Circhubs

Customer value in circular economy business market

In the phase of growth in the circular economy market, ‘what is the customer value?’ question is often answered with assumptions or rather expectations. Considering customer value in general, one must wonder how it may be referred to circular economy context and how the value dimensions may differ as the business perspective of circular economy is definitely different. Research on circular economy business models promise profitable development through many new opportunities for the firms. Hence, the expectation is that in circular economy business market, firms can create new profit streams and competitive advantage while the users can benefit by gaining more choices, experiencing fewer complications and pre mature obsolescence and enjoy improved service quality.

Customer value is the cornerstone of the business market, where it is used as a concept to compare competitive advantage among the offerings. Thereby, for the CircHubs research group, the absence of research on how circular economy offerings are accepted in the business market was surprising and enticing to research on. The research assessed customer’s perspective about circular economy offers in business market and consumer market. The study included the case firms of which the core businesses are based on material and product surplus, waste management tools, as well as production of alternative sustainable solutions.

The findings of the research were eye opening as expected.  Firstly, the customers who partnered with surplus selling solutions appreciated the offer as a waste reduction method and an effective alternative to disposal of surplus. Reduction in waste with the aid of such solutions also saves disposal cost and efforts the customer firms had to pay before acquiring the solutions. However, selling surplus instead of disposing opens not only new streams of income, but also opportunities to expand current markets of the customer firms. Particularly, the customer firms seek prospects for their products through discounted sale of their surplus, yet with acceptable quality. The satisfaction through surplus is expected to encourage the surplus market in buying full priced products, expanding the normal sales as well. Moreover, with solutions that help to get rid of surplus at zero cost, the customers are pleased with the convenience offered, to carry on with their main business operations without worrying about piling-up surplus.

Secondly, the waste management tools have customers who seek to avoid pre mature obsolescence of their operational material.  Hence, while the supplier offers performance enhancement of the material, the customers experience many more subsequent benefits including reduced cost, effort and resources on maintaining the material. The monitoring and analysis service of waste management tools expose useful data not only to manage material performance, but also to know the health of heavy machines that the material is used on. Such information surprises the customers about necessary maintenance that the customers were unaware of, before the acquisition of the waste management tool. Therefore, waste management solutions also aid customers in preventive maintenance and uninterrupted production.

Finally, the alternative sustainable product producers mainly have traders as their immediate customers. The customers collaborate with the producers in distribution logistics, marketing, sales and even value co-creation for product development. As alternative sustainable solutions add products to the customers’ shelves, the offers are seen as an appealing opportunity to expand the customers’ product variety. Additionally, innovation oriented nature of the alternative sustainable products comply with the customers’ strategic choices in responding to trending consumer demands for sustainable consumer products, other than high product variety. Another value worthy of mentioning about chooser of alternative sustainable products is that the value for job creation and economic growth in the society, through supportive collaboration with start-up firms as kind.  

In general, circular economy customers in business market, value the prestige of becoming a sustainable business or involving with a sustainable solution provider, as it adds competitive advantage to the firm. The easy integration to circular economy operations as well as low expense for acquisition of such solutions provide more convenience to being part of circular economy business market. Furthermore, a key finding in the research is the significance of personal values of the decision makers in customer firms affecting the initiation of involvement in circular economy business. Therefore, the awareness of resource scarcity, the emotions towards protecting the environment, count for existence of personal values in circular economy business market.

The research on circular economy consumer market was limited to the buyers of surplus material and products. Accordingly, a fundamental characteristic that could be detected in consumer market is the low pricing. Similar to the high significance of emotional value towards environment, high economic value on discounted products and services won the consumer popularity in circular economy markets. Hence, the solutions are currently in the phase of fast growth, back resulting as an attraction to consumers for increasing product and service variety available in the circular economy consumer market. For example, although in small quantities, leftovers become available for consumers from many providers of many own serving markets. This broad variety of products at cheap pricing and right quantities serve the consumers almost completely, due to small compromises on quality and fitting the purpose. However, surplus solutions with indefinite product descriptions also carry a surprise component to emotional dimension of customer value in a positive manner. In addition, low pricing and variety tend to harbor certain lifestyles, such as well-being with healthier food choices at cheaper pricing.  On the account of esteem values, the consumers of circular economy solutions are proud of being part of saving waste.

Written by Martina Don Welathanthri, Project Researcher, Tampere University / Hervanta campus

The photos are published with their owners’ consent.