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 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 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; 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 needsatisfying 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 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 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 selfesteem, 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 decisionmaking 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 BACKGROUND 10 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 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 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 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 CONCLUSIONS 47 SUGGESTIONS FOR FURTHER WORK 49 APPENDIX 51 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 Three levels of approaches for evaluating consumer acceptance of products 12 Figure Disciplines that study consumption and consumer behaviour 14 Figure Customer satisfaction process (adopted from (Engel, Blackwell et al 1995), p 143154, 177) 15 Figure The hierarchy of effects models 18 Figure The Kano model (Kano, Seraku et al 1996) .27 Figure Adopter categorisation on the basis of relative time of adoption of innovations (Rogers 1995) 29 Figure The Service Quality Model (Grönroos 1982) 30 Figure The Total Perceived Quality (Grönroos 1988) 31 Figure 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 Some attributes for tool library 44 Table 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) 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 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 Conclusions 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 contributes to the vision of sustainable development, but it proves to be an insurmountable task over a short period of time Instead, changing the design of product-service system to reduce the behavioural pitfalls may potentially be an easier way towards sustainable development Changing system design requires understanding 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 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 its use 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 one’s self-esteem, and much-much more Therefore, the goal of this study was to make a step toward better understanding the complexity of the phenomena we intend to change We looked at how different disciplines perceive the consumption process in general and consumer decision- making process in particular We saw the wealth of theories and frameworks being developed trying to solve this puzzle We than looked closer at potentially most promising models, which could prove valuable for 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 consumers Identified frameworks and tools were then evaluated for suitability for the PSS context We also provided some suggestions and examples for how some of the 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 address consumption from some perspective This perspective may be unique to this discipline, or may share common premises with another Cross- fertilisation and learning is the key to success 47 • The challenge is not in the availability of analysis tools, but in analysis frameworks, which would allow us to speak the same language with our system and understand it better • We can probably employ just one tool to measure customer satisfaction with our system But it is a multifaceted system 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 48 Suggestions for further work The identified gaps in specific tools for evaluating customer satisfaction with PSS and the existence of a vast amount of methods for evaluating customer satisfaction with products and services suggests clear direction for adjusting the present techniques to the specificity of PSS In order to also improve current techniques of evaluating customer satisfaction, identification of best practices in measuring customer satisfaction in both manufacturing and service companies is needed As the results of the study show, a range of data collecting techniques exist dominated by surveys and questionnaires employed by both academia and businesses What is needed is a guideline for what techniques are better suited for collecting specific data from customers As was exemplified with the Kano model, various techniques are suitable for evaluating the spoken and unspoken attributes of products and services This direction needs to be further explored and tested in real case studies The overview of the existing company practices of measuring customer satisfaction can be conducted through a survey and interviews with companies This will allow evaluation of business approaches to measure consumer PSS satisfaction in B2B and B2C markets Comparing the techniques will provide a good starting point or basis for improving specific PSS-directed customer evaluation methods The indicators, which companies use for measuring customer satisfaction, is another important area to explore The study has shown that there is a mismatch between measures and indicators that are used and the ones companies think are useful Identification of methods and indicators that reduce the mismatch would allow for the improvement and streamlining of the measurements As the study concluded, it is the absence of frameworks, tools and data collection methods tailored for PSS, which is the main concern Developing a framework that would identify major attributes and elements, based on which a PSS can be evaluated, and linking these attributes to specific data-collection techniques will greatly simplify and foster measuring customer satisfaction with PSS and eco-efficient services According to the IIIEE definition, PSS is a system of products, services, supporting networks (actors) and infrastructure that is developed to be: competitive, satisfy customer needs and have a lower environmental impact than traditional business models The difference between eco-efficient services and PSS has not been distinguished in this study Currently, there is a tendency that any combination of products and services is automatically called a PSS without evaluating their environmental profile A range of services is labelled as eco-efficient without systematic evaluation of their environmental performance In order to foster the development towards sustainable production and consumption systems, the development of new market offers that would be designed as environmentally sound and tested for customer acceptance prior to market launch is needed Therefore, the support to the pilot projects and attempt to develop new PSS is vital Development of new offers is a time consuming matter that requires involvement of a number of actors, often of those who are usually considered to be outside of the traditional product chain The development of scenarios that can be tested with real life actors and evaluated from environmental and customer acceptance perspective may provide a good illustration of expected outcomes Some attempts were already made to develop scenarios of more 49 sustainable consumption practices, such as SUSHOUSE project; however, the scenarios were the final outcome of the project, and did not lead to new viable offers on the market The IIIEE is currently conducting a project that aims to develop a PSS scenario for a socalled hobby-tool library in close cooperation with the producers, rental and housing companies, as well as households The scenarios are planned to be followed by a pilot project where a PSS will be developed This could potentially provide a ground for evaluating customer satisfaction with PSS, which are designed with environmental consideration and with customer requirements incorporated into the PSS To promote sustainable production and consumption, new, behaviour-changing PSS are needed It is not enough to learn about existing ways of providing products and services, because as we see, they are not sustainable Developing new solutions that are well evalua ted is the way forward Existing PSS and eco-services can be evaluated from environmental and customer acceptance perspectives, but the next step should be to analyse whether expressed customer requirements could be matched with less environmental harmful solution, while still be accepted by customers Undoubtedly, the efforts of academy and business, should be supported by policy actions, which should be directed towards involving new actors, disseminating information about more sustainable ways of living and supported by economic instruments (Mont 2002) As was already stressed, various instruments (policy, economic, etc.) have different time frames for implementation Reducing environmental impact from the consumption side requires changing the behavioural patterns of people However, this cannot be achieved by policy measures alone, since personal values are influenced by institutional frameworks and values in society By changing societal values, the best outcomes can be achieved, but this requires a concerted effort of all 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Journal of Business Research 30(1): 63-74 61 ... 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. .. helps to raise customer service standards and identify weak points from the customer perspective It allows evaluation of services from the customer side and unbiased representation of the weak... organisation of repair and maintenance of tools and their final disposal at the end of their life For the example of the tool library, the following attributes could be suggested in the above context