CONSUMERS SATISFACTION OF ATTRIBUTES IN ONLINE PRODUCT DESIGN
IT’S IMPACT ON WILLINGNESS TO PAY
Master Thesis
Master of Science Economic and Business
Master Specialization Marketing
Erasmus University
Author:Semra Kurt
Student number:282725
Coach: Dimitris Tsekouras
PREFACE
This thesis is a part of completion of the master Marketing of the study Business Economics at the Erasmus University Rotterdam. To receive the Master of Science degree in Marketing is of great value to me. Although I’ve spent five years to complete a whole study, I put out everything I could give in order to successfully complete my courses.
Using this opportunity, I would like to thank several people who gave me fully support during my graduation period.
My special thanks go on the first place to my parents, who gave me the ability to study abroad and were always there to support me.
To HakanTekin, not only as a partner but also as my best friend, being side by side on good and bad days for his unlimited patience during the time I’ve spent on writing this thesis. And for sure, it was a long time…
Special thanks to my lovely sisters and dear friends for their support and help. Without them I would not able to collect my data for the thesis so quickly.
Last, but not at least, Dimitris Tsekouras, my supervisor. Without his comments, guidelines and feedback I wasn’t be able to finish my thesis. His patience and support is also very appreciated.
Semra Kurt,
Rotterdam, March 2012
ABSTRACT
Online co-designing, as a new era of personalization, aims to provide individually self-made goods that meet exactly consumers’ needs. The present study seeks to develop a better understanding how co-designing is evaluated by consumers through information and interaction systems. It provides highlights in the process of co-designing a product to own needs or desires. This study focuses on the websites and the toolkits, which are used to actually help consumers to make their own products. By mass customization, the online experience is a critical factor for completing the process and the ability of a merchant is reflected in its ability to handle sales transactions and the expertise to generally conduct business online. When consumers experience superior states of satisfaction, they perceive a high outcome of a trade and therefore are willing to pay more than less satisfied consumers, because this results in a reasonable relation of outcome to input. In this sentence, it is found that Product Satisfaction is the mainly influencer of willingness to pay.
Keywords: Mass Customization, Satisfaction, Online Toolkit, Willingness-To-Pay
TABLE OF CONTENT
PREFACE
ABSTRACT
TABLE OF CONTENT
Part I. INTRODUCTION
1.1 Mass customization and importance of online product co-design
1.2 Research relevance
1.2.1 The current study and the research questions
1.3 Outline of the study
Part II. LITERATURE REVIEW AND CONCEPTUAL MODEL
2.1 Co-designing
2.1.1 Information systems: Websites
2.1.2 Interaction systems: Toolkits
2.2 Theoretical framework
2.2.1 Website attributes
2.2.2 Toolkit attributes
2.2.3 Process Satisfaction and Willingness to pay
2.2.4 The effect of moderators
2.2.5 Conceptual framework
Part III: RESEARCH METHODOLOGY
3.1 Data collection
3.2 Measurement
Part IV: ANALYSIS AND RESULTS
4.1 Data preparation
4.2 Analysis
4.3 Results
Relationship between attributes and online process satisfaction
Relationship between satisfaction with co-designing process and willingness to pay
The effect of the moderators
Summary of the results
Part V DISCUSSION & CONCLUSIONS
5.1 General Conclusions
5.2 Managerial implications
5.3 Limitations & Future Research
REFERENCES
APPENDICES
Appendix A: Questionnaire
Appendix B: Print screen Design Skins
Part I. INTRODUCTION
1.1 Mass customization and importance of online product co-design
The idea of integrating consumers into the design and production process is a promising strategy that embraces both a closer reaction to the consumers’ need and efficiency. People are different, different in the sentence that they have different lifestyles, needs, feelings or thoughts. Every customer has a unique demand for products. To meet those differences of consumer demands, firms invite them to cover their uniqueness through mass customization. Mass customization relates to the ability to provide customized products or services through flexible processes in high volumes and at significantly low costs.
There is a large amount of definitions and descriptions in the literature for the term of mass customization. The concept has manifested in the late 1980s, by Davis (1987), who first developed the idea as the ability to provide individually designed products and services to every customer through high process agility, flexibility and integration, in this manner that the perception may thus reach customers as in the mass market but also treat them individually. Many authors propose similar concepts. Pine’s (1993) concept is more at a customer’s point of view. According to Pine’s opinion customers don’t want choices; customers precisely know what they want. The more recent definition of Piller and Muller (2004) is used in this thesis. The authors describes mass customization as the production of goods and services for a relative large market which meet exactly the needs of each individual with regard to certain products characteristics, at costs nearly corresponding to those of standard produced goods. Hence, through mass customization, customers are integrated into the design of a product by configuring, choosing and matching their individual characteristics among several options offered by the firm in a way that customers maximize the fulfillment of their needs and preferences.
Co-designing is a unique principle of mass customization (Piller 2003). The foremost belief of online product co-design is a mechanism for interacting with the customer and obtaining specific information in order to identify and thereafter convert the customer’s needs and requirements ending into a concrete product or service (Zipkin 2001). In general, co-designing construe that consumers can express their product requirements and realize the design process by mapping the requirements into the product (von Hippel 1998). With the importance of co-designing, many firms in various industries have begun to offer their customers the opportunity to design their own products online. In this way, customers can partly design the product. Researchers such as, Prahalad and Ramaswamy (2000) and Vargo and Luschargue that value is set in the co-design process between the customer and the supplier. This opportunity carries out that the customer shifts from being a passive audience to an active player. In this way, the consumer is incorporated to the value creation of the supplier.
Although, companies are getting increasingly aware of the fact that competition is severe and the expansion of the internet is raising further up, which brings consumers with lot of alternatives, this concept also leaves the firm not only to acquire new consumers but also to sustain them by keeping the consumer satisfied. For example, a great number of companies, like Adidas, Converse or Nike have shoes that fit their preferences through an online process. Indeed like Nike, that allows customers with Nike ID to design their pair of shoes selecting almost all the elements on an online developed interface. The same concept is also triggered by Converse with Make Mine RED. Not only with the shoe industry, but also with the textile industry is the same trend available. Customers can choice from different lettering on thirsts. Furthermore, Lego allows customers to create their own Lego set online. From footwear to clothes and even cars, like BMW are examples of companies which developed co-designing process to provide their customers to create individualized products that meets their customers better. Therefore firms are in the hunt for users in their activities by offering them toolkits for innovation (von Hippel 2001). The primary idea of engaging users in such innovation activities is that users have knowledge about their needs and the setting of use, so that they are better equipped to develop products and services to match their needs. Firms, conversely, design the solution space offered by the user toolkit for innovation in such a way that the solutions developed by the users are producible by the firm.
In line with the online environment, having a successful website is a critical step into the future and a necessary move to stay competitive in this fast moving world. Existing evidence from research showed the importance of website attributes to consumers' online shopping behavior, as well as certain attributes that help create demand for online purchasing and increase store transactions and sales (Lohse & Spiller 1998; Swaminathan et al. 1999; Zellweger 1997). A study notes especially that website attributes influence consumers' current purchases andalso future purchase intentions (WatchravesringkanShim 2003).
1.2 Research relevance
In an increasingly dynamics business environment, firms are realizing the importance of collaboration for creating and sustaining competitive advantage. A company exists because it aims to gain profit and the only source of such profit is the customers. All the sales activities, production, and marketing plans have a common objective and that is to attract customers to purchase their products or services in order to bring in money to the company.
For the last decades, companies have been soliciting the consumers input when implementing the more personalized marketing strategies in order to provide products and service that fit the consumers need. Understanding the needs of your customers will help a company define and create new market opportunities that significantly contributes to revenue growth in the organization. With the rapidly changing economy and dynamic technology, customers also observe a rapid change in personal tastes and preferences. Customer predictability is not as conventional as it used to be. A company must conduct regular market research to be updated with the latest trends and consequently will be able to generate new and broader marketing strategies needed in the various marketing programs. New product creations can even be designed as an answer to changing customer needs.Nevertheless with the arrival of a new century that traditional methods for research is enough, is hardly been challenged. This new era of marketing, where consumer’s role is shifting from being a passive spectator to an active player seems to be growing interest in the business world.
More recently, scholars in strategy and marketing have focused on collaboration with customers to co-create value.The scholars argue that interaction that enables a consumer to co-create experiences with the company is the key to unlocking new sources of competitive advantage (PrahaladRamaswamy, 2004; Thomke & von Hippel, 2002).Merging this concept with the rise of interest of companies of doing business thru the internet has made a challenge as well easier as well more challenging.
1.2.1The current study and the research questions
As we enter the twenty-first century, the marketing function remains concerned with serving customers and consumers effectively. This new trend, integrating customers into the co-design process is a great competitive advantage for firms that mostly apply mass customization.The aim of the current study is to investigate in depth the impact of this process through the website and toolkit attributes for the designed product. The study also intends to extend the existing literature by exploring whether the product satisfaction derived from the process and the outcome is significant enough to influence the Willingness to pay (WTP). In summary, the main research question of this thesis is:
Howdoes willingness to pay differ across different website or toolkit attribute levels?
Because of the large amount of the possibility to design online nowadays, it is very interesting what kind website & toolkit attributes will affect the willingness to pay for the co-designed product. There is a lot of literature about the effect of website attributes and using toolkits on co-design process. FrankePiller (2004) proved, in a case study regarding watches, that the willingness to pay for self-designed product is higher than comparable standard models in the same market. This allows the interpretation that subjects derive benefits from the perceived uniqueness of the products. There is an untouched area in the online environment about what will influence the willingness to pay for the co-created product. In this sentence, this thesis will provide insights about which attributes, both website and toolkit, are more affected the willingness to pay and if satisfaction moderates an asymmetric affect. Although it seems very simple, co-designing is still a hardly touched area. In the academic literature, attributes are investigated mostly insubjective studies and describes this cases in a narrative style. These relationships have not been researched efficiently and when encountered they are just suppositions or conjectures. Furthermore, earlier studies mainly focus on firms implementing and using the attributes, not on users interacting with them.
In order to investigate the impact of the co-design process on the willingness to pay, the most important website and toolkit attributes had to be chosen. After a careful secondary research on the literature, website attributes (design, navigability and transaction capability) and toolkit attributes (complexity, enjoyment and control) are chosen.The following research questions aim to underline the contribution of the present study to the mass customization literature.
- What is the impact of the website attributes on customer’s satisfaction with the mass customization process?
- What is the impact of the toolkit attributes on customer’s satisfaction with the mass customization process?
- How is customers’ Willingness to pay influenced by the website attributes, toolkit attributes and the interaction of product satisfaction and transaction capability?
The conceptual model of the research and the methodology selected will be presented in the following chapters.
1.3Outline of the study
The first part of this study includes the first presentation of the topic for this thesis with the main subjects and significance of the study included. Furthermore the structure of the study is explored. The aim of the second part is to observe the existent literature and to present the findings of the literature that has been used. Part two gives some general information about the online co-design, how different website attributes affect this process in turn to affect the willingness to pay of consumers with the moderating effect of the product satisfaction. The same with toolkits attributes are explored. In the second part, the theoretical framework used in this thesis and the hypotheses to be tested are discussed. The goal of the third part is to clarify the research method to test the research model of the current study and the research tools selected. The 4th part will report the data presentation. This includes the statistical results and interpretations. The final part will discuss the conclusions resulting from this study. Also the implications and limitations are included.
Part II.LITERATURE REVIEW AND CONCEPTUAL MODEL
The aim of a literature review is to review critical points of past literature relevant to the online co-design concept and other relating constructs. The first part is a general review of the elements that are used in this study. The second part includes, based on the literature of the aforementioned concepts, the hypotheses of the current study and furthermore the conceptual model will be presented.
2.1 Co-designing
The purpose of this section is to give a comprehensive description of the co-design process and how customers integrate with it. Furthermore, the environment of this involvement will be clarified by the presentation of the platform where this kind of customization takes place. The presumption of this study will start at a visit on the given website. After visiting the website, it is intended to create your own product. There will be an interaction system on the websiteto start the co-creation process and design the product of desires and unique style. After finalizing the product, the process continues with purchase the product if there is overall satisfaction with the customized product. Then the use of the website comes back in the spotlights. Although the consumer is constantly on the website, the interaction system is overwhelming the thoughts of being on the website, but not using it consciously. Thus the process of this study goes first with being on the website, then the use of the interaction system and finalize with again being on the website. Although, this process, the act, is just an appellation for the reader.
2.1.1 Information systems: Websites
The internet is an important market space in our millennium. The high level of recorded interaction with customers allows for many ways to alter a website a customer’s profile and increase sales or improve communication. Web sites are being widely deployed commercially in the online environment; they can be conceptualized as information repositories that represent organizational or individual sources, while also reflecting the characteristics of those sources through design features of the sites themselves. Web sites play an important role in the overall marketing communication mix (Berthon et al. 1996). They set off direct selling activities, present supplemental material to consumers, project a corporate image, and provide basic company information to customers.