The total cost of ownership of durable consumer goods: A conceptual model and an empirical application

This paper proposes a general model to evaluate the Total Cost of Ownership (TCO) of durable consumer goods (e.g. cars, household appliances). The TCO approach has been developed to support purchasing decisions in the business-to-business domain: here we use similar principles to consider the business-to-consumer context. The new customer-oriented activity-based model includes 37 activities, classified by process and temporal phase. The model allows computing the costs incurred by the customer from the search and selection phase to the end of the product life. Furthermore, the paper discusses four modes of application of the model: One-to-one TCO evaluation, Average Product TCO evaluation, Average Customer TCO evaluation, and Average TCO. An empirical test on a sample of washing machines shows that customer habits (e.g. the usage frequency or the detergents used) are the most relevant factor affecting the TCO, with a far greater impact than the purchasing price. Thanks to the resolution of a number of gaps pointed out by a literature review on TCO research, the new model can be used as a decision support tool by enabling product comparisons and cost structure analysis.