The Effect of Life Cycle Cost Information on Consumer Investment Decisions Regarding Eco‐Innovation

Abstract

SummaryLife cycle cost (LCC) computations are a well‐established instrument for the evaluation of intertemporal choices in organizations, but they have not been widely adopted by private consumers yet. Consumer investment decisions for products and services with higher initial costs and lower operating costs are potentially subject to numerous cognitive biases, such as present‐biased preferences or framing effects. This article suggests a classification for categorizing different cost profiles for eco‐innovation and a conceptual model for the influence of LCC information on consumer decisions regarding eco‐innovation. It derives hypotheses on the decision‐making process for eco‐innovation from a theoretical perspective. To verify the hypotheses, the publication reviews empirical studies evaluating the effects of LCC information on consumer investment decisions. It can be concluded that rather than finding ways to make customers pay more for environmentally sound products, the marketing challenge for eco‐innovation should be reconceptualized as one of lowering customers’ perceived initial cost and increasing awareness of LCC. Most existing studies report a positive effect of LCC information on the purchase likelihood of eco‐innovations. Disclosing LCC information provides an important base for long‐term thinking on the individual, corporate, and policy levels.