior Model Consumer decision-making process goes through steps of: 1.Need Recognition 2.Information search 3.Evaluation and Selection 4.Purchase 5.Post-Purchase processes

5. Consumer Behavior 1.Needs Recognition Need recognition: Maslow’s theory of needs refers to: Physiological needs: food, water, clothing, shelter Safety needs: physical security from natural forces, disease Social needs; love, friendship Esteem needs: Independence, importance Self- actualization needs- self-fulfillment

6. 2.Needs determined by External Influences Culture: personality of the society which influence a consumer and defines boundaries within which most people act Values: widely held beliefs, which can be self-oriented, others oriented or environment oriented Demographics Social status Households, social groups

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

8. Consumer Behavior 3.Information Search Information on existing services Information on developing criteria for decision making Sources of information: Memory Personal sources-friends Independent sources-consumer groups Marketing sources- media Experiential sources- inspection or trial use

9. Consumer Behavior 4.Evaluation and Selection Evoked set- groups of products/services, a consumer considers acceptable options. Technology Choice between self-provision or hiring someone to perform Strategies to reduce risk as more risk is involved in services because of non-standardization and intangibles Qualitative assessment- normally after the experience

10. Consumer Behavior 4.Purchase Moods (transient) and emotions (stable) influence Delivery of service can be conceived as drama- the skills, dress, behavior of service providers count Physical setting of service, like the stage is important for desired impression Changing of brands is less often as awareness of alternatives is limited

11. 5.Post Evaluation Real evaluation of services is after the purchase, Dissatisfaction is partly on account of customer himself as he has been actively involved in decisions. However, service provider can play an important role through empathy to reduce the impact

12. Customers and/or their assets as inputs People processing : Directed at customers’ body as surgery, travel, Possession processing : Directed at goods/possessions such as car repairs Mental stimulus processing ; Directed at customers’ mind such as TV, education. Service providers performance and behavior determines customers perception Information processing : Directed at the customers' intangible assets as banking over email, ATM

13. Customer as an Employee Customers perform a variety of roles in service delivery system: Service specifier : exteriors design, dresses, decorations, food selection, travel instructions Quality inspector : restaurants, satisfaction values, patients recovery, applause in a theatre Co-producers : They become a part of the ‘atmosphere for other customers in a restaurant or theatre; self service

14. Benefits of customer involvement Inclusion : An increased sense of loyalty develops Resource productivity : Self service restaurants save on manpower Customer control : Customers feel that they have more personal control over what happens. Internet based services are popular for this reason as the customers have a control to switch on or off.

15. Customer management issues Defining customer competence : Who is the customer- educated, young, entrepreneur? Customer selection : Hotels, clubs do so Customer training : customers may not be aware of the use of some service component- security alarm Customer motivation : Rewards for good customers Customer removal : important in social situations. Drunk passengers in an airlines or theatre

16. Issues because of Customer presence Safety Signposting : customers should know where to go Layout : Ease of access/ car parking Décor : Décor influences the atmosphere Manner of delivery : employee filling a form No-pretest : Hair dresser has to be first time correct Unpredictability : Customers do not behave always as expected

17. Customer presence: Contd. Customer as unpaid employee : self service ATM Labour intensive : productivity may vary from person to person in delivery of service High levels of personal judgment is needed ; Customer requires on spot decisions from people attending him Numerous outlets are needed : nearness to the customers is the criteria Distribution : services are also sometimes delivered at customer’s place Quality control is limited to process control; ‘Right first time’ is essential

18. Customer presence: Contd. Customer as unpaid employee : self service ATM Labour intensive : productivity may vary from person to person in delivery of service High levels of personal judgment is needed ; Customer requires on spot decisions from people attending him Numerous outlets are needed : nearness to the customers is the criteria Distribution : services are also sometimes delivered at customer’s place Quality control is limited to process control; ‘Right first time’ is essential

19. Customer types : Operations view Focus on marketing approach and design facilities accordingly. Examples for a restaurant: A family restaurant will call for easy to clean and adustability to large seating arrangement Romantic restaurant will call for different furnishing depending on the type of customers Upbeat music for younger couples as evening progresses Fast food will call for self service

20. Customer types The Ally : Positive frame of mind and willing to provide positive feedback. Other customers infer that service must be good, if ‘ally’ is happy The Hostage : bound to the suppliers for service, as in case of service during warrantee; difficult when service deteriorates The Anarchist : Does not like rules and systems. Creates problems for other customers who follow rules

21. Customer types The Patient : Locked in to service, such as a patient in a hospital or a student. Can become an Anarchist or Hostage with too many restrictions The Tolerant : Passive and waiting type. Very often they become invisible and get ignored. Goodwill can be lost The Intolerant : Seldom passive or patient and cause problems and stress service for themselves first.

22. Customer types The Victim : Victims react by blowing up incidents or resign to their fate. The Terrorist : Mounts a damaging attack when you least expect it The Incompetent : Confused by procedures; first time users; may not come back if they find bad experience. Need training The Champion : Helpful in all possible ways and provide positive word-of –mouth support. Ideal for all services

23. Aims and Objectives Create Allies through information, communication, explanation, involvement in process Bottom left require counseling and support Anarchist and Terrorists are the most difficult to handle. ‘Removal’ is one way out. Use of their negative energy through personal involvement is another approach

24. Customer Retention Valued Customers: ( Allies and Champions) Valuable Customers: who generate high lifetime values. These depend on current and potential annual spend, duration of relationship, profitability of customer and contacts with customer. Firms deploy: CRM Product relationship: buy loyalty through future discounts Personal relationship: build loyalty and social bond Key Account Management: for small strategic customers

25. Value to a customer Porter: what buyers are willing to pay. Superior value stems from offering lower prices than competitors Marshall: Value is the equilibrium price formed when the marginal cost equaled the marginal utility. Exchange value is thus determined not by usefulness of a good but the last unit of it that is consumed. Thus the value is not only the marginal use for a customer but also the marginal cost of producing the last unit. Value is the ability of a good or service to satisfy a need or provide a benefit to a customer

26. Six Components of Customer Value Perceived Quality: Quality exists in the eyes of the customer. Customer is satisfied if the perceptions of what he receives matches or exceeds expectations of service. Higher the perceived quality, higher the perceived value Intrinsic Attributes: Benefits provided to the customers. Core service- without these services are impossible; such as air transport Supplementary service- for delivery of core service; such as seats, food, pillows More value is created by increasing supplement. services

27. Six Components of Customer Value Extrinsic Attributes: Psychological benefits. Created attributes where service organization has no direct control over them. ‘Best’ restaurant Monetary price: Sum of all expenses incurred by a customer to get a service Non-monetary price: Any perceived sacrifice such as time spent, risk, anxiety, stress, pain in treatment

28. Six Components of Customer Value 6. Time: This can appear in three ways Time needed to use the service- Less the time required to use a service, higher is the value of service to the customer. Time and service quality are interrelated Service as a time –saving alternative to another service, such as air travel, air mail Time horizon within which the service provides benefits- value varies for different lengths of time Value now for a short duration, such as hotel stay Value now over indefinite duration, as telephone service Value in future over limited period, as elementary school Value in future over indefinite duration, as education