A Conjoint Analysis in High Involvement Purchase Decision

A Conjoint Analysis in High Involvement Purchase Decision There was a time when humans hardly cared for the environment around them, they rather saw the environment as a sphere to simply dominate (Merchant, 1989, p.7-9). Human society as a whole has moved miles away from that view point since then. Now, chances are high that even the regular Joe takes a look at the labels of the products he wants to purchase to make sure they are not harmful to the environment. Customers nowadays not only look for an environmentally safe product but also look into the depths of the production process of the said product as well. Factors such as animal testing, child-labor etc. are strong determinants in many consumer purchase decisions (De Pelsmacker, Driesen, Rayp, 2005, p.363; Unruh Ettenson, 2010a, p.96, 98). It is very common today that a regular coffee drinker makes sure that his/her coffee has UTZ Certified  [1]  logo, Rainforest Alliance Certified  [2]  logo, FairtradeCertified  [3]  logo, and Eco-friendly labels on the coffee pack or the at the restaurant menu prior to purchase (Gurskis, 2009). Continuation of this behavior can be seen when consumers pay extra for their airfare to off-set their carbon footprint, purchase a low-energy motion sensitive bulb for home usage, or purchase organic or ecological food products (GGAS, 2011; Soil Association, 2010, p.4-9). Needless to say, these shifts in customer trends have created quiet big impacts for the businesses and their policies around the globe. The emergence of the green consumer has made it absolutely essential for a business enterprise to obtain somewhat detailed information about its potential and/or existing customers (DSouza, Taghian, Lamb, Peretiatkos, 2006, p.144; Ryan, 2006 p.1). With more and more consumers paying more attention to the environmental features of the products and willing to pay more for such sustainable products, marketing (in the sense of transparent communication) of sustainable products to the potential and existing consumers has become more important than ever. Sustainable or eco-friendly product offerings can accelerate business growths, enable innovations, and build, rebuild, or establish brands (Ottman, 2006). From 2007 to 2009, the launch of eco-friendly products has increased by more than 500% across the globe (Unruh Ettenson, 2010a, p.94). Such an influx did not go unnoticed by the executives. Top businesses around the world now understand that being environmentally responsible can pave the way the to both business growth as well as differentiation (Unruh Ettenson, 2010a, p.96). And sustainability for the business enterprise can be achieved by striking a balance between social, environmental, and commercial goals (Unruh Ettenson, 2010b, p.113). The green trend has made its ground in virtually all product and service categories such as water filters to cleaning products to electronics. Today web hosting service providers such as iPage, fatcow, hostgator etc. have gone green  [4]  . The trend is so strong that even cable service providers are trying to come up with ways to go green (Unruh Ettenson, 2010b, p.114). The Green House Effect or global warming have become household phenomena these days. Either way, a change in global climate could result in severe consequences for planet earths vegetation, lifeforms (including human beings), habitable lands in short, the entire planet would be in danger (Held Soden, 2000, p.441-443). This danger warning was the reason behind the formation of the United Nations Framework Convention for Climate Change and devising a global treaty with the aim of stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system (UNFCCC, 2005, p.5). 1.2 The Emergence of Green Cars According to reports by Federation Belge De lIndustrie De Automobile Et Du Cycle or FEBIAC (2008, cited in De Craecker De Wulf, 2009, p.1), annually about 28 tonnes of CO2 is deposited to the atmosphere of which 37% comes from production of energy and 25% from transportation sector. The report also states that 10% of the annual global Carbon Dioxide or CO2 emissions are caused by private automobiles. So, it is no wonder that the automobile sector is one of the prime concerns for the environmental protection activities. The need for green cars or environmentally friendly vehicles was greater than ever. The automobile industry formally stepped into this Green or environment-friendly product category with Toyotas development and mass-marketing of Prius in 1997 (Lake, 2001). Since then Honda and many other leading automakers have followed suit. The list of auto-makers that already have developed and marketed hybrid (green) automobiles or those who are planning to introduce green automobiles is growing rapidly and even includes sports car giants Porsche (Unruh Ettenson, 2010a, p.98). As we have discussed above, the need for green products is growing day by day. About 75% of the European Union citizens are willing to purchase environment-friendly products (European Commission, 2008). Cars are no exception. This European attitude can be justified by the Belgian example, where, between 2003-2008, the sales of eco-friendly cars (with CO2 emissions of less than 140 g/km) has doubled while sales of more polluting cars (with CO2 emissions of 210-250 g/km) has decreased by 50% (FEBIAC, 2008, cited in De Craecker De Wulf, 2009, p6). About 75% of the European citizens are willing to purchase environment-friendly products (European Commission, 2008, p.27). This growing consumer need is one of the reasons for green cars emergence. The governments and regulatory agencies have also put new regulations to curtail emissions from the automobiles as transportation sector remains a major contributor of environmental pollution. The EU has implemented a policy of reducing CO2 emissions by 20% by the year 2020 (Lindfors Roxland, 2010, p.1). So, the member countries are applying various tactics and regulations to meet this goal. For example, Swedens automobile tax is now calculated based on the amount of carbon emissions by the automobile (Lindfors Roxland, 2010) and therefore creating an indirect push on the sales and development of the greener vehicles. The US government, among others, provides income tax credit of upto $7,500 for purchase of an electric car in or after 2010 (US Department of Energy, 2010). UK, China, and France have government programs that provide incentives to motorists who are buying green cars as well (Vaughan, 2011). Many cities (such as Stockholm, London) are exempting green car owners from pa ying congestion tax, driving tax etc (Lindfors Roxland, 2010). 1.2.1 Automobile Industry Initiative As Unruh and Ettenson (2010b, p.110) points out, a race is on in virtually all business industries to produce green products. The automobile industry is no exception. To illustrate the importance of the emergence of the need for green or eco-friendly cars, Fords Chairman William C Ford said in 2003, The automobile business is about to experience the most profound and revolutionary changes its seen since the Model T first hit the streets. (Cited in Office of Technology Policy, 2003, p. 27). Of course, the Model T was the first ever vehicle to be produced. So, according to the chairman of the largest automobile company in the world, the importance of the eco-friendly innovations for the automobile industry has the same magnitude as the invention of the automobile itself. Association des Constructeurs Europà ©ens dAutomobiles (ACEA) states that sustainability is now the key concern of European automobile industry and in the process manufacturers delivered 50 new CO2 reducing technologies (ACEA, 2009, p.10). The automakers are requesting for a à ¢Ã¢â‚¬Å¡Ã‚ ¬40 billion loan fund to develop new technologies to improve the green cars (ACEA, 2009, p11). ACEA entered into a voluntary agreement with the European Commission in 1998 to cut down emissions. As a result, in 2008, the total CO2 emissions of the new cars have been reduced by 20% compared to that of 1998 (ACEA, 2009, p.15). The most significant aspect of this agreement is that the ACEA initiated this even before and legislative restrictions on emissions were put in place. The willingness of the automakers towards developing eco-friendly cars can be clearly understood by this. Moreover, an ongoing initiative by the leading automobile manufacturers to produce even greener vehicles is gaining steady footing. Using bio-plastics for various engine and other components by Ford, Toyota, and Mazda yields proof to this (Guzman, 2010, p.20). Understanding the consumer preferences is one of the most fundamental activities for the businesses as this understanding leads to understanding the consumers needs, and business firms exist to satisfy the consumer needs (Bettman, Luce, Payne, 1998, p.187; Solomon, 2009, p.35). The automobile industry is no exception and is very keen to understanding consumers preferences and answering the needs associated with the resulting needs and demands. For example, a consumer demand for a hybrid car with the plug-in electric option (a switch on option that enables the car to be driven only on electric power to travel a short distance) opted Toyota to develop the Prius PHEV that is due out in 2012 (Vasilash, 2010, p.28-29). Nissan has moved another step further and introduced the Nissan Leaf an electricity fueled car specifically designed for city traveling (Vaughan, 2011). 1.3 Problem Discussion As this study intends to examine the consumer preference of green cars, it falls under the category of consumer behavior or to be more precise green consumer behavior. So, the authors looked into prior works into the fields of green marketing, green consumer behavior, green consumer profiling, and most importantly studies related to green cars. The field of green marketing is relatively new as it was developed during the late 80s and the early 90s (Polonsky, 1994, p.1). So, the number of studies in this field is relatively fewer than other branches of marketing. The approach of identifying and analyzing environment conscious consumers and formulating appropriate marketing strategies has only started over the last two decades (Moon, Florkowski, Brà ¼ckner, and Schonhof, 2002). In case of green consumer profiling, as both the green products and the green consumers are relatively new in this market, the initial studies were not always very conclusive. In studies conducted in the 90s, people were found to be conscious about environment and preferred the green products in general but did not intend to buy green products by themselves (Simmons Market Research Bureau 1991; Roberts 1996). So, the conclusion from these studies suggests that early consumers obtained the green attitude but not the behavior. However, subsequent studies show that the situation is different now. Laroche, Bergeron, Barbaro-Forleo (2001) conducted a study in North America to develop a profile of the green consumers. This study focused on consumers attitude, knowledge, values, demographics, and behavior and their influence on consumers willingness to pay more for environmentally friendly products or services. While the study finds that about 80% consumers are willing to pay more for gree n products, they would refuse to buy products (even green products) from the companies that are known to be polluters (Laroche et. al., 2010, p.519). Although the study by Laroche et. al. (2001) provides evidence of the transformation of consumer attitudes into behavior and successfully develops a profile of potential green consumers; it does not do so in a specific product or service category. That is, the developed profile may be useful to know the state of the green consumers, but it fails to provide us with information regarding a customer profile for a specific product. So, a need for green product or service (such as green or environment-friendly cars) specific consumer profiling exists in the academic arena. The studies relating consumers to green cars are even scarcer as the development of first successful green car dates back to only 1997 and, therefore, even fewer studies are conducted concerning green cars. However, the authors have encountered a few green or environment-friendly car related studies. These studies were conducted in Sweden, The Netherlands, and Taiwan. The first examined environmental-friendly car specific study was conducted in the Netherlands by Rijnsoever, Farla, Dijst (2009). They investigated the consumer preferences and information channels used for car purchases of about 1500 car owners using cluster analysis. Although green car specific, this study only covered existing car owners and did not investigate potential buyers and their preferences. The study was also more investigative of the information channels used prior to the purchase of the current vehicles. The next examined green car related study is by Lindfors Roxland (2010) that looks into the impact of Swedish governments green car rebate program on green cars sales performance. The results of the study showed that although the green car sales increased due to the rebate program, the program might be costing too much in terms of benefit (Lindfors Roxland, 2010, p.38). This study was conducted from the regulators point of view and examined the impact of incentives, regulations, and restrictions on the sales performance of the green cars and did not investigate the consumers or their preferences in any way. Jansson, Marell and Nordlund (2009) used a cluster analytical approach concerning green purchase and curtailment behavior on Swedish car owners as well. The study was conducted on Swedish car owners. There are two major components that have been identified in this research to measure green consumers attitude and behavior. The tendency of green purchasing behavior is to obtain green products and green technologies, while, on the other hand, curtailment behavior is to chop down the use of conventional products (Jansson, Marell and Nordlund, 2009). Value, Belief and Norm(VBN) theory has been taken into account to profile consumers. However, the researchers merely focused on alternative fuel vehicles (AFVs) and not on other versions of green cars. In addition, the investigation was conducted only on car owners that show the post purchase behavior of car owners. This study did not investigate the potential owners and their preferences. The last examined green car related literature is an International Association for Management of Technologies (IAMOT) conference paper by Li-Hsing, Yi-Chun, Kun-Shiang (2006) presented in Beijing. This paper investigated the consumer preference of potential consumers of green cars in Taiwan. Conjoint analysis was used to identify the preferred attribute sets of the consumers. This study was conducted as green cars were about to enter the Taiwanese market, and although the results identified only 20% of the respondents as potential buyers (Li-Hsing, Yi-Chun, Kun-Shiang, 2006. p.6-8). Although this paper works to develop a consumer profile of green cars in Taiwan, it is incomplete as it could not take into account the post-purchase behavior (as green cars were to be introduced to the market and therefore no existing owners were there) of the consumers. The authors also acknowledge the inability of the study to be representative of Taiwanese market due to online data collection proces s and therefore the lack of reliability of the responses (Li-Hsing et.al., 2006. p.7). From the reviewed studies, we can conclude that a study that represents the potential owners of green automobiles may be of great importance from both business and academic perspective. Now, with the emergence of the Green Cars, consumers have different options in selecting their automobile of choice. So, an understanding of what factors or attributes of a green car can make a consumer tick or turn away can be of great academic interest. And, in light of the prior literature review, the authors believe that a green car specific study focusing on consumer preferences (including both existing car owners and potential car owners) is important to gain further knowledge in the field of green consumer behavior. And to the best of our knowledge, no other previous studies have used conjoint analysis to examine preferences of both potential and existing consumers on green cars rather they used cluster analysis, cross-sectional surveys, or co-variance models. So we believe a study employing Co njoint analysis would enable us to obtain an indirect mapping of the consumer preferences that would be helpful in answering the identified research gap. 1.4 Research Question The research questions that the authors would like to answer through this study is What are the determining attributes of consumers green car choice? How the defined attributes influence the consumer decision concerning green cars? 1.5 Research purpose The authors intend to study the consumer preferences concerning green car purchase. The authors would identify the determining factors in the green (car) purchase decision process. The study would examine both the existing and the potential green car owners to get the measure of the attitude towards the different attributes of green cars. A secondary purpose would be to partially develop a consumer profile of green car consumers. 1.6 Limitations of the Study This study will be conducted in Sweden and therefore only the Swedish definition of Green car will be taken into account. We understand that doing so, a global generalization may be inappropriate and unachievable. We conducted our study based on respondents from Umeà ¥ and Stockholm only. Although we tried to study the Swedish consumers attitude towards green cars, a study based on only two cities may not be entirely representative of entire Sweden. While our study relates to the marketing field of Green Consumer Behavior, we have only focused on the automobile sector. A study incorporating other aspects of green consumer behavior might have yielded a better understanding. This study will examine the consumer preferences related to the specifications available to existing green cars only. The developments in the pipeline are not considered. So, upon the arrival of such developments, a similar study might be conducted. We understand that the green market is evolving fast. This study aims to examine the current green consumers. Further evolution to the green consumer behavior may yield a need to study many different aspects of the consumer preferences apart from the ones we will examine in this study. 1.7 Disposition ** Text will be added here. CHAPTER-TWO (Work is in progress) 2. Theoretical Framework 2.1 Defining Green Car The exact definition of green cars differs from one country to another. However, we may start by stating the conventional perception of green cars. Any car that pollutes less (in reality, emits less CO2 or other pollutants into the atmosphere) may be considered to be environment friendly or green. There are many versions of green cars available in the market. These include, Alternative Fuel Vehicle or AFV, Patrol-Electricity Hybrid, Diesel-Electricity Hybrid, Bio-Fuel vehicle, and Electric vehicles. The AFVs run on non-fossil fuel such as Ethanol (alcohol), while the Hybrids use traditional fossil fuel along with an electric motor for reduced emission and increased efficiency. Bio-fuel vehicles use fuels produced from renewable organic sources such as Bio-diesel. These vehicles produce less emissions than traditional vehicles. Electric vehicles do not use any fuel at all and run on rechargeable battery-powered engines. These vehicles produce zero or no emissions, however, they have fairly short driving range. 2.1.1 Green Car in Swedish Context Both the authors are currently residing in Sweden and therefore would like to conduct this study on Swedish consumers of green cars. So, the specific Swedish definition of green cars would be appropriate here. According to Svensk fà ¶rfattningssamling (SFS 2007, cited by Lindfors Roxland, 2010, p.4), the Swedish definition of Environment-friendly Vehicles or Green Cars depends on the amount of carbon emissions and/or fuel consumption by a vehicle. For AFVs, if their consumption lies below the energy equivalent of 9.2 liters of gasoline/100 km, or 8.4 liters of diesel/100 km or 9.7 m3 of gas/100 km, they would be considered as green cars. Electric cars are considered green if the consumption lies below 37 kWh/100 km. For traditional or fossil-fuel powered vehicles, if their carbon dioxide emissions lie below 120 g/km, they would be considered to be green. Diesel powered cars must also have a particle emission of less than 5 mg/km meaning that they need to have a particle filter fitted to be green. 2.2 Green Consumer Behavior Green consumer behavior may refer to the consumers attitude towards environment friendly products (Roozen De Pelsmacker, 1998, p.23). From this simple definition we can derive that when the consumer attitude towards purchasing (or not) a product is influenced by the green or environment friendly features of the product, we may call that green behavior. Aside from just purchasing, green behavior also includes performing other environmentally responsible activities as well, such as recycling, working in environmental organizations, taking part in environmental-friendly movements etc. (Haanpà ¤Ãƒ ¤, 2007, p.478). In terms of purchasing green, Young, Hwang, McDonalds, Oates (2010) state that consumers purchase green products for everyday use fairly easily but search for information extensively when it comes to high-technology products. They also say that in case of high-technology products, consumers are willing to pay extra and buy green product if it has credible environmental labelling, such as European Commission or EC Energy Label (Young, Hwang, McDonalds, Oates, 2010, p.23). So, having a reliable certification is an important aspect for green consumers. As mentioned earlier, green consumer behavior is not only concerned with purchase of product(s), it also involves not purchasing as well. As Laroche et.al. (2001) point out, majority of the consumers would not purchase products of polluting companins, Young et.al. (2010) find that brand boycotting over environmental concerns has become a regular occurrence as well (De Pelsmacker et.al., 2005, p.364; Young et.al., 2010, p.23). 2.2.1 Determinants of Green Consumer Behavior The determining factors for green consumer purchases tend to be consumers strong green value, prior purchase experience, available time for information search concerning the product(s), knowledge about product relevant environmental issues, availability of the product, and of course, affordability of the said product (Young et.al., 2010, p.29). So, an absence or weakened presence of any of these factors may adversely effect green consumer behavior. This can be justified by the finding of De Pelsmacker et.al. (2005). In that study, the key causes of not performing green stems from unavailability or limited availability of green products, lack of credibility of green label issuer, and lack of accessibility of green product information (De Pelsmacker et.al., 2005, p.383). 2.2.2 Consumer Preference towards Green Consumer preference is the basic groundwork to measure consumer demand and how they act in terms of buying a product. In economic and cognitive psychology traditions, consumer behavior is assumed as rational and consistent. Consumers act consistently on the basis of their preferences and beliefs (Rokka and Uusitalo, 2008,p.517). This is the subjective experience of an individual through which one can measure product attributes from various bundles of goods. As heightened rise of environmental issues consumers are well aware of their environmental product selection. In terms of auto mobility, studies have been found that consumers are highly aware about negative impacts of auto mobility but can not be referred to the changes in car use and purchase behavior. Although attitude and corresponding behavior are interrelated but in practice they find it hard to translate these values of attitude into behavior (Young et. al. 2010, p.20; Rijnsoever et.al. 2009,p.335). 2.3 Consumer Decision-Making Process Consumer behavior is an intermingle of more than one academic disciplines. It blends with psychology, sociology, economics, business and anthropology (Jansson, 2009, p.17). But the relationship of consumer behavior with marketing is inseparable. However, consumer behavior is a vast area of subject that starts with problem recognition and ends up with post-purchase behavior and evaluation (Jansson, 2009, p.17). In order to understand green consumer behavior, we must start from our understanding of the consumer decision making process. This decision making is the outcome of a consumers behavior (be it positive or negative) towards a certain product or service 2.3.1 The Five Stage Consumer Decision making Process In order to understand green consumer behavior completely, we must start from our understanding of the consumer decision making process. This decision making is the outcome of a consumers behavior (be it positive or negative) towards a certain product or service. A consumer goes through five stages during the decision making process. These stages are, Problem Recognition, Information Search, Evaluation of Alternatives, Product Choice or Purchase Decision, and Outcomes or Purchase Evaluation (Solomon, 2009, page 350-352). Figure:01 Stages of Consumer Decision Making Process Image source: Solomon, 2010, p.351 A consumer, recognizing the need searches for information available for satisfying that specific need. The information search may have various sources, such as friends, family, product commercials, internet search etc. Upon receiving sufficient information, the consumer evaluates or compares available alternative products or services that would meet his/her needs. Upon completion of this comparison process, the consumer then decides on which product or service to obtain, and after completing the purchase, the consumer evaluates the purchased product or service against the original need. If there is a gap between the product performance and the need, the consumer starts over these stages by initiating further information search and so on. 1. Need Recognition This is the initial stage in the consumer decision process. A consumer recognizes or realizes his/her need to solve a problem or fulfill a deficiency at this point. The need could be as simple as need for food, or as complex as need for enjoying a movie in a THX certified surround sound system. 2. Information Search Now the consumer begins acquiring information concerning the solution to his/her problem or need. For low-involvement purchases, this stage tends to be short while for the high-involvement purchases information search is almost always extensive (Jobber, 2004, p79). 3. Evaluation of Alternatives Upon collecting sufficient information, the consumer evaluates and compares among the available alternatives that would serve the need. Usually for the higher costing and/or technical products, this step is very extensive as the consumer usually wants the alternative list to be exhaustive (Jobber, 2004, p.79) 4. Purchase Decision This step is the outcome of the alternative evaluation step. Here the consumer chooses the alternative that would satisfy his/her need. The consumers decision of not selecting any alternatives (as none of the available alternatives may be suitable for the need) is also taken in this stage. Upon deciding, the consumer makes the purchase. 5. Purchase Evaluation This perhaps is the most important step for the business enterprise in the consumer decision making process. Here, the consumer evaluates his/her purchase decision and measures his/her satisfaction. If a high degree of satisfaction is attained, likelihood of repeat purchases would be greater, while dissatisfaction would not only eliminate the chance of a repeat purchase but also result in negative marketing of the product/service by the concerned consumer. This is a very basic and simple approach that we as consumers take almost everyday while selecting products to shop. This process implies that a product or service is a solution to a problem and we respond to that problem by researching, deciding, and finally acquiring the product/service that answers the said problem. The above mentioned five stages are not always equally important. For example, the decision process for purchasing hand soap and a TV would be different. While a consumer might rely on prior experience during a hand soap purchase and get it done in minutes without even comparing between alternatives, s/he might spend days in the information search stage and in comparison stage before finally deciding and making a TV purchase. As we mentioned earlier that automobile purchase falls under the high involvement product purchase category, some further understanding is required aside from this simple five stage process. As the green car is not merely the solution to a problem but is an effort to answer the growing consumer awareness of the environment, we need to examine the product decision process in a different and detailed way. 2.3.2 High Involvement Purchase Decision Making: The Cognitive Consumers The decision making process is comparatively complex in terms of high involvement purchase process. Consumers undertake more extensive pre-purchase information search in high involvement purchase (Foxall, Goldsmith, and Brown, 1998, p.28). The central point of this study is environment friendly cars. So, the framework has drawn on high involvement green car purchase decision process. Consumers seek information willingly in terms of extensive problem solving situation (Peter and Olson, 2005, p.188). According to Foxall, et.al. (1998, p.28-29) there are three major steps of high involvement decision making process: stimulus (receiving environmental stimuli- attentional and perceptual filter), organism (interpretation, formation and evaluation), and response (developing, acting, re-evaluating, storing). The S-[O]-R psychology is based on cognitive science. The three steps decision process can be simplified as inputs, central processing and outputs. The process primarily generated from social, business, cultural, political and economic environment (Foxall, et. al. 1998, p.29). Figure: 02 Consumer Choice Process Model Source: Adapted from Foxall, Goldsmith, and Brown, 1998,p.29 According to, Rijnsoever, Farla, and Dijst (2009, p. 335) consumers form an attitude before they get involved into purchasing a new car that lead them towards the probability of possessing a new car. 2.3.3 Multi-Attribute Attitude Model A car is a product that can be seen as a bundle of attributes. So, we need to consider choice behaviors as an automobile purchase involves a choice among two or more options (Ajzen, 2008, p.526). The Multi-At