How to Improve Popularity of Remanufactured Products?
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.
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