Risk and Reward Trumps Moral Appeals in Sharing Economy Study
The growth of the sharing economy shows little sign of slowing down in 2012, with Airbnb logging 5 million nights booked in 19,000 cities as of February, the establishment of the City of San Francisco’s Sharing Economy Working Group, and the attention of angel investors such as Ron Conway. Collaborative consumption appears to be on the cusp of going mainstream, but what will it take to break through?
A new study by Cait Poynor Lamberton of the Katz Graduate School of Business at University of Pittsburgh, and Randall L. Rose of the Moore School of Business at the University of South Carolina, suggests that perceived risks and the cultural norms of the ownership society are the most immediate barriers among potential users, and identifies a number of ways that sharing services can make their pitch to a mass audience. Some takeaways from the study:
Emphasize personal gain over moral appeals
The researchers contend that “as costs of sharing are minimized and utility is maximized relative to ownership, propensity to choose a sharing system will rise.” A study of the perception of carsharing among 369 licensed US drivers found that while the initial propensity to share was low in the sample group, respondents were sensitive to considerations of cost, utility, and the availability of vehicles.
Using Zipcar as an example, the study found that the moral arguments for carsharing—the environmental and social benefits—were not particularly effective. Lamberton and Rose conclude that “consumers’ perceived risk of product scarcity plays a significant role in determining sharing propensity even when cost, utility, substitutability, and knowledge are accounted for,” which suggests that consumer education may be a more effective approach to increasing adoption rather than moral appeals.
Users must be convinced that sharing doesn't mean going without
Lamberton and Rose write that “the perceived risk of scarcity related to sharing is a central determinant of its attractiveness.” The study recommends that collaborative consumption services demonstrate how sharing is preferable to ownership, and that it doesn’t mean making sacrifices or going without. They write, “perceived risk of product scarcity is a major driver of sharing propensity in commercial sharing systems.”
Ways to reduce the perception of risk include providing control mechanisms that allow users to choose who they will share with, releasing usage information to demonstrate the tangible benefits, and clearly communicate that using a sharing service will not reduce the availability of the product in question—in short, that if they need a lawnmower on a Saturday morning, they’ll be able to get it.
Diversify your user base
The researchers contend that a strong barrier to sharing service adoption is the perception that sharing with peers or like-minded people will increase the risk of scarcity. They write, “individuals who are likely to be heavy product users intuit that they will face less product scarcity risk when sharing with dissimilar as opposed to similar others,” noting that for this reason, a more heterogeneous demographic of users could increase confidence in the utility of the service.
Trust matters, but not as much as availability
Counterintuitively, Lamberton and Rose’s research suggests that while trust plays a factor in whether a user will adopt sharing services, perceived lack of availability is a greater disincentive. They write, “results suggest that consumers’ focus on the likelihood of product availability provides a more direct influence on propensity to share than emphases on the trustworthiness of others.” They recommend that sharing services address such “practical rather than social concerns” to spur adoption.
The ownership mentality is entrenched
Education is key to combating entrenched perceptions of scarcity and ownership. Citing Russell Belk’s 2007 paper “Sharing” (PDF), Lamberton and Rose note the “strong product ownership norm” in American culture, noting that prior familiarity and experience with sharing systems makes people more comfortable with the notion. They surmise that such services may have an easier time in regions with a history of public goods and collectives. To scale, collaborative consumptions services should reach the attention of mass media, actively engage in the conversation about sharing, and educate potential customers on the benefits.
Less Obligation, Less Risk, More Users
Lamberton and Rose emphasize flexibility, noting that the fees and obligations of the co-op model can serve as a deterrent to potential customers. Other factors that can affect adoption is whether occasional users can opt-in at will, or if they’re locked into contractual obligations by the service.
Comments
Cait Lamberton wrote on 07.11.12, 7:58am:
Thanks for the report, and for the insightful comments, Adam. Wanted to share a few thoughts.
We originally started this project thinking we'd find evidence of moral/social benefits driving participation in sharing. However, note that our research focuses on commercial sharing systems - those that are managed by marketers and largely governed by contractual agreements. When people decide whether to pool their cell phone minutes with others or whether to buy or own a bike on their own, costs and benefits will inevitably be highly salient.
And really, that does provide a sustainable model, and a rational one as well. Extracting unused utility from a system is efficient across an entire economy. However, if people buy into a sharing program due to moral or social motivation and then find that the resource they need is unavailable, they're likely to be alienated and show a backlash toward sole ownership - even if that leads to waste. So, one could argue that if we want sharing systems to flourish in the long-term, making them a rational, mutually beneficial, economically efficient decision is actually critically important right now, when people are in the learning phase.
Emphasizing more abstract benefits, of course, doesn't hurt propensity to share, and I agree that those things are important. They're part of creating a cognitive and affective network that supports sharing. In less commercial systems than those we studied, they may also be more important than in our contexts. Determining the relative importance of economic v. social/moral factors across different types of sharing contexts is an important area for future work to explore.
Seth Schneider wrote on 07.11.12, 4:39pm:
Insightful comments, Adam. Who would be the main losers that you refer to? The collaborative consumption companies that aren't profitable (and their investors)?
Adam Walker wrote on 07.12.12, 1:34am:
Hi Cait,
Anyone who has not yet read your paper should really take the time to do so it is excellent. Congratulations on bringing some academic rigour to a subject that threatens to be crowded out by pollsters chasing one dimensional answers.
In my opinion you are absolutely correct that in a commercially driven sharing system any perception on the part of the consumer that the product they want to consume will not be available at the time they want it will reduce their propensity to share. Indeed for those to whom availability is prime, buying may always be the preferred method of consumption.
I believe that how we seek to address these negative determinants of preference to share will define whether collaborative consumption is to be a radical change or not.
For example, in addressing availability you envisage marketers developing control mechanisms that try and match consumers based on complementary usage patterns. Is it not more likely that in a profit driven system the accountants will simply introduce new product based on a demand model of availability and optimum profit. I think that you acknowledge this need when you say that municipalities may need to offer “a buffer of for-hire vehicles in the event that vehicles are unavailable in marketer-mediated systems”.
The problem here is that we are no longer concerned with maximising the efficiency of products but rather finding the intersection of efficiency and optimum profit. Overall the system will be more efficient but it is not striving to be maximally efficient. How efficient it gets will be determined by profit rather than environmental concerns.
I might want a lawnmower on a Saturday morning but efficient sharing means that I have to get used to mowing my lawn on a Thursday evening. Otherwise we end up on a path that leads back to each of us owning our own lawnmower.
Hi Paul,
This is an excellent report.
It seems to me that this article is foreshadowing the debate about the ideological heart of collaborative consumption.
Reduced to its core themes we can either see collaborative consumption as a (more) socially acceptable and environmentally friendly version of market capitalism or as a fundamental shift from individual greed and accumulation to an emphasis on the larger good of the community.
The first version, Capitalism 2.0, is concerned with business as usual. The goal is still profit but with new tools and a winning marketing message. The illusion is that we can share, save the planet and make money. In the short term this may look like it can happen but with the emphasis on individual benefit it will only last as long as everyone profits and that isn't sustainable - scarce resources means a few winners and a lot of losers - Capitalism 2.0 is a Ponzi scheme.
On the other hand we can play the long game. Educate, lead by example and build excellent collaborative consumption models that are economically sustainable and allow further growth. If people understand why they are sharing then their behaviour will be locked in and more resilient in the face of economic changes. The movement needs to take root, grow and flourish and not take short cuts.
In my opinion emphasising personal profit and imitating existing business models are short cuts. They are not the solid foundations that are required.