Consumer behaviour for Services

CONSUMER CHOICE BEHAVIOUR IN SERVICES:

The Drivers Of Consumer Choice:

The drivers of consumer choice in servicescan be broadly categorized as brand name and functional quality.

Brand Name:

Service Offerings Versus Products The absence of a tangible physical good on which a brand name can be affixed often necessitates assigning greater prominence to the corporate brand name on the various physical products and facilities used to deliver the service.

Functional Quality:

The perceived service quality concept suggests that the service quality perception is formedby the disconfirmation between expected and experienced service. The consumer expects a service based on marketing communication, word of mouth and image.

The actual service experience is based on the actual service process and the outcome of the service. These two dimensions are known as functional quality (how the service process functions) and technical or the outcome quality (what the service process leads to) dimensions.

Service complexity:

The factors that consumers use to evaluate service offerings -that is those, which can be used indifferentiating a service may be contingent on thecomplexity of the service offering in question.

For certain more complex or sophisticated financialservices offerings in particular, their high intangibility makes it potentially difficult to envisage the use of specific services features as the basis for differentiation.

CUSTOMERS’ ROLE IN SERVICE DELIVERY:

·         Customers play a very vital role in successful deliveryof service as customers are often present in the placewhere service is produced (Delivered).

·         Customers alone can influence whether the deliveredservice is as per customer defined specifications.

·         Other customers who are present in the Servicescape can also influence the Service positively ornegatively.

·         The level of participation of customers variesfrom Service to Service.

·         In “High level of participation.” Eg. B to B projectslike providing software solutions & consultancies.

·         In “Moderate level of participation” customersinputs are necessary to facilitate effectivedelivery of service

PRICING OF SERVICES:

Differences between customer evaluation ofpricing between services and goods:

a) Customers have limited or inaccurate referenceprice for services.

b) Monetary price is NOT the only price relevantto service customers.

c) Price is a key indicator of quality in services;

i.e. higher the price better is the service.

NON MONETARY COSTS:

Time costs, search costs, convenience costsand psychological costs are the non monetarycosts in a service and play an equallyimportant role like that of monetary cost.

PRICE AS AN INDICATOR OF SERVICE QUALITY:

·         In the absence of other forms of communication fromthe company, price becomes the sole decisive factor inselection of a service. Customers look for cues likeinformation through advertising, brand image etc.

·         In certain services which are perceived as high risk likeconsultancy services and medical treatment the customersassociate pricing with quality assurance.

·         Too low a pricing can act as a repellant. It could send negative signals. Too high a price can set very high expectations

PRICING APPROACHES:

·         COST BASED:Cost based Pricing: Used in services like advertising, contracting etc.

Price = Direct Cost

+

Overhead Cost

+

Profit Margin

·         COMPETITION BASED PRICING:

This approach is based on using the competitors’price as the point of reference

Eg: Fitness clubs, Driving classes, Computer classe setc.

a. When services are standard across providers.

b. In oligopolies where there are few large service providers : Airlines

c. Going-rate Pricing

d. Sealed bid pricing: govt. tenders.

·         DEMAND BASED PRICING:

ü  Based on establishing prices consistent with customer perception of value i.e. pricing depends on what customers are likely to pay  for the services provided

ü  Example Show time in multiplexes, happy hours in restaurants, midnight buffets. Etc.