University of Amsterdam
Amsterdam Business School
The Role of Service Knowledge and Brand
Knowledge in Consumers’ Evaluations of Service
Brand Extensions
Master thesis - Final version
Student Name: Codruta - Mihaela Carcota Student Number: 6315135
Date: 29th of June 2015
Programme: MSc Business Administration - Marketing Track - 2014/2015 Faculty: Faculty of Economics and Business, University of Amsterdam Supervisor: Dhr. Drs. Ing. A.C.J. Antoon Meulemans
Statement of Originality
This document is written by Codruta - Mihaela Carcota who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Acknowledgment
I would like to take this opportunity to thank my thesis supervisor Dhr. Drs. Ing. A.C.J. Antoon Meulemans for his valuable input, guidance, advice and patience throughout the whole course of this Master Thesis. In addition, I would like to thank my co-reader for reviewing my Master Thesis and being the second examiner.
Codruta - Mihaela, Carcota Amsterdam, June 29th, 2015
Abstract:
As the service industry accounts for an increasing percentage of the global economy, service firms try to find innovative means to achieve competitive advantage. One possibility is to leverage on the existing brand equity by introducing service brand extensions. Although this concept became popular, little is known about it.
The goal of the proposed research topic is twofold: (1) to replicate Aaker and Keller’s (1990) brand extensions model in the setting of services and (2) to investigate the effects of consumer knowledge through the lens of service category knowledge and brand knowledge on consumers’ fit perceptions in attitude formation towards brand extensions. In addition, this study supplements Van Riel et al. (2001) research that studied the difference in consumers’ evaluations towards services and product extensions and extends it by examining retail brand extensions setting. Unlike previous studies that focus only on service feature similarity, the proposed research evaluates as well the role of service category knowledge and brand knowledge in service evaluations. The approach of the research will be empirical, focusing on an experiment designed to test hypothesis and to claim causality between variables.
Potential findings for the proposed research will have both theoretical and managerial implications. The insights related to the service field that will be uncovered, can be used by marketers to better capitalize on their brand equity, to strategically position service brand extensions and to decrease their failure rate.
TABLE OF CONTENT
CHAPTER I – INTRODUCTION ... 7
1.1 GENERAL INTRODUCTION ... 7
1.2 THESIS OBJECTIVE AND RESEARCH PROBLEM ... 8
1.3 BACKGROUND ... 9
1.4 CONTRIBUTION ... 10
1.5 OUTLINE OF THE RESEARCH ... 10
CHAPTER II - LITERATURE REVIEW ... 12
2.1 BRANDING THEORY ... 12
2.1.1 THE CONCEPT OF BRANDING ... 12
2.1.2 BRAND EQUITY ... 13
2.1.3 LEVERAGING BRAND EQUITY ... 17
2.1.4 BENEFITS OF BRAND EQUITY ... 19
2.1.5 RETAIL BRANDING ... 20
2.2 BRAND EXTENSIONS RESEARCH ... 21
2.2.1 INTRODUCTION ... 21
2.2.2 DIFFERENCES BETWEEN LINE EXTENSIONS AND BRAND EXTENSIONS ... 22
2.2.3 BRAND EXTENSIONS SIMILARITY STUDIES ... 23
2.2.4 THE ROLE OF CONSUMER KNOWLEDGE IN BRAND EXTENSIONS EVALUATIONS ... 29
2.3 SERVICE THEORY ... 36
2.3.1 SERVICES- DEFINITION ... 36
2.3.3 SERVICE CLASSIFICATION SCHEMAS ... 37
2.3.4 CHALLENGES IN BRANDING SERVICES ... 40
2.3.5 SERVICE BRAND EXTENSIONS EVALUATIONS ... 44
CHAPTER III: CONCEPTUAL MODEL AND HYPOTHESES ... 48
3.1 CHAPTER OVERVIEW ... 48
3.2 RESEARCH QUESTIONS ... 48
3.3 HYPOTHESES DEVELOPMENT ... 51
CHAPTER IV: RESEARCH DESIGN AND METHODOLOGY ... 60
4.1 CHAPTER OVERVIEW ... 60
4.2. RESEACH DESIGN AND EMPIRICAL MODEL ... 61
4.3 MEASUREMENTS OF VARIABLES ... 64
4.4 STIMULI DEVELOPMENT ... 71
4.4.1 PRE-TEST 1 ... 71
4.4.2 PRE-TEST 2 ... 78
4.5 DATA COLLECTION METHOD – QUESTIONNAIRE ... 81
4.5.1 QUESTIONNAIRE DESIGN ... 81
CHAPTER V: RESULTS AND ANALYSIS ... 84
5.1 CHAPTER OVERVIEW ... 84
5.2 RESPONDENT RATE ... 84
5.3 DESCRIPTIVE STATISTICS ... 85
5.4 SUITABILITY AND ADEQUACY OF THE SAMPLE ... 92
5.5 RELIABILITY OF THE SAMPLE ... 93
5.6 MULTICOLLINEARITY ... 94
5.7 MANIPULATION CHECKS ... 97
5.8.1 Model 1 - Full regression analysis ... 109
5.8.2 Model 2 - Full regression analysis ... 112
CHAPTER VI - DISCUSSION AND IMPLICATIONS ... 117
6.1 CHAPTER OVERVIEW ... 117
6.2 DISCUSSION OF RESEARCH FINDINGS ... 117
6.3 RESEARCH IMPLICATIONS ... 123
6.3.1 THEORETICAL IMPLICATIONS ... 123
6.3.2 MANAGERIAL IMPLICATIONS ... 124
6.4 LIMITATIONS AND FUTURE RESEARCH INDICATIONS ... 125
CHAPTER VII – CONCLUSIONS ... 128
REFERENCES ... 130 APPENDIX 1 ... 140 APPENDIX 2 ... 143 APPENDIX 3 ... 146 APPENDIX 4 ... 148 APPENDIX 5 ... 153 APPENDIX 6 ... 154
CHAPTER I – INTRODUCTION
1.1 GENERAL INTRODUCTION
Service sector has become the largest and fastest growing sector in the global economy which drawn substantial attention from scholars. In developed countries, the contribution of the service sector to gross domestic product is more than 70% and to employment is of 65% (Pina et al., 2005). In addition, the rise of this sector has an important effect on global competition by enhancing investment, creating employment and human capital, developing infrastructure to move up the value chain and adding value to consumption experience. However, despite the growing relevance of service economies at global level, the service branding research is still at its infancy.
Branding plays a vital role in marketing strategy. Brands are becoming increasingly important to companies. They are valuable assets, which create differentiation on the marketplace, reduce consumer cost search, perceived risk and convey the quality of the product (O’Cass & Grace, 2003). Brand extension strategies are becoming increasingly important for companies that activate in the service industry. Nevertheless, the unique features of services brands pose even more daunting challenges than those faced in product branding (Pina et al., 2005). Services characteristics such as intangibility, heterogeneity, inseparability and perishability (Zeithhaml & Bitner, 1996, Berry, 2000) make them more difficult to evaluate than physical goods.
De Chernatony (2011) suggests that based on the 2009 Best Global Brand from Interbrand, product brands are more predominant than service brands. Thus of the top 20 brands 14 of them are product brands and 6 are service brands. Despite this ranking, the scholar argues that developed economies wealth derives mainly from services rather than
product sector. Therefore, there is a momentum for service brand to increase their brand equity and financial value.
To overcome the branding challenges posed by the unique characteristics of services, it is important to shed light on the extent to which the conceptualizations of the brand and brand extension, developed in relation to products, is relevant to services domain.
1.2 THESIS OBJECTIVE AND RESEARCH PROBLEM
Over the past decades researchers have focused on the role of consumer knowledge in consumer brand extension evaluations in the fields of goods. As the service industry accounts for an increasing percentage of the global economy, service firms try to find innovative means to achieve competitive advantage. One possibility is to leverage on the existing brand equity by introducing service brand extensions. Although the concept of brand extensions became popular and currently encompasses various effective branding strategies and principles established in the area of physical goods, little is known about it in services domain.
Unlike previous studies that focus intensively only on service feature similarity, the proposed research brings novelty by evaluating the role of consumer knowledge in consumer evaluations of service brand extensions, in retail context. The approach of the research will be empirical, focusing on an experiment designed to test hypothesis and to claim causality between variables.
The objective of this research thesis is twofold. Firstly, by replicating Aaker and Keller’s (1990) brand extensions model in the setting service brands, the study intends to understand how consumers evaluate retail brand extensions and to identify to which extent consumer based brand equity transfers to other categories in a services context. Secondly, the thesis aims to investigate the effects of consumer knowledge viewed through the lens of service category knowledge and brand knowledge on consumers’ fit perceptions in attitude
formation towards brand extensions. By studying consumer knowledge, the thesis aims to shed light on the main research problem transformed into the following research questions: (1) How does service knowledge and brand knowledge impact consumer’s fit perceptions of service brand extensions? Do both of them have an impact on consumer’s fit perceptions of service brand extensions or only one of them? (2) In the case where both the service knowledge and the brand knowledge influence consumer fit perceptions, is the magnitude of their effect equal or does it differ?
1.3 BACKGROUND
The departure point of this research is represented by Aaker and Keller’s (1990) pioneering brand extensions model, supplemented by Van Riel et al. (2001) research, which studied the difference in consumers’ evaluations towards services and product extensions. According to scholars one dimension of fit between the service parent brand and the extension category products, more precisely complementarity, seems to play an important role in the process of service brand extension evaluations (Van Riel et al, 2001). Even though previous service branding literature shown that service intensiveness plays a role in the service brand evaluation process (Lei et al., 2004); and shed light on the relationship between service brand extensions and their parent corporate image (Ruyter and Wetzels, 2004; Pina et al., 2006), a more detailed understanding with respect to service brand extensions is needed.
To investigate the role of consumer knowledge in service brand extensions evaluations, this thesis takes into account previous research carried in the field of goods which indicates that consumer knowledge is multidimensional, having two components: product knowledge and brand knowledge, that exert different effects on consumer behavior (Brucks, 1986; Peter and Olson, 2005, Fiske, Luebbehusen, Miyazaki and Urbany, 1994). Consumers with high product knowledge evaluate brands more from the functional aspect, whereas those with high brand knowledge evaluate brands more from a symbolic aspect (Bei
and Heslin, 1997). Moreover, Czellar (2003) and Grime et al. (2002) indicate that consumer knowledge affects also brand extensions evaluations, acting as a moderating variable which impacts consumer perceived fit between an extension and its parent brand.
Shostack (1977) argues that service dominant entities differ from product dominant entities mainly through the fact that service knowledge and product knowledge are not acquired in the same way. The author considers that the experiential aspect of services produced by intangibility is explored less in the area of marketing practice and that there is little documented guidance on acquiring service knowledge.
1.4 CONTRIBUTION
The contribution of the proposed research should be twofold: theoretical and managerial. From the theoretical point of view this study is intended to fill in a gap in the service brand extensions literature. Potential findings for the proposed research will have both theoretical and managerial implications. More insights will be uncovered related to the service field that could be used by marketers to better capitalize on their brand equity, to strategically position service brand extensions and to decrease their failure rate. Relevant to practical issues, marketing managers who activate in services area could better leverage on service extension opportunities and can also improve the positioning strategies of service brands.
1.5 OUTLINE OF THE RESEARCH
The research is structured into seven chapters. Chapter I introduces the main objective of this study, the research problem statements and the contribution of the empirical findings. Chapter II outlines the theoretical foundation of the study, focusing on branding in general, retail branding and the connection between brand equity and brand extensions; and service
theory. Building on theoretical concepts, Chapter III introduces the research problem translated in several research questions and nine testable hypotheses.
Chapter IV provides an overview of the research methodology introduced for the study. It describes the research design and analysis procedure used for hypotheses testing, the development of measurement for every variable and the process of brand stimuli selection.
The findings of the empirical design are presented in Chapter V. The developed hypotheses are empirically tested by performing simple linear regression analysis, moderated regression analysis and multiple regression analyses. Moreover, the chapter covers specific issues such as: descriptive statistics, sustainability and adequacy of the sample, reliability of the sample, multicollinearity and manipulation checks. A discussion of hypotheses is derived in Chapter VI as well as implications for theory and practice, limitations of the conducted study and suggestions for future research. Finally, Chapter VII will present the main conclusions.
CHAPTER II - LITERATURE REVIEW
Even though the importance of service economies continues to rise at a worldwide level, services branding literature is still in its infancy (O’Cass and Grace, 2003). Research carried out by de Chernatony and Dall’Olmo Riley (1999) and de Chernatony and Segal- Horn (2003) suggest that traditional branding strategies which are applied to products should be adapted in order to conform to the specific characteristics of services. Before service brand extensions can be dealt with, a deeper understanding of the related terms and concepts is addressed.
2.1 BRANDING THEORY
The main body of the thesis focuses on brand extensions theory, therefore it is necessary to upfront the meaning of branding concept and its importance. Thus, this chapter discusses the role of branding, emphasized the importance of brand equity and how it can be leveraged over time and finally provides insights on retail branding.
2.1.1 THE CONCEPT OF BRANDING
According to Tuominen, challenges in branding involve developing a deep set of meanings for the brand and “the historical evolution of brands has shown that brands initially have served the roles of differentiating between competing items, representing consistency of quality and providing legal protection from copying”1 (Tuominen, 1999). The complexity of branding makes Kotler (1994) to assert that the most skillful professional marketers are the ones who focus on creating, maintaining, protecting and enhancing brands.
Various experts have tried to define the meaning of a brand. According to Kotler a brand is defined as “a name, term, sign, symbol, or design, or combinations of them which is
1 Tuominen, P. (1999). Managing brand equity. LTA, 1(99), p. 65.
intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors”2 (Kotler, 1994). The notion of defining a brand to stand for more than a product is supported by Kapferer (1997) suggesting that importance of the legal implications of a symbol.
The level of success of a brand is deeply rooted in both the value it gives to consumers and the functions a brand has to serve consumers. Tuominen (1999) defines a successful brand to be “identifiable product- consumer or industrial-, service, person or place, augmented in such a way that the buyer or user perceives relevant unique added values, which match their needs closely”3 (Touminen, 1999). The importance and functions of brands have been studied by Keller (2003). The author suggests that a brand firstly offers consumers the possibility to identify a product’s source by assigning responsibility to a particular manufacturer or distributer. Secondly, through experiences associated with brands, consumers have the ability to make easier product decisions. Thirdly, brands perform an economic function by reducing search costs. Furthermore, brands convey specific functional benefits through product performance and pricing; and symbolic benefits by allowing consumers to project their self-image. Lastly, brands offer consumers the ability to signal quality (Keller, 2003).
2.1.2 BRAND EQUITY
Over the last decades, the concept of brand equity gained a lot of attention, being researched from different perspectives (Maltz, 1991; Aaker, 1991; Tauber 1988; Farquhar 1989). The emergence of brand equity as a core business concept is driven by the mergers and acquisitions boom of the 1980s, where it was demonstrated that the purchase price of a firm was established by taking in consideration the value of its brand (Leone et al., 2006).
2 Kotler, P., (1994). Marketing Management: Analysis, Planning, Implementation, and Control. 8th Edition, Prentice-Hall, Inc., New Jersey, USA, p. 442.
3 Tuominen, P. (1999). Managing brand equity. LTA, 1(99), p. 65.
Consequently, a first motivation for studying brand equity lies on the financial perspective. Mergers and acquisitions mentioned previously, accounting purposes such as asset valuation, or divesture purposes emphasized on the value of the brand and the importance of estimating it (Keller, 1993). Having the financial dimension in mind, Simon and Sullivan (1991) contended that brand equity can be defined in terms of the incremental discounted cash flows that would result from a product having a brand name in comparison with the proceeds that would accrue if the same product would not have that brand name. Besides financial considerations, another dimension that acts as a motivating factor for attaching great importance to brand equity is represented by the companies’ interest of improving marketplace productivity. Due to several factors, such as increased competitive landscape, higher costs and decreasing demand in several markets, companies tend to seek strategic ways of increasing efficiency and to attach more interest in understanding consumer behavior (Keller, 1993).
As a result of realizing the importance of brand value, viewed through financial and marketplace productivity, different academic models and approaches of branding and brand equity have been proposed over time. Keller and Lehmann (2006) identify three types of brand equity – company based, financial based and customer based. However the purpose of this section is not dedicated to review the entire vast area of perspectives developed by scholars and marketers, but to put emphasis on the importance of brand equity from the customer perspective. Since Keller’s (1993) model focuses on the differential effects that a brand has on consumers, the current chapter will pay more interest on his much acclaimed Customer-Based Brand Equity construct.
Keller (1993, p.2) defines the Customer Based Brand Equity (CBBE) concept as “the differential effect of brand knowledge on consumer response to the marketing of a brand”4. Thus, CBBE involves consumers reactions to an element of the marketing mix for the brand
4 Keller, K. L. (1993). Conceptualizing, measuring, and managing customer-based brand equity. The Journal of Marketing, p. 2.
in comparison with their reactions to the same marketing mix element attributed to a fictitious brand. The premise that stands at the foundation of his model is the extent to which consumers have learnt, seen, felt and heard about the brand. Besides familiarity with the brand, consumers have to hold favorable, strong and unique associations of the brand in mind for CBBE to occur. As already mentioned, brand knowledge represents the core of the model and its dimension is embedded in the following constructs: brand awareness and brand image. By using the “associative network model”, Keller established these elements as two crucial nodes.
Consumers’ semantic memory or knowledge consists of a network of nodes and set of links, in which nodes represent stored information and links represent the strength of association between this information (Keller, 2003).
Figure 1: Dimensions of Brand Knowledge. Source: Keller (1993).
According to Keller (2003) brand awareness is the first “super” node in the knowledge network model. It describes the strength of the brand node or trace in memory, as reflected by the consumers’ ability to identify the brand under different conditions and
consists of brand recognition and recall performance. Brand recognition relates the consumer’s capability to confirm prior exposure to the brand when given the brand as a cue, whereas brand recall expresses the consumer’s ability to retrieve the brand from memory when given the product category, the needs fulfilled by the category or a purchase or usage situation as a cue (Keller, 2003).
Keller and Lehmann (2006) contend that brand awareness is a necessary element to build brand equity, but is not the only component. The second super node, brand image, represents the “perceptions about a brand as reflected by the brand associations held in consumer memory”5 towards the brand (Keller, 2003). In other words, brand associations are other informational nodes linked to the brand node, conveying the meaning of the brand for a consumer (Keller, 2003). Furthermore, Tuominen expands on the concept of brand image, arguing that it represents the sum of impressions that affect the way consumers perceive a brand. These impressions include elements that identify or distinguish one brand from another, the personality acquired by the brand and the benefits it conveys. Because brand image is formed through reasoned or emotional consumer interpretations, it may be a considered highly “subjective and perceptual”6 concept (Tuominen, 1999).
Keller (2003) distinguishes between three types of brand associations in the memory network model, based on their level of abstraction: attributes, benefits and attitudes. Attributes represent the descriptive features that characterize a product or service and they can be categorized as product and non- product related element (Keller, 2003). Product related attributes are linked to the product’s physical characteristics and can also be typified as features. Non-product related attributes are defined as external aspects that relate to a product’s purchase or consumption. Benefits refer to the personal value that consumers connect to the attributes of a product or service (Keller, 2003). The benefits associations are
5 Keller, K.L., (2003). Strategic Brand Management: Building, Measuring, and Managing Brand Equity, 2nd Edition, Pearson Education Inc., Upper Saddle River, New Jersey, USA, p.66.
6 Tuominen, P. (1999). Managing brand equity. LTA, 1(99), p. 77.
again divided into functional, experiential and symbolic associations, which represent the wanted satisfaction that product or service features convey (Pitta & Katsanis, 1995). Functional benefits are connected to the intrinsic features possessed by the product, mainly associated with a product’s performance. Experiential needs are also linked to a product's features and pertain to how it feels to use the product. The third type, symbolic benefits, relates to the consumers self-concept and can be associated with higher order needs such as social and self-esteem needs (Keller, 2003). The last and most important association is the consumer’s attitude towards a brand. It represents consumers’ overall evaluation of the brand, which can be viewed as the response to the combination of product related, non-product related attributes and benefits (Keller, 2003).
In order to further move towards the purpose of the study, the following section will focus on building and leveraging brand equity. A pivotal body of work in building brand equity is represented by Keller’s (2003) Customer Based Brand Equity model.
2.1.3 LEVERAGING BRAND EQUITY
Farquhar (1989) suggests that firms can build brand equity by focusing on the following actions: creating positive evaluations with a high quality product, cultivating accessible brand attitudes that have an increased impact on consumer purchase decision and through creating a brand image that fosters relationships with consumers.
Keller (2003) suggests that in order to build CBBE brands should engage in developing favorable brand associations in consumers’ minds. According to him favorable associations “are those that are desired by consumers and are successfully delivered by the brand”7 (Keller, 2003). In order for companies to achieve competitive advance, focusing on
7 Keller, K.L., (2003). Strategic Brand Management: Building, Measuring, and Managing Brand Equity, 2nd Edition, Pearson Education Inc., Upper Saddle River, New Jersey, USA, p.72.
developing favorable brand associations is not enough, they need to convey uniqueness as well.
Figure 2. Customer Based Brand Equity Pyramid. Source Keller (2003)
Keller’s (2003) model for building CBBE is represented by a pyramidal framework made up of six brand-building blocks: salience, performance, imagery, judgments, feelings and resonance. Brand salience lays the foundation of the pyramid and it refers to brand awareness. The second building block is represented by brand performance explained through the ability of a product or service to meet the functional needs of consumers, and brand imagery referring to abstract levels of the brand such as: purchase intentions, user profile and personality, and etc. The third layer is formed by brand judgements and brand feeling. When all performance and image associations of the brand are elicited, consumers form personal opinions and evaluations through brand judgements. In order to create brand equity, brand judgements need to convey quality, credibility, consideration and superiority. On the other hand, brand feelings are represented by consumers’ emotional reactions to the brand. At the top of the pyramid lays brand resonance, which refers to “the ultimate
relationship and level of identification that a consumer may have with a brand”8 (Keller, 2003).
According to Aaker (1996) companies can leverage brand equity through various strategies such as: co-branding, stretching and extensions. Co-branding occurs when a company uses its brand associations by coupling with other established brands in order to launch and market together a joint product or service. The second option - stretching, can be pursued both ways: vertical and horizontal. The marketplace context regarding companies having to handle increased competition and technical developments and consumers switching from luxury products to lower cost options, influences firms to resort to vertical-stretching and to offer vertical downscale versions of their products. On the other hand, horizontal stretching strategy is employed when companies want to tap into niche markets by offering an upscale product with innovative features superior from the standard product. The third strategy used to leverage brand equity refers to brand extensions decision.
As brand extensions concept is within the scope of this research, in the upcoming sections this strategy and its aspects will be discussed in greater detail.
2.1.4 BENEFITS OF BRAND EQUITY
By building strong customer based brand equity, one can take advantage of several benefits in terms of both greater revenues and lowered costs. According to Keller (2003), these benefits can be grouped into: factors related to growth, such as new customer attraction and acquisition, sustained competitive activity, new extensions introduction, and factors related to profitability. The latter includes brand loyalty, premium pricing, lower price elasticity and greater trade leverage. Besides the above mentioned benefits, which are related to the products or services themselves, brands that have positive and high brand-equity attract
8 Keller, K.L., (2003). Strategic Brand Management: Building, Measuring, and Managing Brand Equity, 2nd Edition, Pearson Education Inc., Upper Saddle River, New Jersey, USA, p.92.
better skilled employees, investors and gain more support from shareholders (Keller, 2003). In addition, Tuominen (1999) argues that “brand equity helps to differentiate the product from competitors’ offerings; serves as a proxy for quality and creates positive images in consumers’ minds; presents market share erosion during price and promotional wars; and prevents market share erosion by giving a firm time to respond to competitive threats”9.
2.1.5 RETAIL BRANDING
Research literature suggests two main approaches to branding: manufacture brands and private brands also known as own label, distributor, retailer, dealer or store brands (Tuominen, 1999). Ailawadi and Keller (2004) suggest that product brands and retailer brands operate based on common branding principles however the differences between the two create complexities in the actual application of these principles. According to the authors, the retailer as a brand should get more acknowledgement and they suggest that retailer brands are more multi-sensory than product brands and put more emphasis on rich consumer experiences to affect their brand equity. In order to create their brand image, retailers apply various strategies such as attaching unique associations to the quality of their service, through product assortment and merchandising, pricing, credit strategy and by leveraging the equity and brand image of the manufacturer brands.
Taking into consideration the American Marketing Association’s definition of a brand, Ailawadi and Keller (2004) suggest that a retail brand describes the goods the goods and services of a retailer and differentiates them from those of competitors. Therefore, a retailer’s brand equity determines consumers to react more favorably to its marketing actions than they would do to competing retailers. When consumers evaluate a brand they take into consideration various elements of the marketing mix (Keller, 2003). The evaluative process for retail service brands includes the specific tangible products that are commercialized in
9 Tuominen, P. (1999). Managing brand equity. LTA, 1(99), p. 74.
store as well as consumers’ evaluation of the brand image and retail service experience (Fullerton, 2005).
Due to the multi-dimensional aspect of retailers, Ailawadi and Keller (2004) suggest future research initiatives in the area of developing and applying traditional branding theory to retailer setting such as brand personality, brand architecture, brand equity and extendibility potential.
The upcoming section will be devoted to the clarification of brand extensions strategy and the most important aspects related to it.
2.2 BRAND EXTENSIONS RESEARCH
2.2.1 INTRODUCTION
According to Aaker and Keller (1990), companies that want to penetrate new markets but face an increased financial risk, often resort to leveraging brand extension strategies to take advantage of brand name recognition and image. Brand extensions are known to bring a lot of advantages: such as decreased costs of gaining distribution and increased efficiency of promotional expenditures. By launching extensions on the market, parent brands can increase their sales base, through enhanced communication towards consumers of the brand values and image (Tauber, 1981). Besides the aforementioned benefits, extensions endorse instant consumer awareness, providing a fast and cheap way of penetrating a new market and also tend to have a higher survival rate than new brand names (Grime, Diamantopoulos and Smith, 2002).
On the other hand, using brand extensions to exploit the most important asset owned by a company can also pose risks. A wrong extension can create brand associations that might harm that asset in an expensive or irreversible way (Ries and Trout, 1981). Respectively, the extension might create confusion or negative associations in consumers’ minds which in turn would lead to weakened brand core values (Tauber, 1981). Another
pitfall of using an extension strategy is represented by the cannibalization effect. If the extension is closely connected with the original product, consumers might choose buying the extended product over the firm’s existing product (Grime, Diamantopoulos and Smith, 2002).
2.2.2 DIFFERENCES BETWEEN LINE EXTENSIONS AND BRAND EXTENSIONS
The extensions literature includes various extension definitions and terminologies (Grime, Diamantopoulos and Smiths, 2002). An early extension definition is given by Tauber (1981), who coined the term “brand franchise extensions” as the strategy of taking a brand name familiar to consumers and applying it to a product from a new category or product class.
According to Aaker and Keller (1990), extensions should be distinguished between line extensions and brand extensions, specifically: “a line extension, whereby a current brand name is used to enter a new market segment in its product class” and “a brand extension, whereby a current brand name is used to enter a completely different product class”10. However, Farquhar (1989) gives a slightly different definition to extensions. In his opinion, a line extension means applying an existing brand name to a product category that is new to the company (e.g. the Freelander by Range Rover), while a category extension refers to applying an existing brand name to a product category, which is new to the company (e.g. Caterpillar and fashion clothing).
Line extensions have been defined differently by Aaker and Keller (1990) and Farquhar (1989), however the brand extension definition is consistent in both trains of thought. In this research, sharp focus is put on brand extensions, though the result of the study could be also applied to certain line extensions examples.
2.2.3 BRAND EXTENSIONS SIMILARITY STUDIES
The most popular research in the field of brand extension evaluations is the pioneering research study conducted by Aaker and Keller (1990). Their study aimed to shed light on how consumers evaluate brand extensions and what are the reasons behind their failure and success. They based their research on psychological reasoning, arguing that an attitude towards an extension is based on the cognitive categorization process. The categorization theory suggests that consumers evaluate brand extensions in two ways: by piecemeal processing or category based processing. The first concept refers to the extension evaluation as a function of inferred brand attributes beliefs, while the latter concept refers to an extension evaluation as a function of the overall attitude toward the parent brand. Aaker and Keller (1990) studied the bases of “fit” or “similarity” between the original and extension product classes and their effect upon consumer brand extension evaluations. According to them, “perceived fit” or “similarity” is based on three dimensions, such as: COMPLEMENT, SUBSTITUTE and TRANSFER. Complementarity indicates the extent to which consumers see two product classes as sharing the same usage context for satisfying a particular need, whereas the substitutability stands for the extent to which two product classes have a common application and usage context for satisfying a need. While these two dimensions are derived from a demand side perspective, the third base, transferability takes a supply side perspective. Transferability represents the extent to which the perceived ability or know-how of a manufacturer that is needed to make the extension overlaps with that of the parent brand. A group of consumer reactions on hypothetical extensions of renowned brands were used to test if the perceptions of fit between the parent brand and extension product categories result in more favorable extension evaluations.
Aaker and Keller’s (1990) study indicated that the degree of perceived quality for the original brand did not influence in a direct way brand extension evaluations. The direct
relationship between the original brand and the extension was strong only when there was a dimension of perceived fit between the two product classes. Complementarity and substitutability did not have a direct influence but an interaction effect on the perceived quality between parent and extension brands. On the other hand, transferability had a direct impact on consumer extension evaluations. Thus, if a consumer perceives that a company has the right competencies and capabilities to create a brand extension in the relevant product class, then he/she can evaluate that extension in a more favorable way. Aaker and Keller’s (1990) research model for evaluating brand extensions confronts with the limitation that their research depends exclusively on measures of perceived product category similarity fit. Future researches could take into account the broader meaning a brand is able to convey as a relevant dimension of fit.
Aaker and Keller’s (1990) study was replicated in other pieces of research conducted by several academics (Sunde and Brodie, 1993; Bottomley and Doyle, 1996) and even though results varied, they still reached the conclusion that consumers’ evaluations of brand extensions depend on the attitude toward the parent brand and on the perceived fit or similarity between the extension and original brand. Bottomley and Doyle’s (1993) results from their replication research support Aaker and Keller’s (1990) initial hypotheses but also provide strong evidence that the quality of the parent brand alone has a direct relationship to the attitude toward the extension, without product category similarity fit. The authors posit that the “fit/similarity” dimension has to be further researched especially through the lens of “brand concept” or “product concept”.
Aaker and Keller (1990) posit that perceived fit happens whenever consumers recognize the new product to be consistent with the parent brand. The concept of fit was also debated by Tauber (1981) who considered that there should be “a benefit of the parent brand
that is the same benefit offered and desired in the new franchise extension”11. Thus, if a consumer “accepts the new product as logical and would expect it from the brand”12 then perceived fit occurs (Tauber, 1988).
Besides similarity, another popular concept in the brand extension literature that has been used to define the dimensions of fit is “typicality” (Boush and Loken, 1991). In their research, Boush and Loken (1991) used “typicality” to measure the consumers’ perception of fit between the original family branded product and the extension product. Typicality stands for how representative the extension product category is of the original family branded products. According to their study, when an extension shares more features of current family-branded products, it will be a more typical member of the family brand. Thus, the affect transference will be more likely to occur on the new extension (Boush and Loken, 1991).
Moreover, Boush and Loken (1991) document that “brand extensions appear to be evaluated more highly to the extent they are perceived as similar to (or typical of) the brand’s current product offering”13. They have elaborated upon the process underlying the consumer’s evaluation of brand extensions by examining which evaluative process – categorization or piecemeal- are applied to different degrees of typicality between the parent brand and extension. Based on the typicality between the parent brand and the extension, their research model studied which evaluative processes are applied - categorization or piecemeal. Results show that moderately typical extensions were evaluated in a more piecemeal way than extremely typical or atypical extensions. Another finding indicated that brand breadth had an interaction effect on brand extension typicality.
Referring to typicality, Grime et al. (2002) study shows that an extension may be perceived as a typical member of the original brand family not only because it has in
11 Tauber, E.M., (1981). Brand Franchise Extension: New Product Benefits from Existing Brand Names, Business Horizons, Vol. 24-2, p. 38.
12 Tauber, E.M., (1988). Brand Leverage: Strategy for Growth in a Cost-Controlled World, Journal of Advertising Research, Vol. 28 August/September, p.27.
13 Boush, D.M., Loken, B., (1991). A Process-Tracing Study of Brand Extension Evaluation, Journal of Marketing Research, Vol. 28-1, p. 26.
common many physical features of the original product, but also other non-product related aspects, like the brand image. Even though, “typicality” encompasses some non-physical aspects of “perceived fit”, these aspects could be better represented by “brand concept consistency”.
Brand concept consistency differs from similarity and relatedness of the product category as it refers to the way “a brand image affects consumers’ evaluations of fit rather than the way the latter is affected by the similarity of product features, attributes and benefits”14 (Grime, Diamantopoulos and Smith, 2002). Besides differences, “brand concept consistency” also poses commonalities with other dimensions of fit. Gurhan-Canli and Maheswaran’s (1998) research demonstrates that “the typicality of the extension and consumers’ level of motivation determine the effect of extensions on family brand names”15. Gurhan-Canli and Maheswaran (1998) suggest that brand concept consistency has in common with typicality the fact that extensions have to correspond with the family brand image in order to be perceived similarly.
The concept of “brand concept consistency” has been stressed by Park, Milberg and Lawson (1991) in their research. Aaker and Keller (1990) took in consideration only the perceived product category similarity in the process of evaluating brand extensions. However, Park, Milberg and Lawson (1991) argued that the level of fit does not depend solely on product-related associations but also on brand concept consistency between the brand concept and the extensions.
A brand concept represents the unique abstract meaning, like high status, that is derived from a particular configuration of product features (e.g. high price) and a company’s efforts to create meanings from these arrangements (Park et al., 1986). Brand concepts
14 Grime, I., Diamantopoulos, A., Smith, G., (2002). Consumer Evaluation of Extensions and Their Effect on the Core Brand: Key Issues and Research Propositions, European Journal of Marketing, Vol. 36-11/12, p. 1425.
15 Gürhan-Canli, Z., & Maheswaran, D. (1998). The effects of extensions on brand name dilution and enhancement. Journal of Marketing
Research, p. 464.
position products in the minds of consumers and differentiate given products from other brands in the same product category (Park, Jaworski and MacInnis, 1986).
The extent to which an extension product is considered consistent with the brand concept depends on how rapidly it can accommodate a certain brand name concept (Park, Milberg and Lawson, 1991). For their study they used a functional oriented brand concept, whose associations are related to product’s performance, and a prestige oriented brand concept, representing consumer perceptions of symbolic attributes as self- concept. Their findings show that, for both function-oriented and prestige-oriented brand names, most positive evaluations occur when brand extensions show high brand concept consistency and high product similarity. Moreover, if the brand’s concept is consistent with those of its extensions, the prestige brands have a greater extendibility to products with low feature similarity that the functional brands do.
According to Park, Milberg and Lawson (1991), future research on brand extensions should: examine the reciprocal effects on the original brand name (Aaker and Keller, 1990); investigate when and how these reciprocity effects work to weaken or strengthen the brand name, and what the implications for the measures of brand equity and measure the brand equity in terms of the brand-extension range as well as susceptibility to the negative and positive reciprocity effects of brand extensions.
The different effects of prestige and functional brand types on brand extensions that were demonstrated by Park, Milberg and Lawson (1991), were also supported by Roux’s (1995) findings. By replicating Aaker and Keller’s (1991) research model on luxury brand extensions, Roux (1995) found that conceptual fit and brand quality play an important role in predicting perceived extension quality. When consumers evaluate the extension perceived quality for luxury goods, they react on an abstract-level, and when they evaluate a functional brand, they react on a more concrete, product related level.
In line with the above studies, lies also the research performed by Lye, Venkateswarlu and Barret (2001), which takes into consideration the importance of brand concept consistency in influencing consumers’ evaluations of brand extensions. They argue that if brand types (functional and prestige) are evaluated differently by consumers, then Aaker and Keller’s results should be adjusted for different business situations. Thus, the study focused around examining the influence of brand type on brand extension attitude formation, by bringing together several aspects: the concepts of prestige and functional brands, quality and Aaker and Keller’s (1991) brand extension attitude formation model. The authors proposed to examine what is the influence/effect of the type of brand (i.e. prestige/functional brands) on brand extension attitude formation and what are the differences in dilution effects. After running a national survey, their results showed that Aaker and Keller’s model is still robust for both prestige and functional brands, but its application may hide significant differences between brand types and on an individual extension category level. Quality and fit variables play a role in the formation of attitudes towards brand extensions, however their share of influence is different depending on the brand types. The findings also support Park, Milberg and Lawson’s (1991) study, the prestige brand model offering lower extendibility than for functional brands. The two studies diverge in the sense that, functional brands experience less dilution effects than prestige brands, implying less risk and greater extendibility, finding different from Park, Milberg and Lawson’s (1991) results. Lye, Venkateswarlu and Barret, (2001) also put on emphasis on the specific extension categories, which might also interact with the brand type in the process of attitude formation toward brand extensions and also assert that there are limits to what consumers find acceptable for brand extensions across categories. It is indicated that future research could improve on brand type categorization to eliminate the potential for misleading results; investigate the linkage between specific functional brands and dilution effects; emphasize on improving the measurement of brand
extension attitude (i.e. exposure to additional extension information in pictorial/narrative form, multiple exposures to brand and extension information).
Moreover, the importance of “brand concept consistency” is stressed also in Bhat and Reddy’s (1997) research paper. Besides taking in consideration the product category similarity as a dimension of fit, the researchers also focus on brand image similarity or brand concept consistency.
The next section will combine the brand extension subject with the consumer knowledge concept, which represents a focal point of this thesis.
2.2.4 THE ROLE OF CONSUMER KNOWLEDGE IN BRAND EXTENSIONS EVALUATIONS
This chapter deals with reviewing further the state of art literature in the area of consumer knowledge, in particular the relationships between consumer knowledge and fit perceptions in brand extensions evaluations process. As presented in the previous chapter, the consumer fit perception and its dimensions play an important role in brand extension evaluations. Research shows that consumer knowledge is viewed as a moderating factor that influences the consumer fit perceptions in the brand extension evaluation process.
According the Muthukrishnan and Weitz’s (1991) research, consumer knowledge influences to a high extent various stages of consumer behavior. The scholars posit that “the decision processes and strategies of consumers who are high on product knowledge differ from those who are low”16 (Muthukrishnan and Weitz, 1991). Consumers with high and low knowledge, known as experts, respectively novices, react differently in a setting of various consumer behaviors, such as information search, information processing, evaluations strategies and decision-making (Rao & Monroe, 1988; Selnes & Howell, 1999).
16 Muthukrishnan, A. V., & Weitz, B. A. (1991). Role of product knowledge in evaluation of brand extension. Advances in
consumer research, 18(1), p. 407.
The same train of though is studied and validated by several researchers. Bettman and Park (1980) researched the effects of prior knowledge and experience on choice processes. Their findings indicated the following: consumers with moderate knowledge and experience did more processing of the available information than did the high and low groups, consumers with high prior knowledge and experience tend to use brand processing to a greater extent, whereas consumers with less experience rely more on attribute processing. In addition, regarding the phases of choice processes, consumers start first with attribute based evaluations and then resort to brand processing. Johnson and Russo (1984) studied the knowledge effects on new product information learning, positing that greater familiarity increases learning during a new purchase decision. They conclude that consumers familiar with the product category demonstrate stronger brand organization of the new information.
The impact of consumer knowledge on consumer behavior has been studied as well by Rao and Monroe (1988) by focusing on the knowledge effects on strategies of using product information cues in product evaluations. The researchers argue that familiarity with a product is likely to influence the price-perceived quality effect. Their findings suggest that for a product with a positive quality-price association in the marketplace, the study shows that low-familiar and highly familiar subjects tend to perceive a stronger price-quality relationship than do moderately familiar subjects.
Research has indicated that expert consumers with high prior knowledge differ from novice consumers with low knowledge. These differences take place at the level of cognitive structures, analysis and inference abilities, memorizing and decision making (Bettman & Park, 1980; Brucks, 1985; Johnson and Russo, 1984; Rao and Monroe, 1988). However, expert and novice consumers may be different from each other in terms of “fit” perceptions and brand extensions evaluations triggered by the differences between their prior knowledge levels.
Alba and Hutchinson (1987), defined consumer knowledge as a construct of two major components: familiarity, which is defined as the number of product-related experiences that have been accumulated by the consumer; and expertise, representing the ability to perform product-related tasks successfully. Through their study regarding conceptualizing familiarity, Marks and Olson (1981) posit that consumers who have higher familiarity are expected to have a more stable, complex and well-developed cognitive structure of product knowledge.
Sujan’s (1985) research studied the effects of consumer knowledge on strategies of evaluations processes. According to his findings, expert consumers with more developed category knowledge in memory are more sensitive to the consistency and inconsistency between incoming information and category knowledge. When information matches category-based knowledge, expert consumers rapidly reach final impressions and evaluations and produce more thoughts related to the product category and fewer related to the product’s attributes. When discrepancy intervenes, knowledgeable consumers resort to more analytical processing and delay to form impressions of the product. Moreover, results show that when information matches product knowledge, the evaluation process is represented by category-based affect model; and when information is discrepant to product knowledge the evaluation process is done through piecemeal model. However, for novice consumers, it is difficult to detect consistency and inconsistency as clearly as experts can. They use category-based processing to a greater extent than experts do – both when information is consistent with and discrepant from category expectations. These results indicate that in brand extensions evaluations, expert consumers may perceive the fit or inconsistency between the extensions and the original brand more correctly than novice consumers.
Moreover, the effect of differences in product knowledge on the learning and organization of product information in consumers’ memory has been researched as well by Cowley & Mitchell (2003). For instance, consumers tend to organize information about
brands hierarchically with the product category node at the highest level, then with subcategories, followed by brands and attributes associated with each brand. The degree of knowledge consumers have determines how well the information will be organized hierarchically. By applying a spreading activation network model of memory, the researchers determine that consumers who are lacking in knowledge experience difficulty with forming well-developed complex and hierarchical cognitive structures. However, expert consumers learn brand information appropriate for different usage situations and have the ability to organize the information retrieved by product categories (Cowley & Mitchell, 2003). These findings may indicate that when novices evaluate a new extension product, they may only be able to categorize it into a very broad product category, but not the subcategory, or even its original brand group, due to his/her limited cognitive structures.
All above mentioned studies in the area of consumer knowledge indicates that consumer who are higher in knowledge level are inclined to have better cognitive structures and increased capabilities of analysis, inference and memory than consumers low in knowledge level.
Previous research studies have empirically explored the role of consumer knowledge in brand extensions evaluations.
For instance, Muthukrishnan and Weitz (1991) researched the role of product knowledge in consumer evaluations of brand extensions, suggesting that experts and novices may differ in their attitude towards brand extensions on the basis of the type of relationship between the original product and the extension. The researchers viewed consumer perceived similarity as a two dimensional construct: similarity based on deep cues, referring to factors that may account for the performance of the product in the original category and may also be related to the performance in the new category; and similarity based on surface cues referring to factors that are not related to the performance of products. Their findings indicate that consumers with higher product knowledge are capable to accurately identify similarity both
when it is based on deep and surface cues. However, low knowledge consumers have the ability to detect similarity only when it is based on surface cues. This implies that when a new extension is introduced based on deep cue similarity with the parent brand, novice consumers would be able to perceive the degree of fit between the extension and the original brand, but would not have a favorable attitude towards to it as expert consumers do.
The influence of consumer knowledge on brand extensions evaluations has been studied as well through the lens of brand knowledge. Broniarczyk and Alba (1994) suggest that besides studying the influence of brand affect and degree of similarity between the original brand and the extension, specific focus should be given to the brand specific associations. The researchers conclude that for expert consumers the influence of brand specific associations not only moderates the effect of brand affect and product category similarity, but also dominates these two effects in a brand extension evaluations setting. Since this powerful influence of brand-specific associations is conditioned by brand knowledge, the influence of brand-specific associations is week for novice consumers with low brand knowledge.
Roux and Boush’s (1996) research investigated the role of familiarity and expertise by focusing on luxury brand extensions. By employing actual brands and hypothetical brand extensions in their study, the authors posit that consumer familiarity moderates the effect of fit in extensions and parent brand evaluations. Findings show that consumer familiarity results in more refined and complete knowledge structures. Consumers have the ability to better recognize and understand brand images and to recall the product.
Consumer knowledge classifications: product and brand knowledge
Research literature suggests that different levels or types of consumer knowledge influence the decision-making and purchasing behavior in various ways (Brucks, 1986; Fiske et al., 1994). These findings also infer that consumers’ evaluations of brand extensions can be
affected to various degrees. In order to understand these effects on brand extensions evaluations it is important to determine the consumer knowledge classifications and types.
Hastie (1982) defines consumer knowledge as a two dimensional concept, making the distinction between generic product knowledge and individual product knowledge. The generic product knowledge refers to “general information about classes of product, instances exemplifying the products, the existence of different types of products, and information about the attributes or dimensions that are relevant and important in making decisions concerning the products”17 (Hastie, 1982. p.72). Individual product knowledge includes “information such as prices, color, taste, durability, features, etc. of each product”.
Building on Hastie’s (1982) classification of generic and individual product knowledge, researcher Brucks (1986) established an eight-category typology of consumer knowledge. This typology incorporates the following dimensions: terminology (knowledge of the meanings of terms used within a domain), product attributes (knowledge of which attributes are available for evaluating a brand), general attribute evaluation (knowledge of the overall evaluation for an attribute), specific attribute evaluations (knowledge of specific criteria used to evaluate an attribute), general product usage (knowledge of how the product can be used), personal product usage (memories of usage experiences), brand facts (overall evaluation of a brand), and purchasing and decision making procedure (knowledge of the purchasing process). With the exception of purchasing and decision-making procedure, all typology components are grouped into generic product knowledge and individual product knowledge.
As presented by previous classifications and noted by Brucks (1986) consumer knowledge is multidimensional and can be classified and measured by the content. Peter and
17 Hastie, R. (1982). Comment: Consumer’s memory for product knowledge. Advances in Consumer Research, 9(1), p. 72.
Olson’s (2005) content that consumers categorize knowledge hierarchically at different levels within the memory structure. Their consumer knowledge classification includes product knowledge and brand knowledge. Product knowledge refers to information about product categories, either the most general category, or subcategories stored in a consumer’s memory. Brand knowledge refers to consumer knowledge about a brand, including brand name, attributes, benefits, concepts, images and all other associations of the brand.
Based on their research, Bei and Heslin (1997) argue the two types of consumer knowledge: product knowledge and product involvement play different roles in brand evaluations. Product knowledge refers to “consumer’s knowledge of terminology, attributes, and usage situations”18, whereas product involvement encompases brand facts and brand commitment. The scholars found that consumers knowledgeable about the product category choose brand that offer more value for the price, meaning that there is a good balance between product quality and price. Thus, product quality and price refer to the functional aspects of the product. Moreover, the findings show that consumers who prefer famous and more expensive brands signal a higher degree of consistency between the brand images and their personalities, egos or interests than for the functional aspects of products. When product involvement is high consumers may “choose a famous brand because of its prestigious image. To them, the prestigious image is worth the extra cost”19. These results demonstrate that consumer category product knowledge and brand knowledge have different effects on brand evaluations. Product knowledge can influence consumers to evaluate brands from a product, functional related angle, whereas brand knowledge facilitates consumers to evaluate brands from a symbolic, non-product-related aspect. After presenting these important studies, which relate to the proposed research topic, a more narrow approach will be focusing on the most relevant research findings in the service brand extensions domain.
18 Bei, L. T., & Heslin, R. E. (1997). The Consumer Reports Mindset: Who Seeks Value-The Involved or the Knowledgeable?. Advances in Consumer Research,24, p. 152.
19 Bei, L. T., & Heslin, R. E. (1997). The Consumer Reports Mindset: Who Seeks Value-The Involved or the Knowledgeable?. Advances in Consumer Research,24, p. 152.
2.3 SERVICE THEORY
After experiencing rapid growth in the past decades and becoming the driving force behind developed economies (Martinez and Pina, 2005) the service sector deserves intensive research attention.
2.3.1 SERVICES- DEFINITION
Even though the importance of service economies continues to rise at a worldwide level, the service branding literature is still in its infancy (O’Cass and Grace, 2003). Research carried out by de Chernatony and Dall’Olmo Riley (1999) and Chernatony and Segal- Horn (2003) suggests that traditional branding strategies which are applied to goods should be adapted in order to conform to the specific characteristics of services.
Before service brand extensions can be dealt with, a deeper understanding of the related terms and concepts is necessary. To begin with, the American Marketing Association (AMA) defined services as: “activities, benefits or satisfactions which are offered for sale, or are provided in connection with the sale of goods”20.
2.3.2 CHARACTERISTICS OF SERVICES
There are four main characteristics which imply that services have to be treated separately by marketers since they determine the customer behavior in a different way than the tangible goods.
Intangibility is the major component differentiating services from goods. Services cannot be touched, felt or seen before consumption; therefore they should be perceived as an experience, performance. This aspect of services is indicated as the critical difference between services and goods (Berry, 1984).
20 Regan, W. J. (1963). The service revolution. The Journal of Marketing, p. 57.
