FAITH COLLEGE

BBA-VI

MARKETING OF SERVICES

UNIT-2

CONSUMER BEHAVIOR IN SERVICES

Consumer orientation lies at the heart of the marketing concept.1 As marketers, we are required to understand
our consumers and to build our organizations around them. As Jeff Bezos of Amazon.com puts it, “We see our
customers as invited guests to a party, and we are the hosts. It’s our job everyday to make every important
aspect of the customer experience a little bit better.” 2 Understanding consumers and improving the experience
is particularly important for services, which in many instances still tend to be operations-dominated rather than
customer-oriented. Given today’s economic and competitive environment, it is more important than ever to
understand consumers, how they choose among alternative services offered to them, and how they evaluate
these services once they have received them.

The Consumer Decision Process

To market services effectively, marketing managers need to understand the thought processes used by
consumers during each of the three stages of the consumer decision process: the prepurchase choice among
alternatives, the consumer’s reaction during consumption, and the postpurchase evaluation of satisfaction.
Although we can never truly know the thought process used by the individual when making that choice, the
consumer decision process helps to structure our thinking and to guide our understanding regarding consumer
behavior.

STAGES

Prepurchase stage of the consumer decision process model which includes the phases of stimulus, problem
awareness, information search, and evaluation of alternatives.

The Prepurchase Stage: The Stimulus

The prepurchase stage of the consumer decision process refers to all consumer activities occurring before the
acquisition of the service. This stage begins when an individual receives a stimulus that incites a consumer to
consider a purchase.4 The stimulus may be a commercial cue, a social cue, or a physical cue.

Commercial cues are the result of promotional efforts. For example, a consumer may be exposed to a
commercial about a local college. As a result, the individual may begin to assess his or her current situation in
life and the possibility of enrolling at a university to pursue a university degree. Similarly, social cues are
obtained from the individual’s peer group or from significant others. For example, watching friends leave for
college in the fall, or watching peers who have completed college degrees being promoted at work may incite
an individual to consider furthering his or her own education. Finally, the stimulus may also be the result of a
physical cue such as thirst, hunger, or various other biological cues.
The Prepurchase Stage: Problem Awareness

Problem awareness occurs when consumers realize that they need to do something to get back to a normal state
of comfort. During the problem awareness phase of consumer decision making, the consumer examines whether
a need or want truly exists for the product category.

The Prepurchase Stage: Information Search

During the information search phase, the consumer collects information regarding possible alternatives that will
ultimately resolve the consumer’s problem. It is clear that in all consumer decision making, consumers seldom
consider all feasible alternatives. Instead, they have a limited list of options chosen on the basis of past
experience, convenience, and knowledge.

The Prepurchase Stage: Evaluation of Alternatives

Once relevant information has been collected from both internal and external sources, the consumer arrives at a
consideration set of alternative solutions to resolve the recognized problem. The possible solutions are
considered in the evaluation of alternatives phase of the consumer decision process. This phase may consist of a
nonsystematic evaluation of alternatives, such as the use of intuition—simply choosing an alternative by relying
on a “gut-level feeling”—or it may involve a systematic evaluation technique, such as a multi-attribute choice
model. Such systematic models utilize a set of formalized steps to arrive at a decision.

Evaluation of alternatives: The phase of the prepurchase stage in which the consumer places a value or
“rank” on each alternative.

Nonsystematic evaluation: Choosing among alternatives in a random fashion or by a “gut-level feeling”

approach.

Systematic evaluation: Choosing among alternatives by using a set of formalized steps to arrive at a decision.

The Consumption Stage: Choice

During this consumption stage, the consumer may make a store choice—deciding to purchase from a particular
outlet, or a nonstore choice—deciding to purchase from a catalog, the Internet, or a variety of mail-order
possibilities. This decision is accompanied by a set of expectations about the performance of the product to be
purchased.

The Postpurchase Stage: Postpurhase Evaluation

Once a purchase has been made and as the product, whether a service or a good, is being consumed,
postpurchase evaluation takes place. During this stage, consumers may experience varying levels of cognitive
dissonance—doubt that the correct purchase decision has been made. Marketers often attempt to minimize the
consumer’s cognitive dissonance by reassuring the customer that the correct decision has been made. Strategies
to minimize cognitive dissonance include aftersale contact with the customer, providing a reassuring letter in
the packaging of the product, providing warranties and guarantees, and reinforcing the consumer’s decision
through the firm’s advertising.
 MARKET SEGMENTATION
Segmentation
Segmentation refers to the process of creating small segments within a broad market to select the right target
market for various brands. It is a process of dividing a large unit into various small units which have more or
less similar or related characteristics. Segmentation helps the organizations decide on the marketing strategies
and promotional schemes.
Market Segmentation
Market segmentation is a marketing concept which divides the complete market set up into smaller subsets
comprising of consumers with a similar taste, demand and preference. A market segment is a small unit within a
large market comprising of like minded individuals. A market segment comprises of individuals who think on
the same lines and have similar interests.
Market segmentation helps the marketers to devise and implement relevant strategies to promote their products
amongst the target market.

A market segment consists of individuals who have similar choices, interests and preferences. They generally
think on the same lines and are inclined towards similar products. Once the organizations decide on their target
market, they can easily formulate strategies and plans to make their brands popular amongst the consumers.

Not all individuals have similar needs. A male and a female would have varied interests and liking towards
different products. A kid would not require something which an adult needs. A school kid would have a
different requirement than an office goers. Market Segmentation helps the marketers to bring together
individuals with similar choices and interests on a common platform.

Basis of Market Segmentation

1. Gender
The marketers divide the market into smaller segments based on gender. Both men and women have
different interests and preferences, and thus the need for segmentation. Organizations need to have
different marketing strategies for men which would obviously not work in case of females. A woman
would not purchase a product meant for males and vice a versa. The segmentation of the market as per the
gender is important in many industries like cosmetics, footwear, jewellery and apparel industries.
1. Age Group
Division on the basis of age group of the target audience is also one of the ways of market segmentation.
The products and marketing strategies for teenagers would obviously be different than kids. 
2. Income
Marketers divide the consumers into small segments as per their income. Individuals are classified into
segments according to their monthly earnings.
The three categories are:
High income Group
Mid Income Group
Low Income Group
Stores catering to the higher income group would have different range of products and strategies as
compared to stores which target the lower income group.
3. Marital Status
Market segmentation can also be as per the marital status of the individuals. Travel agencies would not
have similar holiday packages for bachelors and married couples.
4. Occupation
Division on the basis of occupation of the target audience is also one of the ways of market segmentation.
Office goers would have different needs as compared to school/college students.
Types of Market Segmentation
 Demographic Segmentation
Demographic segmentation is one of the common methods of market segmentation. It involves breaking
the market into customer demographics as age, income, gender, race, education, or occupation. This
market segmentation strategy assumes that individuals with similar demographics will have similar
needs. Example: The market segmentation strategy for a new video game console may reveal that most
users are young males with disposable income.
 Psychographic segmentation

The basis of such segmentation is the lifestyle of the individuals. The individual’s attitude, interest, value
help the marketers to classify them into small groups. Psychographic segmentation strives to classify
consumers based on their lifestyle, personality, opinions, and interests. This may be more difficult to
achieve, as these traits may change easily and may not have readily available objective data.
Example: A fitness apparel company may target individuals based on their interest in playing or
watching a variety of sports.

 Behaviouralistic Segmentation
The loyalties of the customers towards a particular brand help the marketers to classify them into smaller
groups, each group comprising of individuals loyal towards a particular brand. Behavioral segmentation
relies heavily on market data, consumer actions, and decision-making patterns of customers. This
approach groups consumers based on how they have previously interacted with markets and products.
This approach assumes that consumers prior spending habits are an indicator of what they may buy in
the future, though spending habits may change over time or in response to global events.
Example: Millennial consumers traditionally buy more craft beer, while older generations are
traditionally more likely to buy national brands.
 Geographic Segmentation
Geographic segmentation refers to the classification of market into various geographical areas. A
marketer can’t have similar strategies for individuals living at different places.  This approach groups
customers by physical location, assuming that people within a given geographical area may have similar
needs. This strategy is more useful for larger companies seeking to expand into different branches,
offices, or locations. Example: McDonald’s in India does not sell beef products as it is strictly against
the religious beliefs of the countrymen, whereas McDonald’s in US freely sells and promotes beef
products.
Need for Market Segmentation
 Market Segmentation helps the marketers to formulate appropriate marketing strategies and promotional
schemes according to the tastes of the individuals of a particular market segment. A male model would
look out of place in an advertisement promoting female products. The marketers must be able to relate
their products to the target segments.
  Market segmentation helps the marketers to understand the needs of the target audience and adopt
specific marketing plans accordingly. Organizations can adopt a more focused approach as a result of
market segmentation.
 Market segmentation also gives the customers a clear view of what to buy and what not to buy.
 Market segmentation helps the organizations to target the right product to the right customers at the right
time. Geographical segmentation classifies consumers according to their locations. A grocery store in
colder states of the country would stock coffee all through the year as compared to places which have
defined winter and summer seasons.
 Segmentation helps the organizations to know and understand their customers better. Organizations can
now reach a wider audience and promote their products more effectively. It helps the organizations to
concentrate their hard work on the target audience and get suitable results.

Steps in Market Segmentation

1. Identify the target market
Identify the target market is the first step in market segmentation. The marketers must be very clear about
who all should be included in a common segment. Make sure the individuals have something in common.
A male and a female can’t be included in one segment as they have different needs and expectations.
Maruti Suzuki has adopted a focused approach and wisely created segments within a large market to
promote their cars.
Lower Income Group - Maruti 800, Alto
Middle Income Group - Wagon R, Swift, Swift Dzire, Ritz
High Income Group - Maruti Suzuki Kizashi, Suzuki Grand Vitara
2. Identify expectations of Target Audience
Once the target market is decided, it is essential to find out the needs of the target audience. The product
must meet the expectations of the individuals. The marketer must interact with the target audience to know
more about their interests and demands.
Kellogg’s K special was launched specifically for the individuals who wanted to cut down on their calorie
intake.
3. Create Subgroups
The third step in market segmentation is creating subgroups. The organizations should ensure their target
market is well defined. Create subgroups within groups for effective results.
Cosmetics for females now come in various categories.
Creams and Lotions for girls between 20-25 years would focus more on fairness.
1.
Creams and lotions for girls between 25 to 35 years promise to reduce the signs of ageing.
2.
Naming market Segment
The next step is giving an appropriate name to each segment. It makes implementation of strategies easier.
A kids section can have various segments namely firstcry, newborn, toddlers etc.
Marketing Strategies
Create relevant strategies to promote brands amongst each segment. Remember you can’t afford to have
same strategies for all the segments. Make sure there is a connection between the product and the target
audience. Advertisements promoting female toiletries can’t afford to have a male model, else the purpose
 gets invalidate. A model promoting a sunscreen lotion has to be shown roaming or working in sun for the
desired impact.
Review the behavior
Review the behavior of the target audience frequently. It is not necessary individuals would have the same
requirement (demand) all through the year. Demands vary, perceptions change and interests differ. A
detailed study of the target audience is essential.
Size of the Target Market
Knowing the target market size is an essential step in market segmentation. Collect necessary data for the
same. It helps in sales planning and forecasting.
SERVICES POSITIONING

Positioning

Positioning is concerned with the identification, development and communication of a differentiated advantage
which makes the organization’s products and services perceived as superior and distinctive to those of its
competitors in the mind of its target customers. It is the means by which a brand or company presents its
features and benefits to prospective customers. It is a means of establishing identity, one that sets a business
apart from competitors. It is also determined by variables that include price, target audience, and the area where
a firm does business.

A business must set itself apart from its competition. To be successful it must identify and promote itself as the
best provider of attributes that are important to target customers.

Example: Convenience- making things easy for the customers. Customer services, variety, quality, value,
reliability, safety etc.

Every service offered has the potential to be perceived as different by a customer. Buyers have different needs
and are therefore attracted to different offers. It is therefore important to select distinguishing characteristics
which satisfy the following criteria:

Importance – the difference is highly valued to a sufficiently large market.

Distinctiveness – the difference is distinctly superior to other offering which are available.

Communicability – it is possible to communicate the difference in a simple and strong way.

Superiority – the difference is not easily copied by competitors.

Affordability – the target customers will be able and willing to pay for the difference. Any additional cost of the
distinguishing characteristic(s) will be perceived as sufficiently valuable to compensate for any additional cost.

Profitability- the company will achieve additional profits as a result of introducing the difference.

Process of Positioning:

1. Determining levels of positioning - The first step in positioning is to determine which level(s) – service level,
product sector level, corporate level – are to receive explicit positioning attention. Some examples will illustrate
the choices that are made by some service organizations. The level or levels of positioning to be undertaken are
usually fairly clear out, although some organization, have placed different emphasis on these levels at different
points in time.

2. Identification of attributes - Once the level of positioning has been determined it is necessary to identify the
specific attributes that are important to the chosen market segments.

3. Location of attributes on positioning map - The positioning process involves the identification of the most
important attribute and location of various companies’ services, for these attributes, on a positioning map.
Where a range of attributes are identified, statistical procedures exist for combining these attributes into
aggregate dimensions. Such dimensions are referred to by various names such as principal components, multi-
dimensional scales, factors etc. depending upon how the data were elicited and which statistical procedures
were used. Usually two dimensions are used on positioning maps and these often account for a large proportion
of the ‘explanation’ of the customer’s preferences. Positioning maps can be based on either objective attributes
or subjective attributes Maps can also use a combination of objective and subjective attributes.

4. Evaluation positioning options -According to Ries and Trout, there are 3 positioning options:

 Strengthening current position against competitors: This means to better ones own services and thus
strengthening the current position against competitors.
 Identifying an unoccupied market position: This means to identify and fill the unoccupied and
unnoticed .gaps through better service delivery.
 Repositioning the competition: This means to frequently reposition in order to attain a better position as
compared to the competitor can be achieved through advertising and innovation.

5. Implementing positioning -A successful positioning strategy should make the service clearly distinguishable
by features which are desirable and important to the target customer segment. This means that the positioning
strategy should be examined from time to time to ensure that it does not become outdated and that it is still
relevant to the target market segment.

Importance of Positioning

1. To Make Entire Organisation Market-oriented: Product positioning is a part of the broader

marketing philosophy. It concerns with identifying superior aspects of product and matching
them with consumers more effectively than competitions. This philosophy makes the entire
organisation market oriented.
2. To Cope with Market Changes: Once the product is positioned successfully doesn’t mean the
task of manager is over. He has to constantly watch the market. As per new developments in the
market place, new competitive advantages should be identified, discovered or developed to suit
the changing expectations of the market. It makes the manager active, alert and dynamic.
3. To Meet Expectation of Buyers: Generally, the advantages to be communicated are decided on
the basis of expectations of the target buyers. So, product positioning can help realize
consumers’ expectations.
4. To Promote Consumer Goodwill and Loyalty: Systematic product positioning reinforces the
company’s name, its product and brand. It popularizes the brand. The company can create
goodwill and can win customer loyalty.
5. To Design Promotional Strategy: More meaningful promotional programme can be designed.
Based on what advantages are to be communicated, appropriate means are selected to promote
the product. Product positioning signifies those advantages that are significant to consumers.
 When such benefits are promoted through suitable means of advertising, it definitely catches the
interest and attention of consumers.
6. To Attract Different Types of Consumers: Consumers differ in terms of their expectations from
the product. Some want durability; some want unique features; some want novelty; some wants
safety; some want low price; and so on. A company, by promoting different types of competitive
advantages, can attract different types of buyers.
7. To Face Competition: This is the fundamental use of product positioning. Company can respond
strongly to the competitors. It can improve its competitive strength.
8. To Introduce New Product Successfully: Product positioning can assist a company in
introducing a new product in the market. It can position new and superior advantages of the
product and can penetrate the market easily.

Types of Positioning

1. Positioning by features:

It is based on a single feature or attribute of a service. If your product or service has some unique features that
have obvious value this may be the way to go. For example, the largest roller coaster in town: an amusement
park. One new ride added every month, for a similar theme park, live music along with a dinner, for the
restaurant.

2. Positioning by comparison:

In this service is positioned against a particular competitor. For example, the highest percentage of successful
candidates, for a coaching class or educational institution. Business schools frequently use rankings in
independent surveys to claim they are in the top 10 or 15 in the country. One business school, Indian Institute of
Planning and Management (IIPM), even positions itself against the Indian Institutes of Management (IIMs),
with the line “Dare to Think Beyond the IIMs”.

3. Positioning by benefit to consumer:

It is based on some benefit the customer derives using a particular service . As in “You have a dream of
becoming an expert programmer, working for a multinational, going abroad, etc., and we help you to fulfill it”,
could be the slogans of a computer training institute such as NIIT or SSI.

4. Positioning through guarantees:

Full satisfaction, or your money back, or returns with no questions asked, in case of retail stores.

5. Positioning as a leader:

Number 1 in the furniture retailing business, or leadership with responsiveness, in the banking industry.

6. Positioning through smart tag lines:

Positioning through smart tag lines, which may implicitly convey some benefit, like the famous line used by
Met Life Insurance, USA, which says “Get Met. It Pays.” (In India, they are currently using the tag line “Have
you met life today?”). This may indicate that it settles claims with less of fuss than competitors. It may also
imply other value, though not explicitly specified.
 7. Positioning through emotions:

Positioning through emotions such as fear, love, kinship, concern for the environment, etc. A hotel chain in
India calls its properties Ecotels, to indicate the environmental consciousness at various levels. Sahara Airlines,
a late entrant into the airline business, positioned itself as “Emotionally Yours”.