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

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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.......

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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 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 1
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. 2
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. BACKGROUND 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. CONSUMER RESEARCH IN DIFFERENT DISCIPLINES 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; 3
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. CONSUMER SATISFACTION PROCESS 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 f information - search for data relevant for the purchasing decision, both from or 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. INTER -DISCIPLINARITY OF CONSUMER RESEARCH 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 4
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. DIFFERENT LEVELS OF COMPLEXITY 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. RESEARCH FRAMEWORKS AND METHODS 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. CONCLUSIONS 5
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. 6
• 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. 7
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 8
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 9
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) 10
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 11
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. 2.2 Methodology Based on the presented perspectives that are of importance for understanding and evaluating consumer behaviour, the following framework for this study is suggested. Attitudes Disciplines Behaviours Methods Acceptance Techniques 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 m easuring 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. 12
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 eco- 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. 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. 13
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 Business Social management Economics Psychology studies & marketing Environmental 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 14
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). The need recognition process Desired state Actual state Degree of discrepancy Below threshold At or above threshold No need Need recognition Variables recognition Environmental Internal Information influences Exposure search search • Culture • Social class • Personal influence Attention • Family Stimuli Pre-purchase • Situation • Marketer alternative dominated Comprehension Memory evaluation Individual differences • Other • Consumer resources: Acceptance time, money, Purchase information processing Retention • Motivation Consumption • Knowledge External • Attitudes search Post-purchase • Personality, values, alternative and lifestyle evaluation Dissatisfaction Satisfaction Divestment 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. 15
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 16
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 17
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). Inputs Outputs High involvement Attitude based Environmental factors Customer satisfaction Positive word-of-mouth on cognitive Beliefs Affect Behaviour information Marketing mix or knowledge Low involvement Matrix Sales Attitude based on behavioural Beliefs Behaviour Affect learning Experiential Attitude based on hedonic Affect Behaviour Beliefs experience expereince Figure 4 The hierarchy of effects models 18
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 decision- makers and assume that well-defined and insatiable desires for goods and services drive 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 19
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 non- 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 to solicit more followers into 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. 20