SAMINT-MILI 2022

Master’s Thesis 30 credits

June 2020

Investigating the elements of

Customer Value Creation in a

Circular Business Model

- A case of a Swedish startup

Anirud Gopal Jayashree

Yogeshwaran Ravindran

Master’s Programme in Industrial Management and Innovation

Masterprogram i industriell ledning och innovation

I

Abstract

Anirud Gopal Jayashree

Yogeshwaran Ravindran

The circular economy and its implications on businesses have been an

area of interest for researchers and firms alike. The transition has been

a rough one, but many firms are moving towards sustainable practices

these days, if not circular. One of the major challenges that lie within

the circular economy and circular business models is that there is very

little or partial understanding of how value can be created for a customer

within this realm. Moreover, complications arise when fragmented

elements drive the idea behind customer value creation in a circular

business model setting.

Therefore, in order to study and understand more about this concept,

we performed a qualitative case-study research with the help of a

Swedish start-up. Our interviews included 7 actors: 2 from the case

company, and 5 of their customers. An established customer value

creation framework was adopted to analyze and compare with the

findings from our study. This framework consists of 4 components,

Functional/Instrumental value, Experiential/Hedonic value, Cost/Sacrifice

value, and Symbolic/Expressive value. Keeping this framework as the

foundation for our study and by using thematic analysis, the empirical

data collected was analyzed and changed to categories, initial codes, and

final codes which has overarching themes from the framework used.

Firstly, the findings of the study indicate that there were a lot of

similarities and differences betweeen the opinions of the firm for value

proposition and the opinion of the customers for value creation.

Secondly, it indicates that each element has a unique contribution to the

overall phenomenon of customer value and finally it indicates the

importance for companies to focus on each element individually. We

highlight in our study how each element in the framework is connected

to the drivers of satisfaction to generate customer satisfaction.

Keywords: Customer value, customer satisfaction, elements of customer

value creation, drivers of customer satisfaction, start-up, circular business

model, circular economy.

Anirud Gopal Jayashree Yogeshwaran Ravindran The circular economy and its implications on businesses has been an area

of interest for researchers and firms alike, but one of the major challenges

lie in the lack of customer understanding within this business model. The

circular business model requires companies to emphasize a lot of focus

on customer value creation and customer satisfaction which are

complementary constructs and they potentially lead to improved

customer retention and loyalty. This led us to study one of the major

challenges faced by companies operating within the circular economy

model i.e., lack of customer understanding and customer knowledge.

Faculty of Science and Technology Visiting address: Ångströmlaboratoriet Lägerhyddsvägen 1 House 4, Level 0 Postal address: Box 536 751 21 Uppsala Telephone: +46 (0)18 – 471 30 03 Telefax: +46 (0)18 – 471 30 00 Web page: http://www.teknik.uu.se/student-en/

Supervisor: Olof Lundström Subject reader: Daniel Tolstoy Examiner: David Sköld SAMINT-MILI 2022 Printed by: Uppsala Universitet

Investigating the elements of Customer Value

Creation in a Circular Business Model

II

Popular Scientific Summary

We talk about technology and innovation like it's our morning cup of coffee. We live in a society

that is full of industries, business organizations, and entities that provide us with all the necessary

things for survival and comfort our lifestyles with luxury. Over the years, the concept of how

businesses used to work have been constantly changing and with the advent of the internet and

technology, products and services that we never even dreamed about have come into existence. In

the same way, technology made it easy for companies to imitate any new product that is launched

in the market and thus the consumer market became flooded with competition. With such a wide

range of options to choose from, the consumer buying behaviour has also changed, people started

to buy products for various other reasons apart from their essential needs. Increased production on

a global scale eventually led to an increase in the consumption of resources. Today’s world is

dominated by the linear economy, where resources are not only being consumed but also being

wasted at a fast rate. The shift to a better model led to the rise of ‘circular economy’ which is seen

as a regenerative system in which goals like reduced emissions and wastage are achieved by repair,

reuse, remanufacture, refurbishing, and recycling.

Circular business model (CBM) is a term used for businesses that are better suited than traditional

businesses to tackle resource constraints and to facilitate circulation of resources, products may be

designed to be easy to reassemble, remanufactured, reuse, recycle and repair. Alternative forms of

access and ownership were introduced for the efficiency of usage under the CBMs paradigm. To

make sure that the principles behind the business model are preserved, most companies retain

‘ownership of products’ to reduce the cost of ownership, to facilitate efficient use of resources,

and for better access of products to consumers. Many people are not aware of such practices, and

it is seen as a difficulty to convince them to pay for products that they can’t own. This situation

makes it difficult for companies to create value that could satisfy customers to pay for such

products. We wanted to address this issue, make the customer value creation process simpler for

circular firms to create value and satisfy their customers and also such a specific concept was not

explored both theoretically and practically.

As a part of this study, we employ a trusted framework used for understanding customer value

creation. We conduct our study based on this framework since it allows us to understand and align

the needs of the organization through 4 elements of CVC in the conceptual model, i.e.,

Functional/Instrumental Value, Experiential/Hedonic Value, Cost/Sacrifice Value, and

Symbolic/Expressive value. With our collaboration with a Swedish start-up, it allowed us to

explore the implications of these elements. Furthermore, we wanted to understand how the

elements of CVC were connected to customer satisfaction and for that we used an established

satisfaction index to understand and analyze the drivers of satisfaction. To do so, we leveraged

information from the case company and its customers, understood how each actor perceived value

creation, and so on. With this information, we were able to discuss in relevance and contrast to

existing theory on how circular businesses could make use of these elements for optimal CVC and

also extended our discussion to how these elements could contribute to the theory of Customer

Satisfaction. The study could be useful for circular businesses and at the same time, it also helps

guide future researchers to contribute to the theory of value creation and quality management.

III

Acknowledgements

This Master Thesis has been carried out in collaboration with the company L2GO Sweden AB

and Uppsala university. The work has been developed by Anirud Gopal Jayashree and

Yogeshwaran Ravindran, both contributing equally to the entirety of the thesis document.

Firstly, we would like to thank our supervisor Mr. Olof Lundström, the CEO of L2GO for

allowing us to work with them and for guiding us through the entire study, and in addition to that

for letting us use their information to generate and contribute certain ideas to the research world.

Secondly, we would like to extend our thanks to our subject reader, Mr. Daniel Tolstoy for making

our thesis what it is today. Not only did he act as a guide, but as a mentor, we learned a great deal

from him apart from his constructive feedback and comments to improve the quality of our

research which has reflected in our report. Every seminar conducted meant more insights and

knowledge for us, and for that, we are eternally grateful.

Our opposing chair in every seminar, Ms. Lisa Lundin gets a special thanks from our side for her

invaluable feedback and strong criticism. She is one of the reasons for changing our original thesis

idea to a more profound and intricate one which proved to be beneficial in the end.

We would also like to thank the CTO of L2GO Mr. David Bauman, for his support during the

entire duration of our thesis and for clarifying doubts when needed. On the same line, we would

like to extend thanks to Mr. Saravanakkumar K.R who acted as an external counsel clarifying

our queries whenever needed.

I, Anirud Gopal Jayashree, would like to thank my mother Mrs. Jayashree Gopal for giving me

all the emotional assistance that I needed, and my father Mr. S.T. Gopal for supporting me all

these years not only financially, but also motivating me in every way possible. My younger sister,

Ms. Akshara Gopal has been kind, caring and open to all my tantrums over the years and has

been a pillar of strength. They mean the world to me and I owe everything to them.

I, Yogeshwaran Ravindran, would like to convey my heartfelt thanks to family and friends in India.

I would like to especially thank my mother Mrs. Nalini Ravindran for being a constant pillar of

support emotionally as well as financially. She has been the biggest source of motivation that

guided me to do my best through the tough times. My father Mr. V. Ravindran has been kind and

supportive over the years. Life far away from home is a big challenge, but the efforts I took to

overcome this was worth the struggle because, this provided me with an opportunity to make my

mother proud, which has always been the dream that I strived to achieve.

Anirud Gopal Jayashree and Yogeshwaran Ravindran

IV

Table of Contents

ABSTRACT ................................................................................................................................................................... I

POPULAR SCIENTIFIC SUMMARY ....................................................................................................................... II

ACKNOWLEDGEMENTS ........................................................................................................................................ III

LIST OF FIGURES .................................................................................................................................................... VI

LIST OF TABLES ...................................................................................................................................................... VI

LIST OF ABBREVIATIONS ..................................................................................................................................... VI

1 INTRODUCTION ..................................................................................................................................................... 1

1.1 RESEARCH BACKGROUND ................................................................................................................................... 1 1.2 RESEARCH GAP ................................................................................................................................................... 3 1.3 RESEARCH APPROACH ........................................................................................................................................ 3

2 LITERATURE ANALYSIS ...................................................................................................................................... 5

2.1 CUSTOMER VALUE............................................................................................................................................... 5 2.1.1 Customer Value Creation in the B2C Context ............................................................................................ 6 2.1.2 Understanding customers in a startup ......................................................................................................... 6

2.2 ELEMENTS OF CUSTOMER VALUE CREATION FRAMEWORK ................................................................................ 7 2.3 CONCEPT OF CUSTOMER SATISFACTION .............................................................................................................. 9

2.3.1 Drivers of Satisfaction ................................................................................................................................ 9 2.4 CUSTOMER VALUE AND CUSTOMER SATISFACTION ........................................................................................... 11 2.5 CONCEPT OF BUSINESS MODELS ....................................................................................................................... 12

2.5.1 Traditional or Linear Business model ....................................................................................................... 12 2.5.2 Sustainable Business Model ..................................................................................................................... 13 2.5.3 The Circular Business Model ................................................................................................................... 13

2.6 CONCEPTUAL MODEL ........................................................................................................................................ 15

3. METHODS ............................................................................................................................................................. 16

3.1 THE RESEARCH METHODOLOGY ........................................................................................................................ 16 3.2 ABOUT THE COMPANY ...................................................................................................................................... 17 3.3 RESEARCH DESIGN ............................................................................................................................................ 18

3.3.1 Case study design ..................................................................................................................................... 18 3.4 EMPIRICAL DATA COLLECTION APPROACH ........................................................................................................ 19

3.4.1 Primary Data Collection ........................................................................................................................... 20 3.4.2 Secondary Data Collection ....................................................................................................................... 21 3.4.3 Empirics: Case company .......................................................................................................................... 21 3.4.4 Empirics: Customers ................................................................................................................................. 22

3.5 DATA ANALYSIS ................................................................................................................................................ 22 3.5.1 Reliability and Validity............................................................................................................................. 23 3.5.2 Reflexivity ................................................................................................................................................ 24

3.6 SAMPLING ......................................................................................................................................................... 24 3.7 LIMITATIONS AND SCOPE .................................................................................................................................. 25 3.8 ETHICAL CONSIDERATIONS ............................................................................................................................... 25

4 FINDINGS AND ANALYSIS – L2GO ................................................................................................................... 27

4.1 FUNCTIONAL/INSTRUMENTAL VALUE ............................................................................................................... 27 4.2 EXPERIENTIAL/HEDONIC VALUE ....................................................................................................................... 29 4.3 COST/SACRIFICE VALUE .................................................................................................................................... 30 4.4 SYMBOLIC/EXPRESSIVE VALUE ........................................................................................................................ 31

5 FINDINGS AND ANALYSIS - CUSTOMERS OF L2GO .................................................................................... 34

5.1 FUNCTIONAL/INSTRUMENTAL VALUE ............................................................................................................... 34 5.2 EXPERIENTIAL/HEDONIC VALUE ....................................................................................................................... 36 5.3 COST/SACRIFICE VALUE ................................................................................................................................... 38 5.4 SYMBOLIC/EXPRESSIVE VALUE ......................................................................................................................... 39 5.5 SUMMARY OF FINDINGS AND ANALYSIS ........................................................................................................... 41

V

6 DISCUSSION .......................................................................................................................................................... 42

6.1 DISCUSSION RQ1 .............................................................................................................................................. 42 6.1.1 Functional/Instrumental Value ................................................................................................................. 42 6.1.2 Experiential/Hedonic Value ...................................................................................................................... 43 6.1.3 Cost/Sacrifice Value ................................................................................................................................. 44 6.1.4 Symbolic/Expressive value ....................................................................................................................... 44

6.2 DISCUSSION RQ2 .............................................................................................................................................. 46

7 CONCLUSION ........................................................................................................................................................ 49

7.1 LIMITATIONS AND FUTURE RESEARCH ............................................................................................................... 50 7.2 THEORETICAL CONTRIBUTION ........................................................................................................................... 50 7.3 MANAGERIAL IMPLICATIONS ............................................................................................................................ 50 7.4 ETHICAL IMPLICATIONS .................................................................................................................................... 51

8 REFERENCES......................................................................................................................................................... 53

APPENDIX A ............................................................................................................................................................. 62

VI

List of Figures

Figure 1. Customer value hierarchy model (Woodruff, 1997)..................................................6

Figure 2. The EPSI Rating model structure; Source: Eklöf & Westlund (2002).....................10

Figure 3. Conceptual model.....................................................................................................15

Figure 4. Data Collection Method............................................................................................20

Figure 5. Main findings from L2GO........................................................................................27

Figure 6. Main findings from customers of L2GO.................................................................34

List of Tables

Table 1. List of variables in the model......................................................................................10

Table 2. Selection criteria for the case company.......................................................................19

Table 3. Interviewee Profile: Firm Representatives...................................................................21

Table 4. Summary of discussions to RQ1..................................................................................46

List of Abbreviations

CBM Circular Business Model

EPSI Extended Performance Satisfaction Index

TQM Total Quality Management

ASCI American Index of Customer Satisfaction

EFQM European Foundation for Quality Management

EOQ European Organization for Quality

BMI Business Model Innovation

TBL Triple Bottom Line (Theory)

SBM Sustainable Business Model

PSS Product Service System

AoM Academy of Management

CE Circular Economy

CVC Customer Value Creation

CS Customer Satisfaction

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1 Introduction

This chapter provides a brief background for the study, an introduction to the concept of Circular

Economy (CE), and its importance to the present day scenario, followed by problematization.

Considering these aspects, it will further contain the scope of the study, contrive a research

problem that leads to the purpose of this research.

1.1 Research Background

The economy is probably the most important system for a country, the organizations and the people

of that country, it provides the framework of how organizations, governments, and individuals run

their day to day work. “The economy is a system that encompasses the production, trade, and use

of goods and services in a particular area” (Wood, 2019). A big threat to the present day is the fact

that the world population is scaling up at a rate like never before, and it begs the question ‘why

should that be an alarming factor’? It should, because population and demand are two

proportionate factors, and with an increase in population there will be an increase in demand for

products and services (McKinsey & Company, 2012). This opens doors to environmental and

social problems, to meet customer demands, companies need to produce more. For increased

production, they require resources (raw materials) and thus companies across the globe have been

using replenishable resources to make products without much regard to the environment and future

(MacArthur, 2013).

This brings us to the current state of how the world works, “Most countries around the globe are

currently following the practice of linear economy” (Stahel, 2016). The linear economy is a model

that takes resources, makes products with them and disposes these products after a certain period

of usage or when broken or damaged (take-make-waste) (Michelini et al., 2017). Linear models

have been a huge contributor to resource wastage in many ways like “production chain and end of

life waste, excessive energy use and erosion of ecosystems” (Michelini et al., 2017). A study by

Ellen Mac Arthur foundation states that “21 billion tons of materials used in production do not get

incorporated in the final product i.e., they are lost during the transition between the forms a

material takes during production as unused by-products, and due to inefficiency, storage problems

seem to be on the rise (McKinsey & Company, 2012). A call for an alternative has thus been on

the rise as we can’t continue to deplete the natural resources.

“A circular economy would turn goods that are at the end of their service life into resources for

others, closing loops in industrial ecosystems and minimizing waste” (Stahel, 2016). Another

definition would be “A CE is a platform in which today’s goods are tomorrow’s resources, forming

a virtuous cycle that fosters prosperity in a world of finite resources” (MacArthur, 2013). We can

see from these definitions that CE aims to eliminate wastes at a major level, it also aims to produce

products using renewable sources of energy and by using non-toxic substances and thus we can

say that in the CE models, environmental factors are ensured in all aspects within the value chain.

The history of the CE is deep-rooted as it has been in existence and discussed since 1970. It was

believed that environmental economists Pearce and Turner were the founders of the concept of the

circular economy, which was later proven false. Its origin was perhaps found to be rooted in

ecological and environmental economics and industrial ecology (Wautelet, 2018). The CE is a

theory that is frequently refined and adjusted based on the concepts of performance economy,

cradle to cradle theory and blue economy, but what remains constant is the bottom line principle

that is (Reduce, Reuse and Recycle) (McKinsey & Company, 2012).

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The growing circular model has huge collisions with the existing linear model. Jain (2017) states

that “Natural friction between the existing economic system and the new approaches to production

and customer interaction with products is bound to arise and create issues for business owners and

policymakers”. A CE approach aims to develop a sustainable and closed-loop system for any kind

of product/service offering organization. Moving towards a circular economic pattern of

businesses, companies might need to consider how these transforming business models would

require innovations to keep them in the loop. When businesses reach out to customers, they have

to produce what the target audience expects, i.e., a business model that is ready to develop a

blueprint for durability, design and long-term satisfaction (Niinimäki, 2017). This introduces us to

the concept of the Circular Business Model (CBM) which is an integral part of the circular

economy. CBMs follow a Take-Make-Reuse approach which implies solutions (products and

services) that are aimed at enhancing the circular economy, responding to resource scarcity and

minimizing environmental impacts (Lieder and Rashid, 2016).

In the Take-Make-Reuse principle, Take; refers to making maximum use of underutilized and

renewable resources, Make; refers to producing and manufacturing through employing sustainable

and environmentally friendly methods and Reuse; refers to sharing of the products between

multiple customers and recycling it at the end of its life cycle. The principle mentioned above can’t

be achieved by any other business model for example, linear or sharing model because they are all

designed in such a way that customers take ownership of products and thereby prohibiting

companies to have any control of it but in CBMs, these principles could be achieved as companies

take ownership of the products used and hence they would have complete control (MacArthur,

2013). Despite its social, environmental and economic benefits, the concept of CBM has only

managed to grab the attention of academicians resulting in an extensive literature study on the

concept, the practical implementation of the CBM has only been modest as we can witness

business practices typically are linear by nature (Tura et al., 2019).

The transformation from linear to a circular way of working for incumbent firms and newly

emerging firms that wish to adopt a circular way of working are particularly not easy as many

factors hinder it (Mentink, 2014; Enckell and Isgran, 2017). Looking at these hindrances from an

organizational point of view, Customer value creation (CVC) seemed to be one of the major

barriers because customers in the first place are not aware of such a concept and further it has been

difficult for companies to convince customers to pay for products without enjoying ownership.

The transition for organizations would become smoother only when more customers are involved

in this process, i.e more customers pay for circular products and services (Tukker and Tischner,

2006). Customers will choose products or services that they think have created value for them. For

products and services to create value, it should satisfy the expectations and needs of the customers.

If companies that function under CBMs improve their value proposition to keep their customers

satisfied, then more people might choose the services offered by these firms. This will lead to less

production and great utilization of resources on a global scale (McKinsey & Company, 2012).

Creating value that could potentially satisfy customer needs has certainly been an interesting area

of research for a very long time, and some companies have been very successful, but many

companies have failed in this process (Verhoef and Lemon, 2013). The focus of this study is thus

on ‘customer value’, which is one of the five dimensions of value (Jain, 2017). The study began

by trying to explore concepts and frameworks that were relevant to CVC specific to CBMs, but

such a specific construct did not exist and so the search was broadened and that's when we explored

3

a generic framework established in a study by (Smith and Colgate, 2007) which could be used to

simplify the process of creating customer value, the framework consisted of 4 elements that looked

at customer value from multiple perspectives of value. During the value proposition stage, it has

practically been tough to establish a common trait between the different elements as they would

differ from person to person and also, understanding the complexities in these elements of value

and how they could lead to CS seems very much unexplored theoretically, so we decided to explore

the range of these elements specific to circular businesses.

1.2 Research Gap

The existing works of literature hugely focus on the CBMs and the circular economy, in the sense

that most of the literature that was available on CBMs are focused on social and environmental

sustainability rather than value creation and customer value (Jabłoński, 2020). Among the few

works of literature that were available on value creation, Jain (2017) studied the different

dimensions of value offered by CBMs and stated that all the dimensions of value are very equally

important for any firm and further developed a framework that could assess each dimension of

value and use them as a competitive advantage. In addition to that, Gülyaz et al. (2019) studied

CVC and developed an approach that could be used to help create customer value in a lean setup.

Also, previous literature studies are based on how customer value has changed from being

unidimensional to a multidimensional construct (Smith and Colgate, 2007; Jabłoński, 2020).

Moreover, separate studies have been conducted on how customer value, in general, has an effect

on CS and how value co-creation could eventually lead to the same. But, despite its importance,

studies pertaining to the contributions of the elements of CVC for firms in the CBM and how they

can be used to drive customer satisfaction, have not been delved into. No specific framework or

conceptual model for CVC specific to CBMs has been established previously. This paper will thus

address this gap, focusing on a CBM challenge from a customer’s perspective with an intent to

explore the range of elements in CVC and to establish how firms operating under the umbrella of

CBMs could make the best use of them. The scope of this study further extends by talking about

how these elements could be connected to the drivers that lead to CS. Our research initially focuses

on understanding how firms under the CBM use the elements of CVC and how customers perceive

the same. From the result of this, we will be able to see how it relates to drivers of satisfaction. To

address these objectives, i.e., to study this, a start-up from the CBM setup is selected, and two

research questions are formulated:

RQ 1: How can firms having a Circular Business Model utilize the elements of customer value

creation?

RQ 2: How can the elements of Customer Value Creation drive customer satisfaction?

1.3 Research Approach

The research takes form in a two-step process. The first step is to carry out an extensive literature

review on the topics of interest here. The point of this review is to shed light on how customer

value is created in CBMs, explore the different elements/constructs/facets of customer value

creation and establish a connection to the drivers of satisfaction within a company following CE

principles.

For empirical validation to support our claims, a case company that operates as a sharing model

within the realm of circular economy has been selected, and a detailed explanation about their

business and activities is provided in section 3.2. This was done to limit our focus on the topic at

4

hand. The company that we have chosen is a startup that is based out of Stockholm, Sweden. An

opportunity was provided at this firm and we leveraged it to conduct our study. Interviews from

various members of the firm and their customers have been conducted to strengthen our theoretical

understanding and in turn our reasoning.

5

2 Literature Analysis

We start the first section of this chapter, by talking about customer value in general and then move

on to explain terms within CVC and end up exploring elements associated with the same. In the

next section, the concept of CS is introduced and the drivers of satisfaction are identified from the

theory. Then, we highlight the synergies between customer value and satisfaction. Finally, the

concepts within business models, how they have transformed over time from a traditional

perspective (linear) to a modern outlook (circular), and a conceptual model explaining the gap we

intend to address as a part of this thesis are explained.

2.1 Customer value

Customer value is the percentage of what a product/service is worth to the customer and is a very

vital element for all businesses alike. It is the glue that keeps the customer attached to the service

offering. Attaching customers’ interests to the brand acts as a gift to the company rather than profit

because this would lead to a constant profit flow sustaining over a very long period (Park et al.,

1986). One reason for companies to create customer value is that customers tend to compare

products or services between the different sellers/service providers, hence the creation of what the

customer perceives as value addition to his/her life, is a good competitive advantage (Kothari,

2017).

It is clear that creating customer value in general, is probably the single most important aspect for

any company as customers these days are flooded with multiple choices to select from, and if a

company fails to create value to its customers, then they will easily be replaced in the market

(Mansfield, 2018). Conceptualizing customer needs is the basis of understanding different

elements of customer value, but this has been quite hard to do as noted by earlier researchers. Park

et al. (1986), in their marketing journal, talks about how customer needs could be an important

concept in influencing the selection of a brand. Further on, they describe these customer needs to

represent value dimensions such as functional, symbolic and experiential needs. Numerous

definitions of customer value have led to different takes on what creates value to the customer and

one such example can be seen from Sheth et al. (1991) where a theory of consumption values was

studied and goes on to explain five different types of value influencing customer choices in buying.

They were functional value, social value, conditional value, emotional value and epistemic value.

As argued by Smith and Colgate (2007), they had missed mentioning the importance of cost-

effective on a customer for value generation.

In addition to that, the situational nature of customer value is important to associate with the

customer and their situation (Holbrook, 1999). To understand what customers value the first step

is to conceptualize an effective value proposition and Holbrook (1999) proposed an axiological

framework entailing eight types of value, namely: efficiency, excellence, status, esteem, play,

aesthetics, ethics, and spirituality (Rintamäki & Kirves, 2017; Smith & Colgate, 2007). We are

familiar with a firm’s perspective on the dimensions of value creation, generally having economic,

social and environmental value as the factors influencing their business. In line with this, the core

motivation for new-age entrepreneurs seems to arise from a firm’s contribution to economic value

while solving an environmental issue at hand (Schaltegger & Wagner, 2011). However, this paper

is not focused on dimensions of value creation but it is no escaping fact that they are the basis on

which any business model stands, from a profit-making and social responsibility perspective

(Clauss, 2017).

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2.1.1 Customer Value Creation in the B2C Context

Value is an evasive concept (Woodall, 2003), hard to create and implement as each customer will

perceive value in a unique way (Grönroos, 2011). Value creation and implementation differ

between Business-to-Business (B2B) and the Business-to-Consumer (B2C) context. In the B2B

context, great importance is given to all the stakeholders during the value creation process which

is not the same in a B2C context in which only the customer is given importance during the value

creation process (Wollenick, 2012). Value creation is not a one-time event and value can’t be

created absolutely in the first transaction between a customer and the company, it is a gradual

process and that is why in the B2C context the relationship between a customer and the firm is

regarded as highly important (Wollenick, 2012).

Value creation in a service system revolves around the fact that value propositions are being

offered to initiate the process of value generation or creation (Smith, Ng and Maull, 2012). The

operational capabilities of organizations are seen as the drivers of customer value delivery from

different companies offering in the subtext of the same customer segment. Woodruff (1997) talks

about how a customer’s idea of customer value affects the value proposition in a way to extend

user satisfaction, overall. Woodruff and Gardial (1996) have laid out a customer value hierarchy

model, Figure 1 will help us understand the perceived preferences and goals of the customer.

Figure 1. Customer value hierarchy model (Woodruff, 1997)

The difference between customer perceived value and value received can be understood if we

grasp an idea of the relationship between customer value and customer satisfaction, which can be

found in section 2.4.

2.1.2 Understanding customers in a startup

Start-ups usually find it difficult to figure out the segmentation of customers who would use their

product/service unless it is a very niche market, marketed for a specific group of people (Taneja

& Chenault, 2019). But eventually, they have to start segmenting types of potential customers and

develop a marketing strategy to get them on board. To understand customers and what they want

(or) need, companies should focus on strengthening the base assumption of their business model.

7

According to Nobel (2011), entrepreneurs usually tend to be single-minded with their strategies

with the launch of their brainchild, sometimes missing out on formulating a plan to ensure the

longevity of the company. Anchoring biases in a direction of how it can prove to be successful for

the enterprise should be thought about, and the main idea lies in understanding the right type of

people to target in hope of them being your potential customers. To explicitly recognize customer

needs, the firm must understand how they can create a certain level of value for the customer.

Various authors have talked about how companies provide value propositions (Cohn, 1967) and

how the value created is something that is insinuated by the customer itself, rather than the firm’s

effect (Yousafzai et al, 2016). In the next section, we talk about the elements of CVC that we

study in this thesis, as relevant for fulfilling the purpose of the research.

2.2 Elements of Customer Value Creation Framework

From a firm’s perspective of customer value, the focus is mostly on what kinds of value can be

created, and how the value proposition can be positioned in such a way (Smith and Colgate, 2007).

To study customer value from both a firm’s perspective and the customers’ perspective, we take

on the operationalized and tested theory of consumers’ choice as noted by Sheth et al. (1991), but

with a slight modification and reduction of the number of factors, as suggested by Smith and

Colgate (2007) which are listed as follows.,

i) Functional/Instrumental value.

ii) Experiential/Hedonic value.

iii) Symbolic/Expressive value.

iv) Cost/Sacrifice value.

This is similar to the framework proposed by Rintamäki, et al., (2007) in which there are 4 key

dimensions of customer value for evaluating a value proposition for competitive advantage, in the

retailing sector. However, each of these four value-creating elements mentioned above constitutes

different ideologies that provide to the study in a certain way. We use this type of categorization

as it is deemed applicable from both, a business and a consumer context.

Functional/Instrumental Value

Sheth, et al. (1991) defines the functional value to be, “The perceived utility acquired from an

alternative’s capacity for functional, utilitarian, or physical performance”. Functional value mainly

stems from the fact that it reduces the amount of work a person has to do and in the context of

customer choices, it is the perceived value of a person generated by finding a solution for their

needs (Rintamäki & Kirves, 2017). In line with this, we can say that functional value is an

underlying notion in the theory of utility which is based on individual preferences (Schmitz, 2012).

Taken from the ‘International Encyclopedia of the Social & Behavioral Sciences’ (2001), “Utility

theory is the basis for eliciting judgments from the decision-maker about preferences among

alternatives concerning each attribute, common units of value across attributes, and uncertainty”.

Kang (2006) says that functional value focuses on issues such as the customer support staff and

the agility of the service post-purchase, in addition to the usefulness and timeliness of the service.

Moreover, Smith & Colgate (2007) say that functional value is related to functional needs that

motivate consumption-related problems and further entail facets such as customization, reliability,

etc.

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Experiential/Hedonic Value

Sheth, et al. (1991) defines experiential value as, “perceived utility derived from an alternative’s

capacity to arouse feelings or affective states” (Rintamäki, et al., 2007). This can be understood as

to how the customer perceives value by their pleasure, enjoyment, and the feeling of being at ease

(Rintamäki & Kirves, 2017). In addition to this, the customer value constructs as viewed in

previous studies have been highly influenced by emotional value-adding factors. To understand

more about what experiential value entails of, a study by Zhang, et al., (2017) has been looked into

for reference, and we found that hedonic value relates to feeling pleased and relaxed, gaining joy

and happiness, and feeling inspired to use the product/service. Furthermore, Smith & Colgate

(2007) in their study summarise experiential value to have aspects such as aesthetics from the

product used, trust through interactions, and personal/relational benefits by keeping customers

informed. Moreover, service attributes such as delivering promises, the life of the product/service

can also affect customer experiences which would be viewed from a hedonic value perspective.

Cost/Sacrifice Value

Customers are inclined towards using certain products/services, sometimes based on the

affordability and the value extracted from that perspective can be loosely termed as economic

value. Companies usually compete for prices in the marketplace by offering an economic value

proposition in terms of low prices, and value-in-use context (Smith & Colgate, 2007). This price

of a product along with transaction and processing costs concerned are usually associated with the

customer ending up buying (or) using the same (Smith & Colgate, 2007). By providing

cost/sacrifice value to customers, they will be able to make informed and better decisions. Also,

Lindman, et al., (2016) say that cost/sacrifice value includes three aspects: monetary costs, non-

monetary costs, and risks. They go on to say that monetary costs are inclusive of the

product/service price, cost of use, maintenance cost, etc. The non-monetary costs would include

personal investments of time and energy. The risk factors include personal investments, financial,

and operational risk.

Symbolic/Expressive Value

Looking beyond material aspects associated with the product/service represents the symbolic value

experienced by a customer. The attachment that a customer pursues on a psychological level can

be seen as symbolic value (Smith & Colgate, 2007), and this means creating meaning-related

benefits that can influence the customer and their surroundings positively. Symbolic consumption

is defined by Sun, et al. (2014) as, “Acquisition, creation, preservation, and presentation of our

existential identity through consumption” (p. 55). This type of value concerns a customer’s self-

appeal and self-worth, i.e., either when they have the product, or when expressing their taste and

personality through the product/service. Smith & Colgate (2007) further in their paper summarise

that symbolic/expressive value can position and help consumers identify the product by making

associations with meaning. They also say that a product/service can enhance personal, social, and

sociocultural meaning through a simple delivery (or) staff-customer interactions.

In the next section, we introduce the concept of CS, drivers of satisfaction, and how CVC is related

to the same. This literature contributes to the discussion of the second research question.

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2.3 Concept of Customer Satisfaction

The customer satisfaction construct has become very popular in the recent decade and it has further

gained importance in the marketing literature (Eggert and Ulaga, 2002). It can be defined as “the

result of a comparison process between perceived performance and one or more comparison

standards, such as expectations” (Eggert and Ulaga, 2002). From this definition, we can understand

that CS is based on how well the product or service meets the expectations of the customer. If the

product or service meets the customer’s expectations then the customer is satisfied and if it does

not then the customer is dissatisfied.

Studies focusing on understanding customers’ consumption practices and value creation have led

the discussion to open a dialogue on CS. In the past, authors have talked about this topic in various

contexts, including how value creation eventually leads to satisfaction and the role of co-creating

value, as well (Vargo and Lusch, 2004; Windsor, 2017). Customer satisfaction has emerged as one

of the most profusely studied theories that fall under the branch of Total Quality Management

(TQM), extrapolated from the field of marketing (Bruhn & Grund, 2000). Total Quality

Management is the ideology in line with continuous improvement in firms, through a commitment

to CS (Barone, 2020).

Until recently, the focus on quality for companies was mainly on products distributed and

consumed (Ahire, et al., 1996). The Total Quality Management (TQM) approaches have since

changed, and CS is seen as the factor that is used to predict customer retention rates and the loyalty

of a customer (Hallencreutz & Parmler, 2019). To understand what CS is and its drivers, first, it is

important to define what we mean by the term ‘Satisfaction’.

“Satisfaction is an overall psychological state that reflects the evaluation of a relationship between

the customer or customer and a company, environment, product or service” (Qualtrics.com, 2019).

It refers to a psychological state and this factor makes it very complex as this state is subject to

change based on the external environment. With this, we go on to say that within the realm of

quality management, value creation has been studied from a context of customers as well as

stakeholders from the angle of analyzing customer needs and expectation (Bergman & Klefsjö,

2010; Eklöf & Westlund, 2002). Following this line of thought, we can see why it is important to

understand and measure CS as a factor in research, to contribute to the theory of Total Quality

Management. CS is the degree to which a customer relates to the perceived value created by

meeting their needs, whilst using the product/service. It stems from relationships established

between the customer and the service provider, usually with multiple dimensions involved (Reed

& Hall, 1997). This is seen as a socially constructed response (Cengiz, 2010), and the related

dimensions are broken down as; i) customer-product relationship, ii) provider-product relationship

and iii) customer-provider relationship (Reed & Hall, 1997).

2.3.1 Drivers of Satisfaction

Customers are viewed as a heterogeneous entity while measuring CS levels since the target of the

measurement effort is mainly from a customer’s perspective, in this study. Based on the theoretical

works previously done in relevance to assessing satisfaction/dissatisfaction levels, a national index

for measuring satisfaction was brought about in Sweden in 1989, known as the ‘Sverige

Kundbarometer’. Similarly, the ‘Deutsches Kundenbarometer’ was developed as a national index

in Germany in 1992 followed by the ‘American Index of Customer Satisfaction’ (ASCI), which

was introduced in 1994 influenced mainly from the Swedish model (Bruhn & Grund, 2000). Over

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time, more trustworthy frameworks have been established that can be used to estimate the level of

CS. The Extended Performance Satisfaction Index (EPSI) Rating model is one such framework

that was developed in 1997 and has been constantly evolving ever since. This was started by the

European Commission and the Pan-European quality organizations EFQM (European Foundation

for Quality Management), EOQ (European Organization for Quality), and IFCF (International

Foundation of Customer Focus) (Eklöf & Westlund, 2002; Hallencreutz & Parmler, 2019).

The design of the model is relatively generic in comparison to some of the other models that are

in use and can be used by an individual organization to analyze comparisons between

organizations. There are latent variables and result variables that are construed within the model

for evaluation, and they are mentioned as presented in the table below (Eklöf & Westlund, 2002;

Hallencreutz & Parmler, 2019).

Table 1. List of variables in the model

The model is designed in such a way to analyze what makes customers satisfied and loyal and in

addition to that, from the firm’s perspective, it can be used to study and improve employee

engagement levels and the organization’s performance compared to competitors in the market

(Index, 2020).

Figure 2. The EPSI Rating model structure; Source: Eklöf & Westlund (2002)

The model presented above is structured in a specific way to understand the synergies between

each of the terms present to arrive at the resulting variable of CS. We can see that satisfaction is

achieved by meeting expectations, understanding perceived value, and by achieving overall

satisfaction. The ‘image’ factor represents the type of association customers create to the brand

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and the offering provided. ‘Expectations’ relates to what the customer expects and how their need

is satisfied through the offering. ‘Perceived value’, as we have already talked about, is dependent

on what the company is providing the customer with during the service, and after the service which

leads the argument for service quality created. (Hallencreutz & Parmler, 2019)

Service quality is a measure of the extent to which the product offering meets the customer’s

demands (Fu & Zhicai, 2016), while CS is an overall effective response to the perceived

discrepancy between prior expectations and perceived performance (Fu & Zhicai, 2016). In simple

terms, a product/service of good quality is not the only criteria required to satisfy the customer.

2.4 Customer value and customer satisfaction

The constant need for customers to collaborate with firms establish that they are the active

participants in the value creation process and how CS is achieved. CS is one of the important

aspects of marketing and it is also known that the customer compares their expectation levels with

the actual service/product offering (Vega-Vazquez, Revilla-Camacho and Cossío-Silva, 2013).

Following this line of thought, it would lead to a theoretical framework concerning the actions

surrounding value creation and its antecedents for better customer satisfaction. However, the

limitation lies in previous studies not probing into the firm’s perspective on how CS has an effect

in value generation and in defining the customer’s engagement in it (Vega-Vazquez, Revilla-

Camacho and Cossío-Silva, 2013). The involvement of the customer within the value creation

process is also linked to factors improving the relationship between the customer and the provider

through generating customer loyalty and trust (Szarucki and Menet, 2018). From an internet survey

conducted by Szarucki and Menet (2018), it has been found out that low-price, well-designed

equipment, user-friendly online platform and refined packaging of goods contributed the most to

CS. With this, we try to establish the fact that CVC might not be the only way to generate

satisfaction, but it sure does have a huge impact on the process.

Customers are the key attributes of any business (Bounds, 1994). To improve the number of new

customers and the involvement of existing customers, any company should strive to keep its

customers satisfied at all points (Dovalienė, Gadeikienė and Piligrimienė, 2007). From sections

2.1 and 2.3 talking about CVC factors and CS respectively, we can arrive at the following

inferences:

- Discovering value opportunities that can be offered by the firm to produce customer value, creates

a suitable marketing offering from the firm’s perspective and eventually could lead to satisfaction

in customers, as their needs are met.

- Following up on what the customers want based on segmentation, the role of creating new value

propositions seem to keep the customers happy and faithful to the firm (Herman, 2014).

- Customer satisfaction establishes an emotional tie for the customer with the product/service

offering (Mansfield, 2018). When customers make the choices they make, their drive to use the

product/service stems from perceived value rather than the derived value and highly satisfied

customers are likely to be recurrent with their purchase and become less price-sensitive. They

might end up creating value indirectly through word-of-mouth by suggesting their friends and

family, to use the product/service.

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2.5 Concept of Business Models

A standard business model would entail generic operations of an organization with an intended set

of plans for understanding their customers and generating revenue. Business models have been a

huge focus amidst both academics and practitioners, and they have become prevalent with the

advancement of the internet (Zott, Amit and Massa, 2011). A business model, as defined by

Morris, Schindehutte and Allen (2005) is, “A concise representation of how an interrelated set of

decision variables in the areas of venture strategy, architecture, and economics are addressed to

create sustainable competitive advantage in defined markets”. This definition could be interpreted

as the representation of plans laid out by an organization that determines how they should function,

and how they could gain a competitive advantage in the marketplace and eventually generate

profits. Business models have certainly been defined very differently by various researchers. In

general terms, one particular definition would not suffice as many studies on business models are

perhaps carried out without explicitly defining the same (Zott, Amit and Massa, 2011). Among the

many different existing business models, the most pertinent in the world today is the traditional or

linear business model (MacArthur, 2013). It is because this business model is followed by a

majority of organizations and companies across the globe. Companies like Facebook, Apple,

Amazon, etc. have used the linear business model, innovated and have achieved success on a huge

scale. (Johnson, 2017). Owing to its properties of unsustainable practises and improper

resource/raw material management, there has been a huge demand for an alternative (Sariatli,

2017). An alternative, which is the CBM seems best fit to solve the problems of linear economy,

foster growth, innovation, and sustainability practices (McKinsey & Company, 2012).

2.5.1 Traditional or Linear Business model

The linear business model is similar to that part of history where wealth was split between

territories based on geography, which eventually allowed certain countries to be very rich and

many to be poor and adhere to poverty (McKinsey & Company, 2012). This indicates that the

current economic model is uneven and unstable, It gives huge opportunities for countries that are

in a higher power and position to exploit the resources of countries that are not (Sariatli, 2017).

The linear economy model takes resources, makes products with them and disposes these products

after a certain period of usage or when broken or damaged (Take-Make-Waste) (Michelini et al.,

2017). So, the relationship between companies and customers is not beyond the time of product

disposal. The “drawback of the ‘take-make-waste’ approach is that it is leading to scarcity,

volatility, and pricing levels that are unaffordable for our economy’s manufacturing base”

(MacArthur, 2013). In a linear economy model, products are manufactured as if all resources were

infinite; this includes natural resources. The Take-Make-Waste approach “enables us to take

resources from the ground to make products, which we use, and, when we no longer want them,

throw them away” (MacArthur, 2013). The Linear model has been a huge contributor to resource

wastage in many ways like “production chain and end of life waste, excessive energy use and

erosion of ecosystems” (Michelini et al., 2017). A study by Ellen Mac Arthur foundation states

that “21 billion tons of materials used in production do not get incorporated in the final product

(i.e. they are lost during the transition between the forms of materials, in production, as unused

by-products, due to inefficiency, as a result of storage problems, etc.) (McKinsey & Company,

2012).

Despite all the criticism and disadvantages, the linear model still has been very prominent and

followed by most countries in the world, this is mainly because the linear model makes the cost of

resources cheaper than human labour (Sariatli, 2017), and thus companies and industries develop

13

their business models by “extensive use of materials and economized human labour” (Sariatli,

2017). Since the cost of resources is cheap, the end product will also appear cheap and affordable

to the customer, burying the idea/concept of recycling and reusing (Sariatli, 2017). This model

thus appears as a huge threat to various forms of sustainability and has provoked the need for an

alternative, a business model in which the economy could preserve the environment, optimize the

use of resources, promote recycling/reuse. Tim Jackson in his book ‘Prosperity Without Growth’

has provided why conventional economic growth will never cease to create value more than we

want to (Jackson, 2009). Jackson here touches on several aspects of how sustainable economic

growth could be achieved, and Bocken, et al., (2014) touches on these features and generates points

to summarize what Tim Jackson had envisioned.

2.5.2 Sustainable Business Model

There have been a lot of studies about business models and there has also been a constant need to

innovate the business models (Zott, Amit and Massa, 2011). Several studies have been carried out

concerning innovations that have shaped business models. Sustainability, which is a very

important factor in the present has not been given huge importance previously when innovating a

business model (Chesbrough, 2010).

“Sustainable business model archetypes are introduced to describe groupings of mechanisms and

solutions that may contribute to building up the business model for sustainability” (Bocken et al.,

2014). According to the definition, an SBM is a business model integrated with sustainable

features and practices. The idea around these business models seems to have arrived from Business

Model Innovations (BMIs) which are aimed to improve economic sustainability factors and

sustainable value propositions to customers (Bocken et al., 2014). Geissdoerfer, et al. (2018) had

conducted a literature analysis and case studies to understand how sustainability pillars could be

woven into the concept of a business model. Similar to the concept of the economic approach of

Triple Bottom Line (TBL) theory that involves 3P’s (People, Planet, and Price) (Tate and Bals,

2018), an SBM would consider the pillars of this theory that captures economic value and is in

balance with social and environmental factors that affect the business; positively or negatively.

The CBM is a sustainable business model that best fits the current situation, and the reason for

saying so is explained in detail in the section below.

2.5.3 The Circular Business Model

Linear business models are being overthrown to adapt to a circular way of working and the reason

for this shift is quite sensible considering the benefits it brings to the business and society. Saying

that the Circular Business Model (CBM) is derived from Sustainable Business Models (SBMs)

and one could even say that CBMs are SBMs but not the other way around. The multiple stages of

the value chain interplay into business activities that result in the product/service offering of an

organization. These operations (or) processes can be streamlined and made circular through

innovative solutions on what the organization offers (Bocken et al., 2014).

The CBM has been proven to address most of the economic, environmental, social and other

sustainable problems faced or created by other business models (Mentink, 2014). It certainly is not

a new concept as it has been existing in fragmented concepts such as Cradle to Cradle,

Biomimicry and Industrial Ecology (McKinsey & Company, 2012; Mentink, 2014). However, it

has drawn the attention of various industries and governments in recent days (Mentink, 2014), the

credits to this succession should be given to the Ellen McArthur Foundation (McKinsey &

Company, 2012; MacArthur, 2013). As like any other phenomenon, the CBM is also viewed in

14

different angles by different people. For example, Linder and Williander (2017) state that the

CBMs help companies cut down on costs significantly while Antikainen and Valkokari (2016)

state that companies under the CBM need to have more capital for establishing new business

opportunities. On the other hand, Mentink (2014) and Bocken et al., (2018) look at the CBM as a

phenomenon that is close to impossible to implement as any company trying to implement needs

to bring about huge changes to their existing setup. The one common thing all the above authors

and McKinsey & Company (2012) is that they agree on the fact that the production, allocation and

usage of resources are minimal and sustainable within the CBM.

The fact that the governments have taken up the CE and the CBMs is highly intriguing. In the

recent past, the European Commission wanted to implement CBMs across Europe and become a

resource-efficient entity (Commission and Others, 2011). They are on a roadmap to create a more

resource-efficient Europe (Mentink, 2014). The Government of the Netherlands is currently

running a program called “waste to resources” (Mansveld, 2014) implementing CBM principles

and trying to adapt a transition to the CE way of working (Mentink, 2014). Apart from these

noticeable government adoptions, the Ellen MacArthur Foundation, through great efforts gathered

almost 50 top-tier companies such as Philips, Coca-Cola, Renault and Unilever to adopt a circular

way of working (McKinsey & Company, 2012). Moving on from a CE aspect to working for

businesses in a CE, the shift has some considerable impacts that are relatable in terms of value

creation and business model positioning. We present a conceptual model that was designed to

understand the components we study in this thesis, and their relationships, in the next section.

Now that we have seen what a CBM is and the measures being taken recently to favour the same,

we can hop on to talk about how a company/firm can call itself circular. According to Pádua

Pieroni, et al. (2018), a successful transition to CE requires systemic changes in the way companies

understand and create value. Companies that provide value propositions that balance economic,

environmental, and social needs, value creation is produced by reducing the consumption of

resources, repairing environmental damage, and creating a social impact (Pádua Pieroni, et al.,

2018). Adhering to follow the principles behind having a circular model and being sustainable

requires new types and approaches to view the problem of take-make-waste, together (Frishammar

& Parida, 2019). Pádua Pieroni, et al. (2018) further claim that the qualifying criteria for being

sustainable and trying to achieve circularity. The main takeaways were that value capture, delivery

and creation need to be treated in a network scale of customers rather than keeping it company-

centric.

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2.6 Conceptual Model

We can infer from the previous sections how the creation of customer value ensures customer

satisfaction when they are provided with satisfactory elements on a functional, experiential, and

symbolic level. Preceding that, we can observe how the process of CVC is aimed at leading the

theory of customer satisfaction.

Figure 3. Conceptual model

Elements of customer value and drivers of satisfaction are thus identified in this paper to address

the research gap. Based on the literature review, a conceptual model is explained in this section as

an illustration that incorporates theories that we have identified and explained as needed to fulfil

the purpose of the research. The model firstly presents the elements of CVC as presented in the

framework by Smith & Colgate (2007). These elements provide grounds for what customers’

perceived value represents as to be a part of a startup following a CBM. The elements of this model

have been followed by the effect it has on perceived value from the firm’s and customers’

perspective, and the relationship between them is the illustration of how the elements of CVC are

connected to the drivers that lead to CS. The theory involving value creation and CS eventually

leads to customer retention and loyalty as depicted in Figure 3.

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3. Methods

This chapter outlines how the empirical data was collected and used to answer the research

questions, in addition to discussing the concepts of reliability, validity and reflexivity. We rewrite

our research questions here for the reader to have a cohesive understanding.

RQ 1: How can firms having a circular business model utilize the elements of customer value

creation?

RQ 2: How can the elements of customer value creation drive customer satisfaction?

Given the limited knowledge available on CVC dimensions specific to CBMs in the existing

academic literature, an exploratory literature analysis was considered as the right approach to

address the research question. During this process, relevant sources of customer value generation

were identified and termed as ‘CVC elements’. A description of the coding process is explained

in this chapter, and later in Appendix A, we have explained the analysis with an analysis tree.

3.1 The research methodology

To answer our research questions, we chose qualitative interviews to be our research method as

we moved forward. We believe that qualitative research is about understanding the underlying

connection found through interaction between individuals. This comes from the branch of a

philosophy rooted in the epistemology theory, called ‘Interpretivism’. The point of the research is

to gain in-depth details on the lives of the respondents to gain an empathetic understanding

(Brantnell, 2019). In turn, from an ontological viewpoint, we could argue that a constructionist

idea is to imply that social understanding is the result of interaction between different actors in the

loop (Bryman and Bell, 2011). To gain reliable and valid data, we conducted academic research

on how we could move forward with the collection of primary data.

In our research, we are following the empiricists’ approach of inductive reasoning driving from

the data collected that is used to arrive at the concluding discussion through logical justification

(Walliman, 2010). We plan on moving in a qualitative research direction to measure and explain

the satisfaction levels of customers. From a relativist standpoint, a subjective theoretical approach

construed by inductive reasoning has been chosen for our qualitative analysis. This would further

help in seeking the underlying meaning in the search for dynamics, leading to complex

interactivities (Walliman, 2010). This study requires a deep understanding of perspectives of both

the case company as well as its customers, hence more importance should be given to ‘words’

rather than ‘numbers’ (Bryman and Bell, 2011). Additionally, using inductive reasoning, we were

able to notice patterns (or) trends that lead to the generalization of data, from a theoretical lens.

Even though our study is predominantly inductive, there is a modicum of deduction present since

we had used theory to drive our research for the prior parts of this thesis. Hence, to theorize our

findings, a qualitative approach is used over a quantitative approach since the latter is described as

concepts involving the collection of numerical data (Bryman and Bell, 2011), which would not be

suitable for this study.

The interview questions were designed to be in an open-ended manner allowing the interviewer

with the flexibility of introducing follow-up questions. Even though the idea was to make the

interview look like a normal conversation between individuals, a certain level of structure is

required to not lose the idea of our focus (Maxwell, 2004). In our study, the underlying

interpretation of the interviewee’s views and expressions was on value creation and the factors

17

leading to it. We gather our information from secondary sources such as books, research articles,

scientific reports and journals to enable accurate and quality results, after analysis. We interplay

within different topics in our literature review, the sole focus is on customer value and satisfaction.

Following that, we introduce the case company that is the focal point of view and go on to explain

the research design that we have decided to move forward with, in regards to the nature of the

study.

3.2 About the Company

L2GO is a Swedish start-up operating from Stockholm catering to customers in the vicinity, at the

moment. Their concept is based on providing a hotel feel atmosphere in your own home. They

achieve this through their service offering of providing eco-certified bedding and bathroom textiles

with a combined cleaning service which is optimized to be environmentally friendly throughout

the lifecycle (Offerta, 2019). The service can be booked through a mobile application ‘Room

Service by L2GO’ available in the app store. “You don’t need your own sheets and towels” (L2GO,

2018). They provide a monthly service package and can pick up and drop textiles anytime you are

in need.

According to the company, through their service, they save people's time while being resource-

efficient with reduced water and CO2 consumption. 80% of the CO2 emissions are generated in

the production phase of textiles (actually clothes, but the logic can be applied for sheets too). In

other words, ”only” 20% of the CO2 emissions are generated during transportation and

consumption, etc. That is why sharing already produced textiles is so important, as well as to

extend the active lifetime of every piece of textile. That’s the main purpose of L2GO’s model of

sharing textiles by applying a Product Service System (PSS) model. (Wennberg, 2020; L2GO,

2020)

“Today, Swedish textile consumption corresponds to approximately 4 million tonnes of carbon

dioxide equivalents (CO2-eq), i.e. 850,000 turns of a car driving around the world” (Wennberg,

2020). Given that the rise in consumption of textiles has risen by 30% in the last 17 years, L2GO

feels that they are working towards a way to reduce this number for a more sustainable future

(L2GO, 2018), and further aims to topple the product ownership idea by introducing a common

platform for a sharing service with sustainable operations and careful logistics. With the regulation

and legislative norms focused on reducing carbon footprint and in promoting the use of circular

services, L2GOs main idea lies in reducing the amount of textile manufactured thus aiding in the

growth of the circular economy. The company, to expand its market and in an attempt to diversify

its business offering, has collaborated with Nordic Choice hotels in late 2019. This offering, along

with the existing capabilities of L2GO, offers customers breakfast vouchers, and bathroom

consumables such as conditioners and shampoos that are reused by refilling them after usage. The

company uses the hotel as a pod to carry out its activities and since the geographical area is limited,

they do it rather easily. It is safe for us to say that the company is moving in a direction that

involves following sustainable practices in the long run and are contributing to synergies across

different industries.

How does this fall under the paradigm of the circular economy?

Calling L2GO to be a circular business model even though they are only a sharing service might

raise questions about how true their claims are. To quote Christian Lunden, Director of future

business at Nordic Choice Hotels, “This is of course incredibly nice for our guests, who get a more

luxurious and comfortable everyday life at a price everyone can afford, but we also see that this

18

will help people to live a more sustainable life. Through coordinated transport, conscientious

suppliers of food and products, and offering food from the hotel's restaurants, we reduce not only

emissions but also food waste. The guests can sleep well and with a good conscience” (Hotels,

2020). In addition to this, L2GO claims to be using their resources smartly to enable better usage

of resources through sharing and reuse. By the service they provide, they are trying to enable

behavioural changes to reduced greenhouse gas emissions in the hope of reduction in new products

while using water sustainably, as they control the ownership of the products used (L2GO, 2020).

Burger, et al. (2018) says that the SE concept is a part of the many definitions of CE and also adds

that reusing resources, one of the main aspects of CE, makes an adequate difference in providing

a holistic contribution to the growing global problem of ‘take-make-waste’ economy. L2GO

controls ownership of the products through its business model. With this theory, the overarching

idea behind CE, and the fact that the practices followed by L2GO are in line with what the literature

explains in section 2.5.3, we think it is fair to call LtoGO Sweden AB as a company working within

the realm of the circular economy, however little the contribution is.

3.3 Research Design

The research design aims to plan empirical data and material in a way that it fits the purpose of

our study. Having identified the variables in the research gap, the next idea was to design the

research in a way that the required data is collected coherently and analyzed to provide the best

inferable results. Our research questions were not concrete at the start of the thesis. They were

vaguely formed in a way that required the researchers to collect data from a CBM firm and its

customers. So, a case study which is described as a study that entails a detailed and intensive

analysis of a single case (Bryman and Bell, 2011) is chosen as a research design to proceed with.

Furthermore, a case study design is the most appropriate solution to research questions having an

exploratory nature (Yin, 2017). The perk of using this method is that it allows viewing the problem

through a holistic lens (Saunders, Lewis and Thornhill, 2009). Our research was thus aligned to

focus on a single case company, L2GO, which is a start-up following a sharing model under the

umbrella of CBMs. We gained clarity on the concept of the CBM after establishing contact with

L2GO and this helped us strengthen our study and form better research questions that drove our

thesis. The case study here is bounded within the geographical landscape of Stockholm within the

road toll system. The case company (L2GO) operates in the areas of Södermalm, Kungsholmen,

Norrmalm, Östermalm, and Gamla Stan with minor exceptions to serve customers outside this

territory.

3.3.1 Case study design

Yin (2014) defines a case study as, “an empirical inquiry that investigates a contemporary

phenomenon (the ‘case’) in-depth and within its real-world context” (p.16). Case studies are

generally bound to answer how or why questions and the researcher has no or very little control

over the results that come out of the study conducted. The qualitative approach towards the subject

attempts to gain an understanding of the meaning in people’s lives and to discover their perspective

on views, rather than just basing our assumptions on scientific explanations and studies (Kvale,

1996).

According to Abercombie et al., (1984, pp.34), a case study is “The detailed examination of a

single example of a class of phenomena, a case study cannot provide reliable information about

the broader class, but it may be useful in the preliminary stages of an investigation since it provides

hypotheses, which may be tested systematically with a larger number of cases”. This was also

complemented by Flyvbjerg (2006) in his article ‘Five misunderstandings about case-study

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research’ saying that a single case study can provide context-dependent knowledge1 and can be

used as a research or teaching method. The case study design entails in-depth ethnographic

research or qualitative interviewing of a single organization (Bryman and Bell, 2011). The context

of the supplier and customer in this study plays a major role in a single case study with different

layers of activities and analysis. Also, the idea behind exploring how individuals on either side of

the value chain perceive value creation and ultimately how that could lead to satisfaction is

interesting as to understand how practices define customer value and the micro process of

interacting and interpreting. “A case study is expected to catch the complexity of a single case”

(Stake, 1995). Furthermore, in a case study, the case selection augments what can be learnt in the

available time scope rather than establishing a premeditated sample size. The selection of the case

company was made according to the following criteria.

Size: Small business, preferably a startup

Business Model: A CBM focused on addressing environmental and social needs

Geography: Within Sweden

Table 2. Selection criteria for the case company

We preferred startups because customers are deemed to be an integral part of a startup’s overall

learning process, and this means that startups would maintain better customer relationships, have

frequent communications with their customers, keep their customers well informed and offer

continuous assistance based on customer feedback. We wanted to have deep interactions with

customers and so conducting our study with a startup making it easier for us to establish contact

with their customers. For the convenience of access, i.e., to conduct face to face interviews and

avoid the hassle of long travels owing to time and fund limitations, we included the geographic

criteria of Sweden.

L2GO was one of the many companies that were suggested as possible office spaces to do our

Master Thesis, by our university during a companies’ gathering session in December 2019 at

Ångströmlaboratoriet. As they were an up-and-coming and thriving business operating with the

ideals of a CBM, we approached them and established contact to gain insights and provide

implications on a theoretical level as well as, at a managerial level.

3.4 Empirical data collection approach

The first step was to conduct a literature review, and this was done to gain knowledge of the CE

and the CBM and to address the research gaps in connecting CVC elements with CS drivers in a

CBM. Secondly, a case company (L2GO) operating under the CBM was chosen to be the subject

of our research. The data collection method has been illustrated by the model presented in Figure

3. Furthermore, we do not rely on one single source of information and rather have included

secondary sources of information through scientific journals, conference proceedings, etc. to

1 Contains the knowledge required to express the circumstances or the surroundings under which the

domain knowledge will be used.

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improve the validity of our study. We further use the triangulation theory to combine, compare

and contrast two or more data sources, methodological approaches, and theoretical perspectives.

Figure 4. Data Collection Method

3.4.1 Primary Data Collection

The collection of primary data was done in two phases, the first being interviews with the

representatives of the case company. Initially, in Phase 1 we started collecting empirical data from

the company’s representatives. Later, after understanding the firm’s perspective on value creation

and their contribution to the same, we went on to phase 2 of the data collection method entailing

interviews with customers of the company (L2GO). In total, 5 customers were interviewed. This

was due to the availability of customers’ at that moment, as informed to us by the case company.

For getting access to these customers, we prepared a draft outlining what our research was about

and attached it to an email invitation, requesting them for an interview. Two separate interview

guides were prepared for the company representatives and the customers of the company as

participants, respectively. The interview guides can be found in Appendix A. Semi-structured

interviews were carried out with each participant involved in the study and the questions were

framed in such a way that it contributed to our understanding of underlying patterns and behaviour

from the customers, and the company. Some of the information which would have been difficult

to gather from a structured interview was collected and presented, owing to the semi-structured

nature of interviewing.

The interview guide was derived in a way to create a certain order on the topics involved in the

study, and the questions were formulated keeping in mind the research questions which drove this

research. For the interview guide with the firm’s representatives, more technical terms were used

in the questions formulated since they had a specific area of expertise. In contrast to that, the

customers’ interview guide was written using simple language for making it comprehensible to

the people we interviewed.

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We had started our data collection process in mid-March, while the outbreak of the pandemic

COVID-19 was at its peak in the trajectory curve. Owing to that reason, we could not conduct

face-to-face interviews like we intended to. The company representatives were interviewed on

Skype, and 3 of the 5 customers were also interviewed using the same platform. The remaining 2

customers were interviewed through ‘Zoom’, a video telephony and online chat service through a

cloud-based peer-to-peer software platform. All the interviews were recorded and transcribed for

using identified themes, later during analysis.

3.4.2 Secondary Data Collection

For the secondary data, a literature review was conducted. It was conducted by following the

normal standards and procedures. First, a list of keywords related to the topic of research was

generated: CBMs, value creation, value generation, customer satisfaction, value co-creation,

sustainable business models, dominant logic. The selected topics were then searched individually

in pre-selected academic databases like Google Scholar and Science Direct. In addition to

academic articles, websites and webpages of companies functioning under the CBMs were also

searched to understand the practical functioning of the CBM, the data/information from these

websites served a valuable purpose. Several screening criteria had to be used as filters by the

researchers because the articles had to be written in the English language and credibility was a

very vital factor to apprehend hence we only took articles that had credible citations. Hence we

were able to arrive at some of the most relevant articles, and research papers. All articles,

approximately 50 papers and website articles of academic nature were reviewed in detail to meet

the objective. First, to discuss the focus on the CBM, second, to analyse the factor(s) that prevented

customers from engaging/involving more in the CBMs. Finally to find a solution by looking at

these factors through the lens of customer satisfaction and customer value.

3.4.3 Empirics: Case company

For the first phase of data collection, interviews were conducted between March 2020 and April

2020. The interviews were conducted with the representatives of the company, and the table below

depicts the participants’ role in the company.

Interview Participants Position at L2GO

1 Olof Lundström CEO (Chief Executive Officer)

2 David Bauman CTO (Chief Technology Officer)

3 Olof Lundström CEO (Chief Executive Officer)

Table 3. Interviewee Profile: Firm Representatives

From table 3, we can see that the CEO of the company was interviewed twice. The first interview

was to gain an understanding of the general operations at L2GO, which takes place on a day-to-

day basis. The second time around, it was aimed at understanding his view of value creation and

the value propositions offered by the firm. The topic about his views of CS was followed up by

this to gain insights on the synergies within the internal operations of the company. In between

these interviews with the CEO, the Chief Technology Officer (CTO) of the company, Mr David

Bauman was interviewed on his thoughts of the value creation paradigm that associated the firm

with the customers, and about the logistics behind the processes involved in the CBM.

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The result of the first phase of data collection is presented in the findings and analysis chapter,

comprising factors extracted from these interviews. A visual representation of the results is

presented in the form of a flow chart in chapter 4.

3.4.4 Empirics: Customers

The second phase of interviews was conducted between April 16th, 2020 and the 4th of May, 2020.

In this phase, the 5 available customers of L2GO were interviewed.

The identities of interviewees were asked to be kept confidential and in addition to that, each

participant was interviewed once. The participants were posed with introductory questions at the

start and moved on to more direct questions ranging from the level of being simple to sometimes

being complicated. To ensure we gained proper insights from the customers, the questions were

framed in an open-ended manner. The questions posed to customers can be grouped into six

groups. The first set of questions were aimed at the information that customers receive from the

company, and the second and third sets included questions on customer expectations and

communication channels, respectively. The final three sets of questions were to gain insights on

the digital interface used, costs associated with the service, and on service quality. Similar to phase

1, a semi-structured design was followed to have an open and profound discussion on topics

addressed and to gain as much data as possible from the customers.

*All interviews were conducted through a video call in Skype as it was the safest option under the

current situation of the pandemic COVID -19. Upon prior consent with the participants, all the

interviews were recorded and the transcripts were later produced by the researchers.*

3.5 Data analysis

There are several approaches in analyzing qualitative data, and one of the most straightforward

approaches to analyze the same is by using thematic analysis (Vaismoradi et al., 2016). In our

study, data was analyzed thematically employing a six-step approach proposed and developed by

Braun and Clarke (2006). Bryman and Bell (2011, p. 572) say that thematic analysis has high

variability and flexibility to be employed in the majority of the types of qualitative analyses.

Thematic Analysis (TA), as developed by Braun and Clarke (2006, 2012, 2013) is a widely used

tool and it is important to analyze data in a systematic and well-ordered way (Saunders, Lewis and

Thornhill, 2009). This thesis focuses on an inductive approach to contribute to the theory of CE

and quality management from an already established framework of CE. We chose thematic

analysis (now known as reflexive thematic analysis) as our method of analyzing data since it is

structured with epistemological assumptions around significant knowledge offering and employs

an organic and recursive coding process that aids in deep reflection and engagement with the data

in hand (Braun and Clarke, 2019). In our research, we assume the elements of CE

(functional/instrumental, experiential/hedonic, symbolic/expressive, and cost/sacrifice value)

mentioned in section 2.2.1 to be our overarching themes in line with our conceptual framework.

The six steps of conducting a thematic analysis as laid out by Braun and Clarke (2006) is an

iterative process and keeps changing within the same construct in relevance to the study conducted.

In our study, the process started with identifying word repetitions and key indigenous terms

relevant to the research, to make sense of what the interviewees meant at the time of delivering the

answer.

The data was first categorized based on commonalities found across transcripts between

interviewees. This was done separately for customers and representatives from the case company,

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respectively. Even though the codes are generated based on the categorization of commonalities

from predetermined overarching themes, it is important to consider how they convey a story and

relate to the research question for clarification and in-depth interpretation (Stuckey, 2015). Then,

some initial codes were developed based on the categorization of data and then underlying codes

within these initial codes were identified keeping in mind its relevance to the research purpose and

study (Ryan and Russell Bernard, 2003). We established how the different themes related to each

other and that was used to be transparent when establishing codes that were interpreted for the

creation of a seamless narrative. We used an open-coding process that allowed us to be flexible

with our usage of the data collected (see Appendix A), and with literature (secondary data) that

was used to back our claims. According to Strauss and Corbin (1990), open coding is ‘the process

of breaking down, examining, comparing, conceptualizing and categorizing data’ (Bryman & Bell,

2011., p. 578). After making distinct connections with codes, there are concepts which are broken

down into categories based on overlaps and relevance.

3.5.1 Reliability and Validity

When we conduct qualitative research, it is important to discuss the reliability and validity of the

results obtained from the research. Reliability deals with the fact that your study is reproducible

by a different researcher or a bunch of researchers, from the point wherever you left off, using the

same methods and this is called external reliability (Bryman and Bell, 2011). This extends to the

level to assess the trustworthiness of the research and its results. Interviewer reliability is another

aspect to look from when thinking that some change in wordings of the interview questions, or the

interview done by a different interviewer, would yield different results (Kvale and Brinkmann,

2009). The previous statement closely relates to the internal reliability of the research. It is

important to decide the level of knowledge the interviewees are provided before the interview, to

not have premeditated answers which create a bias (Kvale and Brinkmann, 2009). When

conducting this study, we wanted to send our research questions to the interview participants along

with a description of the purpose. But, we had many iterations while formulating our research

questions and hence, only the purpose description was sent a day before the interview. This way,

we could make sure that they familiarize themselves with the concept and have answers to

questions coming their way.

As a concept, validity deals with whether a method measures, describes or acts as a tool for the

reason it was introduced as a method. The quality of empirics in a case-study depends on construct

validity, internal validity, and external validity. Firstly, construct validity deals with concept

operationalisation2 and according to Yin (2014), for sound construct validity in a case study,

multiple and reliable sources of information must be used, a solid chain of information and data

collection should be established, and having key informants review the case report. In our study,

we have conducted semi-structured interviews with key actors relevant to the study, various

sources of information from scientific articles, company website handles, articles from conference

proceedings, and government reports have been studied and reflected upon. Using the triangulation

approach (Thurmond, 2001), we make sure to cross verify our data obtained from the interviews

with secondary sources (as described in Fig. 4). Furthermore, the authors working on this thesis

exchanged views and text on findings to eliminate bias towards one perspective. Internal validity

is to prove in a way the assumed causal relationships between individuals (or) actors in a system

is valid (Bryman and Bell, 2011). Determining validity is trickier than having to deal with

reliability issues, as mentioned by Kvale and Brinkmann (2009). In-case analysis has been done

2 Operationalisation is the process of defining a concept through a set of attributes/variables in order to make it

measurable through empirical observations (Loseke, 2012)

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in the data analysis section of the thesis in addition to comparing findings with the theories

surrounding the framework we used. This is to eliminate qualms about internal validation of our

findings and analysis.

External validity relates to the generalizability of the study conducted through replicating results

to other settings within the same investigative realm (Bryman and Bell, 2011). Validity is also seen

as a construct to investigate and develop sound interpretations of observations (Sireci, 2007).

Baškarada (2014) in line with Yin’s (2012) book on ‘Case Study Design’ says that, “case studies,

like experiments, are generalisable to theoretical propositions and not to populations or universes”.

In this sense, our case study does not represent a ‘sample’, and our goal is to expand and generalise

theories that lead to analytical generalisation rather than generalisation based on statistics.

The level of generalizability of a study depends on the fact if the results from the study can be

applied and transferred in different settings (Kvale and Brinkmann, 2009). Given that this study is

confined to one case company within one operating area in Stockholm, Sweden, the

generalizability of the results provided are quite limited. However, the analysis conducted and

results are drawn provide profound insights, and we hope it can be replicated and tried under a

different setting.

3.5.2 Reflexivity

Reflexivity is seen as the critical self-evaluation of a researcher’s orientation and the knowledge

and understanding of how these views could influence the study being conducted (Bradbury-Jones,

2007; Berger, 2015). In this context, we can view this as being a critical scrutinization of ourselves;

i.e., the researchers, and the relationships established throughout the period of study. Social

research outputs in reflective research are perceived on the collective basis of perceptual,

cognitive, linguistic, textual, political and cultural circumstances in relevance to the data collection

setting (Alvesson and Sköldberg, 2017). The relationship between the interviewer and interviewee

is also at the crux of the subject to look at how relationship dynamics influence the questions asked

and answered.

We think that, as researchers, we have had an influence on the interviewees establishing a

temporary relationship with them. We presented ourselves as students of Uppsala University and

briefly informed them of our current semester of study. The interviewees did not want to be

anonymous and we think that this may have influenced some of the answers that they provided us

with. The selection of the case company was based on certain criteria of it having to be a startup

working under the umbrella of a CBM, and revealing the name of the organization along with their

working model is an important aspect when looking at the validation of the theory. Our presence

and what we represent ourselves as, along with our cultural and educational background, will thus

surely influence the empirical data produced.

3.6 Sampling

The sample of the total qualitative study consists of 7 participants in total, 2 from the case company

and another 5 who are the customers of the company. Provided that this is a small firm, the

customer segmentation proved to be difficult as the operating area (geography) was confined to

one area within the capital city, Stockholm. Non-probability sampling often refers to sampling

techniques for which the probability of being selected is unsure and not known. For drawing out

such a sample, certain types of research methods have to be known and exploratory nature of the

sample and this helps in drawing out a type of sampling method under non-probability sampling

(Saylor.org, n.d.).

25

We employ a purposive sampling approach when choosing the case company in regards to specific

criteria that are defined in Section 3.3.1, to provide us with in-depth details in regards to the scope

of the study (Bryman & Bell, 2011). Purposive sampling is used in a flexible manner where the

researchers included participants who represented a narrow range of criterion basis in contrast to

a wide scope of frame of reference. At all times, a certain end goal was in our mind and participants

from the firm for the research, their designation, their social understanding of the concept at hand,

and their potential contribution to the study (Bryman & Bell, 2011; pp.442). Owing to this, we go

on to say that the idea of purposive sampling is highly subjective and that the qualitative researcher

determines the criteria to be considered when selecting participants for the study.

The customers were provided by the company from a total of 15 active customers. We did not

employ any specific sampling method for choosing the customers, even though this type of

selection falls in the line of the convenience sampling method. The customers were only made

available since the company provided us with access to them, and they can be categorized as

relevant sub-samples in this case. They were conveniently available to participate in the study and

this kind of sample was acceptable under the given conditions in the world today, though not very

ideal (Bryman and Bell, 2011). Definitive findings are generated from this since it can be difficult

to generalize the study after it being said that it pertains to a single case.

3.7 Limitations and Scope

The thesis is purely based on the current availability of resources, knowledge and information. The

theories and concepts associated with knowledge management in businesses are changing

regularly and the thesis may fail to shed light on the latest developments that are evolving in the

respective fields. A huge limitation is the research design approach followed by the selection of a

single case study since it limits the scope of our study to a very large extent. Our initial efforts to

widen the scope of our study by studying different companies turned out to be futile, but we hope

to provide a platform on which future developments can be made. The selected case company is a

start-up small in size and is only 2 years old and the key ideology of the company is to utilize

under-used resources to provide services that present the aesthetics and feelings of being in a hotel.

The selected company represents the PSS model and has a sharing economy model, which falls

under the inner circle of the CE according to the Ellen McArthur Foundation (2014), but on the

other hand, there are many branches unexplored within the realm of circular businesses. Our

research consists of interviews in the form of a qualitative study and when framing questions, we

framed them in a certain way to challenge the beliefs and behaviour of the customer, to reduce

cognitive dissonance. Cognitive dissonance is the conflict an individual has with himself/herself

when his/her self perception of the choice of consumption is likely to be deemed negative (Reed

& Hall, 1997). But, even after attempts by us to negate this effect, there is likely to be a bias on

the answers the interviewees gave us.

3.8 Ethical Considerations

The discussions on ethical principles in business research revolve around the type of research

employed for the study. As broken down by Diener and Crandall (1978) and Munhall (1988),

qualitative research can be tricky if not done without considering some of the basic ethical aspects

of it (Bryman & Bell, 2011). The four main areas were,

- Harm to Participants

The protection of participants’ rights is the basic aspect to the interviewing process, and they are

also entitled to be aware of any emotive issues being processed through the data collected through

26

the interview (Ryan, Coughlan and Cronin, 2009). Apart from clarifying the purpose of the

research, the interviewee must be protected at all times from physical harm, harm to future career

prospects, harm from emotional stress, etc (Bryman & Bell, 2011). Confidentiality is one of the

key aspects at play here and the AoM Code of Ethical conduct suggests that all participants

involved in the research must be allowed to take a stand on whether they want to be anonymous

or not, and be given enough time for them to decide to be a part of it (Ryan, Coughlan and Cronin,

2009).

- Lack of informed consent

(Annas, Glantz and Katz, 1977) defined informed consent as “Knowing consent of an individual

or his legally authorized representative, so situated as to be able to exercise free power of choice

without the undue inducement of any element of force, fraud, deceit, duress, or other forms of

constraint or coercion” (Munhall, 1988). The risks involved should be laid out to the participants

and validate agreeing terms with informed consent to the interviewee. Furthermore, the researchers

notified all the participants who took part in the interviews well in advance and every interview

was taken with the consent of the interviewee. The researchers have ensured that all forms of

information that did not belong to them have been cited. No type of covert research has been done

during the entire research process.

- Invasion of Privacy

Invasion of privacy, as we know it, is not considered to be allowed in any type of research we

partake in. Covert methods of research might be noted as an intrusion to the privacy of the

participant before his/her knowledge about it taking place. One of the principles of the MRS Code

of Conduct was to balance the needs of the individual and to protect the integrity of their profession

(Society, 2020). The researchers took permission well in advance before any discussion with the

case company regarding this research. While covert research might find it hard to associate itself

with confidentiality and anonymity, other overt methods are employed in this study to eliminate

these factions of doubt (Bryman & Bell, 2011; pp. 136).

- Act of Deception

Deception occurs when the researcher plays a pretentious game to the participants, whilst having

a completely different idea for the data collected. In the search of experiential knowledge from the

participant, some researchers would not completely be honest with the true purpose of the research.

(Bryman & Bell, 2011)

The MRS Code of Conduct’s principles implies that the researcher is open and truthful to the

interviewee to strictly condone and reduce the deceptive impulses (Society, 2020). Though, some

authors justify deception by stating it necessary for their specific research while the whole notion

of this idea eliminates the ethical idea of conducting research. We believe that, in this study, we

haven’t been involved or involved anyone else in any acts of deception.

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4 Findings and Analysis – L2GO

In this chapter, we present the data collected upon interviewing the representatives within the case

company (L2GO) who are also the decision-makers. Along with the data from the semi-structured

interviews, Interviewee quotes that potentially represents overall statements and information from

secondary sources of articles within CBMs and CVC are also included in certain places, when

deemed necessary, for increased transparency.

Our findings indicate that the company has majorly focused on certain aspects and minorly focused

on few aspects for each of the elements. In some cases, the minorly focused aspects were used as

supporting constructs. To validate our findings, we examined each aspect as an individual entity

and found them in conjunction with the literature from Chapter 2. A flow chart summarising the

main findings from the case company is presented below, in Figure 5.

Figure 5. Main findings from L2GO

4.1 Functional/Instrumental Value

According to Rintamäki and Kirves (2017), functional value is created for a customer when a

solution is provided to his/her needs. This indicates the features or attributes in a product or service

that acts as a solution to customer needs. The main findings identified from the company's

proposition for functional value indicate that the company is trying to provide “high quality”,

“feedback oriented”, and “flexible” services in addition to having strong “communication

channels” with its customers. All these aspects are under the functional value category as they are

features or attributes of L2GO’s services.

The company seems to be very cautious about the quality of materials used. The case company’s

chief executive officer Mr.Olof Lundstrom confirms this claim by saying, “We use high-quality

material (textiles) to extend the lifetime of the textiles, they can handle more washes before they

can be used for their purpose”. Importance to material quality has been stressed a lot in previous

studies as seen in the excerpt from a dissertation, “the customer must be the focal point of the

‘quality’ approach and to provide ‘quality’ as a value, the product must conform to customer needs

in every way” (Jain, 2017). When it comes to the CBMs, its products will be rotated between

customers, and in such cases, if the quality is compromised then the products will not last long,

hence the company could uphold this requirement as they use high-quality materials that could last

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longer than normal textiles. Although they use good/high-quality materials, they must upgrade

their business offering regularly to cater to customers’ growing needs.

The firm thus shows a strong intention of constantly upgrading itself. In general, they are done to

match customers’ needs, so at L2GO, most upgrades are made based on the feedback. Olof says

that “Feedback is the value for us, so we have worked very tightly with the early customers to

gather feedback”.

The main reason why companies collect feedback from customers is to provide themselves with

an opportunity to right their wrongs and ensure better service in the future “Customers are the main

deciders on future levels of competitiveness and are the main beneficiaries of goods and services.

If business organizations are to assess their performance standards, they should positively

encourage and welcome customer feedback” (Zairi, 1992). Complementing that statement, CTO

David says “...what have we changed based on customer feedback...more or less the whole

application has changed based on feedback from the customers” which implies that the company

has evolved and are tailoring services based on customer feedback. One of the barriers for small

and medium companies to embark on circular projects is due to lack of market support and demand

from consumers, and this is probably because circular products or services are not tailored based

on customer needs. A possible solution to this would be that companies in CE try to increase their

customer involvement and improvise based on customer feedback (Camacho-Otero et al, 2019).

The company was initially unsure about the demand for such a service, “The demand for this type

of service has certainly been uncertain over the past few years…the idea to make beds and clean

rooms were inputs from a customer”- Olof. When looking at this, the key here seems to be the

knowledge that customers possess. Customer knowledge at an individual level, might be raw and

embedded in layman terms but when it is analyzed and interpreted to form organizational

knowledge, it becomes a key asset to the organization when utilised effectively (Hoff Den Van &

Jan, no date; Collins & Hitt, 2006). Learning and adapting from the comments of the consumer is

beneficial to the company in the long run as it also paves a way for creating good competitive

advantage (Wirtz and Tomlin, 2000) in addition to the benefits of being a first-mover in the market.

The firm seems to have a strong response rate as they provide services during times that are suitable

to (or) as requested by the customer. Olof says “We try to cater to their needs basically….we can

come anytime during the day...but if they are there to open the door, then they want us to be there

in the morning so that they can go to work afterwards”. The company is trying to be flexible with

its customers’ timings to provide ease of access and a sense of quality. The importance of easy

accessibility for customers has been stressed heavily by Jain (2017), who considers this to be a

metric for measuring customer value. The author further suggests that a company should explore

more options to make its products or services most accessible to its customers, and from L2GOs

perspective, this seems to be valid as they provide their customers with an option of a trial run

once before subscription, and provide them with options to pause and continue the subscription at

their will.

“You can pause the subscription because you have a home renovation” - Olof.

In this case, the company could lose customers that wish to pause the service owing to personal

reasons if the company does not provide a pause option, but with the pause option, they are still

customers of L2GO that will soon resume subscription after a temporary hiatus. The company is

trying to explore more options that could make its service available for their customers, which is

very much in line with them trying to hold on to customers to have a good retention rate. Finally,

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to establish all the findings mentioned above, the company must have frequent and good

communication with its customers.

The company emphasizes communication with its customers as Olof mentions, “I think one thing

(for business development) has been that we have had frequent communication with the

customers”. It can be seen that communication has helped in business development and adding on

to that the company manifests importance to being transparent with its customers as Olof says

“Through communicating, we have a chance to be open and explain things. So even if something

is not perfect, if they understand why it's not perfect, they accept it to a greater extent.”

Transparency is valued a lot in areas like management, policy and finance and it denotes a positive

feature of relations because being transparent felicitates trust but being transparent to customers

has both advantages and disadvantages for any company (Albu and Flyverbom, 2019). Hence, it

is very important to be cautious with transparency. Keeping this in mind, a strong suggestion to

the company would be that they should avoid stressing the importance of being very transparent,

they should not go to the extent of disclosing their operations, collaborations and strategies with

the customers. They should probably uphold to be transparent only when the situation demands

so.

4.2 Experiential/Hedonic value

Experiential value deals with pleasure, enjoyment, and providing the customers with a feeling of

being at ease (Rintamäki and Kirves, 2017). This can be understood as factors and attributes that

deal with the emotions of the customer. The main findings of the company's proposition for

experiential value indicate that the company is trying to establish emotional bonding with

customers and to do that the firm is leveraging the facets of experiential value., “trust”, “aesthetics”

and “customer involvement”.

The company seems to have a good customer retention rate. “Real value equation,(for L2GO) I

think is when you (customers) come back and make a second purchase, and the third and the

fourth” - Olof. The CTO David adds to this by saying “we have high retention…..I think it's almost

100%...so we don't have basically anybody doing one cleaning session and then leaving”.

According to Olof and David, it is very difficult to make the customers establish trust in the

company, but once they have their trust, the customers tend to stay with the company for a long

period.

“At the moment, the customers that we get, they stay, they use our service usually every other

week for several months…so many people like our service when they start trying it, and they stay”

- David.

Several studies stress the importance of good customer relationships and with the advent of the

internet, there seems to exist unprecedented opportunities for initiating customer relationships.

Trust is an essential ingredient for those relationships to bear fruit (Siau and Shen, 2003). The

company has been trying to build a trustworthy relationship with its customers, and several studies

also show that the customers are not comfortable in making internet-based purchases (Siau and

Shen, 2003). For a service like this in which the customers are supposed to let people into their

homes sometimes when they are not at home, it requires the customers to trust the employees.

According to the founders Olof and David, that might be one of the reasons that the company has

a low adoption rate and they add that people who try the service, stay but to get them to try it is

the hard part. The company seems to focus heavily on establishing trust with their customers but

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according to Swan et al, (1999), establishing trust only has a moderate influence over the

development of positive customer attitude, intention and behaviour.

The second aspect with which the company is trying to establish emotional bonds with its

customers is through aesthetics.“At the end of the day, I mean, even when they (customers) go to

bed, and it's so nice, then we are not there. But then the bedsheets are there” - Olof. Adding to

this, a welcome note is left behind for the customers as a sign of a good gesture. “When

they(Customers) come home, and it's a clean home and nice looking and they have the letter

waiting ‘welcome home’...all these things matter.” - Olof. Aesthetics reflect the sensory

experiences in which objects appeal in a distinctive way (Witz et al, 2003), and the company is

trying to use its service to create an emotional appeal. They further claim that aesthetics are related

to sensory experience and these senses predominantly being sight, sound, touch, taste and smell.

Following this train of thought, L2GO seems to tap into the sensory emotions of customers to

create a good experience.

The final aspect here is ‘Customer involvement’ and the company seems to be including its

customers frequently in the business development stage as involving customers provides them with

a feel of being informed and committed. This can be supported by an excerpt from our interview

with Olof, “We(L2GO) get some kind of ideas all the time...You know, why don't you do this?...

a lot of people asked for breakfast bags and stuff… when we did it …quite many of the customers

signed up to it”. According to the CEO, this is done by either asking customers their opinions and

suggestions or by involving customers to try out an idea with a pilot project. “They contribute a

lot to the development but of course sometimes it's our idea and we try them out with them” - Olof.

Empirical studies indicate that customer involvement is one of the important factors for service

development and according to resource dependence theory, customer involvement has a positive

impact on new service performance (Carbonell at al, 2009). Hence it is very clear that both theory

and empirics highlight the importance of customer involvement. To support this, a claim made by

Lundkvist and Yakhlef (2004) is presented which says that the customers' active participation and

involvement with the company lead to new ideas that are jointly co‐created and a commitment to

action from the customers is established.

The company provides its customers with multiple offers and options to choose from. Moreover,

according to Olof, the company is in its starting stages and given the firm's size, there is a flexibility

to provide personalization options to each customer apart from being flexible with the schedule.

“After making a booking, they(customers) can manage their subscription and they can decide on

time slots, what items they want and personalize” - Olof. This option aims to create content or

satisfied feelings with the customers when the company goes above and beyond their existing

offering and capabilities to accommodate their needs.

4.3 Cost/Sacrifice value

Cost/sacrifice value is a very important element of the CVC framework because it determines

whether the customer will end up paying for your product or service (Smith and Colgate, 2007). It

indicates what customers consider as a sacrifice to gain a product or service. The main findings

identified from the company's proposition for cost/sacrifice value indicate that the company is

trying to provide “value for money” services and to do so, have “service recovery” as an avid

aspect.

The company tends to provide services to customers at a reasonable price. “We can offer an

attractive service to our customers that are not unreasonably expensive because we use

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underutilized resources.” - Olof. As mentioned earlier, the price of the product or service is a major

deciding factor for customers to make the purchase. Hence, the company needs to maintain its

pricing at a reasonable level. The company can maintain stability here because the main ideology

is to make maximum use of underutilized resources, which by default falls under the category of

the CBM (Lahti, Wincent and Parida, 2018), and this ideology not only helps the company to offer

its customers a reasonable price but is also a positive contributor to the environment (MacArthur,

2013).

“We (L2GO) provide services from the hotel (Nordic choice) to us that are discounted or

subsidized (to the customers) at the cost price. So to say they are not priced with the profit margin,

but they just have a cost” - Olof. Customers always think of value in such a way that the benefits

obtained from the product or service always exceeds the costs and sacrifices they incur (Horovitz,

2000), which is nothing but the feeling of ‘value for money’. Customers' needs are subjective and

they change very rapidly (Gülyaz et al, 2019), and this might cause the company to lose its value

for money tag. To overcome this, the company is trying hard to meet quickly changing needs by

giving a lot of importance to its customers by adding more services and offerings to its package

and changing their user interface rather regularly.

“This is kind of a way to deal with the fact that the customers want more all the time. So we try to

expand our packaging, but that also means that our total offer is a bit more complicated to explain.”

- Olof.

The company is taking a hit on its profit margins at certain offerings, but by keeping the profit

margins low, they provide the customers with the feel of them not hesitating to pay for such a

service. The company also tries to avoid making any kind of mistakes in the service as much as

possible, but sometimes due to some human errors, there is a possibility of something going wrong.

In all cases, the company has been at its best to compensate for any mistake that was made, “We

try as much as possible to compensate for our mistakes, if we have missed something …. an extra

pillowcase that should have been there, then the next day we go there again, I mean, with a fresh

one” - Olof.

Apart from this, the company goes an extra step to compensate for an issue where the customer is

to complain particularly about something, “We try to give some kind of gesture ... Not exactly a

free gift or something…. We accept the late rebooking without charging extra”. Customers think

about benefits for the costs they pay which means that the customer is ready to sacrifice money

and time in exchange for benefits received from the service. The customer will only make the

purchase when the sum of his sacrifices and the sum of the benefits are equal or the sum of the

benefits received is greater (Khalifa, 2004). The company seems to be aware of the importance of

this decision-making factor and thus the company seems to make up or compensate as soon as

possible and on the other side, the company tries to keep the costs as low as possible which in turn

is aimed to give a value for money feel to the customer.

4.4 Symbolic/Expressive Value

The symbolic value is the value that is created in a customer when a company or its brand could

satisfy the symbolic needs such as self-expression, self-perception, and prestige (Bhat and Reddy,

1998). This indicates the factors that have a positive influence on a person's self-image and

prestige. The findings from the company indicate that the company has been collaborating with

big hotel chains like the Nordic choice and Radisson to create brand value as it positively

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influences a customer’s image. Other aspects of the findings and analysis for symbolic value are

presented below.

The company has established a couple of partnerships “So we have two ongoing

partnerships(collaboration with hotel chains) ”...one is Nordic choice … the second is Radisson”

- Olof to have a good brand image that is aimed to capture value from the customer. They believe

that by having a solid brand name, they could sell better “It's really good for us to use their(Nordic

Choice) brand….. they(Nordic choice) have a well-known brand but we don't ….. That's, of course,

easier to sell.” - David. Partnership with a hotel chain to improve brand value has certainly proven

to be beneficial for the company, they have had some new customers purely due to the association

to the brand “Nordic choice made a press release that resulted in one new customer that explicitly

found us because of that press release. This customer has recommended three people where one of

them signed up, who further recommended a new customer that signed up as well” - Olof.

The company seems to be strongly biased to create symbolic value through collaborating with a

big hotel chain and they also believe that they would be able to sell to more people with this, but

Bhat and Reddy (1998) say that “a good marketing mix that that shows how the brand can be used

to express a consumer’s personality or have some distinct meaning to a consumer would perhaps

be a cheaper, easier and more effective strategy than one that tries to position the brand on prestige

and exclusivity”, which implies that it is better to use a brand to make customers express

themselves and not try to use the brand to explain the practical benefits, image or status symbol.

Hence we can see that the company does not seem to align with theory in this perspective. Further,

the company is very cautious about not polluting the environment on one side and reducing

production and consumption on the other, having a CBM seems to help them stay in line with these

principles “It (circular business model) not just scales as a business but it also has many good

environmental effects” - Olof.

They follow a take-make- reuse approach (Wautelet, 2018), that helps the company to reuse

products and share them among different customers. Furthermore, the take and make aspects of

the CBM also follows sustainable practices, i.e., it restricts the use of non-renewable resources

(MacArthur, 2013). David also complements his previous statement by saying that “Environmental

aspects are fundamental to the whole idea ( circular business model)”. Being a part of the CBM,

the company has the opportunity to establish control over the products they use.

“Since we have control over the whole life cycle (products), we can decide what products to order

and their quality and resources to produce. And when it's done, we can handle the end of the

lifetime also” - David

That could lead to lesser consumption and wastage of resources and Olof adds to it saying, “We

produce less because you basically share, so instead of having two sets of bedsheets at home and

then you need to replace them after X number of years, maybe now it's enough to have one and a

half in our model” - Olof.

Symbolic value, as mentioned above is about identifying and dealing with factors like self-image

and social identification. These are not easy to find as they are in most cases hidden by the

customer. In the present scenario, customers are very much aware of what they buy and how they

buy. They tend to look beyond the product or service for value and they follow the company’s

principles. They don’t accept products as a whole if the process is not clean, as in, they don’t accept

corporate irresponsibility (Küberling-Jost, 2019). The hidden need here could be identified as

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“sustainable practices” and the company seems to be taking that into account seriously, that in turn

they believe helps them create a symbolic value with the customers.

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5 Findings and Analysis - Customers of L2GO

The perceived value concerning the companies’ offering of different value elements is within the

context of this study. This chapter will thus present the results of the data collected from the

customers of the case company L2GO. Along with the data from the semi-structured interviews,

interviewee quotes that potentially represent overall statements and information from secondary

sources of articles within circular business models and customer value creation are also included

in certain places, when deemed necessary, for increased transparency. A flowchart of the main

findings from the customers perspective is presented below.

Figure 6.Main findings from Customers of L2GO

5.1 Functional/Instrumental Value

To gain an understanding of the functional/instrumental value element that falls under fulfilment

of customers’ needs and wants, based on individual preferences, we framed certain questions to

identify how the offering from the case company integrates and connects with the customer. The

answers to the questions posed based on utility and their need provided a deeper understanding of

the role it plays in the context of CE.

Ease of communication & flexibility of the service

The questions were tailored towards understanding the choices of consumers from a research point

of view. When being asked about how they communicate their needs and how they avail certain

aspects of the service, Interviewee 3 said, “I think I am one of the first customers maybe…so then

I have very good contact with them via mail.” Interestingly enough, every other customer of L2GO

that we had interviewed agreed to the fact that it was very easy to communicate their thoughts to

the company via mail. Concerning the flexibility with which the service offering could be

customized, Interviewee 2 said that “...then you can also add...more services if you want.... sort of

flexible”.

Interviewee 3 also added that in a way the services can be customized a little. Other participants

focused on this area during the interview, at different times, but overall, everyone felt that the

service was very attractive and flexible. In line with this, we can see that the customer’s preference

for personalization creates a hassle-free and flexible feeling. According to (Jr Sondoh, 2007),

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functional benefits are related to the flexible attributes of the product/service, and that it also

mediates the customers’ intention and the satisfactory value obtained. Even though consumers

enjoy tangible benefits offered by a firm (Thomas, 2008), intangible benefits are also of

importance to them such as the flexibility to add or remove services, and the flexibility to

personalize what they need (Vigneron & Johnson, 1999; (Tynan, McKechnie and Chhuon, 2010).

The response time from the firm is also of high importance in this context since they have to be

available for the customer when they need them, and in light of that, one customer said that “I had

a direct line if I needed one. So, they always answered quickly and promptly.” Effective

communication channels are of core importance to maintain customer relationships, and Tynan et

al., (2010) supports this argument by saying that informed customers are happy if effective

marketers keep them in the loop of what they do at the micro and the macro level. In addition to

that, Parasuraman (1997) says that customers feel seriously valued when companies have strong

coordination methods and resource sharing elements to communicate their ideas.

Service Personalization

The customization of services, according to the customers’ wants is called service personalization,

and we framed some questions focusing on how customers felt about this, and the need for the

same. We got some quite interesting answers, one being by Interviewee 5 when she said, “They

do my windows, that's an add on…I just talked with the work leader for the cleaning company…he

fixes it for me and then it comes from the invoice from l2go… haven't figured out how to do that

in the app yet”. The utilitarian value associated with the functionality such as personalized services

based on customer needs denotes to customers about the excellence and appropriateness of the

service offered, which in turn leads to a unique connection established with the customer (Smith,

Brock Smith and Colgate, 2007); (Tynan, McKechnie and Chhuon, 2010). This leads us to believe

that unexpected services offered by the company to the customer result in a better value offering.

A similar notion was viewed in an answer given by another interviewee and an excerpt from his

interview is given to illustrate that, “In a way, you can already, you know, customize the offerings

a little bit” (3)

What we can infer from this is that the firm cares about its customers, if they are willing to go to

certain lengths to make them happy, and additionally might result in the customer being loyal, in

the long run. Addressing the growing needs of the customer might only be possible if the requested

service provides to the bottom line of the firm, and further expands their portfolio. Following the

literary work of Khalifa (2004), certain customer delighters have an innovative offering to solve

the latent needs of a customer. The author goes on to explain how certain innovative features

offered by the firm surprises them in a good way. By that, we can see what interviewee 4 had to

say about this kind of service that attracts a specific target group of middle-aged and elderly people

whilst offering an innovative solution. To put it in her words, “I think that this period that we are

going through now is going to, we are going to come out with…a lot of new ideas, new business

ideas. So, when you have something new like this, I think this is a good idea”

Another customer (i.e., Interviewee 5) said that she had switched from a different firm to L2GO

based on word-of-mouth and said that, “...they just had a cleaning part, no towels or bedsheets,

that's not that nice.” The switching of firms for a better and innovative service seems to be the

cause of this and aligns with what we had talked about above. Following Kano’s model of customer

perception of value (Khalifa, 2004), some of the basic must-have needs were identified in the

services offered by L2GO and certain dissatisfiers with her previous firm came to light. These

factors drove her to stick with the firm after trying on a test model once and this also indicates that

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customers keep looking for better alternatives at the same time when their needs are met, they stick

to a particular brand and pay for it.

User Interface

Contrary to their attributes that create functional value for a customer, the interviewees more or

less found the application to be not so useful and that it needed to be improved. Interviewee 4 had

an interesting take when she said, “Guiding them to certain things that I think that they should,

you know, implement in the app, maybe…we don't need these fancy web pages. We just need to

know shortly.” This leads us to believe that she wanted the company to capture value in a short

time through the improvement of the user interface. Following the work of researchers Bowman

& Ambrosini (2000), it is safe to say that value capture happens during the transaction phase

between the customer and the supplier. In this case, the transaction happens via the mobile

application, and exchange value is realized when the product/service is sold. Exchange value is

realized at the time of sale (Bowman and Ambrosini, 2000), and the firm’s profitability is reliant

on whether they capture value at the time of sale. Another customer had different issues with the

mobile application and that can be understood from this excerpt from our interview with her, “I

don't like that…you can't change your password in it…I always keep forgetting passwords…I

think the app could…need some changes and some updates, maybe” (5)

Two customers had issues with the GPS (Global Positioning System) as one said that, “first when

I tried it in the app, it said, your street is not included…I had to…contact my friend…she

said…contact Olof…then I got registered”(2). Interviewee 4 adds to this saying, “It was not

possible for me to make an order…before I stated my GPS position and I don't like to do that…so

I couldn't pick and choose and enter my address because that was like an obstacle”. In this

particular context, the value proposition offered by the organization has to be captured in a way

that the customers feel satisfied, to generate profits and realize the full potential of the transaction

(Bowman and Ambrosini, 2000). The application has some problems clearly and we can see it

from excerpts extracted from the interviews.

5.2 Experiential/Hedonic Value

The extent to which the service creates certain experiences, feelings and emotions as perceived

from the customer is experiential/hedonic value, and to gain insights on the same, we asked

interviewees how the service had an effect on their experiences with the company staff, and the

service provided.

Hidden needs

Most of the interviewees, as understood by us, felt that the company had tapped into something

that the customer had needed all along, but never realized it. These hidden needs, as interviewee 3

says,“...this is something that I didn't experience that I needed, but once I tried it, I want to stay

with it” Similarly, Interviewee 5 said that, “They actually, provided for a need that I didn't know I

had so...it’s, really nice” Jung Choo, et al. (2012) explains that emotional involvement and

relationships (customer-supplier in this case) are important in maintaining effective long-standing

relationships, and as Smith and Colgate (2007) explain, customer value is something that the

customers get for what they pay that results in an emotional bond to the product/service employed

(Jung Choo, et al., 2012).

Hidden needs are defined as stipulations that customers have but aren’t yet recognized by them.

They are latent needs that need to be fulfilled to associate their emotional state of mind, as they

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perceive. Goffin, Lemke and Koners (2010) research on uncovering the hidden needs of a

consumer goes beyond the traditional market research approach, and they had found that firms’

need to look at the world from a users’ perspective to look for needs at the emotional level by

studying what they say, how they say, and in what context it relates to. Their research included

observations, contextual interviews and product developers as users who supposedly ‘lived the life

of a customer’ (Goffin, Lemke and Koners, 2010). From this, we can take away what L2GO had

done from the founding of the company back in 2017 till today. They had changed their business

model from an out and out washing firm to provide services such as ‘providing a hotel feel at

home’.

Trustworthiness

Well, we can perceive this in two ways. Either that the company had focused on a specific type of

niche offering, or that they had tailored this service after feedback from their initial customers.

However, not only did this tap into the customers’ hidden needs but also gave them some sense of

being at a state of tranquillity. This argument can be supported by what one interviewee had to say

about a conversation with her friends about the service, “I think the people who have come to a

certain age where we know that this is for us, we have learned that we have to take care of

ourselves, of being sustainable people” (4)

Innovative ideas stem from either discovering new usages from an existing product/service (or)

from an entrepreneurial standpoint to create something new and make a difference (Freeman and

Engel, 2007). Marcus (1998) explains that proper customer segmentation is one of the most

important factors for market-driven growth and that there is great value in keeping things simple

while establishing a local marketing relationship. Furthermore, since the case company, in this

case, is a startup, focusing on building strong customer relationships is key since they are low on

resources to market heavily and gain solid ground. Adding to that, the business idea leverages the

needs of a particular segment of people (based on age, geography, and consumption), and is

growing at a steady pace.

Aesthetics

Talking about the aesthetic feel as experienced by the customer, we had certain interesting insights

on this part. We see the emergent code of aesthetics to fall under both experiential, and symbolic

value elements. In simple terms, we perceive this since the happy feeling that the customer

experiences can be categorized as hedonic and the satisfactory feel can be categorized under

expressive value. Sheth et al., (1991) talked about conditional value as something that people

would self-associate themselves with and how the resulting factor is an act emergent from one’s

situation. In line with that, here’s an excerpt from an interview, “Because they...put on the

cover...decorated with the pillow…do not want to go to bed and destroy the whole thing” (3)

Furthermore, in a study done by Kim, Gupta and Koh (2011), the research model listed aesthetics

as an emotional element to be perceived and added that the intention to buy increases, for

customers. In this case, the intention to buy again in repetition is the most likely outcome and in

the same research, they had said that social value elements (symbolic) can provide experiential

value through establishing social relationships with a side benefit of motivating customers.

Interviewee 4 says, “...when I came home, there was a note on the bed. I appreciated it and also...I

see the bed and I have this note, then you have me. I mean, I'm all yours.” We can say that L2GO

taps into the emotive senses of the customer and creates a sense of attachment and affection,

indirectly. Also, the case company does not exploit their customers by having unrealistic ideas

about what they might want and perceive.

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Customer Involvement

Keeping customers informed and embedded into the crux of the organization is proven to provide

keen insights on what the company can provide and what the customers want. From our findings,

we infer that some customers want to be involved in business development and some do not. One

of our interviewees says that “the trick is to make them go through this small effort of changing...there's

additional reluctance here, of course...has to be interesting enough to push them over, push them over the

edge” (I3). From this we can infer the company to have a moderate level of customer involvement but that

they need to do more. Another customer’s perspective was a bit more different in terms of engaging

customers as he states that,

“To me, it's not important to feel involved in the development of new services or products, per se,

although it's always a good idea to have a feel for what the customers want, it's not as if I'd feel

sidestepped or anything if they decided to launch stuff without asking. I do pay them to save time

not spend time, so I prefer them to come up with products they want or need” (I1)

In line with this, we can relate to studies on co-creation and better value propositions from the

provider’s (company) point of view and for that, a certain level of involvement and control is

needed (Heinonen, et al., 2010). Customer involvement and engaging them within the business is

closely tied to value co-creation and Oswald, et al. (2004) in their research, go on to explain

customer involvement as a new way to enhance CS and customer delight. They along with many

other authors such as Romero & Molina (2009) agree to the fact that continuous customer

involvement is far more dependent on intangibles such as relationships, branding, and customer

experience3.

Another one of our interviewees said that she is only interested in being informed and involved if

there are new products that are going to emerge. To put it in her words, “I would consider it

(customer involvement)...if it's just about the new services, then yeah, probably”. With this in

mind, we go on to assert that customers need to be involved in development activities continuously

to co-create value and provide customer experience, successfully. Romero & Molina (2009), in

their research paper, say that an experience-centric model is to create collaborative organizations

and customer communities based on trust-building and co-creation strategies. The overarching

construct seems to be hedonic, and L2GO needs to improve on their engagement efforts and try to

keep their customers embedded within the organization.

5.3 Cost/Sacrifice Value

Cost/Sacrifice value, as we had discussed before, recognizes the customer’s belief regarding value

created in the context of paid costs. To give up something to gain the service is a sacrifice in this

context, and when we questioned customers about the price break-up for the services provided,

many felt that there are certain benefits to the service that justified the cost. Usually, the sacrifice

concert involves more than just the cost, such as time, effort and other factors, as perceived by the

customer and this has been validated by various researchers over the years (Butz and Goodstein,

1996); (Naumann, 1995; Grönroos, 2000; Khalifa, 2004). Also, perceived customer value has been

defined by many authors as the difference between a customer’s perceived benefits and perceived

costs. From an excerpt of an interview question asking about how they saw costs/benefits ratio

concerning the service provided, one interviewee said that “I feel it's I feel it's a good value for the

money, the package I have” (3) Interviewee 2 confirmed the thought behind the statement given

3Experience(s) – Interactions between customer and producer for personalizing/shaping a product (good or

service) based upon the customer’s specific needs and situations (e.g. context) (Romero & Molina, 2009)

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above and added that non-customers of L2GO also felt that the prices for the services were fair.

To put it in her words, “...I think it's...a good price...I've heard from some people that are not using

l2go, they think it's a good price”

Not only that, but the hassle-free experience for the customers also seems to make the cost worth

it, and one interviewee said, “Considering the amount of time, I saved doing laundry...I still avoid

the hassle of cleaning, so it was still worth it” In line with what these interviewees had to say, we

can look at what (Flint, Woodruff and Gardial, 2002) had to say about how customer value involves

certain trade-offs and sacrifices for experiencing certain benefits. L2GO’s business model brings

the hotel experience to home and it can be seen as to how customers’ give up their private space

for gaining a bigger benefit. Also, the authors argue that sacrifice includes more than just the price

factor (Flint, Woodruff and Gardial, 2002), even though there is not enough data to back it up in

this study. However, interviewee 4 had a different viewpoint on justifying the price paid, and what

she had to say goes like this, “I think the price was really clear...as an entrepreneur and a business

owner, I can easily understand...”

Since we had established that she was a speaker for Nordic choice hotels in the previous

subsection, it is safe to say that this claim can be valid on grounds of her experience. Dameri,

Garelli and Resta (2015) in a conference proceeding mentioned how economists such as

Schumpeter stood behind innovators using new combinations of resources and then pursuing that

opportunity for generating sales at prices they wanted. Van Praag (2005) backed this claim by

saying that a motivating factor for generating profits within the firm would be to buy at a certain

price and sell at an uncertain price, later. This confirms what the participant in the interview had

to say about pricing from an entrepreneurial point of view.

5.4 Symbolic/Expressive value

The symbolic (or) expressive value represents the attachment the customer establishes with the

firm or with the product/service that they offer (Smith & Colgate, 2007). Customers’ self-appeal

and worth are at play here, and our questions are tailored in a way to answer them. Informing the

customers about an added service within their portfolio creates a sense of belonging to the

customers, and L2GO seems to make informed business decisions as they place their focus on the

customer. We will talk about this later in this section.

Sustainable business practices

When we questioned customers on how they felt about the company’s business model and their

practices following the circular economy model, some customers had some insights on how

important they felt it was while others did not. An interviewee had a pretty interesting insight

saying that, “We can't consume at that high speed...last many years...can't exploit as we have been

doing...” and further added that “...they have to have the right values behind this “. These

statements shed light on how natural resources are being depleted at a rapid pace and the call for

more sustainable businesses to emerge to improve sustenance levels of resources used.

Furthermore, this can be validated by what the same interviewee said, “...through the introduced

sharing economy...the company is making it accessible and available for everyone.” (4)

Interestingly, another interviewee had thoughts about the environment when she said, “I keep

thinking of it...it's nice to do something good for the environment as well”

Since L2GO follows a Product Service System (PSS) business model, they can be viewed as a

social construct that provides a competitive and innovative business offering, and as a service

provider, L2GO’s services have a heterogenetic characteristic that is intangible at the same time

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(C, et al., 2010). There is symbolic communication of ideals followed by the firm that imparts a

certain level of value to the customer using it and the influence is pretty huge when working in a

sustainable manner (Tynan, McKechnie and Chhuon, 2010). Furthermore, environmentally

friendly services when used by a consumer gives them a sense of pride and belonging, in addition

to providing them with a personal meaning of self-consciousness and pride (Jung Choo, et al.,

2012). Some customers did not know about the company’s sharing economy concept since they

had joined through affiliation or word-of-mouth.

Brand Recognition

Questioning customers about the effect of the partnership of L2GO with Radisson and Nordic

choice hotels, we got some pretty unanimous responses about how the brand association did not

change the way they perceived the service provided and so on. When we asked Interviewee 5 about

whether the brand affiliation of the firm made a difference in their adoption of the service, she had

denied such claims. Interviewee 2 had an opinion of how the brand of ‘Nordic Choice’ was good

but said that it did not affect her choosing/using the service. To put it in her words, “It doesn't hurt,

but it does not really make a difference” (2)

Another point added by the same interviewee was about the ‘hotel points’ which accumulate if

they are part of the Nordic Choice Club and said that the hotel points can be availed at any time

and that, that was a good thing. Interviewee 3 had a similar thought about the brand name making

a difference in his choice of continuing with the firm. However, another interviewee who has been

working with Nordic choice in giving keynote speeches at specific events said that she got

associated with L2GO at an event, and when she was questioned about the importance of the brand

recognition, she said, “So, do I want sheets from Radisson, or do I want sheets from Nordic choice?

I don't care. I understand that that is important for the hotels, of course, but I would say one option

and then this is the collaboration between blah blah” (4). This comment by her is pretty ironic, we

feel since she has been using the package that is provided in collaboration with Nordic choice

hotels.

Brand recognition is viewed as a form of self-expression that gives customers a social meaning

such as prestige, status and image. Relating to sociocultural meanings associated with the brand

provides a larger scope within the same branch called conditional meaning (Smith, Brock Smith

and Colgate, 2007). Kapferer & Bastien (2009) say that symbolic value in many ways is associated

with experiential values as well, in terms of relationship-building through brand names (Jung

Choo, et al., 2012). Connecting and interacting with customers through association with brand

value is seen as a form of social symbolism rather than the reputation of the brand itself. Here,

with the case company partnered with Radisson and Nordic choice hotels, we can see that the

customers interviewed are more inclined towards the creation of a conditional meaning that has a

personal meaning and consortium, rather than to be influenced by luxury brands partnerships and

so on.

Word-of-Mouth

As mentioned earlier, some of the users have joined because of the recommendation from their

friends and when asked whether they would recommend the service to their circle of friends and

family, we got some interesting answers. The symbolic value represents a form of self-expression

along with a social meaning associated with it, and passing on the ideals of one customer to his/her

acquaintances provides individual value (Wiedmann, Hennigs and Siebels, 2009). In line with that,

we present an excerpt from an interview conducted, “...after trying this service.... they don't want

to give it up...I do recommend it” (3). This can be seen as how the customer attaches some personal

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feeling to the service when he says that he recommends it. Another interviewee had a similar

thought that is presented as “I have recommended it to a couple of my friends and they're quite

impressed...”(2)

Not only did this customer recommend it to her friends, but rather they had employed the service

and had been impressed by it. This associates the self-worth of the individual who recommended

the service and also creates a social meaning within the circle of friends (Smith, Brock Smith and

Colgate, 2007). From the works of Tynan, McKechnie and Chhuon (2010), we can see this as a

sign of boosted self-esteem within a social circle. This inclines us to believe that the customers

who might join after being recommended could stay as customers for a long time and also

recommend it to other people to associate themselves with some sort of individual and social value

(Wiedmann, Hennigs and Siebels, 2009). Another interviewee had to say about how she was

introduced to the company and its business model from a friend and had been associated with

since. “Some friends of mine know... who started L2GO...then I jumped on that train and then I

stuck with them”(5). The aspect highlighted here is that the customer service provided by the

previous firm had not been effective or created any value concerning one’s self, and when L2GO

provided a better service with additional services, the customer noticed the uniqueness,

authenticity and probably the aesthetics combined (Tynan, McKechnie and Chhuon, 2010), and

hence retained the company as her service provider.

5.5 Summary of Findings and Analysis

To validate our findings, we examined each aspect as an individual entity and found them in

conjunction with the literature from chapter 2. The findings of the study firstly indicate that there

were a lot of similarities of opinions i.e., both the firm and its customers had similar thoughts about

the quality of products used, flexibility of service, aesthetics of the product, value for money

perspective, and on sustainable business practices. However there were some differences of

opinions too, i.e., there were conflicting thoughts about the L2GO app from a consumer’s

perspective, and continuous customer involvement for business development wasn’t accepted by

all. Further, the thoughts on brand collaborations varied between the perspectives of the case

company and the customers. This shows that customers were only happy with certain aspects of

what the company was trying to provide for each element and not all of it. Secondly, it indicates

that each element should be given equal importance i.e., companies should not suppress some

aspects to concentrate more on the others.

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6 Discussion

In this section, the key findings and analysis from sections 4 and 5 will be leveraged to discuss and

address our research questions in combination with theory and literature.

6.1 Discussion RQ1

The first part of this chapter focuses on answering RQ1. The analysis of the data on one side shows

that the company has tried to utilise all the elements of CVC, and on the other side it shows that

the customers have appreciated some areas and have also devalued certain aspects. A discussion

of how to effectively use these findings is carried out below to help answer the first research

question.

6.1.1 Functional/Instrumental Value

The central theme or concept identified here was that L2GO is trying to provide high-quality

solutions to its customers. By this, we mean that the company is trying to use products of supreme

quality that have an extended life. This is very much in line with previous studies by Ardente and

Mathieux (2014) and Whalen (2019), who also say that it is beneficial to extend the life of products

rather than to replace them. The company further extends its hand in being flexible and friendly to

its customers by collecting feedback frequently and maintaining customer-friendly communication

channels.

The company is focused on using high-quality materials for their service; they use bed linens and

towels that could withstand more washes than normal linens, they use soaps and handwashes from

an established brand, which is known for its quality in the market. We were able to validate this

with the data obtained from the customers. The importance of ‘quality’ in the realm of CBMs have

been highlighted in previous studies by authors such as (Mcdonough, 2002) who in their book

“Cradle to Cradle: Remaking the Way We Make Things” say that a CE involves careful

management of flows and are designed to circulate with high quality without entering the natural

world (Hernandez, 2019). The benefits of providing quality products and services while being

circular are not only beneficial to the customer but also the other stakeholders involved (Howard

& Webster, 2018). Hence we could see that the empirics are in line with what previous works of

literature state.

By using quality products with an extended lifespan, we could influence a positive contribution to

‘resource efficiency’ as Bakker et al. (2014) explains “Consumers, on average, already discard

products long before their optimal product lifespan is reached”. The CBM allows the company to

take ownership of the products used and hence they are not discarded unless it is of absolute

necessity (Whalen, 2019). The asset owner and the customer are the most benefited here since

following a circular model allows the company to be flexible with their offering whether on-

demand or by themselves, and the customer gets the benefit of a discounted price along with

customizable options while being sustainable (Guglielmo Carra & Nitesh Magdani, 2017).

L2GO tries to provide both tangible (products) and intangible (flexibility) benefits to its customers.

Based on the findings, it is clear that the customers seem to have enjoyed both tangible and

intangible benefits offered by L2GO. For companies under the umbrella of CBMs, a PSS model

as followed by L2GO seems to provide greater intangible benefits than a linear model (Hernandez,

2019).

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Although the customers have spoken positively about the quality of the service, its flexibility, the

friendliness of the company and ease of communication, there still seems to exist a notion of detest

towards the application (L2GOs mobile app.). This inhibits functional value creation with the

customers of L2GO to a certain extent. Value capture happens mostly in the transaction phase

(Bowman & Ambrosini, 2000). We could see that transactions these days have become digital and

are made either through an application or a website. Hence it is important for companies that have

digital transaction options to have a good digital interface, else firms might be pushed to take a hit

on their profits as Bowman & Ambrosini (2000) say that a firm’s profitability is reliant on whether

they capture value at the time of sale, especially for circular businesses, the transaction is not a

single time event rather a recurring event and when the customers do not like the digital interface,

capturing value might be difficult.

The findings also indicate that if customers like the functions and utilities that are integrated into

attributes of the products or service, they tend to pay for it and not look for alternatives in the

market. This is debatable in a general context as we mentioned earlier that customers always look

for better options, but when looking at this from a circular business point of view the benefits

enjoyed by the customers as mentioned above. We can safely say that when customer value is

created at the functional level, customers tend to pay for your products or services and not look for

linear alternates.

6.1.2 Experiential/Hedonic Value

The central theme or concept identified here was that L2GO is trying to establish emotional bonds

with its customers by tapping into their hidden needs, providing them with eye-catching aesthetic

detail, and continuously involving them in business development activities. According to Ellen

MacArthur Foundation, circular business model firms should focus on having good customer

connections, since, in this model, customer relationships do not end at the point of sale, but rather

continue afterwards as well.

Importance of emotional involvement to establish bondings with the customers has been stated

previously by Jung Choo et al. (2012), and L2GO seems to focus on establishing trust and

providing aesthetic emotional feel to build emotional bonds. In a circular business model setup, a

customer's relationship does not end at the point of sale it continues way beyond, hence building

bonds with customers could be the correct approach. Hernandez (2019) says, in a circular economy

model business relationships should not only depend on material flow but should also depend on

integrated knowledge flow. From the perspective of keeping customers informed about

developments in the business end, L2GO seems to focus on the right things. “Without inference

or learned response, a product can be aesthetically pleasing” (Townsend and Sood, 2012). This

explains a lot about how the finish and presentation grab the attention of an individual. Similarly,

Fiore et al. (2005) imply the need for implementing aesthetically pleasing factors in a

service/product offering, “Individuals engage or approach stimuli that create pleasurable affective

responses and avoid stimuli that create unpleasant affective responses”.

Some customers, as we saw in the findings section, do not wish to be involved continuously as

part of company development as people availing these type of services, in general, are considered

as busy people and they might not want to spend their free time for/with the company but this

claim can not be considered completely legit as it was not made by all or at least majority of the

customers and in fact, some customers were delighted to be involved in the company’s

development process. Hence, this claim could be considered customer-specific but it is important

to discuss here as it is a minor factor that could potentially hinder value from being created.

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The findings also indicate that good aesthetic feel and trust over the company has influenced the

customers to make successive purchases, hence we could say that when customer value is created

at an experiential level, customers tend to stay for longer periods resulting in long term customer

relationships.

6.1.3 Cost/Sacrifice Value

The central theme or concept identified here was that L2GO is trying to provide “value for money”

service to its customers by providing them with a reasonable price and maintaining a good service

recovery. Earlier we discussed that firms in CBMs must use high-quality products with extended

lifespan and also talked about the flexibility of L2GO’s service offerings.

In general, high quality indicates higher costs but L2GO can find a trade-off between cost and

quality because the company is using underutilized resources. The usage of underutilized resources

is one of the key attributes of the CBM as noted by McKinsey & Company (2012). Firms in the

CBM, just like L2GO, eventually save a lot of money invested in production as the core of the CE

is to ‘design out waste’ by designing products and optimizing them for a cycle of disassembly and

reuse (McKinsey & Company, 2012). Other firms like CHEP, a pallet manufacturing company

and Teemill, a circular fashion company that is also able to offer a reasonable price for their

products and services that are of high quality, add more credibility to this as they also use a CBM

(Chep.com, 2020; Teemill.com, 2020). Furthermore, the customers of L2GO feel that the service

is worth the money they pay for and the time they save. This could be a valid claim that L2GO’s

efforts to create cost/sacrifice value has been successful so far.

It is important to note that L2GO has made a couple of errors with their service in the past, like

forgetting some utilities or sometimes not being on time at the customer’s place. Although the

company tries to make up for its mistakes as soon as possible and in the best possible way and

customers did not mention this as an issue, it is still important for the company to avoid making

such mistakes and inform the customers when running late or otherwise it might cause an

unpleasant feeling for the customer.

It is also important to discuss the fact that L2GO does not have a direct competition and hence the

customers are not offered a choice of alternate prices to choose from. Customers are very much

aware of the recent market trends, they know about the various options and different service

providers that are available in the market (AlNajem, 2018). So, if a company in the future offers a

similar service with a better price profile without giving up on service quality, then there is a

chance that the customers might shift or expect L2GO to reduce its prices. The term ‘so far’ has

been stressed or highlighted in the claim made above owing to this reason.

6.1.4 Symbolic/Expressive value

The central theme or concept identified here was that L2GO is trying to create a brand image by

collaborating with big hotel chains like Nordic Choice Hotels and Radisson. With the help of such

brand names, L2GO believes that they could create some sort of value their customers can

associate themselves with. Apart from this, a secondary finding indicates that the company creates

certain constructs of symbolic value by following sustainable practices.

Importance to brand image and how it could be used by companies to assess the purchasing

intentions of consumers and how the brand image is used to influence a customer’s decision have

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been previously explored by Walley et al. (2007), Malik et al. (2013) and many others. Macdonald

and Sharp (2000) claim that despite consumers being familiar and willing to pay for a product,

brand awareness is a major factor that might influence this purchase decision. In line with this,

L2GO has partnered with two leading hotel chains in Sweden aiming to create brand value to its

customers and eventually sell more.

Despite its importance in general, there is no concrete study or evidence in the circular business

model realm that stresses the importance of brand image. Studies and research on circular business

models talk about environmental effects, resource efficiency, waste management and other

sustainable issues and how companies could use the circular business model as a solution to these

issues (McKinsey & Company, 2012; MacArthur, 2013; Michelini et al., 2017). Bhat and Reddy

(1998) suggest companies to use brand and brand names to express customers’ personalities rather

than using it to express image, prestige and exclusivity. L2GO claims that some customers have

signed up due to the brand factor, but as far as the customers of L2GO are concerned the brand

was never a deciding factor for them. Looking at it from a general perspective, we could see that

the customers were anyways ready to sign up or subscribe for L2GO’s service irrespective of the

brand. Hence we could say that L2GO’s efforts to create symbolic value through brand

collaboration is not very successful but the symbolic value is successfully being created through

the company's sustainable business practises. The circular business should thus stick to the

principles of the model and try to work on and improve their contributions to the environment

which in turn they could use as a statement to create symbolic value with their customers.

The findings also indicate that when customers are happy with the money they spend for the service

and at the same time contribute positively to the environment, they tend to spread the word around,

inviting more people to try the service. Hence, we could say that when the customer value is

created at the cost or symbolic level, customers tend to recommend the brand, their products and

services to friends and family resulting in word-of-mouth.

The analysis shows that customers make purchases based on their expectations (perceived value)

and not what the company is trying to do for them. The conceptual model relates to our findings

in a way that the four elements are found through empirics and in connection with literature. This

goes on to convey that a firm can only provide propositions, and creation happens only after

connecting to the customer itself, among other value creation factors.

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Summary: RQ1 Discussion

With the help of literature analysis and the empirical findings, a discussion of how L2GO should

use each element of customer value creation is presented in table 4 below, from which companies

of similar setups could also follow the same. This can also be viewed as an answer to the first

research question.

Element Description

Functional/

Instrumental

Firms could use high-quality products as solutions to customer’s needs, they could be flexible,

friendly and maintain an easy communication channel. For companies that have an option of

digital transaction, it is also important to maintain a good digital interface thus making sure

that value is captured and yet created in all three phases (Pre-Transaction, Transaction, Post

Transaction). When customer value is created at the functional level, customers tend to pay

for your products or services, and not look for linear alternates.

Experiential/

Hedonic

Firms could present their products and services with eye-catching aesthetics and further, they

should try and earn their customer’s trust by keeping them well informed and involved in

certain business development activities. Customer involvement is a highly subjective concept,

some customers will like being involved and some may not so when involving customers, it

is important to make sure that companies take prior consent from the customer and avoid

involving the same set of customers continuously. When customer value is created at an

experiential level, customers tend to stay for longer periods resulting in long term customer

relationships.

Cost/Sacrifice Firms should provide value for money products and services since the bottom line for circular

business is to make maximum utilisation of underutilized resources, firms can create and

maintain the value for money tag. L2GO does not have a direct competitor in the market and

so its customers are not provided with multiple options to choose from. For firms that have a

competitive market, it is important to have a competitive price without compromising on

quality, more specifically customers will not appreciate it if you maintain high-profit margins.

Symbolic/

Expressive

Firms should focus on sticking to the principles of the circular model and try to work on and

improve their contributions to the environment which in turn they could use as a statement to

create symbolic value with their customers. When customer value is created at the cost or

symbolic level, customers tend to recommend your brand, products and services to their

friends and family resulting in word of mouth business.

Table 4 summary of discussions to RQ1

6.2 Discussion RQ2

In this section, we try to answer our second research question which is viewed from an extrapolated

viewpoint of how elements of CVC influence customer satisfaction, through its drivers.

From the elements of customer value studied, analysed, and discussed in the previous sections, we

write this section discussing the drivers of satisfaction as listed in the Extended Performance

Satisfaction Index (EPSI) Rating Model, which was explained in section 2.2.1. We had also

mentioned how there were latent and result variables in the EPSI model and how they were

interconnected. The interpretation of findings for the first research question (RQ1) has been talked

about in the previous sub-section along with its importance and connection to prior research. We

have divided the discussion of the second research question (RQ2) into 4 parts to be in line with

the 4 latent variables (drivers) of CS (image, customer expectations, product, and service quality),

47

as mentioned. The model of satisfaction index involves many synergies and the most relatable to

the creation of perceived value is the product offering and service quality which contain the

expectations of the customers, and the corporate image of the brand. Hu, Kandampully & Juwaheer

(2009) says that the connection between service quality and perceived value ultimately leads to

CS that develops corporate image. Already, we can see overlaps between different factors of the

EPSI model.

Moving on from that, in our study, we have found various overlapping codes between the different

elements of CVC and how customers perceive them. The perception of the corporate image is

derived from a person’s past experiences and cognitive generalization of one’s self as written by

Andreassen and Lindestad (1998), and it is also believed to have a positive impact on the service,

customer satisfaction and ultimately, in customer loyalty.

The ‘image’ factor in this scenario fits into the field of ‘Symbolic value’, and in addition to that,

as symbolic value relates closely to brand names/partnerships, and concerning other social

elements, the corporate image that we talk about here also fits within the same function.

Psychologist Markus (1977) said in his study that corporate image had the same characteristics of

self-schema (i.e., a summary of a person’s beliefs, experiences and generalizations about the self)

which has an uncanny resemblance to the concept of symbolic value in which the individuals

experience self-conceptualizations and identify one’s association of what self-esteem is.

Moreover, author Thøgersenin (2018), in his study of ‘Basic drivers of energy saving in European

households’, says that self-identity is associated with environmental effects and the direct effects

on energy saving, and further expands on claiming how frugal4 self-identity with a pro-

environmental mindset is the ultimate contribution to greener households. From a circular

economic lens, we can associate these factors to a certain level. Due to the lack of supporting

secondary sources on this topic, we extracted data from a singular source to support our

discussions. From our findings, we saw that customers did not pay heed to the brand association

that L2GO had, rather they valued the service for its standout quality. This is a form of self-

perception based on how the construct ‘image’ is built upon. This contributes to CS in a way of

contributing to service quality and customer expectations in general.

Customer expectations manifest in multiple ways depending on what they want, need and perceive

based on prior experiences or hearsay (Hallencreutz and Parmler, 2019). These can be categorized

mainly under the concept of functional value since most customers start by expecting certain

utilitarian functions from the product/service they receive and expect the quality to be good. CS

could arrive from a singular or multiple experiences and only when a person’s emotional need is

fulfilled, is he/she truly satisfied (Oliver and Swan, 1989; Mano and Oliver, 1993; Hu,

Kandampully & Juwaheer, 2009) and in this case research, we think that the customers involved

in the study are emotionally satisfied and hence are happy customers. We say this because, in the

findings section, we had talked about the experiential value factors that lead the customer to use

this service. In addition to that, customer expectations also emerge through the quality of service

provided post-transaction by the firm to the customer. Quality of service, as perceived by the

customers of L2GO, seem to be seamless with mild delays that do not affect the satisfaction

compass of the customers by much. Customers’ perceived ideas play a part in determining their

acceptance within the CE context as noted by Planing (2015). Also, it was inferred that the

organization must provide a value proposition that addresses not only rational but also non-rational

motives of the customer when being circular.

4 the process of reducing the complexity and cost of a good and its production

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Service quality is not viewed as a unidimensional phenomenon, rather it is claimed and tested to

be a multidimensional occurrence that is generally dependent on the gap between expectations and

the actual product. In addition to that, it is viewed as a means to distinguish between firms and is

also a known contributor to market share and customer satisfaction (Berry et al., 1988; Vandamme

& Leunis, 1993; Zeithaml, 2000). By extending service lifetime, resources are used more

efficiently while re-using and re-introducing materials into the loop. Moreover, within the CBM

paradigm, interdependencies exist between the provider and the consumer, so collaborations are

to be importantly seen from an expressive value perspective. The connection between service

quality and the cost of the product lies in how committed the customer is to the company and the

offering provided. The study done by Zeithaml, Berry and Parasuraman (1996) confirmed that

when customers experienced better quality of service, they would not hesitate to pay more than

what the cost was in the first place. In circular businesses, cost savings can be achieved through

the usage of underutilized resources, and by taking away the cost of ownership from the customer.

There is also a need for firms to assess their sustainability impacts when carrying out activities for

withholding service quality.

We can summarize that service quality is an attribute associated with the concept of functional

value which continuously fulfils the customer’s utility, at the case company. Provided that the

customers of L2GO accept that the service is good but can be improved from our findings, leads

us to believe that their perceived value levels have been achieved to a certain level which again is

a sign of a satisfied customer.

In line with our conceptual model (Figure 3), there seem to exist synergies within the whole system

between the elements of customer value creation, perceived value, and drivers of satisfaction.

When the drivers of CS are affected in a certain way, it is sure to make an effect on the satisfaction

levels of the customers as well, since the latter is contrived from the former like we saw in the

reasoning above. Authors such as Eggert and Ulaga (2002) have argued about customer perceived

value replacing CS as a paradigm to measure satisfaction levels but from our study, we believe to

have established a fine line between the both.

With these justifying arguments, we can say that CS itself is a multidimensional construct that has

arrived because of an extended set of service experiences. It is also safe to say that, in this study,

the customers of L2GO are satisfied on an experiential level since those constructs are the ones

that are data-heavy in comparison to functional, symbolic and cost/sacrifice value. If the question

posed relates to whether in this study, the second research question has been answered, the answer

would be, partially. We say this as a limitation since we wanted to study the constructs of CS at a

greater level as well, but owing to the limited scope, we had to derive answers from the constructs

within the CVC framework. Some studies lead arguments to believe that the effective creation of

CS leads to customer loyalty and retention and in this case, we can see certain traces of customer

retention levels as claimed by the firm and as said by certain customers about the time they have

stayed with the company given its youthful exuberance. However, the theory of customer retention

and loyalty is broad and is beyond the scope of our study and could be a potential future research

area.

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7 Conclusion

The concept of value creation and the dimensions surrounding the same have been studied

extensively by authors and practitioners alike. In particular, studies on customer value has also

been done extensively and frameworks and conceptual models have been formulated to understand

this concept of CVC, how it is created, the implications and barriers to achieving the same.

However, the existing literature on CVC has been biased to lean towards uni-dimensional

constructs surrounding the concept, rather than multi-dimensional ones. This leads to a problem in

literature as there is no measure to understand the perspectives of the firm and the customer.

This gets further disintegrated when we look at it from a CBM perspective. Hence, the purpose of

this study was to explore the range of elements in the CVC framework and to establish how firms

operating under the umbrella of CBMs could make use of these elements. Our first research

question focused on understanding how firms operating in a circular way could utilise the elements

of CVC successfully. The second question was to understand how these elements could be

exploited to bring about CS. To answer the research questions appropriately, we adopted a

qualitative approach with a single case study design, and we collected a detailed set of information

from the case company and its customers. A total of 7 semi-structured interviews were conducted

using an interview guide; 2 representatives from the case company and 5 participants who were

the customers.

Using thematic analysis as our method for identifying and extracting underlying information from

the data, we had some overarching themes for which we generated initial level codes based on

categories and later reached finalized codes. These, along with scientific journals, research articles,

and conference proceedings helped us answer our research questions. Answering our RQs, we

offered the connection between the different elements of CVC: Functional/Instrumental,

Experiential/Hedonic, Symbolic/Expressive, and Cost/Sacrifice value. We highlight how within

each element there are emergent constructs that could prove to be useful for firms having a CBM.

Further, it can help firms to understand how they can position their value proposition to better suit

their customers’ needs. Aso, it provides a chance to look into value co-creation through

collaboration with customers and keeping them involved in the business processes. As for our

second research question, the drivers of satisfaction; Image, Customer expectations, product, and

service quality, have been studied in relevance to the elements of the CVC framework. The results

arrived to provide some light on how these elements could be leveraged to understand customers’

perceived value, and eventually attain CS.

We incline to trust that, although there are multiple frameworks and theories in place for addressing

gaps of a similar vein, there is without a doubt lack of study surrounding the topic of CVC in

CBMs. By understanding this gap and addressing it, our dissertation will be contributing to the

existing literature of value creation, customer value creation, customer satisfaction, and value co-

creation.

On an ending note, we hope that firms, in the near future look into our study and leverage the

insights we have found in our thesis. From an academic perspective, we hope that this study

invokes interest in other students, and academicians to probe into the same domain further and to

enhance our case study.

50

7.1 Limitations and future research

The limitations and findings of this study provide for plenty of opportunities that could be probed

into in future studies regarding circular business models and elements of customer value creation.

First, we start by highlighting the barriers we faced while conducting this study. The data that we

collected from the company was restricted to two personnel so we could not gain a holistic

perspective from different angles but fetched data from only two entities. It would have been

interesting to see how other employees of the firm felt about the concept that we had framed

questions for. Similarly, the customers that we interviewed were not experts on any specific subject

matter and hence they weren’t able to comment on certain theoretical and practical implications,

rather just explain their own experiences. Informed knowledgeable customers might have provided

for an even better interpretation of our study. The second barrier is the type of study that we

conducted.e., a qualitative study. Since we had pursued to conduct a qualitative study, the

generalizability of results is at a question as to how reliable and coherent they are under different

scenarios. Usually, generalizability is stronger when using quantitative research to validate the

findings and hence we suggest that maybe in the future, a quantitative study could be carried out

to test the relationships as depicted in our conceptual model. The relatively small sample size

should also be noted as a limitation to this study and we think that the future implication should

involve a bigger sample size under different settings to gain different views on perspectives and

experiences. Furthermore, this study focuses on one specific case company with a specific target

group (Generation X) and we suggest that future research sheds light on a large set of companies

involving different target groups. Future research could also focus on getting information for

experts in this field to have a cohort study of companies, customers and the outcomes of the

synergies between them.

7.2 Theoretical contribution

The research on how companies following the circularity model use value creation elements to

create customer value has been lacklustre. Therefore this study contributes to academia by

providing advanced knowledge on each of these elements and what factors to consider for good

utilisation of each of these elements. The study further extends its contribution to the academic

world by finding synergies between these elements of customer value and drivers of satisfaction.

Thanks for conducting a comparison study between a firm in the circular business model and its

customers. This study is one of the first to contribute with advanced organizational insights to each

element of customer value creation under the circular business model. In turn, this study enables

future research to continue exploring these elements of customer value creation more thoroughly

by involving a larger set of companies and multiple target groups.

7.3 Managerial Implications

For companies under the circular business model that give importance and wish to create customer

value, this study provides valuable insights on how to make the best use of the elements of

customer value creation to create customer value with its customers. More specifically this study

showcases what the company should focus and what to avoid in each of these elements. In

particular, the findings of this study provide the following implications,

First, much like previous research, companies providing customer expectations based on the

product and service offering was a key factor in improving customer value. In addition to that, we

had found out how leasing services affected how customers viewed value creation aspects and how

the company sought after their customers. We also found how companies partner with certain big

51

brand names to lessen their costs and improve the flexibility of their service offerings. Not only

does this help in cutting overhead costs, but it also is a way to scale up in a faster manner than

otherwise.

Secondly, the findings of this study implicated that in the case of a startup, marketing activities

might be difficult to carry out because of the costs involved and we suggest that they move toward

digital marketing strategies that are relatively cheaper to implement and reach a grand audience at

the same time. Due to lack of knowledge by many potential customers, the company loses out on

gaining a more attractive response rate and adoption. Therefore, this study also suggests that

entrepreneurs (or) managers in startups seek to adopt a solid adoption strategy to proactively find

customers and gain insights on what they would want apart from the original product/service

offering.

7.4 Ethical Implications

In our thesis, the actors that we have studied here, the case company, LtoGO Sweden AB and it’s

customers, both are subject to disputable discussion from an ethical standpoint.

One may argue that the textile industry, which is one of the biggest in the world, and one which

contributes to some countries as a source for an economic boost and so on to be a driver to meet

sustainability goals established by the UN for the fashion and textile industry (Nations, 2020).

However, there are underlying facets to the darker side of the industry that are shadowed by the

end product that we receive.

As we understand from our case company, the objectives of people employing the sharing service

vary. Some customers are using it for the ease of the service and some for sustainable reasons, and

cost savings. Nevertheless, one thing that they have in common is that they do not mind paying

for a service that addresses their needs. We can perceive this as the buyer being a premium user to

employ such a service. They responsibly employ the service and are contributing to the economy

in a good way by re-using products and keeping them in the loop. We cannot directly see the

underlying ethical issues before it reaches this closed circle. There might be unethical practices

being used in production, and there might also be industrial spillage when and where these

materials are being manufactured, but the users of this service do not care about that because they

are not interested in that. Furthermore, production of these textiles, unlike L2GO, might not use

underutilized resources thus using the already overly exploited resources that go into the

fabrication of materials. So, in the end, this begs the question of how sustainable are the practices

followed in the firm? Even though the case company might not have a direct impact on

deteriorating resources, behind-the-scenes of the procurement, production and distribution is

called into question.

Another point that we would like to stress on here is that this service is not available for everyone

and is not easily accessible by many. This leads us to believe that the company caters to a

privileged set of people (upper middle class/upper class) which has a societal impact in

developing/under-developed countries. Also, as service providers invest heavily in procuring

materials, establishing partnerships, and providing a novel service, they try to minimize their

operational costs and might have to ignore some of the ethical aspects related to their business.

To address these concerns is not something that one entity can bring about, alone. It has to be a

collaborative approach where the customers/users are well-informed of the entire life-cycle of the

products they receive and companies being completely transparent with their activities. The

government could re-assess regulations and employ better rules for the production of textiles and

52

procurement of the same, within a B2B setting. Customers should be able to ask the right questions,

ranging from local ethical and societal impacts to going deeper than what is portrayed by the firm

on their website and so on. However, there could be more ethical implications that might arise

from brainstorming and future research, which should be carried out as an extension of this study.

53

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Appendix A

Interview questions for the case company

CEO

Background

- What is your position at L2GO?

- What are your main tasks and responsibilities?

- How long has the company been active for?

Business development and Customers

- What was your initial business idea when you started the company back in 2017?

- How has it changed since?

- Why has it changed?

- Could you briefly explain L2GO’s business model?

- Was a circular business model always your idea, or did you start with an idea of a linear

model for your business?

- What was your motivation for this change? (Linear to Circular)

- What has changed during this transition?-Also, could you give a brief comparison

of what works now and what didn’t work back then? (Circular to circular)

- How many employees does L2GO have?

- How flexible would you be with customers being involved in the business development

aspects of the company?

Value creation

- Can you define ‘value creation’ in your own words?

- How do you think the value is created by L2GO?

- How do you think the consumers perceive value?

- Can you tell us about L2GO’s customer acceptance and retention rates?

- Roughly, how many customers are registered to your mobile application right

now?

- Do you see an increase or decrease in the number of customers during the last year,

quarter-wise?

- How connected are you with your customers in terms of hearing their problems and

solving them?

- How would you address challenges in terms of customers?

- Were there some things that you would rather have not tried with the service offering?

Stakeholders

- Who are the stakeholders and partners for the company?

- Who have you collaborated with in terms of a partnership?

- Can you explain a few words about the pilot project with Nordic choice hotels

group?

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- How was the customer reaction to this collaboration? Has it increased your

customer base?

- Can you state the differences between the type of relationship with Radisson blu

and Nordic Choice hotels?

Future strategies

- What is the company planning on doing along with Nordic Choice hotels in the near

future?

- What kind of improvement, change or growth are you trying to enact at the company?

- How do you see the company changing in 2 years?

CTO

As for the Chief Technology Officer, we had a few extra questions apart from the ones listed

above. To reduce confusion, we are just providing the additional questions that were asked to the

CTO.

Technology aspect

- What is the role of technology in the development of L2GO so far?

- Has it played a major role in shaping the business model?

- How do you think it would advance in the near future to address the business

needs?

Mobile Application

- Why are customers restricted to book services only through the app and not via website

or email or call (any other means)?

- How many versions of the app have been developed so far?

- What have been the major challenges while developing the app?

- Why is the app only in the Swedish language?

- Was there any major customer feedback about the app that you had to work on?

- What is the future version of the application going to look like?

Customers

Background and general questions

- How long have you been a customer of L2GO?

- How many times during your relationship with the company, have you booked for a

cleaning service?

- Did you avail these services with necessity or maybe because you simply wanted to try

such a service?

Information to customers

- What do you think about L2GO having a customer portal acting as a forum for discussion,

queries, etc?

- What functions and information do you think should be in the customer portal?

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- Should the firm evaluate the needs and wants of the customer before marketing their

product/service?

- If L2GO expands its portfolio of service offerings, how soon are you notified and made

aware of it?

Customer expectations

- What do you prioritize, customer support programs or flawless service?

- Have you tried any service similar to L2GO previously? If so, what made you change to

L2GO?

- Was the fact that the company follows a circular business model part of your decision?

- Do you think L2GO’s package meets your needs?

- If yes, were they needed before than it is now?

- If no, what were your expectations that weren’t met by the company’s offering?

- Do you think that there should be certain boundaries in having your home feel like a

hotel?

- When the company brought the feeling of a hotel to your home, was there

anything that you felt the company overdid?

Reach and communication

- How did you come to know about L2GO?

- Was the company’s profile easy to find? If so, comment on their advertisement or

marketing activities that were explicit.

- How easy was it to establish contact with L2GO?

- Were you able to then get all the information that you require?

- If yes, was the information clear for you to understand?

- If not, what kind of information did the company miss out on?

Digital Interface

- Do you think that the application has a good interface for user experience?

- If not, would you have preferred a function in the website for placing your order?

- Do you think the app has all the information that you as a customer require?

- If not, what according to you could be improved in the application?

Costs

- What was your opinion on the cost of the service?

- How well did you understand the breakup of costs involved in the service?

- Would you pay for the service even if they increase the costs over time?

- Are you satisfied with the payment options? Would you like some other mode of payment?

- If L2GO decides to give you some additional services for the same package cost, what

services would you desire?

Service Quality

- How was your experience with the staff? Do you think they are well trained?

- Did you experience any problems in terms of delivery or service quality?

- Has L2GO been able to cope up with the agreed schedule every time?

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- How is the quality of the materials that are used for your bed linens and mattresses?

- How satisfied are you with L2GO?

- How likely are you to recommend L2GOs service to a friend or a relative of yours?

- What aspects of business would you like to see improvements in the near future?

Analysis Tree

For data analysis, we followed a deductive thematic approach in which we had predefined

overarching themes based on the framework Elements of CVC. We further coded and categorised

similar responses based on the framework. The analysis process was done separately for the

company and customers. The following is a combined version of the analysis tree that represents

how we arrived at our finalized codes for each element from our empirics. To validate our findings,

we examined each aspect as an individual entity by checking its relevance to the theory.

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Colour codes: