CHAPTER 3

Basic concept of services marketing and how to go
beyond

service to create experiences

TABLE OF CONTENTS

1 Introduction To Services Marketing
2 Creating The Service Product
3 Model of Services Consumption
4 Service Marketing Programmed
5 Service Quality and Productivity
6 Assessment

Conclusion

Chapter Three

MODEL OF
SERVICES
CONSUMPTION

Chapter Three

LEARNING OUTCOME:

By the end of this chapter, students should be able to:
❑ Demonstrate the three-stage model of service

consumption
❑ Explain service encounters
❑ Recognize the categorize of service processes

a. People processing
b. Possession processing
c. Mental stimulus processing
d. Information processing
❑ Explain the levels of customer contact differences
a. High-contact services
b. Medium-contact services
c. Low-contact services
❑ Explain service as a system
a. Service operation system
b. Service delivery system
c. Service marketing system
❑ Demonstrate the flowchart of service experience
❑ Demonstrate post-encounter stage
❑ Explain the relationship between service
performance and expectation

3.1 DEMONSTRATE THE THREE-STAGE MODEL OF
SERVICE CONSUMPTION

3.1.1 Demonstrate the three-stage model of service
consumption

❑ Service consumption can be divided into three main stages:-
1. Prepurchase
2. Service encounter
3. Post-encounter
❑ The prepurchase stage includes need-awareness,

information search, evaluation of alternatives, and making a
purchase decision.
❑ During the service encounter stage, the customer initiates,
experiences, and consumes the service.
❑ The post-encounter stage includes evaluation of the service
performance, which determines future intentions such as
wanting to buy again from the same firm, and
recommending it to friends.

3.1 DEMONSTRATE THE THREE-STAGE MODEL OF
SERVICE CONSUMPTION

3.1.1 Demonstrate the three-stage model of service
consumption

3.1 DEMONSTRATE THE THREE-STAGE MODEL OF
SERVICE CONSUMPTION

3.1.1 Demonstrate the three-stage model of service
consumption

3.1.1 Demonstrate the three-stage model of service
consumption

Pre purchase Stage

A. Need Awareness

❑ When a person or organization decides to buy or use a
service, it is triggered by an underlying need or need arousal.

❑ The awareness of a need will lead to information search and
evaluation of alternatives before a decision is reached.

❑ Needs may be triggered by:
• People’s unconscious minds (e.g., personal identity and
aspirations).
• Physical conditions (e.g., Susan Munro’s hunger drove her
to Burger King).
• External sources (e.g., social media or a service firm’s
marketing activities)

❑ When a need is recognized, people are likely to be motivated
to take action to resolve it.

❑ Needs and wants are continuously developing, for example,
the need for increasingly novel and innovative service
experiences in extreme sports, such as guided mountain
climbing, paragliding, white-water rafting, mountain biking,
and bungee jumping

3.1.1 Demonstrate the three-stage model of service
consumption

Pre purchase Stage

B. Information Search

❑ Once a need has been recognized, customers are motivated
to search for solutions to satisfy that need. Several
alternatives may come to mind, and these form the evoked
set.

❑ The evoked set can be derived from past experiences or
external sources such as social media, online reviews, online
searches, advertising, retail displays, news stories, and
recommendations from service personnel, friends, and
family.

❑ However, a consumer is unlikely to use all the alternatives in
the evoked set for decision-making.

❑ The consumer is likely to narrow it down to a few
alternatives to seriously consider, and these alternatives form
the consideration set.

❑ For Susan, her consideration set for a quick lunch included
the sandwich store and Burger King. During the search
process, consumers also learn about service attributes they
should consider and form expectations of how firms in the
consideration set perform on those attributes.

3.1.1 Demonstrate the three-stage model of service
consumption

Pre purchase Stage

C. Evaluation of Alternative

❑ During the search process, consumers form their
consideration set, learn about the service attributes they
should consider and form expectations of how firms in the
consideration set perform on those attributes.

❑ Multi-attribute models have been widely used to simulate
consumer decision making. According to these models,
consumers use service attributes (e.g., quality, price and
convenience) that are important to them to evaluate and
compare alternative offerings of firms in their consideration
set.

❑ Each attribute is weighted according to its importance.
❑ Consumers using the same information can ultimately

choose different alternatives if they use different decision
rules.
❑ There are three types of attributes: search attributes,
experience attributes and credence attributes.
❑ Search attributes refer to tangible characteristics consumers
can evaluate before purchase.

3.1.1 Demonstrate the three-stage model of service
consumption

Pre purchase Stage

C. Evaluation of Alternative

❑ These attributes (e.g., price, brand name, transaction costs)
help consumers to better understand and evaluate a service
before making a purchase and therefore reduce the sense of
uncertainty or risk associated with a purchase decision.

❑ Experience attributes, on the other hand, cannot be reliably
evaluated before purchase. Consumers must ‘experience’ the
service before they can assess attributes like reliability, ease
of use and consumer support.

❑ Credence attributes are characteristics that consumers find
hard to evaluate even after making a purchase and
consuming the service. This can be due to a lack of
technical experience or means to make a reliable evaluation,
or because a claim can be verified only a long time after
consumption, if at all.

3.1.1 Demonstrate the three-stage model of service
consumption

Pre purchase Stage

D. Purchase Decision

❑ After consumers have evaluated possible alternatives by, for
example, comparing the performance of the important
attributes of competing service offerings; assessed the
perceived risk associated with each offering; and developed
their desired, adequate, and predicted service level
expectations, they are ready to select the option they
likebest.

❑ Many purchase decisions for frequently purchased services
are quite simple and can be made quickly without too much
thought — the perceived risks are low, the alternatives are
clear, and, because they have been used before, their
characteristics are easily understood.

❑ If the consumer already has a favorite supplier, he or she will
probably choose it again in the absence of a compelling
reason to do otherwise. In many instances, however,
purchase decisions involve tradeoffs. Price is often a key
factor.

3.1.1 Demonstrate the three-stage model of service
consumption

Pre purchase Stage

D. Purchase Decision

❑ For example, is it worth paying more for faster service, a
larger room with a better view, or a better seat in a theater
performance

❑ For more complex decisions, tradeoffs can involve multiple
attributes, as we have seen in the section on consumer
choice based on the multi-attribute model.

❑ In choosing an airline, convenience of schedules, reliability,
seating comfort, attentiveness of cabin crew, and availability
and quality of meals may well vary among different carriers,
even at the same rates.

❑ Once a decision is made, the consumer is ready to move to
the service encounter stage.

❑ This next step may take place immediately, as it is in
deciding to enter a fast-food restaurant, or it may first involve
an advance reservation, as what usually happens with taking
a flight or attending a live theater performance.

3.1.1 Demonstrate the three-stage model of service
consumption

Pre purchase Stage

D. Purchase Decision

❑ For example, is it worth paying more for faster service, a
larger room with a better view, or a better seat in a theater
performance

❑ For more complex decisions, tradeoffs can involve multiple
attributes, as we have seen in the section on consumer
choice based on the multi-attribute model.

❑ In choosing an airline, convenience of schedules, reliability,
seating comfort, attentiveness of cabin crew, and availability
and quality of meals may well vary among different carriers,
even at the same rates.

❑ Once a decision is made, the consumer is ready to move to
the service encounter stage.

❑ This next step may take place immediately, as it is in
deciding to enter a fast-food restaurant, or it may first involve
an advance reservation, as what usually happens with taking
a flight or attending a live theater performance.

3.2 DEMONSTRATE SERVICE ENCOUNTER STAGE

3.2.1 Explain Service Encounters

❑ After making a purchase decision, customers move on to the
core of the service experience. The service encounter stage
is when the customer interacts directly with the service firm.

❑ The proposed service encounter model is an integration of
the servuction (combining the terms ‘service’ and
‘production’) model and the servicescape/environmental
model

❑ The servuction model focuses on the various types of
interactions that take place in a service encounter and
together create the consumer’s service experience.

❑ The servuction system consists of a technical core invisible
to the customer and the service delivery system visible to
and experienced by the consumer

❑ As in the theatre, the visible components can be termed
‘front stage’ or ‘front office’, while the invisible components
can be termed ‘back stage’ or ‘back office’.

3.2 DEMONSTRATE SERVICE ENCOUNTER STAGE

3.2.1 Explain Service Encounters

❑ The servuction system includes all the interactions that
together make up a typical consumer experience in a high-
contact service.

❑ Consumers interact with the service environment, service
employees and even other consumers present during the
service encounter.

❑ Each type of interaction can either create value (e.g., a
pleasant environment, friendly and competent employees,
other consumers who are interesting to observe) or destroy
value (e.g., another consumer blocking your view in a movie
theatre).

❑ Firms have to coordinate all interactions to ensure their
consumers have the service experience for which they came.

3.2 DEMONSTRATE SERVICE ENCOUNTER STAGE

3.2.2 Categorize of Service Processes

❑ Consumers rarely involved in manufacture of goods but
often participate in service creation and delivery

❑ Challenge for service marketers is to understand how
customer interact with service operation

❑ Based on differences in nature of service act ( tangible /
intangible )and who or what is direct recipient of service (
people / possessions ), there are four categories of services :

• People processing
• Possession processing
• Mental stimulus processing
• Information processing

3.2 DEMONSTRATE SERVICE ENCOUNTER STAGE

3.2.2 Categorize of Service Processes

a) PEOPLE TANGIBLE
PROCESSING ACTIONS

b) POSSESSION INTANGIBLE
PROCESSING ACTIONS

c) MENTAL STIMULUS
PROCESSING

d) INFORMATION
PROCESSING

3.2.2 Categorize of Service Processes

A. PEOPLE PROCESSING

❑ Service aimed at physical care to people’s bodies.
❑ Example: healthcare, clinics, restaurants, hairstylist and

fitness centre.
❑ Customer need to be physically present throughout service

delivery to receive its desired benefits.
❑ Managers to think about process and output in terms of

what happens to the customer (or other object being
processed) because it helps them to identify what benefits
are being created.
❑ Service process it self help to identify some of the
nonfinancial-cost such as time, mental and physical effort.



3.2.2 Categorize of Service Processes

B. POSSESSION PROCESSING

❑ Services aimed at physical possession and tangible assets.
❑ Many such activities are quasi-manufacturing operations and

do not always involve simultaneous production and
consumption.
❑ Example, laundry, repair services, landscaping and house
cleaning services.
❑ In most possession services, the customer’s involvement is
usually limited to dropping off the item that needs
treatment, requesting the service, explaining the problem,
and later returning to pick up the item and pay the bill.
❑ Example: lazada and Zalora.



3.2.2 Categorize of Service Processes

C. MENTAL STIMULUS PROCESSING

❑ Service aimed at mind of customer.
❑ Example: education, information, entertainment, consulting

and psychotherapy.
❑ Receiving these service requires an investment of time on

the customer’s part.



3.2.2 Categorize of Service Processes

D. INFORMATION PROCESSING

❑ Service directed at intangible assets.
❑ Information is the most intangible form of service output,

but it may be transformed into more tangible form as letters,
report, books, tapes, diskettes.
❑ Service that are highly depend on the effective collection and
processing of information are financial services and
professional service.
❑ Example, banking, law, marketing research, legal
consultation, brokerage, and financial service.



3.2.3 Levels of customer contact differences

3.2.3 Levels of customer contact differences

❑ High-Contact Services
❑ Medium-Contact Services
❑ Low-Contact Services

3.2.3 Levels of customer contact differences

A. High-Contact Services

❑ Active contact between customers and service personnel
❑ Includes most people – processing service
❑ Example : hairdressing , medical service

3.2.3 Levels of customer contact differences

B. Medium-Contact Services

❑ Involve only a limited amount of contact between customers
and elements of the service operation.

❑ The purpose of these contact is often limited to:

1. Establishing a relationship and defining a service need
- Example : personal financial consultant , marketing,

2. Dropping off and picking up physical possession that being
serviced

-Example : dry cleaning , car repair

3. Trying to resolve a problem
-Example : telephone banking , CIMB group

3.2.3 Levels of customer contact differences

C. Low-Contact Services

❑ Little or no physical contact with service personnel
❑ Contact usually at arm’s length through electronic or

physical distribution channel.
❑ Facilitated by new technologies (e.g. the Web) help reduce

contact levels
❑ Example : radio & television , insurance, banks, courier

3.2.3 Levels of customer contact differences

High-Contact to Low-Contact

3.2.4 Service as a system

❑ The level of contact that a service business intends to have
with its customer is a major factor in defining the total
system, include overlapping subsystem.

❑ There are three types of service as a system:-
a. Service Operation System
b. Service Delivery System
c. Service Marketing System

3.2.4 Service as a system

a. Service Operation System

❑ Front stage and backstage
❑ The visible component of service operation can be divided

into those relating to the actors (or services personnel) and
those relating to the stages set (or physical facilities
equipment and other tangibles)
❑ Customer evaluate the production on those elements they
actually experience during service delivery and on the
perceived service outcome.
❑ Includes facilities, equipment, and personnel

3.2.4 Service as a system

b. Service Delivery System

❑ Front stage
❑ Where “final assembly” of service elements takes place and

service is delivered to customers
❑ Service delivery system is concern with where, when and

how the service is delivered to the customer.
❑ Traditionally, service providers had direct interactions with

their customer. But to achieve goals ranging from cost
reduction and productivity improvement to greater customer
convenience, many services that don’t require the customer
to be physically present in factory now seek to reduce direct
contact.

3.2.4 Service as a system

i. How the service product is delivered (physical and e-
commerce)

Customer goes to the organization
❑ When the customer need the service, they should go to

organization that offer the service.
❑ Example: banking and Hospitality

Service organization goes to customer
❑ Companies sent agents to the customer to provide

information about their services.
❑ Example: Counselling and insurance

❑ Customer and organization transept at armslength
❑ Technology was change the ways organization delivery their

service to the customer.
❑ Example: atm machine and vending machine

3.2.4 Service as a system

ii. Delivering process (pre, during and post delivery)

PRE
❑ entails the planning and activities that enable the

organization to determine its customers and the services that
will be offered to them as they enter the system
❑ Example: Health care make marketing research including
gathering any data about the market itself - potential
customers, their wants, needs and habits in terms of health
care, and the services an org could provide that would satisfy
those wants and needs

DURING
❑ A period of time during which a customer interacts directly

with the service provider.
❑ Example: Health care is oriented around patient care and

delivery (clinical), market activities, market study in order to
suggest good manner in health care delivery.

3.2.4 Service as a system

ii. Delivering process (pre, during and post delivery)

POST
❑ Evaluation of service performance.
❑ Involves consumers’ behavioral and attitudinal responses to

the service experience.
❑ Example: Health care make a follow up include activities

which include calling after surgery or clinic visit to ask if
everything is going as expected or whether additional
prescriptions/help is needed

3.2.4 Service as a system

c. Service marketing

❑ Service marketing system involves not only the delivery
system but also include additional components.

❑ Example: ASTRO not only send the bill to the customer but
also send offers and promotions to its customers.

3.2.4 Service as a system

c. Service marketing

Service Marketing System for a
High-Contact Service

Service Delivery Other Contact
System Points

Service Operations Other Advertising
System Customers
Sales Calls
Technical Interior & The
Core Exterior Custome Market Research
Facilities r Surveys

Equipment Billing/Statements

Service Misc. Mail, Phone Calls,
People E-mails, Faxes, etc.

Backstage Other Website
(invisible)
Front Stage Customers Random Exposure to
(visible) Facilities/Vehicles

Chance Encounters with
Service Personnel

Word of Mouth

3.2.4 Service as a system

c. Service marketing

Service Marketing System for a
Low-Contact Service

Service Service Delivery Other Contact
Operations System Points
System
Mail Advertising
Technica
l Core Self The Market Research
Surveys
Backstage Service
(invisible) Billing/Statements
Equipment Customer
Random Exposure
Phone, to
Fax, Web- Facilities/Vehicles
site, etc.
Word of Mouth
Front Stage
(visible)

3.2.5 Flowchart of Services Experiences

3.2.5 Flowchart of Services Experiences

3.3 POST-ENCOUNTER STAGE

❖ The last stage of service consumption is the post-encounter
stage which involves consumers’ attitudinal and behavioral
responses to the service experience.

❖ Important consumer responses are customer satisfaction,
service quality perceptions, repeat purchase, and customer
loyalty.

Customer Satisfaction

❖ In the post-encounter stage, customers evaluate the service
performance they have experienced and compare it with
their prior expectations.

❖ Satisfaction is a judgment following a series of consumer
product interactions.

❖ Most customer satisfaction studies are based on the
expectancy-disconfirmation model of satisfaction.

3.3.1 Relationship between service performance
and expectation

Expectancy-disconfirmation model of satisfaction.

❑ In the model, confirmation or disconfirmation of pre-
consumption expectations is the essential determinant of
satisfaction.

❑ During the decision-making process, customers assess the
attributes and risks related to a service offering. In the
process, they develop expectations about how the service
they choose will perform.

❑ For example, if a customer paid a premium of $350 for a
direct flight rather than one that has a four-hour stopover,
the customer will not take it lightly if there is a six-hour
flight delay.

❑ A customer will also have high expectations if he paid a
premium for high-quality service, and will be deeply
disappointed when the service fails to deliver.

❑ Smart firms manage customers’ expectations at each step in
the service encounter so that customers expect what the firm
can deliver.

3.3.1 Relationship between service performance and
expectation

❑ During and after consumption, consumers experience the
service performance and compare it to their expectations.

❑ Satisfaction judgments are then formed based on this
comparison. If performance perceptions are worse than
expected, it is called negative disconfirmation.

❑ Susan Munro’s expectations were negatively disconfirmed
when her suit was not ready for pick up at the dry cleaner,
leading to her dissatisfaction and her intention to give
another dry cleaner a try in the future.

❑ If performance is better than expected, it is called positive
disconfirmation, and if it is as expected, then it is simply
called confirmation of expectations.

3.3.1 Relationship between service performance and
expectation

❑ Customers will be reasonably satisfied as long as perceived
performance falls within the zone of tolerance, that is, above
the adequate service level.

❑ As performance perceptions approach or exceed desired
levels, customers will be very pleased.

❑ Satisfied customers are more likely to make repeat
purchases, remain loyal, and spread positive word-of-mouth.

❑ However, if the service experience does not meet their
expectations, customers may suffer in silence, complain
about poor service quality, or switch providers in the future.

❑ Satisfaction with service attributes thus results from the
experience of attribute-specific performance and strongly
influences consumers’ overall satisfaction.

❑ Understanding this helps managers to cement the strengths
of the firm’s services and to focus improvement efforts on
where it matters most.

3.3.1 Relationship between service performance and
expectation

❑ To plan a services performance
successfully it is necessary to
understand a performances
characteristic:

❑ A services performance is likely to
be a multifaceted phenomenon

❑ A service performance exists only
during it's actual enactment

❑ A services performance occurs over
time and involves a sequence of
events

❑ beliefs about service delivery
❑ serve as standards or reference

points against which performance
is judged
❑ customers compare their
perceptions of performance with
these reference points when
evaluating service quality
❑ through knowledge about customer
expectations is critical to services
marketers

THANK YOU..