Integrating Gap Analysis and Utility Theory in Service Research

Abstract

Conventional utility theory models customer preferences in terms of actual performance and does not use benchmarks. But empirical work in gap analysis shows that customer preferences clearly depend on the disparity between performance and some benchmark. To resolve this apparent discrepancy between theory and experiment, this article shows that a simple reinterpretation of utility makes utility a function of the uncertainty-discounted gap between actual performance and a benchmark. The author interprets the benchmark as reflecting customer product expectations. The resulting formulation is used to derive a consumer choice model in which customer choice depends on how perceived performance compares to expectations and on customer uncertainty about performance and expectations. In this model, increasing information on a product or service tends to increase its sales if its performance is above customer expectations and to decrease its sales if its performance is below customer expectations.