Customer satisfaction: review of literature and application to the product-service systems

Executive summary This feasibility study commissioned by the National Institute for Advanced Industrial Science and Technology in Japan AIST and supported by the Sustainable Consumption

Customer satisfaction: review of

literature and application to the

product-service systems

Final report to the Society for Non-Traditional Technology,

Japan

Oksana Mont Andrius Plepys

Research Associates International Institute for Industrial Environmental Economics

at Lund University <http://www.iiiee.lu.se/>

P O Box 196 Tegnersplatsen 4 SE- 221 00 Lund Sweden Phone: +46 46 222 0200 Fax: +46 46 222 0230 oksana.mont@iiiee.lu.se andrius.plepys@iiiee.lu.se

Lund, February 28 2003

Acknowledgments

The authors would like to thank the National Institute for Advanced Industrial Science and Technology in Japan and the Ministry of Economy, Trade and Industry (METI) of Japan for financially supporting this study and for useful comments on the drafts

We would like to thank our supervisor, Prof Thomas Lindhqvist for valuable

guidance and challenging comments

Executive summary

This feasibility study commissioned by the National Institute for Advanced Industrial Science and Technology in Japan (AIST) and supported by the Sustainable Consumption Unit (UNEP) provided an overview of approaches used in different disciplines for evaluating consumer behaviour The study analysed the applicability of existing research concepts, theories, and tools for evaluating consumer satisfaction with product-service systems (PSS)

It included a discussion of their strengths/weaknesses

It has been recognised that eco-efficiency improvements at production and product design level can be significantly reduced or totally negated by rebound effect from increased consumption levels In line with this problem factor 10 to 20 material and energy efficiency improvements have been suggested (Factor 10 Club 1994; Schmidt-Bleek 1996; Bolund, Johansson et al 1998; Ryan 1998) The improvements, however, if not carefully done, may still lead to rebound effects through changes in resource prices

As a potential solution to the factor 10/20 vision, system level improvements have to be made, contrary to redesigning individual products or processes (Weterings and Opschoor 1992; Vergragt and Jansen 1993; von Weizsäcker, Lovins et al 1997; Ryan 1998; Manzini 1999; Brezet, Bijma et al 2001; Ehrenfeld and Brezet 2001)

The product service system (PSS) concept has been suggested as a way to contribute to this system level improvement (Goedkoop, van Halen et al 1999; Mont 2000) Here the environmental impacts of products and associated services could be addressed already at the product and service design stage Special focus should be given to the use phase by providing alternative system solutions to owning products

A number of examples in the business-to-business (B2B) area exist that confirm the potential

of PSS for reducing life cycle environmental impact It is, however, increasingly evident that business examples are difficult to directly apply to the private consumer market Private consumers, contrary to businesses, prefer product ownership to service substitutes (Schrader 1996; Littig 1998) Even if accepted, the environmental impacts of “servicised products” offers depend to a large extent on consumer behaviour

To address this problem, either behavioural or service system design changes are needed Changing human behaviour and existing lifestyles contributes to the vision of sustainable development, but at the same time, it is an extremely difficult and time-consuming process A potentially easier way is changing the design of the product-service system to reduce behavioural pitfalls In order to change system design, it is necessary to understand how consumer acceptance of more sustainable solutions is formed, influenced or changed, what are the influencing factors and what are the leverage points for best results with lowest costs Understanding consumer perceptions and behaviour in this context is crucial

A considerable body of literature in a range of different discip lines exists on consumption, consumer behaviour, and consumer decision- making process Research in economics, business, marketing, psychology and sociology domains studies consumer behaviour from different theoretical premises: “for economists, consumption is used to produce utility; for sociologists, it is a means of stratification; for anthropologists – a matter of ritual and symbol;

for psychologists – the means to satisfy or express physiological and emotional needs; and for business, it is a way of making money”(Fine 1997)

For more than a decade now, a range of studies that address environmentally sound consumer

behaviour, e.g car use, waste sorting, minimisation and recycling practices, have been

conducted However, few studies evaluated consumer acceptance of the PSS concept – a consumption based on non-ownership of physical products, see, for example, studies on car sharing schemes (Schrader 1999; Meijkamp 2000), ski rental and washing services (Hirschl, Konrad et al 2001)

One reason explaining the lack of studies in the area could be that, there are still not many PSS schemes in place to serve as test grounds Another reason could be uniformity of research focus Most of consumer research focused on adopter categories, habits, attitudes and intentions, rather than on actually measuring the satisfaction level with the service The reason is probably that PSS ideas have been promoted by researchers from the environmental management, marketing, design, and engineering fields, and to a lesser extent by sociologists, who hold the banner of research in customer satisfaction

The paramount goal of marketing is to understand the consumer and to influence buying behaviour One of the main perspectives of the consume r behaviour research analyses buying behaviour from the so-called “information processing perspective" (Holbrook and Hirschman 1982) According to the model, customer decision-making process comprises a need-satisfying behaviour and a wide range of motivating and influencing factors The process can

be depicted in the following steps (Engel, Blackwell et al 1995):

• Need recognition – realisation of the difference between desired situation and the current situation that serves as a trigger for the entire consumption process

• Search for information - search for data relevant for the purchasing decision, both from internal sources (one's memory) and/or external sources

• Pre-purchase alternative evaluation - assessment of available choices that can fulfil the realised need by evaluating benefits they may deliver and reduction of the number of options to the one (or several) preferred

• Purchase - acquirement of the chosen option of product or service

• Consumption - utilisation of the procured option

• Post-purchase alternative re-evaluation - assessment of whether or not and to what degree the consumption of the alternative produced satisfaction

• Divestment - disposal of the unconsumed product or its remnants

Besides the information processing perspective, marketing analyses consumer behaviour by employing a psychologically grounded concept of attitudes (Balderjahn 1988; Ronis, Yates et

al 1989; Luzar and Cosse 1998) It is consumer attitudes that are usually named as the major

factor in shaping consumer behaviour and a wealth of studies is available on the topic of how attitudes can predict behaviour

Different research disciplines diverge in their presuppositions about human nature, factors influencing consumer behaviour, market response, etc Therefore, they naturally employ different research approaches However, despite that seemingly insurmountable abyss between disciplines, we see that many research topics and methods overlap, and that there is

no clear-cut line between different domains of consumer research Many consumption-related issues are being increasingly addressed from interdisciplinary or multidisciplinary perspectives

Many interdisciplinary concepts and factors are of interest for research on consumer satisfaction with eco-efficient services and PSS Contrary to the suggestions from many traditional neoclassical theories, consumption patterns are very flexible and prone to various influences Today consumer behaviour is increasingly dynamic as the choice of alternatives increases with the growth of global markets The complexity of the decision- making process and a large number of influencing factors suggest that changing consumer behaviour towards more sustainable consumption is a challenging process, which requires coordination at individual and societal level

The area of PSS and eco-efficient services is still developing Further efforts are required in order to understand relations between the functional and emotional needs of customers

When evaluating satisfaction with a product, customers initially assess tangible features of the product In the service context, the features, though observable, are considerably less tangible and are thus more difficult to assess A product service system comprises four components (products, services, infrastructures, and networks), rendering the evaluation process of consumer satisfaction even more complex (Mont 2000) Here the part of the system, with which the customer comes into direct contact, is larger than in the case of a pure product or service, which has implications for customer evaluation process In the case of PSS or eco-services, customers are exposed to both dimensions: product and service In addition, due to closer relations with the service provider, customers can even become exposed to infrastructure and networks that support PSS delivery Therefore, in the PSS context, an evaluation of all four PSS components becomes relevant:

• Product evaluation is conducted by assessment of products or technologies

• Person-based or other types of services (technical, information and knowledge services) that are included into PSS may be evaluated

• Infrastructure can be evaluated when the customer comes into contact with enabling supporting technology, or by evaluation of ambient conditions, spatial layout or by evaluating signs and artefacts of the PSS

• Networks, are not usually exposed to the customer, but in some cases may be evaluated when they come into contact with customers

A great variety of methods and frameworks for understanding and evaluating consumer acceptance and satisfaction are used in different disciplines The study has discussed the following frameworks: Kano model of customer satisfaction, the Innovation diffusion of Rogers, the service quality model of Grönsroos, and SERVQUAL model by Parasuraman The study has also surveyed a range of tools used for evaluating and measuring consumer satisfaction These included surveys, in-depth interviews, focus group interviews, observations, mystery shopping, and psychographic portrait of customers A number of drawbacks and benefits pertaining to the tools have been pointed out and discussed Both the research models and the tools, while diverse to a different extent, were found to be useful for application in the PSS research area

The environmental impacts of ever increasing consumption throughout the world have been recently recognised Many solutions have been proposed to combat the rising levels of consumption One of the concepts suggested as a potential solution to reduce consumption levels is the concept of product-service systems (PSS)

The concept proved to be viable in the business-to-business context However, in the private consumer markets, it has been less successful, both in terms of economic viability and environmental impact reduction User behaviour has been named as the primary reason for this situation

To address this problem, either behavioural or service system design changes are needed Changing human behaviour and existing lifestyles contribute to the vision of sustainable development, but it proves to be an insurmountable task over a short period of time

Alternatively, changing the design of product-service system to reduce the behavioural pitfalls could be a potentially easier way towards sustainable development Changing system design requires understanding how consumer acceptance of more sustainable solutions is formed, influenced or changed, what are the influencing factors and what are the leverage points for the best results with lowest costs Understanding consumer perceptions and behaviour in this context is crucial

However, the consumer decision-making process is much more complex and intricate than just a simple decision about shifting from owning a product towards paying per use of it Throughout this study we demonstrated that products are not seen purely for their functional features, but rather products are complex combinations of various attributes, which, together with functionality, also bring status, serve as a key to a certain social class, reinforce self-esteem, and much- much more

Therefore, the goal of this study was to take a step towards a better understanding of the complexity of the phenomena we are aiming to change We did that by looking at how different disciplines perceive the consumption process in general and the consumer decision-making process in particular We saw the wealth of theories and frameworks being developed trying to solve this puzzle We then looked closer at the potentially most promising models, which could prove useful in understanding the consumer decision- making process in the context of ownerless consumption

We also found some useful tools, which can be employed for collecting information about and from consumers Ident ified frameworks and tools were then evaluated for suitability in the PSS context We also provided some suggestions and examples for how several presented models could be operationalised in the PSS context

Some important lessons were learned from this study:

• The consumer is a moody creature – swinging between rationality and emotional behaviour

• All disciplines we looked at addressed consumption from some perspective This perspective may be unique to this discipline, or may share common premises with other disciplines Cross- fertilisation and learning is the key to success

• The challenge is not in the availability of analysis tools, but in analysis frameworks, which would allow us to speak the same language as our system and understand it better

• We can probably employ just one tool to measure customer satisfaction with our system But it is multifaceted and thus a combination of tools is more promising

• PSS is a system, comprised of products, services, infrastructures, and networks The criteria we want to evaluate this system against should include attributes of each dimension

• PSS is a multi-disciplinary area and initiating system level change will require system level effort Researchers with various backgrounds need to be involved in developing ideas and methods for measuring customer satisfaction with PSS “Non-social” PSS practitioners should learn methods of social sciences

Table of content

EXECUTIVE SUMMARY 3

1 BACKGROUND 10

2 METHODOLOGICAL FRAMEWORK AND GOAL OF THE STUDY 12

2.1 GOAL 12

2.2 METHODOLOGY 12

2.3 LIMITATIONS 12

2.4 OUTLINE OF THE REPORT 13

3 CONSUMER RESEARCH IN DIFFERENT DISCIPLINES 14

3.1 BUSINESS AND MARKETING DOMAIN 14

3.2 ECONOMICS DOMAIN 19

3.3 SOCIAL STUDIES DOMAIN 21

3.4 PSYCHOLOGY DOMAIN 22

3.5 ENVIRONMENTAL STUDIES 24

4 FRAMEWORKS AND TOOLS FOR EVALUATING CUSTOMER SATISFACTION 27

4.1 FRAMEWORKS FOR EVALUATING CUSTOMER SATISFACTION WITH PRODUCTS 27

4.1.1 Kano Model of Customer Satisfaction 27

4.1.2 Innovation framework 28

4.2 FRAMEWORKS FOR EVALUATING CUSTOMER SATISFACTION WITH SERVICES 29

4.2.1 Why measure services with different measures? 29

4.2.2 Service Quality Model 30

4.2.3 The SERVQUAL model 31

4.3 TOOLBOX FOR MEASURING CUSTOMER SATISFACTION 32

4.3.1 Surveys 33

4.3.2 In-depth interviews 34

4.3.3 Focus group interviews 35

4.3.4 Observations 35

4.3.5 Mystery shopping 36

4.3.6 Psychographic portrait of customers 36

5 ANALYSIS OF FRAMEWORKS AND THEIR APPLICABILITY FOR PSS 38

5.1 USEFULNESS OF FRAMEWORKS FOR PSS 38

5.1.1 Marketing model for creating customer satisfaction 38

5.1.2 Kano Model of Customer Satisfaction 39

5.1.3 Innovation framework of Rogers 40

5.1.4 Service Quality Model 40

5.1.5 SERQUAL model 41

5.2 TOWARDS A FRAMEWORK FOR EVALUATING CUSTOMER SATISFACTION WITH PSS 41

5.2.1 Identifying PSS attributes 42

5.2.2 What tools to use for evaluating PSS? 45

6 CONCLUSIONS 47

7 SUGGESTIONS FOR FURTHER WORK 49

8 APPENDIX 51

9 REFERENCES 52

List of abbreviations

B2B Business-to-business

B2C Business-to-customer

PSS Product-service system

TRA Theory of Reasoned Action

TPB Theory of Planned Behaviour

SERVQUAL Service Quality model

QFD Quality Function Deployment

List of Figures

Figure 1 Three levels of approaches for evaluating consumer acceptance of products 12

Figure 2 Disciplines that study consumption and consumer behaviour 14

Figure 3 Customer satisfaction process (adopted from (Engel, Blackwell et al 1995), p 143-154, 177) 15

Figure 4 The hierarchy of effects models 18

Figure 5 The Kano model (Kano, Seraku et al 1996) 27

Figure 6 Adopter categorisation on the basis of relative time of adoption of innovations (Rogers 1995) 29

Figure 7 The Service Quality Model (Grönroos 1982) 30

Figure 8 The Total Perceived Quality (Grönroos 1988) 31

Figure 9 Service Quality model (Parasuraman, Berry et al 1985) 32

Figure 10 Different data collection methods for different type of attributes (Edvardsson, Gustafsson et al 2000) 40

Figure 11 PSS dimensions that can be exposed to customer judgement 43

Figure 12 Service Attribute Dual Importance Grid (Jacobs 1999) 46

List of Tables Table 1 Some attributes for tool library 44

Table 2 Customer satisfaction measures for new products in financial services (Edgett and Snow 1997) 51

A dissatisfied customer will tell seven to 20 people about their negative experience A satisfied customer will only tell three

to five people about their positive experience (Kan 1995).

1 Background

It has been recognised that eco-efficiency improvements at production and product design level can be significantly reduced by ever increasing consumption levels (Khazzoom 1980), (Brookes 2000; Binswanger 2001; Haake and Jolivet 2001; OCSC 2001) While companies are struggling to reduce material intensity of each production unit and each product, the total environmental impact of the economy is growing In order to address this problem, some authors suggest that for long-term sustainability, we need a factor of 10 or even 20 in materials and energy efficiency use improvements (Factor 10 Club 1994; Schmidt-Bleek 1996; Bolund, Johansson et al 1998; Ryan 1998) As a potentia l solution to the factor 10/20 vision, some authors propose that system level improvements have to be made, instead of just having products redesigned (Weterings and Opschoor 1992; Vergragt and Jansen 1993; von Weizsäcker, Lovins et al 1997; Ryan 1998; Manzini 1999; Brezet, Bijma et al 2001; Ehrenfeld and Brezet 2001)

Sustainable consumption has been highlighted as an important constituent of sustainable development in Rio de Janeiro, 1992 at the United Nation Conference for Environment and Development and by the World Summit on Sustainable Development in Johannesburg, ten years later in 2002 One of the generally accepted definitions of sustainable consumption is the following: “sustainable consumption is the use of goods and services that satisfy basic needs and improve quality of life while minimizing the usage of irreplaceable natural resources and the by-products of toxic materials, waste, and pollution” (Sierra Club 2002) It highlights the need to provide value to people, while reducing the environmental impact associated with producing and delivering this value In other words, there is a need to de- link consumption of goods and services from material consumption Many authors call for simplifying lifestyles and reducing consumption, associating the management of consumption with the so-called sufficiency revolution1, which considers how much is enough for a good life Our comprehension of this approach is still in its initial stage (Sachs 1999), but what is clear already is that it is a challenging task to reduce consumption levels, as the entire economic system is based on presumption of economic growth linked to the increased use of material resources and products What is needed instead is consumption that is based on economic growth, which is decoupled from material resources We propose the fo llowing

definition of sustainable consumption: sustainable consumption is consumption that provides

value by decoupling material-based growth from economic growth and environmental impact Following this definition, more value needs to be provided with fewer materials

involved and less environmental impact associated with the production and total delivery of that value

The product service system (PSS) concept has been suggested as a way to contribute to the system level improvement that tries to de- link economic and environmental growth (Goedkoop, van Halen et al 1999; Mont 2000) The concept proposes that the environmental

1

Sufficiency solutions refer to organising activities in more intelligent ways, in which the need for product is

eliminated (see Heiskanen, Eva and Mikko Jalas (2000) Dematerialization Through Services - A Review and Evaluation of the Debate Ministry of Environment: Helsinki, no 436, p 12)

impacts of products and associated services should be addressed already at the product and service design stage, with special focus on the use phase by providing alternative system solutions to owning products

A number of examples (mainly from the business-to-business area) exist that confirm the potential of PSS for reducing life cycle environmental impact It is, however, increasingly evident that these examples are difficult to directly apply to the market of private consumers, mainly because business customers often prefer services to product ownership (Alexander 1997), while according to some studies it is a formidable challenge for private customers to adopt “ownerless consumption” (Schrader 1996; Littig 1998) In addition, the environmental impacts of such offers depend to a large extent on user behaviour To address this problem, changes are needed in consumption behaviour; consumption patterns and levels; and ultimately a change in lifestyles towards more sustainable patterns Many authors recognise that “the health of our planet is inextricably dependent upon human behaviour” (Geller 1995), and therefore changing human behaviour may foster and maintain sustainability (Gudgion and Thomas 1991; McKenzie-Mohr, Nemiroff et al 1995; Oskamp 2000) An increasing number of studies have been conducted in search for instruments that can potentially help facilitate the shift toward more sustainable patterns of consumption, e.g., (Goodwin, Ackerman et al 1997); (OECD 1997); (Stern, Dietz et al 1997); (Thøgersen and Ölander 2002)

In order to initiate the change process, it is necessary to understand how consumer acceptance

of more sustainable solutions is formed, influenced, or changed, what the influencing factors are and what the leverage points for best results with lowest costs are A considerable body of literature exists on consumption, consumer behaviour, and consumer decision-making process The range of disciplines that address these questions from different points of view is quite broad - economics, business and marketing, social, and psychological studies of consumer behaviour, to name just the major ones According to Fine (1997), “for economists, consumption is used to produce utility; for sociologists, it is a means of stratification; for anthropologists, it is a matter of ritual and symbol; for psychologists, it is the means by which

to satisfy or express physiological and emotional needs; and for business, it is a way of making money”(Fine 1997)

There is a range of studies that address consumer acceptance and attitudes towards more environmentally sound consumer behaviour, mostly coming from studies of car use, waste sorting and minimisation practices, recycling and other similar industries, see for example Steg, et al (1995), Aragón-Correa and Llorens-Montes (1996), and Guerin (2001) (Steg, Vlek

et al 1995; Aragón-Correa and Llorens-Montes 1996; Guerin 2001) For more than a decade now, this wealth of literature has also been applied to studies of consumer acceptance of environmentally sound products and services, e.g Gatersleben (2001) and Rowlands, et al (2002) (Gatersleben 2001), (Rowlands, Parker et al 2002)

However, very few studies evaluated consumer acceptance of the concept of product service

systems, i.e consumption that is not based on ownership of goods, see, for example, studies

that investigated consumer acceptance of car sharing schemes (Schrader 1999; Meijkamp 2000), ski rental and washing services (Hirschl, Konrad et al 2001) The lack of studies that measure customer acceptance of PSS depends on two main reasons First, there are still not many PSS schemes being developed that could serve as test grounds Second, some of the research that studied consumer acceptance, focused on adopter categories, habits, attitudes and intentions, rather than on actually measuring the satisfaction level with the service The reason is probably that eco-services and PSS ideas have been promoted by environmental

management researchers, engineers and designers, environmental marketing researchers, and

to a lesser extent by sociologists, who hold the banner of research in customer satisfaction This report is a result of the feasibility study that is a part of the project on Life-Cycle Approach to Sustainable Consumption, initiated and funded by the National Institute for Advanced Industrial Science and Technology in Japan (AIST) and supported by UNEP, Sustainable Consumption Unit

2 Methodological framework and goal of the study

2.1 Goal

The goal of the study is to provide ideas and suggestions for how customer satisfaction with PSS can be evaluated This goal will be reached in a number of steps We will first provide an overview of existing concepts and schools of thought from different disciplines that try to explain consumer behaviour and consumption patterns The overview will be followed by the presentation of frameworks and tools that are used for understanding consumer satisfaction with products and services These frameworks will then be evaluated as to whether they could be used for estimating customer satisfaction with PSSs and what kinds of adjustments are necessary Some elaboration on how these tools could be used in the PSS context will be provided The study results should be treated as indicative for future more in-depth studies in proposed areas

Figure 1 Three levels of approaches for evaluating consumer acceptance of products

This feasibility study is a desk-top study that includes analysis of academic journals with the use of several databases ELIN, Lovisa, Science Direct, Emerald, ABI Inform available at Lund University and through national Swedish library database LIBRIS A number of interviews with experts in academic circles and in European and Swedish research institutions were conducted with regard to the questions about consumer behaviour and consumer acceptance of eco-efficient services and latest updates in the PSS area

2.3 Limitations

The study is limited by time and no deep analysis of consumer behaviour from a specific discipline point of view has been performed, as the goal of the study is to evaluate applicability of the most often used methods for understanding and measuring consumer acceptance and satisfaction

No sensory and taste ratings and preferences that do not directly translate into the purchase, consumption, or market success of a product were included into this study

The overview of tools for measuring customer satisfaction excluded practical advice on how

to develop these tools and how to analyse collected data, due to the general nature of these tools and availability of sources, which can provide help in these respects

2.4 Outline of the report

An overview of the sections of the report is presented below

Section 1 provides the background and the rationale for engaging in the research of consumer behaviour Section 2 provides the methodological framework for carrying out the study Section 3 provides an overview of some concepts and theoretical groundings from different disciplines that study consumer behaviour, such as economics, business and marketing studies, social studies, psychological research, and the environmental field The section identified differences in studying consumer behaviour and consumption It also highlights the linkages between the disciplines in their approach towards understanding consumer related decision- making processes and draws attention to the relevant current contributions to the discussion from each discipline

Section 4 provides an overview of the major frameworks and techniques for understanding and evaluating consumer acceptance and satisfaction, which are used in many different disciplines The described frameworks are Kano Model of Customer Satisfaction, Innovation framework of Rogers, Service Quality Model of Grönsroos, and SERVQUAL model by Parasuraman The specific tools for evaluating and measuring consumer satisfaction include surveys, in-depth interviews, focus group interviews, observations, mystery shopping, and psychographic portrait of customers

Section 5 analyses presented frameworks and tools for their usefulness for the area of efficient services and PSS Some suggestions are provided as to how to choose the salient attributes on offer, how to blueprint the service process and provides some hints on how to evaluate customer satisfaction by operationalising the Kano Model of Customer Satisfaction

eco-A relevant example of tool library service attributes is presented The section discusses whether new tools are needed for evaluating the acceptance of PSS or what kind of adjustments need to be done to suit existing techniques for the new application area

Conclusions are drawn and directions for future research are discussed in section 6

3 Consumer research in different disciplines

The study of consumption is increasingly enriched by a growing number of contributions The purpose of this section is to provide a selective sampling of literature that deals with issues or methods, which might be applicable for studying the field of product-service systems It is far from an overview of how consumption has been studied by different disciplines Instead, the intention is to select useful sources and draw methodological and theoretical lessons, rather than to provide a thorough literature analysis

This section provides a selective presentation of how consumption and consumer behaviour is studied and explained by economics, business and marketing studies, social, and psychological research The disciplines differ in their presuppositions about the human nature, influencing factors of consumer behaviour, and market response They also employ different research methods, some of which will be described in the following sections Despite that seemingly insurmountable abyss between disciplines, we will see that many research topics overlap, and that obviously there is no clear-cut line between different domains of consumer research In addition, a lot of consumption related issues have been addressed from an interdisciplinary or multidisciplinary perspective As Ackerman puts it, “a new interdisciplinary area of research on consumption has emerged in the last 10-15 years, drawing contributions and participants from sociology, anthropology, history, philosophy, literature, and marketing - even, on occasion, from economics” (Ackerman 1997)

Consumer behaviour

Environmental studies

Business management

& marketing

Psychology

studies

Figure 2 Disciplines that study consumption and consumer behaviour

3.1 Business and marketing domain

This section provides a summary of the current understanding of consumer behaviour based

on the overview of the existing body of business literature on the subject Special focus is given to the formation of consumer needs and attitudes, information processing and the decision- making process within the purchasing decision The ultimate goal of this decision-making process is satisfaction of consumer needs This section helps the reader understand different stages in the consumer decision process and distinguish between the notions of customer acceptance and customer satisfaction It provides background to the following sections, which analyse consumption and consumer behaviour from the point of view of different disciplines

Business management and marketing are concerned with ways of satisfying and retaining customers for the purpose of generating profits, improving companies’ competitiveness and securing market share Some of the major themes in the business management domain include studies of customer relationship marketing, which analyses how customer satisfaction

relates to competitiveness and profits, methods for measuring customer satisfaction (Thomson 1995), and approaches that can help transfer customer satisfaction data into strategies for improvement of customer relations and their retention (Reidenbach and McClung 1998), (Johnson and Gustafsson 2000), (Schellhase, Hardock et al 2000)

The paramount goal of the marketing domain is to understand the consumer and to influence buying behaviour One of the main perspectives of the consumer behaviour research analyses buying behaviour from the so-called “information processing perspective” (Holbrook and Hirschman 1982) The basic concept is derived from the model of the consumer’s decision-making process, suggested by Dewey (1910) and adapted by Simon (1955), that includes the following major steps: problem recognition, search, alternative evaluation, choice and outcomes (Dewey 1910), (Simon 1955) Later this model was expanded to include other steps and add more details One of the models, which will be used in this study as a basis for

understanding the consumer buying behaviour, is the model suggested by Engel et al (1995),

because it combines the consumer decision process with the influencing factors (Figure 3)

At or above threshold Below threshold

No need recognition

Degree of discrepancy

Actual state Desired state

Dissatisfaction Satisfaction

Internal search

• Motivation

• Knowledge

• Attitudes

• Personality, values, and lifestyle

Exposure Attention

Comprehension

Acceptance

Retention

Need recognition

Information search

Pre-purchase alternative evaluation Purchase

Post-purchase alternative evaluation

Consumption

Divestment

Variables The need recognition process

Figure 3 Customer satisfaction process (adopted from (Engel, Blackwell et al 1995), p 143-154, 177)

According to the model, the customer decision-making process comprises a need-satisfying behaviour and a wide range of motivating and influencing factors Consumer decision-making process has the following steps:

1 Need recognition – realisation of the difference between desired situation and the current

situation that serves as a trigger for the entire consumption process

This process depends on the difference between the desired and the current state of affairs Several factors can influence this process: changed circumstances, time, new product purchase, and consumption that trigger the need for other products Once a certain threshold

of this discrepancy is exceeded, the need is recognised However, to trigger the action, the need should be considered as important and the need satisfaction should be within a person’s resources (e.g time, money, etc.)

2 Search for information - search for data relevant for the decision, both from internal

sources (one’s memory) and/or external sources

The search for information usually begins with the internal search for any sort of information, memory, or experience with a product or service The outcomes of this stage depend on the actual existence of internal knowledge about the subject and on the ability of the individual to retrieve this information If the internal search does not produce expected results, the individual turns toward external information sources The external searches differ in scale (how comprehensive the search for information is), in the direction (advertising, brands, in-store information, information received from sales people, or social contacts) and in the sequence of the research (brand or attribute processing) The major determinants that influence a search are product determinants, situational determinants, retail, and consumer determinants The consumer determinants comprise knowledge, involvement, attitudes, beliefs, and demographic features

The extent of the informa tion search depends on the degree of importance of the purchasing decision to the customer For example, people seek information more actively than in cases of more expensive products (Engel, Blackwell et al 1995) The relevance of product information presented to consumers also affects the purchasing decision It has been shown that irrelevant information weakens consumers’ beliefs in the product’s ability to deliver the outcome and satisfy the need (Meyvis and Janiszewski 2002)

3 Pre-purchase alternative evaluation - assessment of available choices that can fulfil the

realised need by evaluating benefits they may deliver and reduction of the number of options

to the one (or several) preferred

In this step, a number of alternatives are evaluated and the final option, which is believed to

be able to satisfy consumer need, better than the other options, is chosen A number of evaluative criteria, which represent product or service attributes or particular dimensions of their delivery, are used for the evaluation The criteria can be functional or expressive in nature, for example, price, brand name, colour, smell, environmental attributes, etc., which have different importance to various individuals (Mittal, Ratchford et al 1990) Ratchford (1975) posits that consumers may often choose products for the status and image attributes and less for their functional features (Ratchford 1975)

Differences in product attributes are also reflected in the way the consumer knowledge about

a product can be measured Functional attributes are more likely to be measured objectively, while expressive /status/ and image attributes can primarily be measured through subjective experiences of consumers with products (Park, Mothersbaugh et al 1994) It has been demonstrated that these image or intangible attributes are important in customer evaluations, especially when their tangible features are difficult to evaluate (Olson 1977)

In addition to the choice of criteria, consumers also choose which alternatives they will evaluate The set of alternatives for the evaluations process is called the consideration or evoked set Research on the evoked set (number of alternatives that are considered in the evaluation process) has focused on both explaining the process in which close substitutes - alternatives sharing the same attributes (usually within the same product category, but of

different brands) – are being evaluated and on the choice of alternatives from different product categories - noncomparables, so called across-category choice alternatives (Johnson 1989), (Park and Smith 1989) The difference in the choice process between close substitutes and alternatives from different product categories has been shown The choice process between close substitutes is a top-down process, in which consumers start from comparing general information about product categories, narrowing it down to concrete choices among brands of products (Park and Smith 1989), (Johnson 1988) The choice process between alternatives from different product categories is the opposite It starts from concrete features

of alternatives and widens the comparison to more abstract characteristics, based on which the alternatives are being compared (Johnson 1989) Knowledge from these studies is useful for analysing consumer acceptance of PSS, because in the PSS context, the consumers have

to compare service alternatives to products, which resembles comparing non-comparables from different product and service categories Following Johnson’s logic, the evaluation in this case will also be a bottom- up process

The information processing capabilities about product characteristics are shown to depend on how well individuals are informed about a product, brand and entire product category (Beattie 1982), (Bettman 1979) It is demonstrated that well- informed customers focus more

on objective information and particular product attributes, while less informed customers rely

on general information about the entire product category (Bettman and Sujan 1987) and use more subjective information and recommendations of social contacts (King and Balasubramanian 1994) Furthermore, studies report that well- informed customers are willing

to pay more for the quality brand than were lower-knowledge customers (Cordell 1997)

An important part of the pre-purchase alternative evaluation is acceptance - whether the consumer accepts and believes the information provided and trusts the sources of that information

4 Purchase - acquirement of the chosen option of product or service

The purchase step is associated with a number of decisions that individuals have to make Even if the alternative is already chosen, the purchasing may still not be made, because motivations and circumstances can change, new information can become available, or there could be no such alternatives available at that particular place The decision also depends on when and where to buy, and/or how to pay for the purchase Thus, at the purchasing stage, the final decision can be fully planned, partially planned, or totally unplanned

5 Consumption - utilisation of the procured option

After the product or service is bought, consumers can use it directly, in a period of time or could even abort the consumption process all together Research distinguishes between sacred and profane consumption, as well as impulsive consumption

6 Post-purchase alternative evaluation - assessment of whether or not and to what degree

the consumption of the alternative produced satisfaction

The result of this step can be either satisfaction or dissatisfaction Satisfaction is the result of

a post-consumption evaluation if a chosen alternative met or exceeded expectations of the customer

According to Oliver’s expectation-disconfirmation model, consumers have three levels of expectations about the product or service performance: equitable performance (what the customer has to receive in return for money and effort spent), expected performance, and ideal performance (Oliver 1980) The model states that individual’s expectations are either confirmed if a product performs as expected, negatively disconfirmed when the product

performs more poorly than expected, or positively disconfirmed if a product performs better than expected A negative disconfirmation results in dis satisfaction, and consumption of the product is likely to be discontinued Confirmation or positive disconfirmation results in satisfaction and the continued use of the product or service

7 Divestment - disposal of the unconsumed product or its remnants

Divestment became a focus of customer research relatively recently because of growing environmental concerns Most of the research has been focusing on final disposal and recycling, but recently the secondary use of a product, such as reuse and remarketing, is gaining more and more attention

Besides “information processing perspective” presented above, marketing analyses buyer

behaviour by employing a psychologically grounded concept of attitudes Attitudes are

usually named as the major factor in shaping consumer behaviour and a wealth of studies is available on the topic of how attitudes can be used to predict consumer behaviour (Balderjahn 1988; Ronis, Yates et al 1989; Luzar and Cosse 1998) Katz’ functional theory of attitudes explains the role of attitudes in shaping social behaviour (Katz 1960) People form attitudes toward products, brands, advertisements, stores, themselves, and other people based on four underlying reasons: utilitarian function (based on rewards and punishments), value-expressive function (consumer’s central values or self- concept), ego-defensive function (serves to protect the person from internal feelings of threat), and knowledge function (need for order, meaning, and structure) Underlying dimensions of attitude include: affect (feelings), behaviour (do), and cognitions (learning and beliefs) These dimensions can be combined into three hierarchies of effects models, which try to explain a different kind of consumer decision-making process

• The Standard Hierarchy or High Involvement Hierarchy perceives the consumer as a rational problem solver and suggests the following order of consumer responses: cognition, affect, and behaviour (learn- feel-do)

• The Low-Involvement Hierarchy applies to low- involvement purchase situations where both motivation and risk are low e.g trial purchases and suggests the following order of consumer responses: cognition, behaviour, and affect (learn-do-feel)

• The Experiential Hierarchy highlights the importance of consumers’ emotions (impulse purchases) and situations in which consumer are highly involved with outcome and suggests the following order of consumer responses: affect, behaviour, and cognition (feel-do-learn)

Attitude based

on cognitive information

or knowledge

Attitude based

on behavioural learning

Attitude based

on hedonic expereince

Attitude based

on cognitive information

or knowledge

Attitude based

on behavioural learning

Attitude based

on hedonic expereince

Attitude based

on cognitive information

or knowledge

Attitude based

on behavioural learning

Attitude based

on hedonic expereince

Attitude based

on cognitive information

or knowledge

Attitude based

on behavioural learning

Attitude based

on hedonic experience

Attitude based

on cognitive information

or knowledge

Attitude based

on behavioural learning

Attitude based

on hedonic expereince

Attitude based

on cognitive information

or knowledge

Attitude based

on behavioural learning

Attitude based

on hedonic expereince

Attitude based

on cognitive information

or knowledge

Attitude based

on behavioural learning

Attitude based

on hedonic expereince

Attitude based

on cognitive information

or knowledge

Attitude based

on behavioural learning

Attitude based

on hedonic experience

These models suggest that there are three ways to change attitude: via changing belief, affect

or via behavioural change Theoretical frameworks dealing with beliefs are described in section 3.4

This section described the step-by-step model of the customer satisfaction process stemming from the “information processing perspective” and the hierarchy of effects models, which are based on a psychologically construct of attitudes These two models in a way provide opposite views of the consumer decision- making process

The next section will explore the economic theory of consumer behaviour in the last decades

3.2 Economics domain

“There was once a man who lived in a Scarcity After many adventures and the long voyage in the Science of Economics,

he encountered the Society of Affluence They were married

and had many needs” (Baudrillard 1988), p 35.

Consumption plays a central role in economic theory The most popular theories and models

in economic consumer research portray consumers as somewhat passive rational makers and assume that well-defined and insatiable desires for goods and services drive

decision-consumer behaviour in the market Traditional neoclassical economists posit that these

desires are not affected by culture, institutional frameworks, social interactions, or the consumption choices and lifestyles of their social contacts Furthermore, these desires or preferences for certain goods are stable by nature and consumers maximise their own utility

in the world of perfect information and market competition They identify three major influencing factors that affect consumption - prices, incomes, and personal tastes As personal tastes fall outside the realm of economics, most often, traditional economists restrict themselves to the role of income and prices in determining consumption choices

Other presuppositions of economic theory of consumer demand are that desires are not diminishing as mo re of them are satisfied and that the origin of desires is in the consumers themselves In response to these traditional views, Galbraith argued that we need to realise that there are limits to desires and that expressions of these desires in specific want s are created by industrial systems, implying that consumer sovereignty is an empty concept (Galbraith 1958) Here he implies that only physiological needs have limits He critiques the present consumer societies, which exploit the fact that psychological needs are insatiable, and which employ great amount of resources to discover and create urge for more and more desires, all in order to sustain the growth drive of indus try

After Galbraith, the narrow scenario of reality drawn by neoclassical economists has been heavily criticised on several grounds and a shift towards new foundations in microeconomics has taken place (Lancaster 1966), (Lancaster 1966), (Lancaster 1971), (Michael and Becker

1973) A modern consumer theory regards consumers as full members of the market who

create their utility in the context of the household The fundamental prerequisite of this approach is that goods and services are simply inputs to the consumption process, and their utility is being extracted by consumers, who spend time and other resources, in the household The notion that needs and outcomes is really what consumers want is at the centre

of this new approach Needs ma y be fulfilled by putting market-provided goods through consumption process, in which time and skills of the consumers are employed The end result could be a great variety of ways consumers can produce utility This vast amount of alternatives makes the consumer decision process a complex task, which consumers face every day Taking into account the concept of bounded rationality with lack of information and cognitive limitations, it is clear that consumers cannot be efficient in their choices and

that neoclassical economics failed to provide sufficient explanation of consumption processes

A different approach to the consumer decision process comes from the studies by prominent

economists who explored the effects of tastes and preferences on consumption choices

(Scitovsky 1992), (Becker 1996) It is been argued that life would be impossibly complex if

we were to go through the entire decision- making process every time we are faced with a choice It is suggested instead that our lives are deeply routinised and the decisions about familiar daily situations are made automatically, as a matter of habit Habits are formed based

on changes in tastes, and our preferences depend on experiences in past consumption This discussion stems from the psychological learning theory, according to which habits are formed in the process of continuous reinforcement of influencing factors Once people are satisfied with their choice and situation, their behaviour becomes routinised and they do not tend to search for new solutions, until new signals and influences come that can trigger the search for better alternative

These ideas built the foundation for an extensive debate on economic implications of habits

(Pollak 1970), (von Weizsäcker 1971) Economists suggested looking at individual costs as

an explanation of the habitual behaviour Stigler and Becker (1977) explain stability of habits with a certain capital, consisting of skills, information and experiences, that was acquired during consumption of a particular object or service Triggers for change reduce this accumulated capital (Stigler and Becker 1977) This discussion is interesting from environmental point of view as well, as routines and habits often offset sustainable patterns of consumption

Another interesting reason for habit stability comes from Leibenstein (1950), who suggested taking into consideration the desire of people to consume certain goods in order to be accepted by a social group As a result, people can be trapped by the desire to adopt to the most accepted or prestigious way of living (Leibenstein 1950) This mechanism implies that

if the prestigious way of living is unsustainable, it might be difficult to change it, as members will always struggle for being accepted into the prestigious circle The contrary is also true: if it is possible to make prestigious life style more sustainable, then it will be easier

non-to solicit more followers innon-to it

The work of Sen brings us closer to the area of product-service systems in that Sen argued that in order to evaluate a person’s well-being it is not sufficient to look at one’s possessions and at the characteristics of these possessions, but at what functioning these possessions provide (Sen 1985) Sen defines functioning as “an achievement of a person: what he or she manages to do or to be It reflects, as it were, a part of the ‘state’ of that person It has to be distinguished from the commodities, which are used to achieve those functionings It has to

be distinguished also from the happiness generated by the functioning” (p.10) Later he summarised the conceptualisation of the processes of how utility is realised (Sen 1997): goods (e.g., a bike)àcharacteristics (e.g., transport)àfunctioning (e.g., moving)àutility (e.g., pleasure) (p.10) This conceptualisation reminds very muc h the direction of the current discussion in the environmental filed about product ownership versus buying functions of products

Examples of economic research provided here demonstrate clear links between psychological, social and marketing research There is a lot to learn from economic research

in terms of knowledge and methods, for example, for evaluating consumer willingness-to-pay and willingness-to-accept Incorporation of economic methods into customer acceptance and satisfaction techniques could greatly contribute to this line of research

In the next section, the explanation and construct of consumer behaviour will be built on social and sociological studies

3.3 Social studies domain

Social institutions, collective behaviour, and constraints of cons umption environments enable and affect consumer behaviour Social studies focus on identifying and studying parameters

of external environments that influence consumption patterns The major themes that are

studied by sociologists with regard to consumption behaviour are culture, social class,

personal influence, ethnic influence, family and household, and situational influences Engel

(1995) shows the scope of individual and environmental influences and this distinction is used in this study for the narrowing down and distinguishing between the two research areas: sociology and psychology

There is a substantial body of literature on consumer culture that analyses cultural differences

and looks into reasons for consumption in a cultural context (Featherstone 1991); (Cross 1993); (Lury 1998) Culture affects the entire structure of consumption Sociology studies why people buy products and find various answers to that simple question: products provide function; products should comply with people preferences about the form in which product function could be delivered; products become symbols of meaning in society (Solomon 1983) The importance of values is described by a theory of consumption values (Sheth, Newman et al 1991) The authors propose that consumer choice is influenced by functional value, conditional value, social value, emotional value, and epistemic value Changes of values are usually explained from a life-cycle perspective (people grow older and their values change) or from a generational perspective, suggesting that values of all generations are being replaced by values of the “leading” generation

Another line of sociological research on consumption analyses institutional influences on

consumption patterns The main institutions in focus are family, religion, and the education system Consumption patterns to a large degree are also affected by social class, because people who belong to the same class share similar values, lifestyles, and interests Sociologists study the role different goods play in distinguishing between different classes and reinforcing identity within a certain class Marketing segmentation is also often based on marketing products to a specific social class by using special language, symbols, and appeal, which triggers associations of a particular social class (see for example, (Williams 2002), or (Henry 2002)

At the heart of the sociological view is the role played by goods in marking the distinction between different social groups and classes and strengthening identity within the group Several sociologists investigated how people belonging to the same class use the construct of

taste to choose particular goods For example, Pierre Bourdieu (1984) maintains that

consumption patterns develop based on taste that is specified by a certain cultural location (habitus), and that people consume in order to distinguish themselves in the social arena He analysed how consumers classify goods in accordance with their taste and how the taste indicates belonging to a certain social class (Bourdieu 1984)

Personal influence on the consumption patterns is studied by investigating the meanings that

consumers attach to the process of consumption, as part of the dimension of identify construction Consumers create themselves and are created by products, services, and experiences Four different types of meanings can be distinguished: utilitarian meaning (perceived usefulness of a product in its ability to perform functional tasks), hedonic meaning (specific feelings the products evoke or facilitate), sacred products that are very important to people, and social meanings (products and services are seen as “media for interpersonal

communication” and for statements about people’s positions and statuses in social groups) (Engel, Blackwell et al 1995)

Status is considered as one of the constructs of conspicuous consumption and was studied among many by Torsten Veblen, who pointed out that achieving a certain status in a social group stimulates consumption of so-called “status goods” (Veblen 1902) Baudrillard notes

an interesting phenomena – on the one hand, marketing tells us to buy goods to be different,

on the other hand, we need to buy because everyone else has already bought it (Baudrillard 1998) There is an important status element in this: we want to be different, but not too different from our social group

The discussion on the formation of habits in section 3.1, can also be enriched by the sociological studies on the topic The major question raised was how habits are formed and

how they can be changed to stimulate habitualisation of more sustainable consumption

patterns Sociology provides several insights about that First of all, behavioural stability is explained by social interdependence of consumption Consumers are seen as being embedded into, influenced and enabled by institutions (North 1981), (Hodgson 1988) Secondly, consumers are also part of social groups, from which they can learn through interaction Again, status and the desire to be accepted and treated as part of the group is an important need (see next section of Maslow’s hierarchy)

Social institutions, social groups, ideologies, and behaviours mutually reinforce each other and shape the development of society Economic instruments and technological innovation alone will not provide desired change Equally important are accepted norms and moral principles that should go together with cha nging techno-economic framework and should provide new grounds that would shape and determine more sustainable consumer choices

As it will be shown later, sociologists can directly contribute to the development of efficient services and PSS with their knowledge of socio-technical frameworks and processes that shape household and individual consumption

eco-The next section will provide some insights into consumer behaviour from a psychological perspective

3.4 Psychology domain

The major part of psychological research, besides social psychology, studies individual processes The domain of psychology research on consumer behaviour focuses on identifying and studying personal human qualities that influence consumer behaviour Another line of research focuses on studying how various stimuli from the surrounding world affect consumer behaviour

Psychology is interested in learning how the urge of need is created, how different stimulators influence the personal decision- making process, and how the satisfaction sensation is created and confirmed It seems that the focus is given to four major topics:

consumer resources (time, money), motivation, knowledge, attitudes, personality, values, and lifestyle (Figure 3) Alongside these, three major processes are being studied by

psychologists: information processing, influencing attitudes and behaviour, and learning processes (Engel, Blackwell et al 1995)

Several schools of thoughts can be distinguished in psychology Representatives of the operant conditioning view of consumer learning investigate the role of rewards and punishment in consumer decision- making process Behaviourists are concerned with the role surrounding conditions have on learning and the decision- making process Behaviourists that support a classical conditioning view study how consumers respond to brand names, scents,

colour, and other stimuli when making purchasing decisions based on knowledge they have gained over time On the other hand, cognitive learning theorists are concerned with studying internal brain processes

Psychological studies analyse the influence of the emotional state of consumers on

purchasing decision (see for example (Gardner 1985)) Psychological processes such as attention, comprehension, memory, and cognitive and behavioural theories of learning, persuasion, and behaviour modification constitute an integral part of marketing studies on consumer behaviour and have been outlined in section 3.1 Needs for social appreciation and status that were discussed before are well grounded in the psychological theory of Maslow (1954), who postulates that human behaviour could be explained by the universal motivation

to satisfy a hierarchy of needs, and that self-realisation and social acceptance are as important

as the basic needs of food and shelter (Maslow 1954) Some needs are pre-potent and need to

be satisfied before higher order needs He argues for a development of a society, which would encourage higher order needs and in such way create a more liberal society that allows its members to reach full potential He argues that the system of needs must be protected from powerful social forces, as higher order needs may totally disappear as a result of such forces, such as unemployment for instance

The lifestyle concept comprises a formal process of integration of social practices, through

which actors express their individual identity Practices of our society are closely linked to an economic and market system based on the notion of consumption Therefore, in Bauman’s opinion, “lifestyles boil down almost entirely to styles of consumption” (Bauman 1990) According to him, people’s individual identity expressed in their lifestyles can be read almost entirely from the package of goods and services people surround themselves with

Recently a new field of “psychology of sustainability” or “new ecological psychology” was

launched to address theoretical and empirical studies that strive to better understand the psychological processes underlying and triggering the development of environmental awareness and concerns with sustainability issues (Jones 1996), (Bonnes and Bonaiuto 2001) The emphasis of this field is on emotional bonds with our planet, application of environmental issues to psychotherapy, even search for an environmentally acceptable standard of mental health

In the context of sustainable consumption and lifestyles, it is worth looking at what kind of

theories the psychology provides to aid in making the shift towards more sustainable consumption patters At the individual level, the psychology has to offer two theories that aim

at explaining cognitive processes behind individual decision making, connecting such constructs as intentions, attitudes, subjective norms, and perceived behavioural control These theories provide some input to the discussion held above about social relevant actors and the importance of belonging to a group

The Theory of Reasoned Action (TRA) suggests that behaviour depends on the intention to

perform the behaviour – the most important determinant of a person’s behaviour is behavioural intent It is a linear correlation between the strength of a person’s intention, a person’s willingness to try to act accordingly, and the likelihood that such behaviour is actually being performed (Fishbein and Ajzen 1975) The theory defines two independent determinants of intention The first determinant is the personal factor named “attitude towards the behaviour”, which refers to the individual beliefs that there will be outcomes and evaluation of these outcomes The second determinant is the so-called subjective norms, which comprise an individual belief that relevant social actors think she should or should not perform a behaviour and an individual’s intention to comply with this behaviour (Ajzen and Fishbein 1980) To conclude, according to the theory, the behaviour is performed as a

rational decision by the individual, which is in a position to make a decision It then depends

on the situation whether the attitude or the subjective norms takes over in shaping the intention

The Theory of Planned Behaviour is an extension of the Theory of Reasoned Action (Ajzen

1988), (Ajzen 1991) It includes the concept of perceived behavioural control, which is the person’s belief about feasibility of using the provided opportunity Individual abilities and opportunities can affect control over the intended behaviour The main idea is that the greater the perceived behavioural control, the stronger a person’s intention is to try to perform the relevant behaviour However, the perceived behavioural control can also affect behaviour by making it impossible to perform a certain behaviour despite one’s positive intentions towards

it

The literature search on psychology, consumption and environment revealed many psychological studies on the general environmental behaviour of people (see for example(von Borgstede and Biel 2002), (Iwata 1996)), social and ethical norms that affect it (von Borgstede, Dahlstrand et al 1999), or on studying particular behavioural patterns and behaviours, for example recycling behaviour (Guagnano, Stern et al 1995), waste sorting behaviour, or energy-saving behaviour (Poortinga, Steg et al 2003) An important line of psychological research is the formation of habits and the environmental consequences of changing everyday behaviours

Summing up the previous sections of chapter 3

Overall, the preceding sections showed that consumption patterns are first of all much more flexible and prone to various influences than was suggested by traditional neoclassical theory Further, it was shown that current consumption behaviour is not a stable preference of consumers but rather one choice of a great number of alternatives generated by the industrial machine Economists and psychologists tend to assume and subsequently study consumer behaviour in isolation from other consumers, while sociologists perceive consumption as being socially grounded The importance of the social context is also recognised and widely used by businesses in their marketing strategies

The complexity of the decision-making process and a large number of influencing factors suggest that changing consumer behaviour towards more sustainable consumption is a challenging process, which requires coordination at individual and societal level The strength and range of forces that seduce and urge consumers into conspicuous consumption might appear discouraging for sustainability pursuit Luckily, there are also other considerations that might help to divorce happiness from commodities Some studies showed that the most valuable things for people have low economic, but high emotional value, such

as family photos, memorable events, souvenirs, etc (Grafton 1993) Furthermore, it was also shown that people attach sacred meanings to different products and objects, such as cars, flags, stars, collections, etc (Belk, Wallendorf et al 1989)

The previous chapters provided a selective overview of concepts and factors of consumer behaviour that are of interest for the following sections, in which an overview of the studies about eco-efficient services and PSS and consumer attitudes towards these schemes will be provided

3.5 Environmental studies

Environmental studies on consumer acceptance build upon results of aforementioned disciplines in their research on consumption They apply existing knowledge to a particular case of environmental problems stemming from consumption The studies are concerned with

what the environmental consequences of consumer purchasing decision could be, how they can be influenced to reduce the associated impact with economic methods, or by changing social and psychological contexts, technological solutions and political frameworks

Beside individual- level research of environmental behaviour, problems with and solutions to environmentally damaging consumption patterns are also studied at a more aggregate level

This field is broadly called sustainable consumption and is an interdisciplinary area that

builds upon economic research, socio-technical and socio-psychological explanations, and policy studies Consumer behaviour models are being developed (Hansen and Schrader 1997) and the environmental impacts of various scenarios of consumption have been modelled (Jager 2000) Material- and energy- intensive consumption patterns have been analysed and suggestions for addressing over-consumption have been provided (Røpke 1998), (Røpke 1999), (Brown and Cameron 2000)

An important part of the sustainability discourse focuses on the ways of involving various

stakeholders in the process towards more sustainable lifestyles, including consumers, see for

example Jenkinson (1997) (Jenkinson 1997) The role of raising environmental awareness of consumers and the importance of streamlining environmental communication and information provision has also been addressed by a vast number of studies (Zimmer, Stafford

et al 1994), (Palm and Windahl 1998), (Björner, Gårn Hansen et al 2002), (Palm and Windahl 1998), (Niva, Heiskanen et al 1997), (Imkamp 2000) Another important development step towards sustainable consumption is the recent acceleration of work on product-related environmental policies (Niva and Timonen 2001), including extensive work

on Integrated Product Policy, and especially the application of life-cycle thinking to product policies (Dalhammar 2002)

One of the approaches for dealing with ever increasing consumption is the so-called

dematerialised consumption that is based on the utilisation value of products Consumers can

extract the utilisation value during the product use and do not necessarily have to own the material product However, studies in the area of eco-efficient service and PSS conducted so far, show that this utilitaristic idea is not that simple to implement in practice, as consumer behaviour is a much more complex process

One of the first studies that analysed acceptance of car sharing and apartment launderettes was conducted by Schrader (1999) (Schrader 1999) Schrader applied the innovation diffusion concept of Rogers to evaluate relative advantage of the services He also created a portrait of potential users of these services, looking particularly at the level of education, gender influences, apartment size, and household size As a result, the study provided insights into potential factors that can stimulate acceptance of eco-efficient services As crucial success factors he identified: increase knowledge about the services; guarantee and communicate the advantages, avoid or reduce disadvantages, and address the target group of customers Following the preliminary study, a comprehensive research into customer acceptance of eco-efficient services was conducted, which resulted in comprehensive empirical work and theoretical developments (Schrader 2001)

The research of Rens Meijkamp offers a comprehensive analysis of reasons for people to become members of car-sharing organisations, provided potential user profile, and investigated factors that stimulate decision- making process towards adoption of the new service (Meijkamp 2000) He used the innovation diffusion framework of Rogers (1995) for conceptualising and structuring the research and specifically for identifying the main steps of car-sharing adoption The purpose of the study was to test the feasibility of the eco-efficient services with regards to acceptance by customers, employment by producers and

environmental potential He concludes the eco-efficient services have a potential to directly and in a more passive way stimulate consumer behaviour change

Hirschl, et.al studied acceptance of ski rental services and washing services with the help of

a questionnaire with two major themes: extension of product use and consumption without ownership (Hirschl, Konrad et al 2001) The majority of respondents replied that they do not replace functioning products by new ones Also, the majority of respondents expressed that they knew where repair facilities were, but noted that they would prefer buying a new product

if the cost of repair is as high as the price of the new product The study revealed that fashion and comfort were important determinants of the behaviour, but not as important as the economic factor Comfort was seen as the amount of time spent on renting/sharing and bringing back the product, but loss of flexibility was perceived as even more problematic The study revealed that consumption through renting or sharing is not a deeply rooted practice, but no direct rejection to the idea was reported either Therefore, opportunities for renting or sharing were seen for seldom- used produc ts and for products with high maintenance costs Against renting or sharing, were concerns about improper use and revealed emotional attachments to some material objects The study classified the respondents into four different groups depending on their stances toward ownership and renting/sharing Two of these groups are potential customers of such services These results have implications for the marketing of eco-efficient services, which have to be segment specific

Littig (2000) criticises the validity of the basic premise of eco-efficient services and PSS that customers need product or service utility, not as much ownership of the material object (Littig 2000) She stresses the symbolic and social functions of purchase and ownership, and the strong connection to the idea of property The author further suggests looking at the studies of collective use as opposed to commercial leasing and renting The article provides the results of a household survey that investigated why people prefer to buy a product instead

of leasing it or sharing The mains reasons to this behaviour are the desire to own things and

to have the possibility to use them anytime When it comes to reasons for collective use, two main rationales are offered: financial reasons and the frequency of product use In conclusion, Littig calls for appropriate attention to the sociological pillar of sustainability in studies of eco-efficient services

All these examples show the importance of psychological and individual factors, as well as social frameworks for accepting eco-efficient services in private markets The area of PSS and eco-efficient services still lacks theoretical groundings As the importance of social factors in PSS design and delivery has been realised, it is therefore important to develop PSS models, which would allow and ensure economic viability, environmental superiority, and social acceptance of the new approaches to sustainable consumption

The first step for developing PSS models that would ensure social acceptability, is to learn from other domains and analyse what can be applied directly, what needs to be adjusted, and what new approaches are required because of the specifics of PSS The first selective overview of the existing models and tools will be done in the following section

4 Frameworks and tools for evaluating customer satisfaction

As the previous section showed, different disciplines approach consumer research from different standpoints, however they are all interested in identifying how an innovation - a new product or a service - is accepted by the consumers Some disciplines use techniques for evaluating market response, others measure social influences on creating market acceptance, while yet others study personal characteristics of consumers and how these affect purchasing decision of each individual consumer Each discipline also develops and uses specific methods as well However, there are also general tools that are employed in many disciplines

4.1 Frameworks for evaluating customer satisfaction with products

4.1.1 Kano Model of Customer Satisfaction

The Kano et al (1996) model of customer satisfaction classifies product attrib utes based on

how they are perceived by customers and their effect on customer satisfaction (Kano, Seraku

et al 1996) According to the model, there are three types of product attributes that fulfil

customer satisfaction to a different degree: 1) basic or expected attributes, 2) performance or

spoken attributes, and 3) surprise and delight attributes

A competitive product meets basic expected attributes, maximises performances attributes, and includes as many “excitement” attributes as financially feasible In the model, the customer strives to move away from having unfulfilled requirements and being dissatisfied (Figure 5)

Fully

Performance or spoken attributes

Surprise and delight attributes (unspoken)

Very satisfied

Very dissatisfied

Not at all

Degree of achievement

Basic or expected attributes (unspoken)

Customer satisfaction

Figure 5 The Kano model (Kano, Seraku et al 1996)

The performance or spoken attributes (the central line of the model) are those expressed by customers when asked what they want from the product Depending on the level of their fulfilment by a product or a service these requirements can satisfy or dissatisfy consumers

The basic or expected attributes (lower curve in the model) are basic attributes, which

customers take for granted and they are so obvious that they are not worth mentioning While the presence of these attributes is not taken into account, their absence is very dissatisfying

The surprise and delight attributes (upper curve in the model) lay beyond customer’s

expectations If they are present they excite the customer, but their absence does not dissatisfy, as customers do not expect them

A successful combination of expected and exciting attributes provides a company with an opportunity to achieve competitive advantage A successful company will correctly identify the requirements and attributes and use them to document raw data, user characteristics, and important service or product attributes

To make information about the identified requirements about attributes understandable and useful for designers, a so-called Quality Function Deployment (QFD) approach is often being used The goal of QFD is to assure that the product development process meets and exceeds customer needs and wants and that customer requirements are propagated throughout the life cycle of the product The approach uses a number of matrices, which help translating customer requirements into engineering or design parameters, specifying product features, manufacturing operations and specific instructions and cont rols QFD allows for the minimising of errors and the maximising of product quality for customers The approach is probably the only existing quality system with such strong orientation to customer satisfaction

4.1.2 Innovation framework

The process of adopting new products has also been studied within innovation adoption literature, and in particular the Rogers’ (1995) innovation framework The framework suggests five steps, through which an adopter goes to the adoption of a new product or a service (Rogers 1995: 36):

first knowledge of an innovation à forming an attitude toward the innovation à decision to adopt or reject à implementation of the new idea à confirmation of this decision

Rogers’ model closely resembles the customer satisfaction model by Engel et al (1995), see

(Figure 3) The first knowledge is acquired when an individual is provided with the information about the innovation The attitude is formed evaluating the features of innovation and a resolution on accepting or rejecting the product follows Implementation corresponds to the consumption and confirmation refers to the need to reaffirm the decision about the innovation adoption

Rogers also maintained that people accept innovation differently, depending on their personality, their innovativeness, and interpersonal communication, and according to this could be classified into innovators, early adopters, early majority, late majority, and laggards (Figure 6) Innovators seek newness and value the time period that is passed since the product launch Laggards seek reassurance and confirmation about product or service qualities through interpersonal communication and word-of-mouth

A large number of studies have analysed the differences between earlier and later adopters based on socio-economic, demographic, cultural, or psychological criteria (Tornatsky, Eveland et al 1983), (Gatignon and Robertson 1985), (Frank, Sundqvist et al 2001), (McMeekin and Tomlinson 1998), (Cestre and Darmon 1998)

Time of adoption of innovation

2%

innovators

13,5 % Early adopters

34% Early majority

34% Late majority

16 % laggards

% of adopters

Figure 6 Adopter categorisation on the basis of relative time of adoption of innovations (Rogers 1995)

Economists, for example, suggest that for social innovation to take place, innovators should first accept innovation and then create institutional framework that would trigger the acceptance of new practices For the laggards to join in another mechanism – the desire not to

be left out of the group – can be used to speed up dissemination of more sustainable practices Besides adopter categories, Rogers also identified a range of factors affecting the rate of adoption:

• Perceived attributes of the innovation

• Nature of the social system

• Extent of change agents’ promotion efforts

These factors are often used in many innovation studies as evaluation criteria, based on which questionnaires for consumer surveys are developed

4.2 Frameworks for evaluating customer satisfaction with services

4.2.1 Why measure services with different measures?

Many studies suggest that there is a fundamental difference between products and services, namely it is the way they are produced and consumed (Grönroos 1990; Grönroos 1998), (Edvardsson 1997; Edvardsson 2000), (Bateson and Hoffman 1999) The time period between service production and consumption is considerably shorter than for products Most

of the services are produced “on a spot” in an interactive process, in which customers and company employees meet

Satisfaction with service quality depends on a large number of dimensions - both tangible and intangible attributes of the product-service offer The impact of intangible dimensions on consumer satisfaction is of particular interest at this point

Many psychological studies even show that non-verbal behaviour by the service provider greatly affects service evaluation (Gabbott Mark 2000) For example, the quality of interaction between customer and service provider influences customers’ perception of service quality In services, a single employee may affect service efficiency and consequent customer satisfaction with the service (Barnard 2002) Even customers own involvement and participation in the service delivery affect customer satisfaction (Kelly, Skinner et al 1982) Due to the differences in production and provision of products and services, customers evaluate quality and attributes of material goods and services in different ways (Mathe and

Shapiro 1993) This realisation has initiated a discussion on the need for special tools for evaluating more diverse and less tangible services (de Brentani 1989) Responding to the growing demands for developing specific and reliable ways to measure customer satisfaction

in service industries, a number of studies have been conducted that suggested methodological frameworks for measuring customer satisfaction (Markovic and Horvat 1999)

Other studies looked at what measures are used by service companies for measuring customer satisfaction Studying how financial sector measures customer satisfaction Edgett and Snow (1997) showed that even though it is mostly traditional (financial) measures that are being used by the sector, they do not provide a sufficient basis for innovation in services and multidimensional approaches need to be devised

The two most often used types of measures in service companies are the increase in the number of customers and increase in portfolio dollars However, the most useful types were direct personal interviews with customers and measure of customer expectations and perceptions Surprisingly, companies use traditional quantitative measures, but perceive qualitative measures as the most useful Authors concluded that financial institutions are not satisfied that the traditional accounting-type measures are presenting the full performance picture for new products (Edgett and Snow 1997)

4.2.2 Service Quality Model

According to Grönroos (1982), the quality of a service perceived by customers will differ depending on what strategy the company chooses to deliver and promote that service The service quality model by Grönroos holds that the quality of a service, as it is perceived by the customer, can be divided into technical quality and functional quality dimensions (see Figure 7) The former denotes what the customer receives as the output of a service production process and the latter how the technical quality is produced and transferred to the customer during buyer-seller interactions

Expected service

Perceived service Perceived service quality

Technical quality

Functional quality

Technical solutions

Mashines

Computerised systems

Technical solutions

Employees’

technical ability

Attitudes

mindedness Behavior

Service-International relations Customer

contacts Accessibility

Appearance

Corporate image Traditional

Marketing Activities

Figure 7 The Service Quality Model (Grönroos 1982)

Grönroos posits that the technical quality is the “basic condition for a positively perceived total quality, but the functional quality is the one that adds competitive edge” (Gummesson and Grönroos 1987) Furthermore, in the relationship marketing, the growth of the