How to Improve Popularity of Remanufactured Products?


 
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How to Improve Popularity of Remanufactured Products?
Stefka Nenkova, Student (University), Netherlands

DEFINITION
Remanufacturing refers to the “process of disassembling, cleaning, inspecting, repairing, replacing, and reassembling the components of a part or product to like-new condition” (Thorn and Rogerson, 2002). It is important to make the distinction between remanufacturing on one hand and repair or reuse on the other.
Remanufacturing reduces waste and has a positive impact on the environment. But customers are still reluctant to buy remanufactured products unless their price is lower than for new ones.

REASONS FOR RELUCTANCE
As pointed out by Harms and Linton (2015) the reasons for reluctance of customers to buy remanufactured products could be found in:
  • The perceived products’ lower levels of functionality, because of their re-manufactured content (Hamzaoui Essoussi and Linton 2010; Guide and Li 2010; Durif et al. 2012),
  • Their low seller reputation (Subramanian and Subramanian 2012),
  • Consumers’ low tolerance of ambiguity (Hazen et al. 2012), and the
  • Disgust caused by physical contact by a previous owner (Abbey et al. 2014).
FACTORS
According to Hamzaoui-Essoussi and Linton, 2014, among the major factors that have a significant impact on the customers’ willingness to pay for “like-new” products are perceived quality/performance and perceived risk:
  • WILLINGNESS TO PAY: the maximum amount of money that a consumer will pay for a good (Miyake, 2010)
  • PERCEIVED QUALITY: Consumer’s opinion regarding the ability of a product (or a brand) to fulfill his/her expectations. In case of remanufacturing it should be noted that the quality of the products is fully tested and certified in the same way as the “virgin” product is (the reason why re-manufactured products are also referred to as “like-new”)
  • PERCEIVED RISK: "Consumer behavior involves risk in the sense that any action of a consumer will produce consequences which he cannot anticipate with anything approximating certainty, and some of which at least are likely to be unpleasant" (Bauer, 1960).
SOLUTIONS
Therefore, a question arises about how to find the right balance between the 3 aspects, or, in other words, how to decrease the perceived risk and increase the perceived quality of remanufactured products in order to increase the customers’ willingness to pay for “like-new” products.

Harms and Linton (2015) suggest that eco-certification reduces the perceived risk and increases the customers’ willingness to pay negating to some extent the perceived lower quality of remanufactured products.
Furthermore, they argue that the effect would be greater for customers with knowledge about and positive attitudes toward the environment.

⇒ What other possible ways can you think of to increase the customers’ willingness to pay for “like-new” products (apart from reducing the price)?

Sources:
Thorn, B. K., & Rogerson, P. (2002) “Take it back: Remanufacturing is a viable alternative to disposal of products that have outlived their usefulness - but only if engineers can unearth sound economic justifications”, IIE solutions, 34(4), 34-40
Harms, R., & Linton, J. D. (2015) “Willingness to Pay for Eco‐Certified Refurbished Products: The Effects of Environmental Attitudes and Knowledge”, Journal of industrial ecology
Hamzaoui Essoussi, L. and J. D. Linton (2010) “New or recycled products: How much are consumers willing to pay?”, The Journal of Consumer Marketing 27(5): 458–468
Guide, V. D. R. and J. Li (2010) “The potential for cannibalization of new products sales by remanufactured products”, Decision Sciences 41(3): 547–572
Durif, F., J. Roy, and C. Boivin (2012) “Could perceived risks explain the ‘green gap’ in green product consumption?”, Electronic Green Journal 1(33): 1–15
Subramanian, R. and R. Subramanian (2012) “Key factors in the market for remanufactured products”, Manufacturing & Service Operations Management 14(2): 315–326
Hazen, B. T., R. E. Overstreet, L. A. Jones-Farmer, and H. S. Feild (2012) “The role of ambiguity tolerance in consumer perception of remanufactured products” International Journal of Production Economics 135(2): 781–790
Abbey, J. D., M. G. Meloy, V. D. R. Guide, and S. Atalay (2014) “Remanufactured products in closed-loop supply chains for consumer goods” Production and Operations Management 24(3): 488–503
Hamzaoui Essoussi, L. and J. D. Linton (2014) “Offering branded remanufactured/recycled products: at what price?” Journal of Remanufacturing 4(9): 1–15
Perceived quality. (n.d.). Retrieved November 15, 2016, from BusinessDictionary.com: www.businessdictionary.com/definition/perceived-quality.html
Bauer, R. A. (1960) “Consumer behavior as risk-taking”. In R. S. Hancock (Ed.), Dynamic marketing for a changing world. Chicago: American Marketing Association, pp. 389-398. Cited from D. F. Cox (Ed.), Risk-taking and information-handling in consumer behavior. Boston: Harvard University Press, 1967, pp. 23-33.
 

 
Example of Marketing 3.0 (Kotler)
Jesus Cedeno, Business School Marketer, Puerto Rico
Excellent article. Currently I work on a cellphone store, and everyday refurbished articles arrive. Customer expectations are totally negative, but with this eco-strategy the commerce can execute Marketing 3.0 named by Phillip Kotler, making customers change the way they look at this kind of merchandise.
 

 
Remanufacturing is Part of Circular Economy
Peter Desmond, Business Consultant, United Kingdom
Thank you Stefka for a stimulating article. Remanufacturing is an integral part of a subject I am working on - the circular economy. Certification is a good idea. My own experience of 'remanufactured' products is not great - mostly refilled toner cartridges which leak. Remanufactured by the original manufacturer would be very different. I have not yet tried HP's range but stick with their originals.
Another idea might be a system like "Trip Advisor" which works well for travel (exchanging feedback from users on their own experiences and recommendations).
 

 
Selling Remanufactured, Refurbished Products
Deepak Agnihotri, Consultant, India
Apart from the price, both seller reputation and seller identity are significant attributes that a buyer would consider.
In addition to this, the seller has to deal with consumers' uncertainty at the same time and safeguard his own reputation and alleviate concerns by consumers by providing an extensive warranty, signaling the quality of the product.
Also returns acceptance can be added to the terms and conditions of sale.
 

 
Re-manufacturing is Recycling
SATISH PANDE, Business Consultant, India
Excellent topic, the culture of using and then throwing away products is a result of spare money in hand and goods being used as a status symbol. Also that new, improved products are regarded as attractive in the market. All of this is good for the short-term economy but also results in more garbage.
In India the market for pre-owned cars is growing. These are inspected and certified by major reputed brands.
Still many electronic goods and other white goods are send to garbage because it is easier to buy a new one. We need to deal with the perception that the cost of the item is recovered, that it is costly to repair the old model, and that there is always a more efficient & better model available.
The idea that the manufacturers can buyback and refurbish products with essential new parts and resell them with certification may work out. It may become a trend or fashion.
 

 
Remanufacturing, Recycling
Papantonopoulos Panos, Business Consultant, Greece
Whether I buy a brand-new cartridge, a new PC, or something else, it usually comes with a guarantee. In fact in the case of cartridges very often they are just refilled ones and I have no idea about it as they are packaged brand new but usually traded not by the original printer manufacturer (ex.: HP) but often by a brand of a reputed retailer.
What counts is the guarantee of the seller or manufacturer that he shall replace or take care of a failure of this component or the damage caused by the defective component to the system (printer).
Yet, re-branded, even the perceived as new and guaranteed item, is not commanding the price of an original unless HP itself sells it under its name. In which case they could dictate the same price making expressly no distinction between re-engineered/re-manufactured and new cartridges and adding their valid guarantee.
It is a very difficult question to answer as its product category has its own level of complication and associated perceived risk.
 

 
Re-manufactering ⇒ Upcycling!
Boers, Other
Great (!) Topic!
We should name it 'UPCYCLING' instead of re-manufacturing... It sounds better and consumers will be more willing to buy it.
 

 
Refurbishment in the New Economy
gharbi, Other, Belgium
Thank you for this article. Very good synthesis of this market reality.
In terms of the environment, it allows to reduce waste generation and Earth destruction.
I've been working for 15 years on B to B companies linked to refurbishment/remanufacturing activities.
The very 1st customer expectation is in term of quality: they always expect that remanufactured parts have the same characteristics as brand new ones. To achieve this expectation, we should only keep "non damageable" components, check if "useable" components are still in the Original Equipment tolerances and scrap the "rings" (o'ring, seal ring...) systematically.
We also have to chase any particles generated during the "first usage". So remanufacturing is also useful on a continuous improvement work philosophy.
Great achievements can result from refurbishment in terms of quality of product, continuous learning, cost reduction and environment!
 

 
Theory of Planned Behavior
Norman Dragt, Other, Netherlands
You could take a look at the Theory of Planned Behavior to try to understand why people will not go for refurbished or upcycled or re-manufactured.
In short, people will change if:
  • they think that they can change,
  • they think nobody will object (using second hand will make people expect that others will see them as less successful),
  • they expect that the consequences are minimal for their current life. With the biggest influences for the expectations about the reactions of their social group and the consequences of the new behaviour.
So how would you motivate people to change from buying new to re-manufactured, for example could be by publishing scientific research that proves that re-manufactured has the same quality as new. Or proves that new does not exist and that every product always is re-manufactured as you never know if a new product is built from parts from products that did not pass an earlier quality test.
 

 
All in But with Some Trepidation
Barney Wade Howard, Manager, United States
This type of production is not only intelligent, but necessary.
My parents grew up during the Great Depression. In these days, you just didn't throw away something just because it was broken; you fixed it. How many remember the repair shop on the Andy Griffith show where the man fixed anything, from radios to toasters. That is the way it was.
Now here is the trepidation aspect. Components used today do not have the longevity as then. I still have a Black and Decker drill my father used and it still works. It is older than me and given the money in the household at that point, it was probably used when my father received it.
I am even under the belief that if you buy a $1 trinket at the dollar store because your child can't live without it, it should work. Yet how many people say, "well, at least it was only a dollar".
I personally look at refurbished as being better than the original. At least someone was trying to make a good product. It is all in the marketing.
 

 
How to Improve Popularity of Remanufactured Products
melchiorre calabrese, Manager, Italy
The reasons for the reluctance to use "regenerated" products are not always valid at all, because:
1. Remanufactured products may have yields equal to new products;
2. Substantial (not apparent) quality can be perfectly aligned with the requirements for new products.
It is necessary to carry out an information and awareness program of the world market regarding the opportunities that a greater use of the remanufactured products can give to:
- Market segments with less chance of spending enough to access acceptable quality products,
- Safeguard the environment, by reducing use of raw materials an energy.
Of course, it is also necessary that the factories producing the "remanufactured products" are really culturally equipped to provide a good quality.
These assurances may be provided to the market through appropriate certifications (for instance ISO 9001, 14001, or another certifications scheme to be created for this purpose).
 

 
Thank You for your Comments
Stefka Nenkova, Student (University), Netherlands
Thank you all very much for your input and comments. It turned into an interesting discussion. Every comment is useful.
 

 
Some Points on Remanufactured Products
Peter Bergstroem, Other, Sweden
Very interesting subject and it certainly is worth exploring.
A problem with remanufactured products is that every product has a lifespan and old models are taken out of production, meaning that spare parts are hard or even impossible to get, which makes the repairs very expensive (special moulds, equipment, etc).
But maybe manufacturers can involve the reuse thinking already in the design process? Some products would hardly benefit from that, though. Electronics especially, since a new faster CPU involves changing every other part that communicates with that CPU.
One plus side of new products is that they often lead to cheaper, more efficient methods that have a smaller impact on our planet. To reuse old products we slow down development since the costs have to be split over fewer new products.
So, the question is perhaps if we can make new products more expensive by including the environmental costs for making them? This would speed up development and decrease need for remanufacturing.
 

 
Remanufacturing is not the Total Answer
Norman Dragt, Other, Netherlands
@Peter Bergstroem: You are right to state that it all starts with thinking at the design level of a product. However we either need to remanufacture or re-use the materials. If we do not start thinking and working according to the ideas of remanufacturing, we will run out of supplies to make anything. And then we will find out that you can not eat money. And nowadays eating money is becoming even more and more difficult, because we have more and more virtual money.
So yes, remanufacturing has its drawbacks, but going on in the same way we are doing now by monetizing everything will only bring us farther and farther away from a world that will offer every human beging a decent living standard with luxuries we all want.
 

 
 

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