Understand the factors that determine that when customers pay a premium for responsible products.

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Will customers pay more for goods with social or environmental attributes?

According to NBS research and a systematic review of 91 studiesyes. And, the average premium customers will pay is about 10 per cent.

This primer defines and describes the factors that determine that premium.

What is Socially Conscious Consumerism?

Socially conscious consumerism happens when consumers purchase products or services produced with social and environmental considerations in mind. It can be described as consumers “voting with their dollars,” by purchasing products and services produced responsibly. Responsible production can encompass a range of social and environmental factors, such as ensuring labour practices are fair or that products are produced with the aim of minimizing environmental impacts. Consumers reward socially responsible firms through higher sales, and punish other firms through boycotts and protests. Many researchers and managers believe corporate social responsibility rests with consumers. From their perspective, as long as consumers demand responsible products, companies will deliver them.

Who is the Socially Conscious Consumer?

A recent survey of more than 2,000 adults revealed that nearly 90 per cent of them described themselves as conscious consumers (i.e. they were more likely to by products produced in socially and environmentally responsible ways).1 And the number of socially-minded consumers is increasing.

As more and more consumers identify themselves as conscious consumers, the need to understand who they are and what drives them becomes more important to business. But there is no one socially conscious consumer. There is no demographic (age, gender, income, education, country) or psychographic (attitudes, lifestyle, morals) profile.

Also, research shows that self-described “conscious” consumers may intend to purchase responsibly but fail to do so at the point of purchase. This attitude-behaviour gap leaves companies wondering whether consumers are actually ready to back up their intentions with their purchasing dollars.

How Does Socially Conscious Consumerism Occur?

Firms’ corporate social responsibility (CSR) actions influence consumers’ attitudes. Consumers’ attitudes shape their intentions, and their intentions affect their behaviour. So, firms’ CSR actions may inspire consumers to change their purchasing behaviour (i.e. buy different products), pay a premium for responsible products, or even deliberately punish those firms that fail to meet their expectations.

Relationship Factors That Enhance Factors That Impede
  • Consumer knowledge of positive company actions
  • A positive attitude towards the firm
  • A good fit between the company or brand and its CSR initiatives
  • Consumer knowledge of negative company actions
  • A negative attitude towards the firm
  • Seemingly contradictory actions by the firm
  • The belief that their purchase will make a difference
  • Consumer’s perception of themselves and perception of the business as acting responsibly
  • Perceived lower quality of responsible product
  • Belief that their responsible purchase won’t make a difference
  • Purchase requires only a small commitment by consumer
  • Product seen as consistent with brand
  • Product aligns with an issue important to the consumer
  • Simple of claims and labeling on the product
  • Effective in-store education of consumer about the product
  • Consumer confusion at point-of-purchase about the product’s responsible attributes
  • Consumer habit
  • Misleading or confusing packaging
  • Trade-offs required to buy the responsible product
  • Competition between brands

How to Market Responsible Goods and Services

Don’t market to a single socially conscious consumer.

Avoid chasing the “conscious consumer” as if there is only one kind. Figure out which issues and product features are important to your various customer segments and market to them accordingly.

Explain how consumers will make a difference.

One study found consumers’ belief that they could make a difference to the environment was more important in determining purchasing than their actual concern for the environment2. Communicate how each consumer’s purchase contributes to the broader social goal.

Maintain product quality and functionality.

Consumers are unwilling to compromise product quality or features for social consciousness.

Communicate carefully.

Companies need to strike a delicate balance between legitimately informing consumers of positive sustainability actions and not over-emphasizing modest claims.

What We Don't Know

Despite the research conducted to date, we still don’t have all the answers. There is a rich body of research growing in consumer psychology, influence, and communication that seeks to provide more guidance on these issues.

Consumer Psychology: What’s behind the drive to buy or boycott? A range of social motivations such as altruism, reciprocity, and signalling is likely at work. Future research should examine not just why consumers buy but also why they boycott, spread negative word of mouth, and protest.

Influence: How can companies influence consumers to act? Consumers consistently say they care about companies’ social performance, but often these words do not translate into actions. The evidence so far suggests consumers are influenced by such simple factors as the placement of the responsibility message and other information they have about the firm.

Communication: When—and how much—should companies talk? If firms self-promote too much, they risk being accused of green-washing—trying to increase sales by overstating virtuous behaviour. By over-promoting, firms expose themselves to scrutiny if a social or environmental issue arises. More information is now available through third party sources to consumers motivated enough to seek it out. For example, www.corporatecritic.org, www.corpwatch.org, and the Good Shopping Guide iPhone App allow consumers to quickly compare companies’ CSR records and the performance of their favourite brands.

 

Connecting to Consumers through Values

Patagonia Case Study

Patagonia, a manufacturer of outdoor clothing with $257 million in sales and 1,300 employees, aims to: “Build the best product, cause no unnecessary harm and use business to inspire and implement solutions to the environmental crisis.” To this end, they’ve donated time, services and at least one per cent of annual sales (totalling $40 million in cash and in-kind since 1985) to grassroots environmental groups around the world. As of fall 2011, all of Patagonia’s clothes will be recyclable.

Patagonia provides tips for customers to reduce their overall clothing consumption, promises free repairs so clothes last longer, and helps customers sell or donate clothes they no longer need. And the company’s values hold internally: employees can undertake two-month paid internships with environmental groups. Patagonia’s commitments and programs help customers see that their purchases are making a difference and that the company genuinely values the environment.

Additional Resources

References

1 The 2009 BBMG Conscious Consumer Report. Available for purchase at: www.bbmg.com

2 Robert, James A. (1996). Green Consumers in the 1990s: Profile and Implications for Advertising. Journal of Business Research, 36, 217-231.

This primer on Socially Conscious Consumerism was developed by Dr. Remi Trudel, Assistant Professor of Marketing at Boston University School of Management.