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Derived Utility

The concept of utility (fitness for use, worthiness, or value) is based on relatable, global economic contributors. Economists have generally portrayed the creators of economic values as providing time (the product is delivered to the consumer at the right time), place (the product is available at the right location), possession (the amount of usefulness or perceived value from owning a product), and form (how well the product meets the customer’s needs) utility to consumers. For a product to possess utility, it should be judged based on its value and/or usefulness. In a classical sense, the utility function incorporates all four utilities as a proxy to consumer demand patterns, actual purchases, and sustainability. According to Scholz et al. (2015), there have been numerous methods applied to estimate the overall utility of a product, but they all appear to have shortcomings with respect to either accuracy or consumer effort. Such discrepancy may indicate a lack of trust between the seller and the buyer. As a remedy, sellers should develop and communicate social and environmental plans with short- and long-term goals that are ethical, sound, and manageable. Such actions can be applied to companies manufacturing various products, therefore increasing their value and utility.

For example, form utility is generally associated with production and manufacturing of products in a way that is of use to and valued by customers (Scholz et al. 2015). Winsor et al. (2004) related this concept to “goods” retailers, who make significant modifications to the products they sell to consumers. With environmental issues in manufacturing receiving increasing attention, many consumers would prefer to uphold global environmental values. According to Dornfeld and Wright (2007), the topic of “green business” has gained popularity with companies and consumers, emphasizing the need for greening of not only the manufacturing process but the whole supply chain. More than a decade earlier, Florida (1996) had considered manufacturing practices and innovative approaches that were environmentally sound as increasing product utility and value. He noted that firms who were innovative in terms of their manufacturing processes were also more likely to address environmental issues across the product life cycle and forge close relationships between end users and suppliers. The onus, he stated, was on companies to adopt green design and production strategies to address consumer demands while improving product utility, value, and quality.

Greater understanding of form utility and its importance to the growing number of green consumers is further discussed by Chahal (2012), who focused on the concept of lean manufacturing as a way of producing high-quality products. This would be done by continually identifying and eliminating waste and by only producing what is needed when it is needed. The relationship between operational practices and performance among early adopters of green supply chain management was examined by Zhu and Sarkis (2004). Recently, many companies in varying industries seem to embrace the value of form utility and are coming up with inventive ways to win over consumers not only with the products themselves but also introducing by biodegradable/ recyclable packaging and containers. Livingstone and Sparks (1994) and others (e.g., Gerschenson et al. 2017; Van den Oever et al. 2017) have reported on various green and/or recycling packaging options that have increased a product’s status as well as utility.

Finally, place utility is another important aspect going hand-in-hand with time utility. This can be defined as having products available where and when they are needed by consumers. Products are usually moved from points of lesser value to points of greater value. We cannot expect consumers to leap to the idea of a sustainable future if the products driving this idea are not readily available to them. As pointed out by Wackernagel et al. (2006), “cities and regions depend on resources and ecological services from distant ecosystems. The well-being of a city and region’s residents is affected by both the health and availability of these ecosystems, especially in today’s ecologically strained world.” A good example would be the situation in Kenya. According to Nzila et al. (2012), biogas production would be the main driver toward ending energy poverty in the rural areas as well as set the pace for a reduction in energy consumption in Kenya’s capital, Nairobi. However, consumers cannot be expected to quickly take to this technology if it is not readily available. This is where we think about how we can provide environmentally friendly technologies, especially in areas that contribute to the vast amount of atmospheric pollution. Biogas is also promoted in other developing countries in Africa, Asia, and South America. However, a sustainable development requires investment in infrastructure and market conditions enabled for easy consumer access to the product by the consumers. Otherwise, the knowledge of an existing solution will not suffice and not serve the purpose.

Product Quality

Product quality in a broad sense is defined as the superiority or excellence of a product (e.g., Reeves and Bednar 1994). There are, however, two major problems with this definition: First, it ignores the fact that a product’s quality can vary greatly, from a range of poor or unacceptable to superior. The second problem is the intrinsic element of subjectivity which is used to determine where the quality of the product lies, within what range, and how it is oriented. In a customer-driven organization (a for-profit company), quality is established with a focus on satisfying or exceeding the requirements, expectations, needs, and preferences of customers.

The meaning of quality also differs depending upon circumstance and perception. According to Owusu (2013), “Quality is how the recipient of the product or service views the product or service before buying, upon delivery and after the delivery/use. Quality is satisfying a customer and it is defined by a customer.” Many would look at a product and immediately connect quality to aspects such as color, material, texture, brand name, packaging, price, labels, or even just the product’s online reviews. Owusu (2013) suggested that the quality of tangible products is also time-based or situational. Macdonald and Sharp (2000) agreed and added that brand awareness for specific products affected consumer choices due to their perceived quality, e.g., “I’ve heard of the brand, so it must be good.” Likewise, Chang and Wildt (1994) stated that perceived quality is positively influenced by intrinsic product attribute information such as perceived price and value. Although some may assume that because a product is expensive, it is automatically of good quality; Sutton and Riesz (1979) cautioned that the price-quality relationship for certain consumer goods is often not positive. According to Sutton and Riesz (1979), it is apparent that the experience of value, or the relationship between quality and price, may be less relevant for product categories in which a consumer’s self-worth may be elevated through the act of purchase. Self-worth in this case would be referring to our focus on purchasing sustainable products. Thorgesen (2000) made it clear that

Knowing a label is a prerequisite for using it in decision making and understanding it

is a prerequisite for using it correctly. Understanding a label implies that the person

knows it exists, what it looks like, and what it means.

To do this, a consumer needs to be able to distinguish between the concepts of eco-labeling, and an unethical corporate practice, termed, “green washing.”

With increased environmental awareness, especially after the 1987 Sustainable Development Goals signed off by the United Nations (Brundtland, 1987), supply chains have recognized the growing value of promoting their products and companies as being green to attract a growing environmentally aware market segment (Furlow 2010). Awareness of the power of marketing green products has also given rise to unscrupulous business practices with some products being falsely labeled or promoted as eco-friendly. This increase in greenwashing is having a profound negative effect on consumer confidence in green products (Delmas and Burbano 2011; Nidumolu et al. 2009; Ramus and Montiel 2005; Lim et al. 2013). Companies in most countries are not legally required to publish their environmental policy statements; however, some do it voluntarily (Ramus and Montiel 2005). Tobler et al. (2011) and Van Loo et al. (2015) acknowledged the fact that consumers are more willing to purchase and consume sustainable products, beginning with eating green. Thogersen (2000) and others (Mackenzie 1991; Eden 1994; Enger and Lavik 1995; Schlegelmilch et al. 1996) have also found that labels and other types of environmental information provided by independent or public sources are trusted more than when provided by the producers and retailers themselves.

In the food industry, for example, product transparency has been of importance to consumers, because it is a direct indication of food quality (Amador and Emond 2010; Bechini et al. 2008). In fact, food transparency has become a legal obligation in many jurisdictions, and companies are strategically investing in transparency in order to promote public confidence in their products and in the quality of their products (Musa et al. 2014). Morris and Bronson (1970) noted that consumers who engage in random, haphazard purchasing of products were likely to lose money, especially on expensive, nondurable goods that create an illusion of quality. Product transparency creates a window for consumers to know' where their products are coming from, who is providing them, how they are transported, and most importantly, what went into their production and manufacture. Transparency is an issue at all levels of the supply chain.

Supply chain product transparency may be defined as “the ability to have a view' of a product’s life cycle in terms of conception, manufacturing, distribution, delivery to the end consumer, consumer’s experience and the products end-of-life activities and processes” (Musa et al. 2014). Basically, this is the quality of tracking and sharing the information about the product based on how each of these activities is carried out and possibly where and by whom. In recent years, there has been a wide range of product recall announcements ranging from food products to nonfood products, many outsourced. According to Lin (2011), this is because the per capita income in developing countries has grown to middle income from poverty level and the countries’ rapid industrialization. Tse and Tan (2012) pointed out that higher percentage of recalls for products manufactured in China is not surprising given the large amounts of exports from China, high consumer demand, complexity of the supply network, and extensive global sourcing. The magnitude of exporting by China increases the likelihood of quality issues with products occurring. If not recalled soon enough, some faulty products may damage health, property, and the environment, resulting in a bad reputation for the end seller, e.g., the manufacturer. Such incidents may create distrust among consumers and raise awareness of the need for ongoing transparency.

However, a win-win solution exists if the supply chains develop innovative and sustainable products and processes. Some good examples of industries/products with sustainable strategies and solutions exist and more are expected to join into this effort. For example, the petroleum industry is in transition to replace petroleum products with more renewable and carbon neutral biofuels, thus avoiding issues such as oil spills that contribute to marine destruction and pollution (c.f., Poulsen and Lema 2017). Likewise, the textile industry, heeding to the calls for sustainable clothing, has introduced the concept of eco-fashion, a sustainable way of textile production that emphasized reuse, recycling, and zero waste practices. However, especially in the fast fashion industry, there seems to be reluctant uptake in purchasing sustainable apparel due to conflicting consumer expectations and behavior (McNeill and Moore 2015).

Product Support Services

To attract more customers, sellers (suppliers, manufacturers, or retailers) often offer products that come with services attached to the product, such as free product warranties, product delivery tracking information, ease of recycling, or travel insurance. These services come in different forms, at different times, and can be provided in various ways, either in-person or remotely. Naturally, these support services affect consumer’s product choices, especially those credence goods, such as sustainable products (c.f., Howells 2004). Product support services may also have cross-effects on the purchasing decision attributes. For example, Bindroo et al. (2020) reported that consumers’ behavioral intentions lean toward choosing product quality over service. A direct managerial implication of this is to realize that quality improvements in the product should be complemented, not substituted, by improvements in service quality. Having nuanced the complexity of cross-effects of purchasing factors for sustainable products, next we consider two other attributes that we categorize as parts of support services to accompany: ease of access to product information and special product end-of-life services such as recycling.

Almost all consumers conduct searches to learn about the product they want to purchase, or to compare with other competing substitutes. The Internet, main enabler for this capacity especially for the products sold online, may offer the searching-consumer (the shopper) more information than traditional outlets such as mail-in catalogs, flyers, newspapers, or word-of-mouth would provide. There is no doubt that the Internet is essential to contemporary buying, and hence, a vital touch point for companies, especially e-tailers and retailers utilizing omnichannel strategies, to sell their products. At the outset, and as expected (Burke, 1997), home shopping has been convenient and profitable, and recently, a necessity during the COVID-19 pandemic lockdown. Consumers’ preference for online shopping inevitably has shifted the supply chain’s dominant power mostly from manufacturers to retailers. This has resulted in new types of logistical challenges and opportunities pertinent to consumer’s time and place utilities.

Companies have been using the Internet to provide detailed information on their products, information that does not fit on a label. Also, in this digital age, company websites help inform, advertise, and signal confidence in their products through transparency. As discussed in Jarvenpaa and Staples (2000), collaborative electronic media is an effective means for information sharing. This is particularly true for the younger populations (generations Y and Z, a.k.a., “digital natives”) who are concerned with natural environment, sustainability, and social justice. Celebi (2015) noted the positive motivations of young individuals toward the Internet as well as their positive attitudes toward advertising and research. Selwyn et al. (2003) also found that older adults (generations preceding GenY, a.k.a., “digital immigrants”) who used information and communication technology in everyday life shared information on sustainable and healthy products. As Young et al. (2017) posited, social media could be used to influence consumption behavior such as in reducing household food waste. Information campaigns and laws by central and local governments have helped change consumer habits and attitudes.

Another important issue that sustainability-aware consumers are vigilant about is how companies handle end-of-life products as a value-adding support service, in enhancing the sustainability of the product throughout its life: Do they have effective sustainability programs that involve consumer engagement? Do they incentivize recycling? Do they have an effective recycling program? Of course, such programs require compliance with governmental regulations. Provision of urban infrastructure such as recycling bins and legal structures like vehicle emission-related taxes and incentives such as renewable energy and technology subsidies are resulting in greater sustainability strategies (Auld et al. 2014).

Return Policy

Consumers may return their purchases for a variety of reasons such as the product being the wrong size or color, malfunctioning, or simply because it does not fit their expectations or tastes. A return policy, which specifies the conditions of the return process (by whom, to where, return period, refund options, returning costs, return time window, etc.), acts as a risk reliever for the customer which may enhance market demand. It is also the main reason why many consumers comfortably purchase products they have never used or sometimes have never even heard of without hesitation. Conversely, if not managed effectively and efficiently, lenient return policies may not only hurt the company’s financial bottom line (Ulkii et al. 2013), they may also cause negative consumer reactions against sellers if returns are denied (Dailey and Ulkii 2018). For the supply chain partners, returns generally relate to the movement of excess stocks from retailers toward upstream channel members (Padmanabhan and Png 1995). The conditions of those commercial returns are generally included in the contracts and warranties in such B2B markets.

As mentioned earlier, products can be returned for many reasons. Besides verifiable reasons such as malfunctioning or wrong color, there may nay be other reasons such product might have turned out to be different than advertised (e.g., erroneous information); the product might have arrived damaged (e.g., improper handling during shipment or poor quality); or the consumer might simply have changed his or her mind after the purchase (c.f., Ulkii and Giirler 2018). At the end of it all, many producers and retailers end up with used/unwanted items that they have to find a way to resell or recycle, or in a worst-case scenario, it becomes waste in landfills. If there were no returns in the first place, it would be safe to say that the introduction of sustainable products would not do as well because no one would be willing to take the risk. Return policies are all-in-all beneficial to the entire supply chain and in the long run, the environment, if the reverse logistics is handled efficiently and sustainably.

Most studies on return policies within the supply chain have investigated the upstream dynamics between the manufacturers (suppliers) and the retailers (buyers). For instance, Yao et al. (2005) claimed that return policies encouraged retailers to order more of a product, especially those with short life cycles such as books, compact discs, and computers. Emmons and Gilberts (1998) examined the effects of a return policy on the manufacturer’s and retailer’s profits and found that a return policy could increase both parties’ profits and eventually those of the supply chain. Similarly, Choi et al. (2004) studied the whole two-stage supply chain and found that a manufacturer could sell returned products online and at even higher prices. For perishable products, Pasternack (1985) showed that full credit/refund returns, or no credit returns for all unsold goods are suboptimal, while partial credit returns can achieve channel coordination.

Only a few studies have investigated the downstream relationship between suppliers and consumers, which is important in terms of consumer returns. In many businesses, consumers have the right to return the products they purchased. With the variety of shopping and buying options in an era of mass-customization, consumers expect to be able to return products as easily as they bought them. As such, a retailer’s return policy would be considered a significant factor in any purchase decision because consumer returns are unlikely to be in new condition, unlike products returned by retailers to manufacturers (Tibben-Lembke 2002), it is imperative for retailers to develop a better system for consumer returns. To that end, for example, Dailey and Ulkii (2018) studied the postpurchase, returning behavior of consumers. Results of their study revealed that positive interactions between the consumer and the service staff while returning the product were paramount. If the product return was denied, the process could have a negative impact for the retailer in the form of a fraudulent return, bad word-of-mouth, and switching the patronship to another competing retailer.

Summary

In summary, there are many underlying factors that are important to attaining a sustainable future. This content analysis addressed decisions made by consumers when purchasing sustainable products as well as consumers’ pre- and postpurchase behaviors. Results of a study by Kim et al. (2014) captured the conundrum faced by consumers. They collected data from 300 consumers who indicate that “they find products more desirable when they perceive that a firm used green management systems, engaged in resource recovery efforts, and behaved in socially responsible ways.” According to Bell (2011), specific types of emotions such as sequential emotions, satisfaction emotions, and negative emotions are involved in the purchasing process. All these emotions can be linked to one’s desire to have a sustainable future. However, choosing a product is complicated when consumers are faced with an increasing number of alternatives and uncertainty about product origins, content, sustainability, environmental impact, and values (see, Bettman et al. 1998, Kaufmann et al. 2012).

 
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