Munich Personal RePEc ArchiveThe consumer empowerment index. Ameasure of skills, awareness andengagement of European consumersNardo, Michela and Loi, Massimo and Rosati, Rossana andManca, Anna RitaEuropean Commission, DG EU Joint Reseach Centre, IPSC, Ispra,ItalyApril 2011Online at Paper No. 30711, posted 05 May 2011 21:02 UTC

The Consumer Empowerment IndexA measure of skills, awareness and engagement of European consumersMichela Nardo, Massimo Loi,Rossana Rosati , Anna MancaEUR 24791 EN - 2011

The mission of the JRC-IPSC is to provide research results and to support EU policy-makers intheir effort towards global security and towards protection of European citizens from accidents,deliberate attacks, fraud and illegal actions against EU policies.European CommissionJoint Research CentreInstitute for the Protection and Security of the CitizenContact informationAddress: Michela Nardo, European Commission, JRC, E. Fermi 2749, TP361, 21027 ItalyE-mail: [email protected].: 39-0332-785968Fax: indicators website: NoticeNeither the European Commission nor any person acting on behalf of the Commissionis responsible for the use which might be made of this publication.Europe Direct is a service to help you find answersto your questions about the European UnionFreephone number (*):00 800 6 7 8 9 10 11(*) Certain mobile telephone operators do not allow access to 00 800 numbers or these calls may be billed.A great deal of additional information on the European Union is available on the Internet.It can be accessed through the Europa server 64349 ENEUR 24791 ENISBN 978-92-79-19926-4 (print), 978-92-79-19927-1 (pdf)ISSN 1018-5593 (print), 1831-9424 (pdf)doi: 10.2788/9102 (print), 10.2788/91744 (pdf)Luxembourg: Publications Office of the European Union European Union, 2011Reproduction is authorised provided the source is acknowledgedPrinted in Luxembourg

Consumer Empowerment IndexNardo MichelaLoi Massimo, Manca AnnaRosati RossanaJoint Research Center – European CommissionEconometrics and applied statistics – Ispra5

Table of ContentTable of Content .6List of Tables.8List of Figures .9Executive summary .111. Introduction .142. The concept of Consumer Empowerment.152.1Consumer empowerment and markets.152.2Consumer empowerment: towards an operational definition .172.3The Consumer Empowerment Index and its components.183. The dataset .204. Statistical dimensionality of the framework.224.1Univariate analysis .234.2Multivariate analysis.245. The Consumer Empowerment Index .315.1A set of weights for the Index .315.2Overview of the Index: scores and ranks .325.3Association of CEI with individual perceptions .355.4Influence of the design weights.365.6Association between the Index and its components.386. Robustness of the results .436.1Robustness of the weighting based on experts’ elicitation .436.2Importance of each pillar.457. Socio-economic aspects of consumer empowerment .477.1Gender .487.2Age.497.3Occupation.497.4Education .527.5Income .537.6Language spoken .547.7Internet use .557.8Perception of empowerment .558. Conclusions.599. Final tables .61References .67Appendix 1.711. Structure of the Consumer Empowerment Index .712. Construction of indicators .723. Univariate analysis .944. References .101Appendix 2.1021. Age distribution analysis histograms .102Appendix 3.1301. The concept of empowerment.1302. References .132Appendix 4. Socio-economic analysis (tables) .1351. Gender .1356

2. Age.1373. Occupation.1414. Education .1585. Income .1616. Language spoken .1657. Internet use .1678. Perception of empowerment .169Country profiles.1717

List of TablesTable 1. Spearman correlation at the individual level (data multiplied by design weights) . 24Table 2. Whole dataset: loadings of the principal components . 26Table 3. Consumer skills: loadings of the principal components . 28Table 4. Awareness of consumer legislation: loadings of the principal components . 29Table 5: Consumer engagement: loadings of the principal components . 30Table 6. Weights based on experts’ elicitation (0 minimum; 100 maximum) . 32Table 7. Consumer Empowerment Index. Scores and ranks of the Index and its pillars . 33Table 8. Scores for the 10 sub-pillars of the Consumer Empowerment Index. 35Table 9. Correlation between CEI (pillars and sub-pillars) and individual perceptions. 36Table 10: Consumer Empowerment Index. Scores of the Index and its pillars when design weights are notapplied. 37Table 11. Average rank difference (in absolute terms) between weighted and non-weighted data . 38Table 12. Score correlation (country level) between indicators grouped in pillars . 39Table 13. Correlation (country level) between indicators, pillars and the CEI scores. . 40Table 14. Correlation (country level) between sub-pillar, pillars and CEI scores . 41Table 15. CEI ranks, maximum and minimum gain in ranks using all the Budget Allocation weights. 44Table 16. Eliminating one pillar at a time: average (absolute) shift in ranks with respect to the baselineCEI. 45Table 17. List of the most influential pillar for each country . 46Table 18. CEI scores according to perceptions: difference with respect to respondents who fell to beconfident, knowledgeable, and protected. . 57Table 19. Consumer Empowerment Index. Distance from EU-27 average. Scores and ranks of the Indexand its pillars. 61Table 20: Scores for the 22 questions of the CEI divided by pillar. . 62Table 21. Spearman rank correlation (individual level) between indicators, pillars and CEI ranks (in redvalues not significant at the 0.5% level). 65Table 22. Spearman rank correlation (individual level) between sub-pillar, pillars and CEI ranks . 668

List of FiguresFigure 1. Framework and weights of the Consumer Empowerment Index (the budget allocation weightsfor the three pillars are detailed in Table 6) . 19Figure 2. Whole dataset: scree-plot of the principal components . 26Figure 3. Consumer Skills: Scree-plot of the principal components. 27Figure 4. Awareness of consumer legislation: scree-plot of the principal components. 28Figure 5. Consumer engagement: scree-plot of the principal components . 29Figure 6. Consumer Empowerment Index, distance from the EU-27 average. 34Figure 7. Pillar values versus the ICE. 42Figure 8. Box plot of CEI scores calculated with each set of weights obtained from Budget Allocation. 44Figure 9. Eliminating one pillar at the time: box plot of the difference with the baseline. 46Figure 10. EU-27 average scores for male (female) divided by the EU-27 average scores for the full sample. 48Figure 11. EU-27 average scores for level of education divided by the EU-27 average scores for the fullsample . 49Figure 12. EU-27 average scores for occupation divided by the EU-27 average scores for the full sample50Figure 13. EU-27 average scores for education level divided by the EU-27 average scores for the fullsample . 52Figure 14. EU-27 average scores for income level divided by the EU-27 average scores for the full sample. 53Figure 15. EU-27 average scores for language spoken divided by the EU-27 average scores for the fullsample . 54Figure 16. EU-27 average scores for internet use divided by the EU-27 average scores for the full sample. 55Figure 17. EU-27 average scores for empowerment perception divided by the EU-27 average scores forthe full sample . 569


Executive summaryThe interest and debate on the notion of ‘consumer empowerment’ has been rapidly increasing during thelast decades. M. Monti in his report to the president of the European Commission “A new strategy for thesingle market”1 places consumers and consumer welfare at the centre of next stage of the single market(page 41). Wider choice, better information and an enhanced corpus of rights, protections and means ofredress are keywords of this view of consumer empowerment. On the other hand, the literatureemphasises the connections with skills, competences, and the abilities of the consumers stating that athorough knowledge of actual capacities, information and assertiveness of consumers is crucial for beingable to design and develop policies that effectively enhance consumer protection. At the European Levelthe 2007-2013 EU Consumer Policy Strategy, while setting as a main objective “to empower EUconsumers”, also emphasizes the importance of a better understanding of how consumers actually behave,advocating for the need of having real choices, accurate information, market transparency and the confidence that comesfrom effective protection and solid rights.2It is to answer to these political needs that DG Health & Consumers and DG ESTAT lunched in 2010 aEurobarometer survey (Special Eurobarometer n. 342) on consumer empowerment aiming at collectinginternationally comparable data on (i) consumers’ basic numerical and financial skills, (ii) consumers’ levelof information on rights and prices, and (iii) consumers complaint and reporting behaviour, as well asconsumers’ experience with misleading or fraudulent offers. The dataset covers 29 countries (EU27 plusIceland and Norway) and had 56,470 respondents. The DG Health & Consumers together with the DGJoint Research Center synthesized part of these data into a unique measure of consumer empowerment,the Consumer Empowerment Index. The Index describes consumer empowerment along three maindimensions: Consumer skills, Awareness of consumer legislation and Consumer engagement, acknowledging themultifaceted concept of empowerment.This report describes the steps followed in the construction of the Index of consumer Empowerment. Inparticular the definition of the theoretical framework, the quantification of categorical survey questions,the univariate and multivariate analysis of the dataset, and the set of weight used for calculating the scoresand ranks of the Index. The report also discusses the robustness of the results and the relationship12See, report final 10 05 2010 en.pdfCOM(2007) 99 final, page 6.11

between the Index and the socio-economic characteristics of the respondents in order to identify thefeatures of the most vulnerable consumers.The Consumer Empowerment Index is a pilot exercise, aimed at obtaining a first snapshot of the state ofconsumer empowerment as measured by the Eurobarometer survey. It is neither a final answer onempowerment nor a comprehensive study on all the different facets of consumer empowerment, butinstead it is meant to foster the debate on the determinants of empowerment and their importance forprotecting consumers.The Consumer Empowerment Index identifies Norway as the leading country followed by Finland, theNetherlands and Germany and Denmark. The middle of the ranking is dominated by western countriessuch as Belgium, France, and UK, with an average score 13% lower than the top five. At the bottom ofthe Index are some Eastern and Baltic countries like Bulgaria, Lithuania, Poland, and Romania with ascore 31% lower on average (this gap reaches 40% and 38% in Awareness of consumer legislation and Consumerskills). A group of southern countries, Italy, Portugal, and Spain score poorly in the Index, especially in thepillar Consumer skills where the gap with the top performers reaches 30%.The survey asked the respondents to express their opinion on whether, as consumers, they feel confident,knowledgeable, and protected. The comparison between these perceptions and the ConsumerEmpowerment Index shows that consumers who feel to be knowledgeable are also those who showhigher basic skills and better capacity to read logos and labels. Consumers who feel confident seem not toread completely and carefully terms and conditions when signing contracts, while they seem to be moreinterested in information on their rights as compared to non empowered consumers. Detriment andredress is not significantly related to the perception of protection.How can we construct an identikit of the most/least empowered consumers? A possibility is to study thesocioeconomic characteristics of the survey respondents. Below the main conclusions. Gender. In all European countries but Norway male respondents score systematically better thanfemale in all pillars and the Consumer Empowerment Index even if 31.7% of them have the leadin shopping decisions vis à vis the 68.4% of female respondents. Age. The age of respondents plays an inverse role in their empowerment: younger generationsseem to be more skilled, aware and engaged than older generations, with the notable exception ofItaly where respondents in the age cohort over-54 are 16.4% more engaged than those in the agecohort 15-24, 11% more aware of their rights and 6% more skilled.12

Occupation. Overall the non active population is less empowered than active population, in 18 outof 29 countries the least empowered are retired consumers, in 5 countries consumers not working(either unemployed or looking after the home) and in 3 countries the least empowered areunskilled manual workers. In all countries but Italy students are among the most empowered. Education. Education has an important role in explaining empowerment. Lower levels ofempowerment are usually associated to low levels of education (ISCED 1-2). The highest gap isfound for Malta, the United Kingdom (UK) and the Czech Republic while the reverse is registeredonly for Norway and Bulgaria where respondents with low education score respectively 19% and10% more than higher educated respondents. Income. Income seems to have an inverse relationship with engagement in Finland, the UK,Ireland, Norway and Denmark: high income respondents (overall 26% of the sample analyzed)result to be less engaged than respondents experiencing income shortages. The reverse holds forthe rest of EU countries, and especially for Bulgaria, Germany, Poland, Portugal, and Romania.Income is not decisive in Cyprus, France, Iceland, Malta, and Spain. Language spoken. The language spoken is not decisive for defining consumer engagement in mostof the surveyed countries, exceptions are Greece, Hungary and Italy where consumers speaking theofficial language are 30% more empowered than those using a different language. The oppositeholds for Malta and the UK. As expected the dimension Consumer skills is driving the results inboth directions (the only exception is the UK where consumers with a foreign language performwell above the native speakers in all dimensions). Internet use. Internet use seems to be related to empowerment: consumers with some experiencein using internet have higher scores in skills, awareness and engagement (with the exception ofNorway). The difference is large especially in Finland, where consumers not using internet are 50%less empowered, and in Malta, Poland and the UK where the gap is around 40%.13

1. IntroductionAs largely recognized by the scientific literature, the empowerment of a consumer is a multifacetedconcept encompassing skills, competences and rights, as well as the ability of the consumer to gather anduse information and the capacity of the market to provide legal and practical protection devices. The EUConsumer Policy Strategy 2007-2013, 'Empowering consumers, enhancing their welfare, effectivelyprotecting them' (COM(2007) 99 final), indicates that 'empowered consumers need real choices, accurateinformation, market transparency and the confidence that comes from effective protection and solidrights'. On the other hand, policy processes without tangible goalposts are meaningless.It is to answer to these political needs that DG Health & Consumers and DG ESTAT lunched in 2010 aEurobarometer survey on consumer empowerment (Special Eurobarometer n. 342) aiming at collectinginternationally comparable data on three main aspects: Consumers’ skills: consumers’ basic numerical and financial skills as well as their knowledge oflogos and symbols; Consumers’ level of information: consumers’ knowledge of their rights (awareness of unfaircontractual terms, unfair commercial practices, guarantee rights, distance-purchasing rights, etc.),of prices, of governmental and non-governmental institutions protecting them and of differentsources of information about consumer affairs; Consumers’ assertiveness: consumers complaint and reporting behaviour, as well as consumers’experience with misleading or fraudulent offers.The dataset resulting from this initiative covered 29 countries (EU27 plus Iceland and Norway), andreached 56,470 consumers (on average 2,000 consumers per country) aged 15 and above.Using this survey the DG Joint Research Center (together with DG Health & Consumers) constructed acomposite measure of consumer empowerment encompassing the plurality of aspects implied by the EUpolicy Strategy.The Consumer Empowerment Index (CEI) is a pilot exercise, aimed at obtaining a first snapshot of thestate of consumer empowerment as measured by the Eurobarometer survey. It is neither a final answer onempowerment nor a comprehensive study on all the different facets of consumer empowerment, butinstead it is meant to foster the debate on the determinants of empowerment and their importance forprotecting consumers.14

This report is structured as follows: the first part introduces the concept of consumer empowerment asdeveloped by the specialised literature over the last 20 years. Section 3 describes the dataset and how weconstructed the 22 indicators used in the Index. Sections 4 illustrates the statistical analysis of the dataset,while Sections 5 and 6 present the Consumer Empowerment Index and discuss some statistical issuesrelated to the framework and its robustness, including the set of weights used. Section 7 relates the Indexto the socio-economic dimensions of the sample of consumer surveyed, like e.g. age, gender, income,internet use, etc. The objective of this section is to portray the features of the most vulnerable consumers.Section 8 concludes. Four Appendices complement the report detailing tables, data, statistical analysis andcountry profiles.2. The concept of Consumer EmpowermentThe interest and debate on the notion of ‘consumer empowerment’ has been rapidly increasing during thelast decades. The literature, while assuming rather than explicitly supplying an agreed framework for thenotion of consumer empowerment (Shaw, Brailsford, 2006), emphasises the connections with skills,competences, rights and the abilities of the consumer on one hand, and with greater choice on the other(Hunter, Harrison and Waite, 2006). Below we offer a brief (and necessarily incomplete) excursus into theliterature on consumer empowerment leaving for Appendix 3 a discussion on the general notion ofempowerment. A brief section on the operational definition of consumer empowerment concludes.2.1 Consumer empowerment and marketsSocial psychology and marketing literature are the main sources for the definition of consumerempowerment, both referring to the strategic role of consumers vis à vis of producers and to the role ofinformation as an empowerment source.In sociology Denegri-Knott, Zwick and Schroeder (2006) map the research on consumer empowermentpresenting three dominant explanatory models: consumer sovereignty, cultural power and discursivepower.Under consumer sovereignty a consumer is empowered when he or she is free to act as rational and self-interestedagent. [.] consumers combine resources and skills to make producers do what they would not do otherwise (Denegri etall, 2006, page 963). Consumers' choices are thus positive instruments to direct and to correct the market,which results in more efficient production, better and cheaper products, social progress, and increased general welfare (ibid.15

page 955). An important feature of this approach is the relationship between consumer empowerment andstrategic behaviours. Following the game theoretic idea of a zero-sum game, power is distributed amongthe 'players' of the market, where gains on one side consist in detriment for the opposite part: the measureof empowerment is a 'function of assessing who influences whom more'. In this literature, empowermenthas a long tradition, dating back to Adam Smith's invisible hand theory (The Wealth of Nations, 1776).Offsprings of the sovereignty model relate empowerment to the level of consumers' ability, skills,knowledge, motivations (Nelson, 2002; Pitt et all., 2002, Sirgy and Su, 2000); or relate empowerment toactions in defence of consumers rights: class actions, boycott, movements against specific producers(Friedman, 1996; Garret, 1987; Gueterbock, 2004).In the cultural model the market is a place of conflict between consumers and producers where the latertry to condition and control consumers’ choices. Consumer empowerment resides not in the simplecapability to stand firm against these manoeuvring, but it implies a strategic behaviour, tactics to react tobuyers’ actions and motivations and processes whereby communities of various form resist and attempt to distinguish themfrom markets (Kozinets 2002, page 23 but also Kozinets et al., 2004). In this context quantitative studies tomeasure empowerment are less common, and cultural consumer power appears more connected toethnographic and phenomenological research, often based on direct evidence, observation and interviews.Finally, the discursive model recognises a positive role to the interaction between consumers andmarketers, who are co-responsible of the market definition (Denegri-Knott, 2004; Hodgson, 2000; Holt,2002). Here empowerment is the ability to construct discourse as a system [ ] determine(s) what is true or false [ ]the ability to the consumer to mobilize discursive strategies to determine what can know and what actions can beundertaken (Denegri et all, 2006, page 956). Researches in this field are interested in social, economic andjuridical differences, cultures, and knowledge variety as drivers of empowerment or disempowerment.Added value of this literature is the identification of the internalised norms, codes, and rules, whichrepresent the ‘normal’ consumer engagement.The notion of consumer

Nardo, Michela and Loi, Massimo and Rosati, Rossana and Manca, Anna Rita European Commission, DG EU Joint Reseach Centre, IPSC, Ispra, Italy April 2011 Online at MPRA Paper No. 30711, posted 05 May 2011 21:02 UTC. EUR 24791 EN - 2011