The role of information on consumer behavior concerning the purchase of pro-environmental investments

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Amsterdam Business School

Executive Programme in Management Studies

Marketing Track

The role of information on consumer behavior concerning

the purchase of pro-environmental investments.

Jolijn Anderiesse 10317163

31-08-2014 Final version

Supervisor: Dr. Vincent de Graaff Second reader: Dr. Karin Venetis

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Abstract

Current use of resources forms a threat to the sustainability of the environment. Many governments and companies have come into action to be more environmentally aware. However, consumers themselves play a role in this as well. Research shows that while consumers are aware of the problems, not everybody is acting accordingly. Therefore, an exploratory research is performed, with as goal to find out why consumers do not take more action to live in a more sustainable way. The main research question is: “How do we get consumers to act in a more sustainable way?“.

The main presumption is that information plays an important role in activating consumers: information can motivate consumers to act, but can also prevent them to act.

The goal of this study is to get people into action by informing them about certain product characteristics, this in the form of three scenarios focusing on economic, innovative or comfort improving benefits. A control scenario is added with no specific focus. After the scenarios, respondents are asked for their purchase intention. The corresponding hypotheses state that “Informing consumers about the economic benefits of an energy saving product leads to a higher purchase intention than when no such information is provided”, the same hypotheses are made for “innovative features” and “comfort improving benefits”. Results show that none of the hypotheses can be supported, provided information did not lead to differences in purchase intention.

A second presumption is that not all consumers have the financial ability to invest in efficiency improvements. Additionally, research shows that consumers do not always use a long term vision when assessing whether or not to invest, and put short term interest before long term (energy) savings. Therefore, the question “What role does financing play, concerning the purchase of efficiency improvements?” is also investigated in this research. A fourth hypothesis, “Offering consumers a smart, non-expensive payment solution leads to a higher purchase intention”, is tested by measuring purchase intention before and after offering a smart payment solution. Results show that purchase intention measured before offering any payment solution is higher than the intention measured after offering any solution. However, results also show that consumers have more interest in a smart payment solution than a regular payment solution. An important limitation of this study is a relatively old and highly educated sample group. Future research should invest if offering a payment solution leads to bigger differences when the low income group is normally represented.

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1 Introduction

So the question is not whether we need to act. The overwhelming judgment of science -- of chemistry and physics and millions of measurements -- has put all that to rest. . . . So the question now is whether we will have the courage to act before it’s too late. And how we answer will have a profound impact on the world that we leave behind not just to you, but to your children and to your grandchildren. (Obama, 2013, “Remarks by the President”, para. 15-16)

Global warming, air pollution, water pollution and growing amounts of waste are some of the problems that threat the sustainability of our environment (Abrahamse, Steg, Vlek, Rothengatter, 2005; Guagnano, Stern & Dietz, 1995; Steg & Vlek, 2008; Unilever, 2012). Many governments and companies have come into action to put a stop to these problems, and to improve the conservation of our planet. One of the most important elements herein is the cooperation of humans themselves (Hertwich, 2005; Klöckner, 2013; Mortensen, 2006). Or as Obama (2013) says, to get people “to act before it’s too late”.

But how do we get consumers to act? Most consumers do not even now how and how much energy they use, let alone that they know how to change this. If they are even willing to change. Doane (2005) provided an interesting review on Corporate Social Responsibility (CSR) by naming basic myths that exist in the field of social responsibility. One of the myths is that “consumers will drive change”. She noted that consumers are actually very passive, and while they say they care, they do not take sustainability into account while purchasing products. Ottman, Stafford and Hartman (2006) went a step further and stated that consumers first look at the benefits green products provide for them, and if there are none (or less compared to a regular product), there is no sale. But is this true? Why do consumers do or do not perform pro-environmental behavior? Many scholars asked for further research in this field (e.g. Abrahamse & Steg, 2013; Bolderdijk, Gorsira, Keizer & Steg, 2013; Roy & Pal, 2009).

In 2012, Dutch households were responsible for 20% of all the energy used in the Netherlands (Centraal Bureau voor de Statistiek [CBS], 2013). This demand is growing, with 2% in 2012 and overall increase of 6% since 2000. In the European Union (EU), this amount is even higher: 30% of the total energy consumption (Halme et al., 2005). Consumer choices in everyday activities

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7 like doing the laundry, taking a shower and preparing food have impact on energy use (He & Greenberg, 2009; Roy & Pal, 2009; Unilever, 2013). In fact, global environmental problems can clearly be linked to consumer behavior in the field of domestic energy consumption (e.g. Abrahamse & Steg, 2013; Brandon & Lewis, 1999; Hertwich, 2005; Noorman & Schoot Uiterkamp, as cited in Poortinga, Steg & Vlek, 2004). However, due to lack of knowledge, consumers may not always be able to act environmentally aware (Mohr, Webb & Harris, 2001; Gatersleben, Steg & Vlek, 2002). Fischer (2008) stated that electricity is seen by consumers as an “unspectacular everyday product”, and Brandon and Lewis (1999) mentioned an “invisible resource”, something that is necessary and that should be available at all times. Furthermore, many consumers feel that their footprint is small compared to these worldwide problems (Blake, 1999; Unilever, 2012). However, while one individual might not add much, all households together form an important target group (Abrahamse et al., 2005; Abrahamse & Steg, 2009; Hertwich, 2005).

Dutch consumers have a relatively high awareness when it comes to environmental concern (Franzen, 2003). A study by the EC showed that 96% of Europeans finds protecting the environment important and 86% recognizes that they have to play a role in this as well. The study also showed that high awareness does not always lead to action: while 76% of Dutch consumers sais they are ready to buy environmental friendly products, only 18% has done so (European Commission, 2008). The goal of this research is to find out why consumers do not take more action to live in a more sustainable way. Research showed that consumers are aware of the current environmental problems and they are aware of their own role in this (e.g. European Commission, 2008; Franzen, 2003), but there are also factors withholding them from taking charge (e.g. Blake, 1999; Mohr et al., 2001; Gatersleben et al., 2002). This leads to the following research question: How do we get consumers to act in a more sustainable way?

To gain a better understanding about the factors influencing consumer behavior in this field, this research focused on answering the following sub questions:

- What role does information play on consumers, concerning the investment in

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8 - Which information can be used to trigger consumers, in terms of purchasing efficiency

improvements?

- What role does financing play, concerning the purchase of efficiency improvements? To find an answer to the research questions, an exploratory study was held. In this study, the role of information and finances was examined, concerning the purchase of efficiency improvements. This based on – among others – research by the EC which mentioned two factors that can possibly explain the gap between intention to act environmentally aware and actual behavior: financial considerations and the provided information (European Commission, 2008). These factors will further be explored in the second chapter, and together with other relevant literature, will be reviewed and analyzed. This leads to the development of the hypotheses, which will also be explained in chapter 2. In chapter 3, research methods will be discussed, including an explanation on the research design, survey design and used sample. Chapter 4 provides a link between the literature and the used variables. Chapter 5 contains the analyses of the research data, followed by a summary of the results in chapter 6. This leads to the last chapter where the results are discussed and conclusions are drawn.

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2 Literature Review

In 2007, IBM mentioned three trends in the energy industry: rising concerns about climate change, technological developments and an increasing consumer awareness (Valocchi, Schurr, Juliano, & Nelson, 2007). In 2009, Roy and Pal (2009) produced an article on the link between climate change and necessary lifestyle changes. Meanwhile, the EU and the Dutch government provide several types of grants to stimulate sustainable behavior under companies and consumers (Janssen, 2004). And although this helps the environment on some fronts (e.g. Dutch CO2 emission decreased from 198 billion kg in 2010 to 185 billion kg in 2012 (CBS, PBL, Wageningen UR, 2013)), household energy use is still rising (CBS, 2013). There is no doubt about the role of consumers in this story. Everyday activities, from using a car to go to work to doing groceries, have an impact on the environment. Although Dutch consumers have a relatively high awareness on environmental changes (Franzen, 2003) and say they find it important (96% of Dutch population; Europaen Commision, 2008), not everybody is acting on this.

This research tries to find an answer to the question “How do we get consumers to act in a more sustainable way?”. To gain a better understanding about the factors influencing consumer behavior in this field, a literature study was held. In the first paragraph, a definition of pro-environmental behavior is given. The second paragraph discusses two sorts of energy savings: curtailment and efficiency improvements and specifies the focus of this study. The third paragraph provides an examination on factors that can motivate or may prevent consumers to act pro-environmental. The fourth and fifth paragraph further elaborate on these factors, providing more insight on information, awareness and contextual factors involved. In the last paragraph, the research framework is presented.

2.1 Pro-environmental Behavior

To be able to define how sustainable behavior can be encouraged among consumers, it is found important to know what pro-environmental behavior is. Current literature shows that scholars use several definitions to describe a socially responsible consumer (Kollmuss & Agyeman, 2002; Mohr et al., 2001; Steg, Perlaviciute, Van der Werff & Lurvink, 2012; Steg & Vlek, 2008; Webster, 1975). Mohr et al. (2001) used the term socially responsible consumer behavior and

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10 mentioned minimizing harmful and maximizing beneficial effects. Kollmuss and Agyeman (2002) and Steg and Vlek (2008) named (pro-) environmental behavior and how this affects the environment, while Webster (1975) mentioned social change. Based on these articles, the following definition is provided: “A socially responsible consumer is a consumer who consciously tries to minimize any negative impact his/her behavior might have on the environment, while maximizing the beneficial effects of his/her behavior.” In other words, a 100% socially responsible consumer is a person who can create social change, tries to use the least amount of resources (water, energy), shops at companies active in CSR and tries to reduce waste. When consumers show pro-environmental behavior, they are trying to be socially responsive. Encouraging this behavior is important, as consumers do not only account for direct energy use (20% of all energy in The Netherlands, 30% in the EU (CBS, 2013; Halme, 2005)), they indirectly influence many other energy needing processes as well.

2.2 Efficiency vs. Curtailment

There are several ways for a consumer to act environmentally aware. Saving energy by reducing shower time, recycling waste, purchasing home insulation and traveling by public transport instead of by car are just a few examples. Several scholars divide this pro-environmental behavior in two categories: efficiency improvements and curtailment (Abrahamse et al., 2005; Black, Stern & Elworth, 1985; Nair, Gustavsson & Mahapatra, 2010; Steg, Dreijerink & Abrahamse, 2005; Sütterlin, Brunner & Siegrist, 2011; Tiefenbeck, Staake, Roth & Sachs, 2013). Energy efficiency improvements “substitute capital for energy” (Black et al., 1985). A definition is provided by Gardner and Stern (as cited in Abrahamse et al., 2005): one action, for example the purchase of an energy efficient appliance, with a long- term effect on household energy use, without requiring a change in everyday energy use. This often means better technology (an AA++ fridge) and/or structural changes like insulation, which are more costly (Tiefenbeck et al., 2013). Curtailment, on the other hand, involves repeated individual behavioral change, aimed to reduce energy use, without investing in these changes (Tiefenbeck et al., 2013; Gardner & Stern, as cited in Abrahamse et al., 2005). For example lowering the thermostat, showering more shortly or carpooling (Black et al., 1985; Sütterlin et al., 2011). Curtailment involves new habits and a change in everyday life (Sütterlin et al., 2011).

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11 Both categories have been studied, but the amount of research on efficiency is quite small (Abrahamse et al., 2005; Tiefenbeck et al., 2013). This is striking, since according to Gardner and Stern (as cited in Abrahamse et al., 2005) the amount of energy saved by efficiency improvements is greater than the energy saved by changing daily routine. This is confirmed in a study by Bolderdijk et al. (2013a), and by a review of Gatersleben (2001). Studies on curtailment have also mentioned a kind of backfire effect. In a study on shower behavior by Tiefenbeck et al. (2013), water use decreased but energy use increased. And other scholars (Abrahamse et al., 2005; Schultz et al., as cited in Abrahamse & Steg, 2013) mentioned that frequent feedback on energy use can even lead to more energy use, with low energy consumers who were acting according or under the norm. Curtailment activities ask for a change in everyday behavior, which can be a cost (in the field of self-interest) that consumers are not willing to pay (Poortinga, Steg, Vlek & Wiersma, 2003; Steg et al., 2012). According to Poortinga et al. (2003), efficiency improvements (technical measures) were therefore more easily accepted. They do necessitate a bigger investment up front, but save more costs on the long run.

To conclude, improving efficiency is easier to perform (one time investment) and provides bigger savings compared to curtailment activities. However, despite the fact that efficiency is easier and provides more benefits, both financially as for the environment, consumers tend not to choose for this option. In a Swedish study by Nair et al. (2010), data from homeowners was analyzed to determine which factors influence the implementation of energy efficiency improvements. They found that curtailment activities were more popular than investment activities. They also found that several contextual and personal factors had an influence on the choices consumers made. The authors proposed that lack of information about costs, possible improvements and effort can prevent consumers from investing in energy efficiency. Vice versa, clear information about costs and payback time may encourage consumers to invest. This is also mentioned in another study by Ak and Söderholm (2010), which confirmed costs, but also named environmental concern and social interactions as factors that determine consumer choices in this field.

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2.3 Motivating a Consumer

In the previous paragraph, several factors that may motivate consumers were already named. For example involved costs, social interactions, effort, the amount of awareness and will to act in a pro-environmental way could play a role. Klöckner (2013) and Steg & Vlek (2008) confirmed that to change consumer behavior, it is important to understand what drives them. Ma, Andrews-Speed & Zhang (2011) and Yan and Lifang (2011) found that consumers are willing to save energy, as long as this does not threat comfort and convenience. They mentioned inconvenience and trouble as main barriers for pro-environmental behavior, and proposed that information and economic benefits can motivate consumers to act responsible. Consumers may fear that choosing sustainable may mean to accept less value (Poortinga et al. 2004), convenience and quality, and/or a higher price (Mohr et al., 2001), so compromising their self-interest. Black et al. (1985) addressed this by stating that most consumers make a costs-benefits analysis when considering sustainable investments. They further state that personal and social norms have no impact. Bolderdijk, Steg, Geller, Lehman and Postmes (2013) counter this by stating that self-interest can become less relevant when self-enhancement can be improved. According to Mohr et al. (2001), some consumers believe that more money means a better life. These consumers are less likely to practice environmentally aware than consumer who value more in life than just money. Bolderdijk et al. (2013b) again counter: economics can also be a reason to invest, when pro-environmental actions provide a clear economic benefit. Making people aware of this benefit is important. Sütterlin et al. (2011) state that not only the economic benefits are important: to stimulate green behavior, consumers must be aware that energy saving does not mean a lesser quality of life. Control over energy (Gyberg & Palm, 2009) and preservation of current lifestyles (Lindén, Carlsson-Kanyama & Eriksson, 2006) are important factors herein.

In their review, Kollmuss and Agyeman (2002) mentioned that the role of economic factors in pro-environmental behavior are poorly understood. Consumers do not always act economically rational, and have a tendency to think in short terms. They choose to invest in energy efficiency, but only when the payback time is short. Bang, Ellinger, Hadjimarcou and Traichal (2000) mentioned that some studies find that consumers are willing to pay more for renewable energy, but their own study questions this. Their results showed that although consumers are highly concerned about the environment, they are only moderately willing to pay more, and even low

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13 on knowledge about the issue. Blake (1999) addressed the gap between environmental concern and pro-environmental behavior with a model. In this model, three barriers are presented: individuality, responsibility and practicality. Where the first two barriers involve interest and efficacy, the third barrier addresses obstacles in time, information, ability and money, also known as contextual factors.

Even though many scholars have invested the subject, none of the several studies provides a clear answer to the question why consumers do or do not perform pro-environmental behavior. And some studies even seem contradicting. The overall message is that information on the benefits that pro-environmental behavior offers is essential, and it seems that finances and quality of life are important factors herein. In the following paragraph the role of information will be further elaborated and the contextual factors involved will be explained.

2.4 Information and Awareness

Lack of knowledge and difficulty collecting relevant knowledge can be a factor that prevents pro-environmental behavior by consumers (Mohr et al., 2001; Nair et al. 2010; Ottman et al. 2006). Bang et al. (2000) stated that many consumers are only affectively aware, and that cognitive knowledge is relatively low. Making benefits more clear (Devinney, Auger, Eckhardt & Birtchnell, 2006; Andreasen, as cited in Mohr et al., 2001) and raising level of awareness by campaigns (Abrahamse et al., 2005; Devinney et al., 2006) are suggestions by scholars to solve this knowledge gap. Abrahamse et al. (2005) stated that information might raise the amount of knowledge consumers have, but it does not directly mean that they will change their behavior. In their study, Bolderdijk et al. (2013a) researched if information interventions had an influence on environmental behavior. Their study showed that consumer intention to act pro-environmental did not change much, whether they were confronted with the impact of their behavior, or not. Only consumers who already cared were more motivated to act on their values. Although scholars tend to agree that knowledge is important, opinions differ about the effect of this knowledge. According to Devinney et al. (2006) and Mohr et al. (2001), the first step in changing consumer choices is making consumers (more) aware. However, Cope and Winward (as cited in Thøgersen, 2005) mentioned that even when consumers are aware, there might be factors that prevent them from taking action. They might not know the exact problem, might not

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14 know what they can do about it and/or who is responsible to act on it. Informing consumers can change this.

By analyzing results of an international survey in which environmental concern was measured, Franzen (2003) indicated that Dutch consumers have a relatively high awareness in this field. On the other hand, research by the EC showed that while 76% of Dutch consumers say they are ready to buy environmental friendly products, only 18% has done so (European Commission, 2008). Awareness and action does not always seem to match. Yet Mohr et al. (2001) argued that information can make consumers more able to practice responsible buying behavior. And in their review of intervention studies, Abrahamse et al. (2005) noted that there are several studies in which antecedents are used as interventions which influence consumer knowledge, which in turn influence behavior. One of these antecedents – information – made consumer more knowledgeable about saving energy. In a later study by the authors, they found that a combination of custom-fit information, goal setting and custom-fit feedback were “especially successful” in reducing household energy use (Abrahamse, Steg, Vlek & Rothengatter, 2007). Mohr et al. (2001) proposed that the relationship between what a consumer believes and how he behaves will be stronger when consumers have more knowledge about the related issues, and the more important they find these issues. However, Sweeney, Kresling, Webb, Soutar & Mazzarol (2013) suggested that increases in attitude, awareness and knowledge concerning energy savings, do not automatically mean a change in behavior.

According to Morrissey, Meyrick, Sivaraman, Horne and Berry (2012), it all comes down to a trade-off. Short-term interests are weighed against an investment providing a long-term benefit. Next to a trade-off, Murphy (2013) mentioned that the other benefits of (in this case) home insulation are not always clear. Communicating benefits like improved home comfort and health, reduced dependency on energy and environmental benefits could also convince consumers to invest. Ottman et al. (2006) suggested that every successful green object should have two objectives: environmental friendly qualities mixed with customer benefits. Poortinga et al. (2003) stated that in some cases, saving energy was not the most important factor. Consumers do take other factors into account when deciding whether to act pro-environmental or not. They indicated that further research is necessary to assess which factors are important. In a study by Steg et al. (2012) on curtailment behavior, customer benefits are defined in hedonic values (good

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15 feelings, less effort) and egoistic values (money and control). They stated that both values are important when addressing consumers to act pro-environmental. This is confirmed by Jakob (2006), who proposed that providing clear information about all the benefits efficiency improvements will provide, is an important incentive in stimulating consumers to act pro-environmental.

Other scholars also argued that information on benefits, other than environmental benefits, is important when stimulating pro-environmental behavior (Ek & Söderhom, 2010; Gyberg & Palm, 2009; Lindén et al., 2006; Roy & Pal, 2009). Following this, the overall assumption is that informing consumers about the non-financial benefits of efficiency improvements leads to a higher purchase intention than when no such information is provided.

2.5 Contextual Factors

While most studies focus on consumer knowledge and awareness, less attention is given to the contextual factors. Many scholars find this remarkable, and demand further research on the role of contextual factors on environmental behavior, and how they may influence consumer abilities (Abrahamse et al., 2005; Black et al., 1985; Poortinga et al., 2004; Steg & Vlek, 2008; Stern, 2000b; Sütterlin et al., 2011; Yan & Lifang, 2011). Contextual factors include economic factors (pricing, savings) (Abrahamse et al., 2005; Black et al., 1985; Steg & Vlek, 2008; Stern, 2000a, 2000b; Yan & Lifang, 2011), social norms (Stern, 2000a, 2000b; Sütterlin et al., 2011; Yan & Lifang, 2011), ability (available resources, opportunities) (Poortinga et al., 2004; Steg & Vlek, 2008; Stern, 2000a, 2000b; Yan & Lifang, 2011) and regulations (Black et al., 1985; Stern, 2000a, 2000b; Sütterlin et al., 2011).

Contextual factors could prevent consumers from performing pro-environmentally behavior (Black et al., 1985; Guagnano et al., 1995; Poortinga et al. 2003; Stern, 2000a). Economic factors, for example, could determine if a consumer is able to invest in home improvement in terms of energy savings (Gatersleben and Vlek, as cited in Gatersleben, 2001; Poortinga et al., 2003; Stern, 2000a). And in the field of ability, households rather adopt behavior that is easy to change, than behavior associated with high costs (Abrahamse et al., 2007). Downside of this finding is that consumers tend to fall back into old routines. Contextual factors can also stimulate consumers to invest: financial incentives have proven to work in several occasions (Bird &

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16 Hernández, 2012; Geller, Harrington, Rosenfeld, Tanishima & Unander, 2006; Murphy, 2013; Zhao, Bell, Horner, Sulik & Zhang, 2012). And rules and regulations made several companies work in a more environmentally friendly way. Not to mention the impact of social norms and, consequently, corporate social responsibility.

Poortinga et al. (2003) mentioned that future research is necessary to discover which factors prevent consumers from investing in energy saving. Stern (2000a) also discussed this, and proposed that contextual factors could predict why consumers would or would not invest in energy saving measures, especially when these measures are expensive. In a study by Poortinga et al. (2003), the authors proposed that investing in efficiency improvements is harder to do for households with a lower income. These measures require an upfront investment, and while they pay themselves back in energy savings over time, the investment itself is too big of a burden. Information is important in advancing consumer knowledge and capabilities (Stern, 2000a) and can help consumers assess potential savings (Murphy, 2013). According to Poortinga et al. (2003), future research should determine if the fact that someone can afford the energy-saving investment determines if they invest. Hereby it is essential to prevent consumers from only thinking short term, so as to prevent them not seeing the possible profitability (Jakob, 2006). Black et al. (1985) found that not only the amount of money involved, but also the risk of making the wrong choices plays a role. When these risks can be taken away, and the monetary (and other) benefits become clearer, pro-environmental behavior will become more attractive (Abrahamse et al., 2005).

Many scholars use Ajzen’s theory of planned behavior to explain consumer choices (e.g. Armitrage & Christian, 2003; De Groot & Steg, 2007; Harland, Staats & Wilke, 1999). This theory states that behavioral intentions are indicators of how much effort someone is willing to give, how hard a consumer is willing to try. Ajzen (1991) stated that “the stronger the intention to engage in a behavior, the more likely should be its performance”. There are three determinants of a consumer’s intention: attitudes towards the behavior, subjective norms and perceived behavioral control. Perceived behavioral control is mentioned as the only factor that can influence the intention, but also directly influence behavior itself (Ajzen, 1991; Armitrage & Christian, 2003). Ajzen further stated that actual behavioral control is obviously determinative in whether or not a certain behavior takes places. Without the resources or the opportunities, it is

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17 impossible to perform certain behavior. However, when these resources and/or opportunities are there, but a consumer does not perceive them that way, the behavior is not performed without having a valid reason for it. Conferring Gardner and Stern (as cited in Poortinga et al., 2003), efficiency improvements, e.g. investing in insulation or solar panels, are easier to perform than curtailment measures, as they do not demand continuous effort. It is expected that informing consumers about the ease and possibilities of efficiency investments will lead to a higher perceived behavioral control. Murphy (2013) proposed that financial mechanisms which offer smart, non-expensive payment solutions, can also increase the actual behavior of investing in energy saving. They provided two examples: KfW loans in Germany, and an interesting solution in the UK where loans are attached to properties instead of people, and can be paid with the amount of energy saved. This could lower the barrier to invest for many consumers, and could even make it possible for households with a low income to invest. Current financial incentives, such as funding and tax credits, were successful in improving energy efficiency in the United States (Bird & Hernánde, 2012; Geller et al. 2006) and are available in The Netherlands as well. Zhao et al. (2012) however remarked that these incentives can be insufficient for consumers considering more expensive efficiency improvements, especially for people with a lower income.

2.6 Research Framework

In the introduction of this thesis the research question, including three sub questions, was presented: How do we get consumers to act in a more sustainable way? In order to answer this question, the previously described literature research was held. In this paragraph, a short recap of this research is provided and a link is made to the sub research questions, the hypotheses and the research framework.

2.6.1 Sub Research Questions and Hypotheses

What role does information play on consumers, concerning the investment in pro-environmental efficiency improvements?

The general opinion of scholars is that information plays an important role in activating consumers. Research on curtailment shows that feedback and social comparison can motivate consumers to change. For efficiency improvements, is seems that information on the economic benefits but also information on the effort needed and the convenience involved play a role.

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18 Information can motivate consumers to act, but it can also prevent them to act: for example when information is unclear, or when consumers feel that the suggested solution takes too much effort. In this research the role of information was further explored, in order to provide an answer to this question.

Which information can be used to trigger consumers, in terms of purchasing efficiency improvements?

The two factors found most interesting to research are economics and convenience. It seems consumers do want to invest, but are afraid of the effort it might take and want to keep their current lifestyle intact. Next to that, investing in efficiency can be costly, and the long payback time might lose is from short term interest. A third factor that was found interesting to invest partly arose while consulting specialists, namely innovation. This process is further discussed in chapter 3, and a further explanation on the forming of the three factors is giving in paragraph 4.3. This research will test if the suggested sorts of information will actually trigger consumers to invest, this leads to the following hypotheses:

- H1: Informing consumers about the economic benefits of an energy saving product leads

to a higher purchase intention than when no such information is provided.

- H2: Informing consumers about the comfort improving benefits of an energy saving

product leads to a higher purchase intention than when no such information is provided.

- H3: Informing consumers about the innovative features of an energy saving product

leads to a higher purchase intention than when no such information is provided. What role does financing play, concerning the purchase of efficiency improvements?

It seems logical that not all consumers have the financial ability to invest in efficiency improvements. Yue, Long & Chen (2013) found that differences in income, and therefore variances in payment capacity, had an influence on actual energy efficiency behavior. And as said before, when consumers do have the ability, they do not always use a long term vision when assessing whether or not to invest. Therefore, the role of financing will be invested in two ways in this study. First, information about financing will be provided, to see if this triggers consumers to invest (hypothesis 1). Second, a smart payment solution, as suggested by Murphy (2013) will

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19 be tested. This process is further explained in paragraph 4.6, and leads to the following hypothesis:

- H4: Offering consumers a smart, non-expensive payment solution leads to a higher

purchase intention than when no such solution is provided.

2.6.2 Research Framework

Figure 2.1 shows the visualization of the hypotheses 1, 2 and 3 in a conceptual model. In this study, hypotheses 1, 2 and 3 are tested in the form of a scenario. Scenario 0 represents a control scenario.

Figure 2.1: Visualization of research concerning hypotheses 1, 2 and 3

Hypothesis 4 is tested separately: a payment solution is offered to all respondents, regardless of the scenario they received. Purchase intention of all respondents before offering a payment solution is compared to the purchase intention of all respondents after offering a payment solution, as shown in figure 2.2.

Figure 2.2: Visualization of research concerning hypothesis 4

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Figure 2.3: Visualization of complete research model

The research model showed above is further developed to a full research plan in chapter 3, which presents the methods used and the steps taken to come to this plan. In chapter 4, the different variables used for this research are explained, including a link to the reviewed literature.

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3 Method

The question that triggered this research is: How can we get consumers to act more environmentally aware? As this is a very broad question, a literature research was performed to identify what is already known in this field, and which questions still remained unanswered. This led to a purpose for this study: to identify the role that information plays on consumers, concerning the purchase of energy efficiency improvements. In the first paragraph of this chapter, this purpose is transformed into a research design. The second paragraph goes deeper into the survey design, followed by the third paragraph which focusses on the pretest. This is followed by an outline of the sample in the fourth paragraph and more details on the procedure in the fifth paragraph. The last paragraph provides a short summary of this chapter.

3.1 Research Design

With the previously mentioned purpose in mind, contact was made with Alliander, a Dutch energy network operator who is also active in the field of conserving energy and creating a sustainable environment. As they were interested in this study, a cooperation was formed. In a first meeting, the overall research idea was presented and discussed: using different “sets” of information and testing if these sets lead to different responses from consumers. This meeting was held with mrs. Mollink-Cunningham, Projectmanager Energy Conservation, Alliander and mr. Tekelenburg, Coordinator Community Involvement and Research, LochemEnergie (personal communication, 20-03-2014). For more information on the consulted specialist refer to appendix 1.

Using literature, several scenarios were drafted and in a second meeting discussed and tested with mr. Kerkhoven, Commercial Director, Green-A-Tec (personal communication, 01-04-2014). This lead to the development of four scenarios, of which one control scenario, which could be used as the “sets of information” used to test if consumers reacted differently on different kinds of information.

Following these meetings, a questionnaire was developed which could test several ideas as found in the literature study and as discussed and suggested by before mentioned specialists in the field. This questionnaire was again discussed with mrs. Mollink-Cunningham and mr. Tekelenburg

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22 (personal communication, 21-04-2014), with mr. van Maanen, Project Manager, Green-A-Tec (personal communication, April 2014) and with mr. Koning, Marketeer B2C, Alliander (personal communication, April 2014) before was tested in a pretest, as described in paragraph 3.5. An overview of this process is shown in figure 3.1.

Figure 3.1: Steps in research design

This process resulted in the development of a deductive, exploratory study (Lewis & Saunders, 2012). As mentioned before, a research design was chosen in which several sorts of information were offered to consumers. This as an experiment, testing if offering information A leads to a higher purchase intention than offering information B. To be able to test this on a large sample, a quantitative approach was chosen. This following Creswell (2003), who advised to use a quantitative approach when testing (intervening) factors that can influence an outcome. In this research, a multi-method approach (Saunders, Lewis & Thornhill, 2009) was used, combining two research strategies: experiment and survey, in a cross-sectional study.

To receive a sample size big enough to test four scenarios, Alliander offered to carry out the study in one of her testing grounds. The assigned testing ground consisted of a cooperation: LochemEnergie, with 470 members interested in energy saving methods and sustainable living. As this sample may not have been big enough to achieve a sufficient response, the decision was

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23 made to expand the sample using the authors personal network. For more details on the total sample refer to paragraph 3.4.

3.2 Survey Design

The survey started with neutral, non-product related questions, aiming to receive information about the living situation of respondents, more specifically in the field of energy conservation. Second, respondents were tested on values concerning sustainability and innovation drive. This first part was followed by the four scenarios, set up as a between-subject design by randomly assigning respondents to one of the scenarios. This was automatically done by using a functionality in online survey software Qualtrics, which made it possible to randomly assign respondents. After the scenarios all respondents were questioned about the product: first on how they perceived the product, second on their purchase intention. This was followed by a test if a payment solution could lower the barriers to invest. This test was set up as an within-subject design. At last, respondents were asked some questions measuring demographic factors. This and the other variables are further discussed in chapter 4. An overview of the survey is shown in figure 3.2. For an overview of the total survey, refer to appendix 2. The survey started with a short introduction, and ended by indicating the end and thanking respondents for participating.

Figure 3.2: Visualization of the survey design

Fundamentally, all scenarios are the same. Three scenarios were designed differently so that they focus on economic, comfort improving or innovative benefits associated with the product. The control scenario did not focus on a specific benefit. This part of the survey was conducted as an in between subject design. This set up was chosen as it is a simple yet efficient way to test if different kinds of information have an influence on consumer buying behavior: differences in the responses can be attributed to the differences in between the scenarios (Visser, Krosnick & Lavrakas, 2000; Bordens & Abbott, 2002). The questionnaire and the fundament of the scenarios was equal for all respondents, this following Bordens & Abbott (2002), who stated that error

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24 variance is reduced when treating subjects within a group as similarly as possible. They further stated that error variance is further reduced when subjects are randomly assigned to the different treatment conditions, in this case the scenarios.

3.3 Pretest

A pretest was held to identify questions that were difficult to understand, to find questions with interpretation problems and/or other problems that might occur in a questionnaire (Krosnick, 1999). The goal of the pretest was to determine possible flaws in the questionnaire and subsequently correct these flaws. This to avoid errors and to improve content validity (Creswell, 2003).

3.3.1 Testing Scenarios and Questionnaire

Before running the pretest, the scenarios were discussed with two specialists from Alliander and LochemEnergie, mr. Tekelenburg and mr. Maanen (personal communication, April 2014) and three neutral friends. It was suggested to use pictures to accompany the written scenarios. The choice was made not to do this: adding a different pictures to each scenario could mean that it would not be clear if differences in outcomes were caused by the text, by the picture or a combination of the text and the picture (Krosnick, 1999; Wang, 2012)..

3.3.2 Running Pretest

A small group of respondents (n=24) were asked to fill in the questionnaire. These respondents were asked to mention any problems they encountered while filling in the questionnaire. Classmates were approached for this job, as they have experience with building a questionnaire and are familiar with research design. Next to that contacts from Alliander and LochemEnergie were approached (personal communication, April 2014), as they are familiar with the target group. Finally, friends were approached that were neutral in this case, as they did not know what the goal of the research was, and so they represented “normal” respondents.

The pretest resulted in the correction of a few typing errors, and the exclusion of three questions concerning purchase intention. As 71% (n=17) of the test group saw these questions as double, these were excluded to prevent irritation among the respondents. Some test respondents mentioned that it took a while before the scenario texts became available on screen. The text

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25 introducing the scenarios was therefore adapted by adding a notification for this. At the construct payment solution, test-respondents mentioned that when a loan is not at all interesting (items 1 and 3), one should be able to check a “not applicable” box at items 2 and 4 (see also paragraph 4.6.2). Adjusting the survey by adding a “not applicable” box reduced the lay out and usefulness of the Juster scale in such a way that this was not acceptable. As a solution, respondents were suggested that when a loan (any kind) was not at all interesting, one should check “0” on the Juster scale. The pre-test also revealed that the survey takes about 10 minutes to finish, and most test-respondents reported back that the survey was easy to participate in, and did not feel as a long survey.

3.4 Sample

For this research, a convenience sample method was used (Saunders et al. 2009). First in cooperation with Alliander, and second by the use of the authors network via social media and personal contacts by e-mail.

3.4.1 LochemEnergie

Alliander provided their testing ground in Lochem as a place to conduct this research. Advantages of this cooperation were the provision of a convenient sample and the access to several specialists in the home energy and energy saving field. A disadvantage was that the provided testing ground is relatively small, and as it is situated in one town and consist of members of a cooperation, it might not be representative for the Dutch population. This is further analyzed and discussed in paragraph 3.4 and chapter 5.

To calculate the expected response of the members of LochemEnergie, a previous study within LochemEnergie was used. In this study, a response rate of 36% was achieved (160 out of 442). Based on these numbers, a response rate of 30% was expected for this study. The survey was spread via e-mail, which contained a short introduction to the research and to the student performing the research, and explained the reason why LochemEnergie was cooperating. This e-mail was send by one of the board members of LochemEnergie, which is a reliable source for the members and ensured the e-mail would not get caught in a spam-filter. Since the survey was spread among 470 members, 141 responses were expected. As 125 respondents started the survey, and 91 respondents completed the whole survey, actual response rate was 19%.

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26 3.4.2 Authors Network

Via the authors network, about 368 people were approached to fill out the survey. The exact number is unknown, as some contacts shared or forwarded the invitation to participate in their own network. The 368 people were contacted via Facebook (n=164), LinkedIn (n=154) and via e-mail (n=50). A response rate of 20% was expected (n=74). As 81 respondents started the survey, and 51 respondents completed the whole survey, actual response rate was 14%.

3.4.3 Total Sample

As table 3.1 summarizes, the total response of the survey resulted in 206 surveys. As 54 respondents did not complete more than half of the questionnaire, these respondents were excluded from further analysis.

Table 3.1: Response rates, total and per sample

Source Number of people

approached

Expected response

Realized response

Total Incomplete1 Complete

LochemEnergie 470 141 (30%) 125 (27%) 34 91 (19%) Social Media 368 74 (20%) 81 (17%) 30 51 (14%) Facebook 164 33 LinkedIn 154 31 E-mail 50 10 Total 838 215 206 (25%) 64 142 (17%) 1

Incomplete represents early drop out (n=54) and incomplete surveys (n=10).

Of these 54 respondents, 41 dropped out after the first round of questions: right before the first construct were measured and 13 respondents stopped before or during the scenario text. It is presumed that after answering some questions, respondents realized they were not willing to participate in the whole survey. As these results were not identified by the pre-test, they were not expected and further studies are necessary to identify why 26% of the respondents (64 out of 206) dropped out in such an early state.

The resulting surveys were analyzed using SPSS, this has led to the exclusion of 10 more respondents (too much missing data) and for six surveys missing data was replaced. For further details on this process and an analysis of the sample refer to chapter 5 “Results”.

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3.5 Procedure

In this study, a self-administered, internet-mediated questionnaire was used to collect data (Creswell, 2003). The questionnaire was hosted by Qualtrics, an online survey software platform which offers free accounts. The University of Amsterdam provides a standard layout to use in Qualtrics, with the branding and logo of the University in it. Respondents could open the questionnaire by using a link. This link was spread in the authors network using social media: Facebook, LinkedIn and e-mail by posting/mailing the link accompanied by a request for assistance on a graduation research on sustainability. The members of LochemEnergie were contacted by e-mail. This e-mail briefly explained the cooperation with LochemEnergie, followed by an invitation to participate in a research study on sustainability. The link was provided, followed by in incentive: participants could win one of five vouchers, with which one could rent an electric car for one day.

The first page of the questionnaire welcomes visitors and opens with a definition of sustainability, followed by the question “What does this mean for you?”. Respondents were told that the study aims to test which values are important to consumers when it comes to sustainability. This is followed by some basic instructions, the notice that it is completely anonymous and that results will be used for academic research. Finally, people are thanked in advance for their cooperation.

At the end of the survey, respondents were informed that they reached the end and were thanked again for their cooperation. A debriefing was send to the members of LochemEnergie, in which they were informed that the research was closed, what the true goal of the research was and they were again thanked for their cooperation. The five winners were provided to LochemEnergie, who informed and awarded the winning participants.

3.6 Summary

A deductive, exploratory study was performed in the form of an experimental survey. Pretest were run before expanding the survey thru the internet. The survey tested with an in between subject design the impact of information on consumers considering the purchase of efficiency improvements. This was tested using three different scenarios, plus one control scenario. The

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28 survey also tested if a smart payment solution could convince respondents to invest in efficiency improvements, this using a within subject design. The sample consisted of two sample groups: LochemEnergie and a sample from the authors network. The different variables used in this study will be discussed in chapter 4, were a link between these variables and the reviewed literature will be made. Subsequently, data will be analyzed in chapter 5.

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4 Variables & Measurements

In this chapter all used measurements are described. For each measurement the theoretical background is explained, followed by the characteristics and source of the measurement. First to provide a link between the measurements and the review literature, and second to provide clear background information on the measurements used.

Some items gave respondents the possibility to enter text by providing an “Otherwise, namely:” option. The text that was entered was analyzed and if possible brought back to one of the provided options. For example: some respondents answered they lived at a farmhouse, for these respondents the box “Detached housing” was checked. Another example: some respondents answered they had LED-lighting, for those the box “Energy saving bulbs” was checked. If no option fitted the entered text, the text was left unchanged/unprocessed and will be mentioned as an outcome if relevant. The different variables will be discussed in the same order they appear in the questionnaire, as shown in figure 4.1.

Figure 4.1: Visualization of the survey design

The first paragraph focusses on the variables living situation, followed by the variables sustainability and innovation in the second paragraph. The third paragraph provides an deeper explanation on the scenarios. The fourth paragraph focusses on variables in the field of product perception, followed by purchase intention in the fifth, and payment solution in the sixth paragraph. The last paragraph explains the demographic variables.

4.1 Living Situation

4.1.1 Theoretical Background

The current use of (natural) resources threatens the sustainability of our environment (Abrahamse et al., 2005; Guagnano et al., 1995; Steg & Vlek, 2008). To prevent this, households

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30 form an important target group (Abrahamse et al., 2005; Abrahamse & Steg, 2009; Hertwich, 2005) and several scholars asked for further research why consumers do or do not perform pro-environmental behavior (Abrahamse & Steg, 2013; Bolderdijk et al., 2013a). Some consumers may think their impact is too small to make a difference (Blake, 1999), others say they care, but do not take sustainability into account (Doane, 2005). The main goal of this construct is to gain a better understanding of the living situation of the respondent, in particular in the field of efficiency improvements currently present in the home of the respondent. This following Yue et al. (2013) who indicated household structure as an important factor that can influence household energy saving behavior. Gaining this information also makes it possible to assess if and how respondents already took action in acting responsible.

4.1.2 Characteristics and Source

This construct consists of six self-made items about the living situation of respondents. Item 1: “What kind of house do you live in?” followed by five options (e.g. terraced housing). Item 2: “Do you live in a owner-occupied or a rental house?” followed by two options (owned or rental). Third item: “In what year was your house build?” followed by seven time slots and a “I don’t know” option. Used time slots were based on information from Vastelastenbond (n.d.) and Green Choice (n.d.), providing information on year built combined with the usual amount of isolation present in Dutch houses from that time frame. Fourth item: “What is the composition of your household?” followed by four options. Item 5: “Which energy saving measures are currently present in your home?” followed by ten options (e.g. roof isolation or energy saving lamps) and a “I don’t know” option. Last item: “Do you use green energy at your home?” followed by four options.

For items 1, 2, 5 and 6 an extra option was provided: “Otherwise, namely:”. Four items had explanatory notes added to the questions; offering respondents to make a guess when they did not know an answer exactly (item 3), offering an extra explanation to a question (item 4 and item 6) or offering the option to check multiple items (item 5).

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4.2 Sustainability & Innovation

4.2.1 Theoretical Background: Sustainability

For this thesis the definition of a socially responsible consumer is set on “a consumer who consciously tries to minimize any negative impact his/her behavior might have on the environment, while maximizing the beneficial effects of his/her behavior”. In a study of Bolderdijk et al. (2013a), informational interventions were used to promote environmental behavior. Results showed that confrontation with behavioral impact did not change a consumer, and only consumers who cared more for the environment were motivated to act on it. Mohr et al. (2001) stated that the relation between beliefs and behavior will be stronger when a consumer has more knowledge and when a consumer finds the issue important. So, the first step in changing consumer choices is making the consumer more aware (Devinney et al., 2006; Mohr et al., 2001). Franzen (2003) indicated that Dutch consumers already have a relatively high awareness. Referring to the theory mentioned above, as Dutch consumers are already more aware, the question remains if they find the issue important as well. To test this, two constructs were chosen and one construct was developed, which measure if a respondent considers the environment in his/her actions (§4.2.2.1); the amount of concern respondents have for the environment (§4.2.2.2); and if a consumer lives in the most sustainable way possible (§4.2.2.3).

4.2.2.1 Green Consumer Values (Green.cons.val)

The construct Green consumer values is measured by seven items (α = ,943) which are adopted from Haws, Winterich and Naylor (as cited in Bearden, Netemeyer, & Haws, 2011). Green consumers are consumers who take the environment in consideration when purchasing products or services. Consumers with high green values tend to make more environmentally friendly, sustainable choices than consumers with low green values. An example of one the items is “It is important to me that the products I use do not harm the environment.”. Items were rated on a 7 point Likert scale, ranging from 1 (Strongly disagree) to 7 (Strongly agree).

4.2.2.2 Environmental Concern (Env.conc)

Environmental concern is measured by three items (α = ,674) from the New Environmental Paradigm and were adopted from Hartmann and Apaolaza-Ibáñez (2012). This construct

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32 measures the amount of concern consumers have for the environment. One of the items is “Humans must live in harmony with nature in order to survive.”. Items were rated on a 5 point Likert scale, ranging from 1 (Strongly disagree) to 5 (Strongly agree).

4.2.2.3 Sustainability (Sustain)

The construct sustainability consist of three self-made items (α = ,841), measuring the extent to which consumers act in a sustainable way. An example of the items is “I will do everything to live my life in the most sustainable way.”. Items were rated on a 5 point Likert scale, ranging from 1 (Strongly disagree) to 5 (Strongly agree).

4.2.3 Theoretical Background: Innovation

Two consulted specialists, independent of one another, mentioned innovation as an important factor in the field of pro-environmental behavior. Mr. Kerkhoven (personal communication, 01-04-2014) mentioned innovation as a trigger to invest: “Some people want innovative solutions, and want to be able to show these devices to their friends and family”. Mr. Koning (personal communication, April 2014) wrote that innovation was an important element for Alliander in drafting customer profiles. Since there is not much information on innovation in relation to consumer efficiency improvements in current literature it was found interesting to investigate this. Main goal hereby is to find out if respondents find it important that products are innovative and new, and how this influences their purchase intention in the field of efficiency improvements.

Innovation drive is measured using the DUCP scale. DUCP is an abbreviation for Desire for Unique Consumer Products, a scale developed by Lynn and Harris (1997). This construct measures the extent to which consumers want to have one-of-a-kind, unique and/or innovative products. The construct consists of eight items (α = ,831), one of the items is “I am very attracted to rare objects”. Items are rated on a 5 point Likert scale, ranging from 1 (Strongly disagree) to 5 (Strongly agree).

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4.3 Scenarios

4.3.1 Theoretical Background

Several scholars have investigated the question why consumers do or do not perform pro-environmental behavior, but none of these studies provide a clear answer. Information to raise awareness and knowledge is important (Devinney et al., 2006; Mohr et al., 2001) but how to provide this information, and which information to provide is unclear. The overall assumption is that informing consumers about the non-financial benefits of investing in efficiency improvements leads to a higher purchase intention than when no such information is provided. However, there is little research in this field and scholars asked for further research (e.g. Murphy, 2013; Nair et al., 2010; Yan and Lifang, 2011). To address this gap, an experiment was drafted using different scenarios to inform consumers about a possible efficiency improvement. Four scenarios were created, fundamentally all the same. Three of the scenarios were designed differently, based on literature and professional opinions, as described in paragraphs 4.3.1.1, 4.3.1.2 and 4.3.1.3. The fourth scenario is set up as an control scenario, and therefor marked as scenario 0. This scenario will not be further explained.

4.3.1.1 Scenario 1: Economic

Many scholars asked for further research on contextual factors (e.g. Abrahamse et al., 2005; Steg & Vlek, 2008; Sütterlin et al., 2011; Yan & Lifang, 2011), such as the economic aspects of behavior. According to Gatersleben and Vlek (as cited in Gatersleben, 2001), Poortinga et al. (2003) and Stern (2000a), economic factors could determine if a consumer is able to invest in home improvement, as these improvements can be associated with high costs (Abrahamse et al., 2007). Bolderdijk et al. (2013b) claimed that economics can also be a reason to invest, provided that it gives a clear economic benefit. Yan and Lifang (2011) found that consumers are willing to save energy, and propose that information and economic benefits can motivate consumers to act responsible. The first scenario therefore focused on the economic benefits of the product. By stating, among others, that the product can be a beneficial solution and is a more economical solution then for example insulation, it is tested whether informing consumers in this field leads to a higher purchase intention.

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34 4.3.1.2 Scenario 2: Innovation

As mentioned before, it was hard to find literature linking innovation and consumer efficiency improvements. Reviewed literature does show that consumers may fear that choosing sustainable may mean to accept less value (Poortinga et al., 2004), and some consumers even believe that more money (or more belongings) equals a better life (Mohr et al., 2001). Bolderdijk et al. (2013b) stated that for some consumers, improving self-enhancement is important. A positive self-concept, and others that perceive you that way, can be a reason for a consumer to invest in sustainability. One of Blake’s (1999) barriers to invest, individuality, is in line with this: when individuality is threatened, consumers are less likely to invest. On the other hand, enhancing this individuality can be a reason to invest. He and Greenberg (2009) mentioned innovation as something people want to try themselves, especially when following successful examples. The second scenario will present an innovative, easy to use, energy solution. The theory that innovative solutions, using gadgets to save energy, could trigger consumers to invest was born after consulting two specialists in the field: mr. Kerkhoven (personal communication, 01-04-2014) and mr. Koning (personal communication, April 01-04-2014). The two consulted specialists both mentioned innovation as an important factor in the field of pro-environmental behavior and proposed that this might convince consumers to invest.

4.3.1.3 Scenario 3: Comfort Improving

Many scholars feel that communicating other benefits than environmental improvements and economic benefits is important. Ottman et al. (2006) suggested that every successful green object should have two objectives: environmental friendly qualities mixed with customer benefits. And Ma et al. (2011) and Yan and Lifang (2011) found that consumers are willing to save energy, as long as this does not threaten comfort and convenience. Sütterlin et al. (2011) stated that it is important to convince consumers that saving energy does not have to mean a lesser quality of life, while Murphy (2013) argued that communicating benefits like improved home comfort could convince consumers to invest. Following Gardner and Stern (as cited in Poortinga et al., 2003), it is expected that informing consumers about the possible improvement of home comfort will lead to a higher purchase intention. Therefore, this third scenario will focus on this aspect.