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The effect of life-cycle cost information on consumer investment decisions for eco-innovation

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abstract Global sustainability challenges like climate change and the depletion of natural resources indicate the need for innovation. While significant
technological development has taken place in the energy sector and oil prices have reached all-time highs, the market diffusion of eco-innovation has remained at surprisingly low levels so far. An important barrier to the diffusion of eco-innovation is the existence of external costs and benefits, and information asymmetries. The literature on eco-marketing has suggested internalization of public benefits as a way to accelerate market diffusion of green products, and has identified customer segments that are willing to pay more for these products. Recent literature on energy-efficient products and carbon reduction potentials (Enkvist et al., 2007), however, indicates that the traditional "green & expensive" versus "brown & cheap" dichotomy may be an oversimplification. We suggest breaking out the relative costs of environmentally sound products into two dimensions, namely initial costs and operating costs. By doing so, it becomes evident that there is a wide range of environmentally sound products that are not characterized simply by higher total cost, but rather by a different investment profile, namely higher initial cost versus lower operating cost. As a consequence, the life-cycle cost for these products may be even lower than for conventional alternatives. This observation has important implications for the understanding of consumer decisions for eco-innovation, and hence for sustainability marketing and for the design of policy measures. Rather than finding ways to make customers pay more for environmentally sound products, the marketing challenge needs to be-conceptualized as one of lowering customers' perceived initial cost and increasing their awareness of life-cycle cost.
   
type conference paper (Deutsch)
   
keywords Life-cycle cost, total cost, marketing, eco-innovations
   
project The effect of life-cycle cost information on consumer investment decisions for eco-innovation
name of conference 2nd Conference of the Sustainable Consumption Research Exchange Network (SCORE!) (Brussels, Belgium)
date of conference 10-3-2008
title of proceedings Proceedings
page(s) 75-88
review not reviewed
   
citation Kaenzig, J., & Wüstenhagen, R. (2008). The effect of life-cycle cost information on consumer investment decisions for eco-innovation. In Proceedings, pp.75-88.