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 S cience and Technology in Japan and the Ministry of Economy, Trade and Industry (METI) o f Japan for financially supporting this study and for useful comments on the draft s. 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 Indus trial Science and Technology in Japan (AIST) and supported by the Sustainable Consumption Unit (UNEP) provided an overview of approaches used in different disciplines for eval uating consumer behaviour. The study analysed the applicability of existing research co ncepts, theories, and tools for evaluating consumer satisfaction with product-service sy stems (PSS). It included a discussion of their strengths/weaknesses. BACKGROUND It has been recognised that eco-efficiency improvements at production and produc t design level can be significantly reduced or totally negated by rebound effect from inc reased consumption levels. In line with this problem factor 10 to 20 material and energ y efficiency improvements have been suggested (Factor 10 Club 1994; Schmidt-Bleek 1996; Bolun d, Johansson et al. 1998; Ryan 1998). The improvements, however, if not carefully d one, may still lead to rebound effects through changes in resource prices. As a potential solution to the factor 10/20 vision, system level improvements ha ve to be made, contrary to redesigning individual products or processes (Weterings and Op schoor 1992; Vergragt and Jansen 1993; von Weizscker, Lovins et al. 1997; Ryan 1998; Man zini 1999; Brezet, Bijma et al. 2001; Ehrenfeld and Brezet 2001). The product service system (PSS) concept has been suggested as a way to contribu te 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 alr eady 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 t he potential of PSS for reducing life cycle environmental impact. It is, however, increasingl y evident that business examples are difficult to directly apply to the private consumer market . Private consumers, contrary to businesses, prefer product ownership to service substitut es (Schrader 1996; Littig 1998). Even if accepted, the environmental impacts of servicised pro ducts 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 su stainable development, but at the same time, it is an extremely difficult and time-consumi ng process. A potentially easier way is changing the design of the product-service system to r educe behavioural pitfalls. In order to change system design, it is necessary to under stand how consumer acceptance of more sustainable solutions is formed, influenced or chang ed, what are the influencing factors and what are the leverage points for best results wi th 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 ut ility; for sociologists, it is a means of stratification; for anthropologists a matter of r itual and symbol; 3

for psychologists the means to satisfy or express physiological and emotional ne eds; 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 soun d consumer behaviour, e.g. car use, waste sorting, minimisation and recycling practices, ha ve been conducted. However, few studies evaluated consumer acceptance of the PSS concept a consumption based on non-ownership of physical products, see, for example, studi es 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 s till not many PSS schemes in place to serve as test grounds. Another reason could be uniformit y of research focus. Most of consumer research focused on adopter categories, habits, attitudes and intentions, rather than on actually measuring the satisfaction level with th e service. The reason is probably that PSS ideas have been promoted by researchers from the env ironmental 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 b uying behaviour. One of the main perspectives of the consume r behaviour research anal yses buying behaviour from the so-called information processing perspective" (Holbrook and Hi rschman 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, bo th from internal sources (one's memory) and/or external sources. Pre-purchase alternative evaluation -assessment of available choices that can fu lfil the realised need by evaluating benefits they may deliver and reduction of the numbe r 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 wha t 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 beha viour by employing a psychologically grounded concept of attitudes (Balderjahn 1988; Roni s, 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 natu re, factors influencing consumer behaviour, market response, etc. Therefore, they naturally employ different research approaches. However, despite that seemingly insurmountable ab yss between disciplines, we see that many research topics and methods overlap, and t hat there is 4

no clear-cut line between different domains of consumer research. Many consumpti on-related issues are being increasingly addressed from interdisciplinary or multidisciplin ary perspectives. Many interdisciplinary concepts and factors are of interest for research on cons umer satisfaction with eco-efficient services and PSS. Contrary to the suggestions fr om many traditional neoclassical theories, consumption patterns are very flexible and pr one to various influences. Today consumer behaviour is increasingly dynamic as the choice of al ternatives increases with the growth of global markets. The complexity of the decision-maki ng process and a large number of influencing factors suggest that changing consumer behavio ur towards more sustainable consumption is a challenging process, which requires coordinati on 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 cust omers. 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 consid erably less tangible and are thus more difficult to assess. A product service system compris es four components (products, services, infrastructures, and networks), rendering the ev aluation 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 t he case of PSS or eco-services, customers are exposed to both dimensions: product and servi ce. 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 se rvices) that are included into PSS may be evaluated. Infrastructure can be evaluated when the customer comes into contact with enabli

ng 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 eval uated when they come into contact with customers. RESEARCH FRAMEWORKS AND METHODS A great variety of methods and frameworks for understanding and evaluating consu mer acceptance and satisfaction are used in different disciplines. The study has dis cussed the following frameworks: Kano model of customer satisfaction, the Innovation diffus ion of Rogers, the service quality model of Grnsroos, and SERVQUAL model by Parasuraman. The study has also surveyed a range of tools used for evaluating and measuring c onsumer satisfaction. These included surveys, in-depth interviews, focus group interview s, observations, mystery shopping, and psychographic portrait of customers. A numbe r of drawbacks and benefits pertaining to the tools have been pointed out and discuss ed. Both the research models and the tools, while diverse to a different extent, were found t o be useful for application in the PSS research area. CONCLUSIONS 5

The environmental impacts of ever increasing consumption throughout the world ha ve been recently recognised. Many solutions have been proposed to combat the rising leve ls of consumption. One of the concepts suggested as a potential solution to reduce con sumption 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 viabili ty and environmental impact reduction. User behaviour has been named as the primary rea son 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 sus tainable development, but it proves to be an insurmountable task over a short period of t ime. Alternatively, changing the design of product-service system to reduce the behav ioural pitfalls could be a potentially easier way towards sustainable development. Chan ging system design requires understanding how consumer acceptance of more sustainable soluti ons 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 perception s 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 u se of it. Throughout this study we demonstrated that products are not seen purely for thei r functional features, but rather products are complex combinations of various attributes, wh ich, 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 understand ing of the complexity of the phenomena we are aiming to change. We did that by looking at h ow different disciplines perceive the consumption process in general and the consum er 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 promi sing models, which could prove useful in understanding the consumer decision-making process i n the

context of ownerless consumption. We also found some useful tools, which can be employed for collecting informatio n about and from consumers. Identified frameworks and tools were then evaluated for suit ability 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 behaviour. swinging between rationality and emotional

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 fram eworks, 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 s ystem. 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 ea ch 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 develo ping 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 .............2

7 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 produc ts...........12 Figure 2 Disciplines that study consumption and consumer behaviour ............. .....................14 Figure 3 Customer satisfaction process (adopted from (Engel, Blackwell et al. 19 95), 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 inn ovations (Rogers 1995)................................................................... ................................................29 Figure 7 The Service Quality Model (Grnroos 1982)................................ ............................30 Figure 8 The Total Perceived Quality (Grnroos 1988).............................. ............................31 Figure 9 Service Quality model (Parasuraman, Berry et al. 1985)................. .........................32 Figure 10 Different data collection methods for different type of attributes (Ed vardsson, 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 (E dgett 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 produc t design level can be significantly reduced by ever increasing consumption levels (Khazzo om 1980), (Brookes 2000; Binswanger 2001; Haake and Jolivet 2001; OCSC 2001). While compan ies are struggling to reduce material intensity of each production unit and each pro duct, 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 eve n 20 in materials and energy efficiency use improvements (Factor 10 Club 1994; Schmidt-B leek 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, ins tead of just having products redesigned (Weterings and Opschoor 1992; Vergragt and Janse n 1993; von Weizscker, 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 sust ainable development in Rio de Janeiro, 1992 at the United Nation Conference for Environm ent 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 co nsumption is the following: sustainable consumption is the use of goods and services that sati sfy basic needs and improve quality of life while minimizing the usage of irreplaceable na tural resources and the by-products of toxic materials, waste, and pollution (Sierra Cl ub 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 f or simplifying lifestyles and reducing consumption, associating the management of c onsumption with the so-called sufficiency revolution1, which considers how much is enough f or a good life. Our comprehension of this approach is still in its initial stage (Sachs 19 99), 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 increas

ed use of material resources and products. What is needed instead is consumption that is b ased on economic growth, which is decoupled from material resources. We propose the foll owing definition of sustainable consumption: sustainable consumption is consumption th at provides value by decoupling material-based growth from economic growth and environmental impact. Following this definition, more value needs to be provided with fewer ma terials 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 contribu te 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 envi ronmental 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 p roduct and service design stage, with special focus on the use phase by providing alternati ve system solutions to owning products. A number of examples (mainly from the business-to-business area) exist that conf irm the potential of PSS for reducing life cycle environmental impact. It is, however, i ncreasingly evident that these examples are difficult to directly apply to the market of pri vate consumers, mainly because business customers often prefer services to product ownership (Al exander 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 environ mental impacts of such offers depend to a large extent on user behaviour. To address th is problem, changes are needed in consumption behaviour; consumption patterns and levels; an d ultimately a change in lifestyles towards more sustainable patterns. Many author s recognise that the health of our planet is inextricably dependent upon human behaviour (Gell er 1995), and therefore changing human behaviour may foster and maintain sustainability (G udgion and Thomas 1991; McKenzie-Mohr, Nemiroff et al. 1995; Oskamp 2000). An increasin g number of studies have been conducted in search for instruments that can potenti ally help facilitate the shift toward more sustainable patterns of consumption, e.g., (Goo dwin, Ackerman et al. 1997); (OECD 1997); (Stern, Dietz et al. 1997); (Thgersen and land er 2002). In order to initiate the change process, it is necessary to understand how consu mer acceptance of more sustainable solutions is formed, influenced, or changed, what the influe ncing factors are and what the leverage points for best results with lowest costs are. A consi derable body of literature exists on consumption, consumer behaviour, and consumer decision-maki ng process. The range of disciplines that address these questions from different po ints of view is quite broad -economics, business and marketing, social, and psychological studie s of consumer behaviour, to name just the major ones. According to Fine (1997), for ec onomists, consumption is used to produce utility; for sociologists, it is a means of strat ification; for anthropologists, it is a matter of ritual and symbol; for psychologists, it is t he 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 towar ds 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), Aragn-Correa and Llorens-Montes (1996), and Guerin (2001) (St eg, Vlek et al. 1995; Aragn-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 acce ptance of environmentally sound products and services, e.g. Gatersleben (2001) and Rowland s, et al (2002) (Gatersleben 2001), (Rowlands, Parker et al. 2002). However, very few studies evaluated consumer acceptance of the concept of produc t service systems, i.e. consumption that is not based on ownership of goods, see, for exam ple, studies that investigated consumer acceptance of car sharing schemes (Schrader 1999; Mei jkamp 2000), ski rental and washing services (Hirschl, Konrad et al. 2001). The lack o f 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 th e service. The reason is probably that eco-services and PSS ideas have been promoted by environ mental 11

management researchers, engineers and designers, environmental marketing researc hers, 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 o n Life-Cycle Approach to Sustainable Consumption, initiated and funded by the National Instit ute 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 satis faction with PSS can be evaluated. This goal will be reached in a number of steps. We will fi rst 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 follow ed by the presentation of frameworks and tools that are used for understanding consumer sa tisfaction with products and services. These frameworks will then be evaluated as to whethe r they could be used for estimating customer satisfaction with PSSs and what kinds of a djustments are necessary. Some elaboration on how these tools could be used in the PSS cont ext will be provided. The study results should be treated as indicative for future more in-d epth 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. Disciplines Attitudes Behaviours Acceptance Methods Techniques Figure 1 Three levels of approaches for evaluating consumer acceptance of produc ts This feasibility study is a desk-top study that includes analysis of academic jo urnals with the use of several databases ELIN, Lovisa, Science Direct, Emerald, ABI Inform avail able at Lund University and through national Swedish library database LIBRIS. A number o f interviews with experts in academic circles and in European and Swedish research institutions were conducted with regard to the questions about consumer behaviou

r 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 s pecific discipline point of view has been performed, as the goal of the study is to eval uate applicability of the most often used methods for understanding and measuring con sumer 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 adv ice on how to develop these tools and how to analyse collected data, due to the general nat ure 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 marke ting studies, social studies, psychological research, and the environmental field. Th e section identified differences in studying consumer behaviour and consumption. It also h ighlights the linkages between the disciplines in their approach towards understanding consume r related decision-making processes and draws attention to the relevant current contributi ons to the discussion from each discipline. Section 4 provides an overview of the major frameworks and techniques for unders tanding and evaluating consumer acceptance and satisfaction, which are used in many diff erent disciplines. The described frameworks are Kano Model of Customer Satisfaction, I nnovation framework of Rogers, Service Quality Model of Grnsroos, and SERVQUAL model by Parasuraman. The specific tools for evaluating and measuring consumer satisfacti on include surveys, in-depth interviews, focus group interviews, observations, mystery shop ping, and psychographic portrait of customers. Section 5 analyses presented frameworks and tools for their usefulness for the a rea of ecoefficient 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 hint s on how to evaluate customer satisfaction by operationalising the Kano Model of Customer Sa tisfaction. 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 o f 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 sectio n 6. 13

3 Consumer research in different disciplines The study of consumption is increasingly enriched by a growing number of contrib utions. The purpose of this section is to provide a selective sampling of literature tha t deals with issues or methods, which might be applicable for studying the field of product-s ervice systems. It is far from an overview of how consumption has been studied by diffe rent disciplines. Instead, the intention is to select useful sources and draw methodo logical and theoretical lessons, rather than to provide a thorough literature analysis. This section provides a selective presentation of how consumption and consumer b ehaviour is studied and explained by economics, business and marketing studies, social, and psychological research. The disciplines differ in their presuppositions about th e human nature, influencing factors of consumer behaviour, and market response. They als o employ different research methods, some of which will be described in the following sec tions. Despite that seemingly insurmountable abyss between disciplines, we will see tha t many research topics overlap, and that obviously there is no clear-cut line between d ifferent domains of consumer research. In addition, a lot of consumption related issues h ave been addressed from an interdisciplinary or multidisciplinary perspective. As Ackerma n 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, ph ilosophy, literature, and marketing - even, on occasion, from economics (Ackerman 1997). Consumer behaviour Environmental studies Business management & marketing PsychologyEconomics Social 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 behavio ur based on the overview of the existing body of business literature on the subject. Spec ial focus is given to the formation of consumer needs and attitudes, information processing a nd the decision-making process within the purchasing decision. The ultimate goal of thi s 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 no tions of customer acceptance and customer satisfaction. It provides background to the fol lowing sections, which analyse consumption and consumer behaviour from the point of vie w of different disciplines. Business management and marketing are concerned with ways of satisfying and reta ining customers for the purpose of generating profits, improving companies competitiven ess and securing market share. Some of the major themes in the business management domai n include studies of customer relationship marketing, which analyses how customer satisfaction 14

relates to competitiveness and profits, methods for measuring customer satisfact ion (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 researc h analyses buying behaviour from the so-called information processing perspective (Holbrook a nd Hirschman 1982). The basic concept is derived from the model of the consumer s dec isionmaking process, suggested by Dewey (1910) and adapted by Simon (1955), that incl udes the following major steps: problem recognition, search, alternative evaluation, choi ce and outcomes (Dewey 1910), (Simon 1955). Later this model was expanded to include ot her steps and add more details. One of the models, which will be used in this study as a b asis 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 thresholdBelow threshold No need recognition Degree of discrepancy Actual stateDesired state Dissatisfaction Satisfaction Internal search External search Stimuli Marketer dominated Other Memory Environmental influences Culture Social class Personal influence Family Situation Individual differences Consumer resources: time, money, information processing Motivation Knowledge

Attitudes Personality, values, and lifestyle Exposure Attention Comprehension Acceptance Retention Need recognition Information search Variables The need recognition process Pre-purchase alternative evaluation Purchase Post-purchase alternative evaluation Consumption Divestment Figure 3 Customer satisfaction process (adopted from (Engel, Blackwell et al. 19 95), p. 143-154, 177) According to the model, the customer decision-making process comprises a need-sa tisfying behaviour and a wide range of motivating and influencing factors. Consumer decis ionmaking process has the following steps: realisation of the difference between desired situation and 1. Need recognition 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 pro duct purchase, and consumption that trigger the need for other products. Once a certa in 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 withi n 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 depe nd on the actual existence of internal knowledge about the subject and on the ability of t he individual to retrieve this information. If the internal search does not produce expected resu lts, the individual turns toward external information sources. The external searches diff er in scale (how comprehensive the search for information is), in the direction (advertising , brands, instore information, information received from sales people, or social contacts) a nd in the sequence of the research (brand or attribute processing). The major determinants that influence a search are product determinants, situational determinants, retail, a nd consumer determinants. The consumer determinants comprise knowledge, involvement, attitud es, 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 tha n 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 d eliver 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 numbe r 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 nu mber 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 e xpressive 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 kno wledge 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 cons ideration or evoked set. Research on the evoked set (number of alternatives that are consider ed in the evaluation process) has focused on both explaining the process in which close su bstitutes 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 dif ferent product categories - noncomparables, so called across-category choice alternativ es (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 pr ocess between close substitutes is a top-down process, in which consumers start from c omparing general information about product categories, narrowing it down to concrete choi ces among brands of products (Park and Smith 1989), (Johnson 1988). The choice process bet ween alternatives from different product categories is the opposite. It starts from c oncrete features of alternatives and widens the comparison to more abstract characteristics, base d 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 consum ers have to compare service alternatives to products, which resembles comparing non-compa rables from different product and service categories. Following Johnson s logic, the eval uation 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 cate gory (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 1 997). An important part of the pre-purchase alternative evaluation is acceptance -whet her 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 a lso depends on

when and where to buy, and/or how to pay for the purchase. Thus, at the purchasi ng 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 peri od of time or could even abort the consumption process all together. Research distinguishes be tween sacred and profane consumption, as well as impulsive consumption. 6. Post-purchase alternative evaluation - assessment of whether or not and to wh at degree the consumption of the alternative produced satisfaction. The result of this step can be either satisfaction or dissatisfaction. Satisfact ion is the result of a post-consumption evaluation if a chosen alternative met or exceeded expectatio ns of the customer. According to Oliver s expectation-disconfirmation model, consumers have three leve ls of expectations about the product or service performance: equitable performance (wh at the customer has to receive in return for money and effort spent), expected performa nce, and ideal performance (Oliver 1980). The model states that individual s expectations a re either confirmed if a product performs as expected, negatively disconfirmed when the pr oduct 17

performs more poorly than expected, or positively disconfirmed if a product perf orms better than expected. A negative disconfirmation results in dissatisfaction, and consum ption of the product is likely to be discontinued. Confirmation or positive disconfirmation r esults 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 gr owing 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 remark eting, is gaining more and more attention. Besides information processing perspective presented above, marketing analyses buy er behaviour by employing a psychologically grounded concept of attitudes. Attitude s 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 behaviou r (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 f orm attitudes toward products, brands, advertisements, stores, themselves, and other people ba sed on four underlying reasons: utilitarian function (based on rewards and punishments), val ueexpressive function (consumer s central values or self-concept), ego-defensive fun ction (serves to protect the person from internal feelings of threat), and knowledge f unction (need for order, meaning, and structure). Underlying dimensions of attitude include: a ffect (feelings), behaviour (do), and cognitions (learning and beliefs). These dimensi ons can be combined into three hierarchies of effects models, which try to explain a differ ent 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 whe re 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 se emotions (impul

purchases) and situations in which consumer are highly involved with outcome and suggests the following order of consumer responses: affect, behaviour, and cogni tion (feel-do-learn). Inputs Outputs InputsOutputsInputsOutputsInputsOutputsInputsInputsInputsInputsInputsInputsOutpu tsOutputsOutputsOutputsOutputsOutputs High involvement Low involvement Experiential High involvementLow involvementHigh involvementLow involvementHigh involvementLo w involvementHigh involvementLow involvementExperientialHigh involvementLow invo lvementHigh involvementLow involvementHigh Beliefs Behaviour Affect Beliefs BehaviourAffect Affect Behaviour Beliefs Attitude based on cognitive information or knowledge Attitude based on behavioural learning Attitude based on hedonic experience SalesCustomer satisfactionPositiveword-of-mouth Marketing mixEnvironmental factors involvementLow involvement 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 descr ibed in section 3.4. This section described the step-by-step model of the customer satisfaction proce ss stemming from the information processing perspective and the hierarchy of effects models, w hich are based on a psychologically construct of attitudes. These two models in a way pro vide opposite views of the consumer decision-making process. The next section will explore the economic theory of consumer behaviour in the l ast 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 a nd models in economic consumer research portray consumers as somewhat passive rational dec isionmakers and assume that well-defined and insatiable desires for goods and service s drive consumer behaviour in the market. Traditional neoclassical economists posit that these desires are not affected by culture, institutional frameworks, social interactio ns, 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 tast es. As personal tastes fall outside the realm of economics, most often, traditional economists r estrict 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 more of them are satisfied and that the origin of desires is in t he consumers themselves. In response to these traditional views, Galbraith argued that we nee d to realise that there are limits to desires and that expressions of these desires in specif ic wants are created by industrial systems, implying that consumer sovereignty is an empty co ncept (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 industry. 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 mic roeconomics has taken place (Lancaster 1966), (Lancaster 1966), (Lancaster 1971), (Michael a nd 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 prerequisi te 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 a t the centre of this new approach. Needs may be fulfilled by putting market-provided goods th rough 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 i nformation and cognitive limitations, it is clear that consumers cannot be efficient in the ir choices and 19

that neoclassical economics failed to provide sufficient explanation of consumpt ion 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 cho ices (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 dec isions about familiar daily situations are made automatically, as a matter of habit. Habits a re formed based on changes in tastes, and our preferences depend on experiences in past consumpt ion. This discussion stems from the psychological learning theory, according to which habi ts are formed in the process of continuous reinforcement of influencing factors. Once p eople are satisfied with their choice and situation, their behaviour becomes routinised an d 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 implication s of habits (Pollak 1970), (von Weizscker 1971). Economists suggested looking at individual c osts as an explanation of the habitual behaviour. Stigler and Becker (1977) explain stab ility 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 fr om environmental point of view as well, as routines and habits often offset sustain able patterns of consumption. Another interesting reason for habit stability comes from Leibenstein (1950), wh o 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 im plies that if the prestigious way of living is unsustainable, it might be difficult to chan ge it, as nonmembers will always struggle for being accepted into the prestigious circle. The contrar y is also true: if it is possible to make prestigious life style more sustainable, th en 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 on e s possessions and at the characteristics of these possessions, but at what functioning these p ossessions provide (Sen 1985). Sen defines functioning as an achievement of a person: what h e or she manages to do or to be. It reflects, as it were, a part of the state of that perso n. 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). Lat er he summarised the conceptualisation of the processes of how utility is realised (Se n 1997): goods (e.g., a bike)characteristics (e.g., transport)functioning (e.g., moving)util ity (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 func tions of products. Examples of economic research provided here demonstrate clear links between psychological, social and marketing research. There is a lot to learn from econo mic research in terms of knowledge and methods, for example, for evaluating consumer willingn ess-to-pay and willingness-to-accept. Incorporation of economic methods into customer accep tance and satisfaction techniques could greatly contribute to this line of research. 20

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 envir onments enable and affect consumer behaviour. Social studies focus on identifying and studying parameters of external environments that influence consumption patterns. The major themes t hat are studied by sociologists with regard to consumption behaviour are culture, social class, personal influence, ethnic influence, family and household, and situational infl uences. Engel (1995) shows the scope of individual and environmental influences and this disti nction is used in this study for the narrowing down and distinguishing between the two res earch areas: sociology and psychology. There is a substantial body of literature on consumer culture that analyses cult ural differences and looks into reasons for consumption in a cultural context (Featherstone 1991) ; (Cross 1993); (Lury 1998). Culture affects the entire structure of consumption. Sociolo gy studies why people buy products and find various answers to that simple question: produc ts 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 (Solo mon 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 f unctional value, conditional value, social value, emotional value, and epistemic value. Ch anges of values are usually explained from a life-cycle perspective (people grow older an d their values change) or from a generational perspective, suggesting that values of all genera tions are being replaced by values of the leading generation. Another line of sociological research on consumption analyses institutional infl uences on consumption patterns. The main institutions in focus are family, religion, and t he 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 intere sts. Sociologists study the role different goods play in distinguishing between diffe rent 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, (Will iams 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 th e 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 cultu ral location (habitus), and that people consume in order to distinguish themselves in the soc ial 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 m eanings that consumers attach to the process of consumption, as part of the dimension of iden tify 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 v ery important to people, and social meanings (products and services are seen as media for interper sonal 21

communication and for statements about people s positions and statuses in social gr oups) (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 (B audrillard 1998). There is an important status element in this: we want to be different, bu t not too different from our social group. The discussion on the formation of habits in section 3.1, can also be enriched b y 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 consump tion patterns. Sociology provides several insights about that. First of all, behaviou ral stability is explained by social interdependence of consumption. Consumers are seen as being embedded into, influenced and enabled by institutions (North 1981), (Hodgson 1988). Secon dly, consumers are also part of social groups, from which they can learn through inte raction. 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 reinforc e each other and shape the development of society. Economic instruments and technological inn ovation 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 cho ices. As it will be shown later, sociologists can directly contribute to the developme nt of ecoefficient services and PSS with their knowledge of socio-technical frameworks and processe s that shape household and individual consumption. The next section will provide some insights into consumer behaviour from a psych ological perspective. 3.4 Psychology domain The major part of psychological research, besides social psychology, studies ind

ividual processes. The domain of psychology research on consumer behaviour focuses on id entifying and studying personal human qualities that influence consumer behaviour. Another line of research focuses on studying how various stimuli from the surrounding world affe ct consumer behaviour. Psychology is interested in learning how the urge of need is created, how differ ent stimulators influence the personal decision-making process, and how the satisfac tion sensation is created and confirmed. It seems that the focus is given to four maj or topics: consumer resources (time, money), motivation, knowledge, attitudes, personality, values, and lifestyle (Figure 3). Alongside these, three major processes are being studied b y 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 a nd punishment in consumer decision-making process. Behaviourists are concerned with the role surrounding conditions have on learning and the decision-making process. Behavio urists that support a classical conditioning view study how consumers respond to brand names , scents, 22

colour, and other stimuli when making purchasing decisions based on knowledge th ey 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 su ch as attention, comprehension, memory, and cognitive and behavioural theories of lear ning, 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 appre ciation 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 re sult of such forces, such as unemployment for instance. The lifestyle concept comprises a formal process of integration of social practi ces, through which actors express their individual identity. Practices of our society are clo sely linked to an economic and market system based on the notion of consumption. Therefore, in Bau man s opinion, lifestyles boil down almost entirely to styles of consumption (Bauman 199 0). According to him, people s individual identity expressed in their lifestyles can b e 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 s launched to address theoretical and empirical studies that strive to better unde rstand the psychological processes underlying and triggering the development of environment al awareness and concerns with sustainability issues (Jones 1996), (Bonnes and Bona iuto 2001). The emphasis of this field is on emotional bonds with our planet, application of environmental issues to psychotherapy, even search for an environmentally accept able wa

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 sustain able consumption patters. At the individual level, the psychology has to offer two th eories 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 a ctors and the importance of belonging to a group. The Theory of Reasoned Action (TRA) suggests that behaviour depends on the inten tion 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 behav iour is actually being performed (Fishbein and Ajzen 1975). The theory defines two indep endent determinants of intention. The first determinant is the personal factor named att itude 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 (A jzen and Fishbein 1980). To conclude, according to the theory, the behaviour is performed as a 23

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 shap ing 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, w hich is the person s belief about feasibility of using the provided opportunity. Individual ab ilities and opportunities can affect control over the intended behaviour. The main idea is t hat 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 b ehaviour by making it impossible to perform a certain behaviour despite one s positive intenti ons 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 patter ns and behaviours, for example recycling behaviour (Guagnano, Stern et al. 1995), waste sorting behaviour, or energy-saving behaviour (Poortinga, Steg et al. 2003). An importan t line of psychological research is the formation of habits and the environmental conseque nces of changing everyday behaviours. Summing up the previous sections of chapter 3 Overall, the preceding sections showed that consumption patterns are first of al l much more flexible and prone to various influences than was suggested by traditional neocl assical theory. Further, it was shown that current consumption behaviour is not a stable prefere nce of consumers but rather one choice of a great number of alternatives generated by t he industrial machine. Economists and psychologists tend to assume and subsequently study cons umer behaviour in isolation from other consumers, while sociologists perceive consump tion 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 leve l. The strength and range of forces that seduce and urge consumers into conspicuous con sumption might appear discouraging for sustainability pursuit. Luckily, there are also ot her considerations that might help to divorce happiness from commodities. Some studi es showed that the most valuable things for people have low economic, but high emotional v alue, 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 c onsumer 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 scheme s will be provided. 3.5 Environmental studies Environmental studies on consumer acceptance build upon results of aforementione d disciplines in their research on consumption. They apply existing knowledge to a particular case of environmental problems stemming from consumption. The studies are concer ned with 24

what the environmental consequences of consumer purchasing decision could be, ho w they can be influenced to reduce the associated impact with economic methods, or by c hanging social and psychological contexts, technological solutions and political framewo rks. Beside individual-level research of environmental behaviour, problems with and s olutions to environmentally damaging consumption patterns are also studied at a more aggrega te level. This field is broadly called sustainable consumption and is an interdisciplinary area that builds upon economic research, socio-technical and socio-psychological explanati ons, and policy studies. Consumer behaviour models are being developed (Hansen and Schrad er 1997) and the environmental impacts of various scenarios of consumption have been mode lled (Jager 2000). Material- and energy-intensive consumption patterns have been anal ysed and suggestions for addressing over-consumption have been provided (Rpke 1998), (Rpke 1999), (Brown and Cameron 2000). An important part of the sustainability discourse focuses on the ways of involvi ng various stakeholders in the process towards more sustainable lifestyles, including consu mers, see for example Jenkinson (1997) (Jenkinson 1997). The role of raising environmental awa reness of consumers and the importance of streamlining environmental communication and information provision has also been addressed by a vast number of studies (Zimme r, Stafford et al. 1994), (Palm and Windahl 1998), (Bjrner, Grn 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 w ork on product-related environmental policies (Niva and Timonen 2001), including extens ive work on Integrated Product Policy, and especially the application of life-cycle think ing to product policies (Dalhammar 2002). One of the approaches for dealing with ever increasing consumption is the so-cal led dematerialised consumption that is based on the utilisation value of products. C onsumers 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 practi ce, as consumer behaviour is a much more complex process. One of the first studies that analysed acceptance of car sharing and apartment l aunderettes was conducted by Schrader (1999) (Schrader 1999). Schrader applied the innovatio

n diffusion concept of Rogers to evaluate relative advantage of the services. He a lso 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 pr ovided 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 targe t group of customers. Following the preliminary study, a comprehensive research into custom er acceptance of eco-efficient services was conducted, which resulted in comprehens ive empirical work and theoretical developments (Schrader 2001). The research of Rens Meijkamp offers a comprehensive analysis of reasons for peo ple to become members of car-sharing organisations, provided potential user profile, an d investigated factors that stimulate decision-making process towards adoption of the new service (Meijkamp 2000). He used the innovation diffusion framework of Rogers (1 995) for conceptualising and structuring the research and specifically for identifying th e main steps of car-sharing adoption. The purpose of the study was to test the feasibility of th e eco-efficient services with regards to acceptance by customers, employment by producers and 25

environmental potential. He concludes the eco-efficient services have a potentia l to directly and in a more passive way stimulate consumer behaviour change. Hirschl, et.al. studied acceptance of ski rental services and washing services w ith 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 tha t they do not replace functioning products by new ones. Also, the majority of respondents expr essed 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 reve aled that fashion and comfort were important determinants of the behaviour, but not as important a s 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 pr oblematic. The study revealed that consumption through renting or sharing is not a deeply r ooted practice, but no direct rejection to the idea was reported either. Therefore, op portunities for renting or sharing were seen for seldom-used products 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 th e respondents into four different groups depending on their stances toward ownersh ip and renting/sharing. Two of these groups are potential customers of such services. T hese 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 serv ices 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 ow nership, and the strong connection to the idea of property. The author further suggests looki ng at the studies of collective use as opposed to commercial leasing and renting. The arti cle provides the results of a household survey that investigated why people prefer to buy a p roduct 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 collec tive 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 sustainabil

ity 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 a rea 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 superiori ty, 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 ad justed, and what new approaches are required because of the specifics of PSS. The first sele ctive overview of the existing models and tools will be done in the following section. 26

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 inn ovation - a new product or a service -is accepted by the consumers. Some disciplines use techniq ues for evaluating market response, others measure social influences on creating market acceptance, while yet others study personal characteristics of consumers and how these affec t purchasing decision of each individual consumer. Each discipline also develops and uses spe cific 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 attribu tes based on how they are perceived by customers and their effect on customer satisfaction (K ano, Seraku et al. 1996). According to the model, there are three types of product attribute s 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 at tributes, and includes as many excitement attributes as financially feasible. In the model, the customer strives to move away from having unfulfilled requirements and being dis satisfied (Figure 5). Customer satisfaction Very satisfied Fully Performance or spoken attributes Surprise and delight attributes (unspoken) Very dissatisfied Not at all Degree of achievement Basic or expected attributes (unspoken) Figure 5 The Kano model (Kano, Seraku et al. 1996)

The performance or spoken attributes (the central line of the model) are those e xpressed 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 dissatisf y 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 menti oning. While the presence of these attributes is not taken into account, their absence is ver y dissatisfying. 27

The surprise and delight attributes (upper curve in the model) lay beyond custom er s expectations. If they are present they excite the customer, but their absence do es 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 correctl y identify the requirements and attributes and use them to document raw data, user characte ristics, and important service or product attributes. To make information about the identified requirements about attributes understan dable 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 an d exceeds customer needs and wants and that customer requirements are propagated throughou t the life cycle of the product. The approach uses a number of matrices, which help transla ting 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 ap proach is probably the only existing quality system with such strong orientation to custom er satisfaction. 4.1.2 Innovation framework The process of adopting new products has also been studied within innovation ado ption literature, and in particular the Rogers (1995) innovation framework. The framewo rk suggests five steps, through which an adopter goes to the adoption of a new prod uct or a service (Rogers 1995: 36): first knowledge of an innovation forming an attitude toward the innovation decision to adopt or reject implementation of the new idea confirmation of this decision Rogers model closely resembles the customer satisfaction model by Engel et al. (1 995), 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 c orresponds to the consumption and confirmation refers to the need to reaffirm the decision abo ut the innovation adoption.

Rogers also maintained that people accept innovation differently, depending on t heir personality, their innovativeness, and interpersonal communication, and accordin g to this could be classified into innovators, early adopters, early majority, late majori ty, and laggards (Figure 6). Innovators seek newness and value the time period that is passed sin ce the product launch. Laggards seek reassurance and confirmation about product or service qual ities through interpersonal communication and word-of-mouth. A large number of studies have analysed the differences between earlier and late r adopters based on socio-economic, demographic, cultural, or psychological criteria (Torna tsky, Eveland et al. 1983), (Gatignon and Robertson 1985), (Frank, Sundqvist et al. 20 01), (McMeekin and Tomlinson 1998), (Cestre and Darmon 1998). 28

2% innovators 13,5 % Early adopters 34% Early majority 34% Late majority 16 % laggards % of adopters 2% innovators 13,5 % Early adopters 34% Early majority 34% Late majority 16 % laggards % of adopters Time of adoption of innovation Figure 6 Adopter categorisation on the basis of relative time of adoption of inn ovations (Rogers 1995) Economists, for example, suggest that for social innovation to take place, innov ators should first accept innovation and then create institutional framework that would trigg er the the d acceptance of new practices. For the laggards to join in another mechanism esire not to be left out of the group can be used to speed up dissemination of more sustainab le practices. Besides adopter categories, Rogers also identified a range of factors affecting the rate of adoption: Perceived attributes of the innovation Type of innovation-decision Relative advantage Communication channels Compatibility Nature of the social system Trialability Extent of change agents promotion efforts Complexity Observability 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 (Grnroos 1990; Grnroos 1998), (Edvardsson 1997; Edvardsson 2000), (Bateson and Hoffman 1999). The time period between service production and consumption is considerably shorter than for prod ucts. Most of the servic