Customer Cost and Mindful Consumption

When I read the article on mindful consumption, it gave me some valuable insights into how to redirect consumption, but still some questions remained open. Now in the lecture on customer costs in particular one aspect regarding mindful consumption got my attention.

We all know that overconsumption is unsustainable consumption; still we consume more than we need. Overconsumption has devastating consequences for personal, economic and environmental well-being. Companies, however, have not yet fully acknowledged the problem of overconsumption, as consumption is a business driver. To pick up on sustainability concerns of consumers, firms started valuable greening approaches. Firms initiated green consumption by selling more eco-friendly products. So, how does this help with the problem of overconsumption? Unfortunately, those green strategies are inadequate for neutralizing the impact of overconsumption; consumption per person is still increasing.
Given this setting the authors suggest a market-driven approach to redirect consumption which they name mindful consumption. This approach implies both consumers’ mindset and their behavior. Mindful consumption is characterized by consumers caring for themselves, the community and for nature. Research has shown that overconsumption reduces individual happiness. It is harmful to the community and violates nature (peak oil, peak soil etc.). Therefore, a caring mindful consumer would be motivated to not over-consume. Regarding behavior the authors emphasize temperance in three types of consumer consumption behavior. Consumer need to show temperance regarding the acquisition of goods they do not need, regarding disposable and potentially obsolete products as well as regarding competitive consumption.

But why would companies implement a mindful consumption approach?
The article gives two reasons: Consumers already turn to a new lifestyle of frugality. Hence, companies should leverage on that development. This, for me, raised some questions: Why do we then still see increasing consumption? In class, we discussed that e.g. LOHAS do not strive for less consumption. So where can we find this frugality? The article gives evidence via surveys conducted among American customers. So, the new frugality can be found in America?
The authors name a second reason: marketing that drives overconsumption leads to a negative marginal profitability. This is based on the assumption that all external costs are internalized, i.e. environmental, social, marketing, and debt costs. I think this aspect has to be linked to the customer costs of the product. Customer costs consist of price, purchase costs, use costs and post-use costs.

Regarding price, in the last lecture we discussed value-based and cost-based pricing strategies from a company perspective. Given the internalization of all external costs, cost-based pricing necessarily has to lead to higher prices compared to companies that do not internalize external costs. In the case of price-sensitive customers (in mass markets) companies have to focus on reducing the other components of customer costs, i.e. purchase costs, use costs and post-use costs. Another approach would be to substitute the initial price of buying the product by a rent or leasing agreement.

Value-based pricing takes on the consumer’s perspective. The price is based on the value the customer assigns to the product. Usually customers see a higher value in sustainable products. Therefore, the value-based pricing strategy does also offer room for internalizing external costs.

I think, given that companies internalize external costs and are able to relate it to customer costs, mindful consumption can increase marginal profitability.


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