A circular business model promotes reuse of products and materials. A case in point is a model where consumers return their jeans to the manufacturer after use. Which circular business model characteristics are consumers willing to accept right now, and what do they refuse? Acceptance of these models seems to increase if companies offer effective or appealing option combinations, such as monthly payment schedules and discounted returns.

Why this experiment was conducted: to promote the circular economy
Escalating consumption is hastening the depletion of raw material reserves and amplifying environmental and climate pressures in an unsustainable manner. A circular business model encourages producers to reuse products and materials so that they do not go to waste. However, many current business models are linear: production - use - discard. What can be done to change this? Rijkswaterstaat (Directorate-General for Public Works and Water Management) wants to know which sustainable business options consumers are receptive to when purchasing a product, so that manufacturers can respond accordingly.

Types of intervention: options for a circular business model
This study seeks to identify the behavioural factors involved in the purchase of three different products: jeans, phones and couches. Will consumers buy the product if they are presented with different choices? The influence of the following seven characteristics was investigated:
• price: higher or lower
• payment method: one-time payment or in monthly instalments (with the incentive for the seller to supply robust products)
• terms of use: a deposit that you get back if the product is returned after use, a discount on your next purchase if you return the product, or a penalty if the product is not returned (in good condition)
• the condition of the product when purchased: new, used, refurbished or recycled
• the lifespan of the product: shorter or longer service life
• repair options: how the product can be repaired if it breaks • what happens to the product after use: incineration, re-use, repair or recycle.

Method used: online choice experiments
A series of discrete choice experiments (DCE), in which the relative importance of characteristics can be determined, were carried out. Participating consumers were asked to imagine they were going to buy a product and had a choice between two options. Which option would they choose? The data were analysed using the so-called multinomial logit model. 750 consumers took part in the choice experiment.

Result obtained: linear is the favoured choice, but there are possibilities for circular
Consumers still seem to prefer linear business models where products are purchased new, without additional terms of use. The results also show, however, that companies can adopt certain characteristics of circular business models with relative ease. As an example: to encourage consumers to return a product after use, companies might consider introducing a deposit. This does not have any significant adverse impact on buying behaviour. Monthly instalments, on the other hand, represent a potentially negative effect, since the average consumer prefers to pay the full price in a single payment. However, this negative effect can be compensated for − at least in part − by extending the lifetime of a pair of jeans by two years and offering a € 20 discount on return. The higher the score, the more the characteristic contributes to the product purchase decision. Participants in the experiments prefer to buy jeans, phones and couches new. Furthermore, they hold negative to strongly negative views on product incineration: they would prefer to see the product reused.

Impact: points of departure for entrepreneurs and policymakers
The report was shared with the CIRCONNECT circular design platform and is being used by entrepreneurs to successfully market their circular business models. The study, and the insights obtained from it, can also be used for policy interventions aimed at promoting circular business models.

Source: https://www.binnl.nl/home+-+en/knowledge/publications/bin+nl+publications/HandlerDownloadFiles.ashx?idnv=2719979