Characteristics of services

Services differ from goods in four ways, usually remembered as IHIP. Intangibility: a service cannot be seen, touched or sampled before purchase, so buyers look for cues such as premises, staff and price. Heterogeneity, also called variability: quality depends on who delivers the service, when and where. Inseparability: production and consumption occur together, and the customer is often present in the process. Perishability: unused capacity cannot be stored; an empty seat on a departed flight is revenue lost.

Many texts add a fifth feature, lack of ownership: the customer gets access or use, not title. Each feature has a managerial response:

• perishability: demand and capacity management, such as differential pricing and reservations;
• heterogeneity: standardisation, training and service blueprints;
• intangibility: physical evidence and strong branding;
• inseparability: training contact staff, managing customers who take part, and multi-site delivery.

The IHIP framework is widely taught but has been criticised in the academic literature. Use it as an exam framework, not as a strict law.

The extended marketing mix

Booms and Bitner (1981) added three elements to McCarthy’s 4Ps (product, price, place, promotion) for services:

• People: employees and other customers who shape the experience.
• Process: the procedures, flow and degree of customer involvement in delivery.
• Physical evidence: the environment and tangible cues, from the waiting area to the invoice and the website.

Physical evidence is the most direct answer to intangibility.

SERVQUAL: five dimensions

Parasuraman, Zeithaml and Berry (PZB) published the gaps model and ten determinants of service quality in 1985 (Journal of Marketing). In 1988 (Journal of Retailing) they developed the SERVQUAL scale: 22 paired items grouped into five dimensions. Service quality is measured as perceptions minus expectations (P − E), item by item.

The mnemonic RATER follows the order of the table. In PZB’s own studies, customers rated reliability the most important dimension. A common confusion is between reliability (accuracy and keeping promises) and responsiveness (speed and willingness to help).

The gaps model of service quality

In 1985, the same authors explained poor service quality through five gaps. Gaps 1 to 4 are on the provider’s side, and together they produce Gap 5, the customer gap. The labels used below (listening, design and standards, performance, communication) come from the later Zeithaml–Bitner textbook. The content of each gap is as in PZB 1985.

• Gap 1, the knowledge or listening gap: customer expectations versus management’s perception of those expectations.
• Gap 2, the standards or design gap: management perception versus the service quality specifications set.
• Gap 3, the delivery or performance gap: specifications versus the service actually delivered.
• Gap 4, the communication gap: service delivered versus what external communications promised.
• Gap 5, the customer gap: expected service versus perceived service.

Overpromising in advertising is a Gap 4 problem; staff failing to follow a well-designed standard is Gap 3; management misreading what customers want is Gap 1.

Brand equity: Aaker and Keller

Brand equity is the value a brand name adds to a product beyond its functional attributes. David Aaker (Managing Brand Equity, 1991) defines it as a set of brand assets and liabilities linked to the name and symbol. They add to or subtract from the value of the product, and fall into five categories: brand loyalty, brand awareness, perceived quality, brand associations, and other proprietary brand assets such as patents, trademarks and channel relationships.

Kevin Lane Keller’s customer-based brand equity (CBBE) model is a pyramid of four steps built from six building blocks. Each step depends on the one below it:

1. Identity (who are you?): salience.
2. Meaning (what are you?): performance and imagery.
3. Response (what do I think or feel?): judgements and feelings.
4. Relationship (what about you and me?): resonance, at the apex, meaning loyalty, attachment, a sense of community and active engagement.

Aaker’s model is a list of assets; Keller’s is a sequence built in the customer’s mind.

Brand strategy choices

Kotler and Armstrong set out four brand development strategies on two axes: whether the brand name is existing or new, and whether the product category is existing or new.

A new flavour or pack size under the same name is a line extension. Using an established name to enter a different category is a brand extension. Several brands in the same category from one company are multibrands. Co-branding combines two established brands on one offering. Private labels, or store brands, are owned by the retailer rather than the manufacturer.

Key points to remember

Frequently asked questions

What does IHIP stand for in services marketing?

Intangibility, heterogeneity (variability), inseparability and perishability: the four characteristics that distinguish services from goods. Many texts add lack of ownership.

What are the five SERVQUAL dimensions?

Reliability, assurance, tangibles, empathy and responsiveness (RATER). Parasuraman, Zeithaml and Berry set them out in the 22-item SERVQUAL scale in 1988.

What is Gap 5 in the gaps model of service quality?

Gap 5, the customer gap, is the difference between the service customers expect and the service they perceive. It results from provider gaps 1 to 4.

What are Aaker’s five brand equity assets?

Brand loyalty, brand awareness, perceived quality, brand associations and other proprietary brand assets such as patents, trademarks and channel relationships.

What is the difference between a line extension and a brand extension?

A line extension adds a new variant under an existing brand in the same category. A brand extension uses an existing brand name to enter a new category.

Practice: 10 MCQs

Attempt all ten questions, then press Submit. The correct answer and a short explanation appear under every question, followed by your score analysis.

References

• Parasuraman, A., Zeithaml, V. A. and Berry, L. L. (1985), “A Conceptual Model of Service Quality and Its Implications for Future Research”, Journal of Marketing, 49(4), 41–50: the gaps model and ten determinants.
• Parasuraman, A., Zeithaml, V. A. and Berry, L. L. (1988), “SERVQUAL: A Multiple-Item Scale for Measuring Consumer Perceptions of Service Quality”, Journal of Retailing, 64(1), 12–40: the five dimensions and 22 items.
• Booms, B. H. and Bitner, M. J. (1981), “Marketing Strategies and Organization Structures for Service Firms”, in Donnelly and George (eds), Marketing of Services, AMA: the 7Ps.
• Aaker, D. A. (1991), Managing Brand Equity, Free Press. Keller, K. L. (2001), Building Customer-Based Brand Equity, Marketing Science Institute Report 01-107.
• Kotler, P. and Armstrong, G., Principles of Marketing: brand development strategies; see also the OpenStax brand development matrix.