How Ethical Consumers Reward Companies

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Ethical consumers may reward companies by changing purchasing behaviour or paying a price premium. This report summarizes 30 years’ research on ethical consumerism.

Close the attitude-intention-behaviour gap with consumers.

Understanding ethical consumerism means understanding the relationship between marketers and consumers. Some marketers have created a culture of materialism through planned obsolescence and consumer dissatisfaction. But there is a growing realization that such behaviour is no longer sustainable. Other businesses have been highly innovative, developing and launching more sustainable products and services.

This executive report on ethical or socially conscious consumerism, by Dr. June Cotte and Dr. Remi Trudel, synthesizes 30 years of research on whether consumers are willing to reward firms for their positive sustainability actions either by changing their behaviour or by paying a price premium. (We use the terms ethical, socially conscious, and sustainable consumerism interchangeably.)

Managers and senior decision-makers in marketing, strategy, and finance can use the findings to close the attitude-intention-behaviour gap with consumers. “The Socially Conscious Consumerism report helped inform our green marketing practices and our green governance. We’re using it to evaluate which green programs to actively promote – and how.” Andrew Wilczyski, Manager, Corporate Social responsibility, TELUS

Consumers would rather change behaviour than pay a premium.

There has been very little reliable research that examines the premium possible for socially conscious production. The findings that do exist indicate a wide range, with a typical average premium being about 10%. Some evidence suggests that consumers will demand a discount for ‘unsustainability’ and that it is greater than the premium for sustainability.

 

The average premium consumers are willing to pay is 10% — if quality remains the same.

 

Figure 1. Studies Showing Willingness to Pay as a Percentage Increase, N = 13

Consumer willingness to change their behaviour (towards the ethical choice) is more common than willingness to pay a premium. Consumers often appear to expect the socially better choice to be of the same quality and price—it does not appear that they will trade-off functionality. This assumption is one explanation for the evidence of a gap between positive attitudes and consumer behaviours.

There is no one ethical consumer.

The environment appears to be an important driver of socially conscious consumerism. But, really, the question is inappropriate because there are so many different socially conscious consumers.

There is no coherent view of who an ethical consumer is. All the usual descriptors used in consumer research, such as demographics (age, gender, income, education, country), psychographics (attitudes, lifestyle, morals, etc) have provided conflicting results thus far.

There is some evidence to suggest that factors other than sustainability attributes are more important in driving consumer behaviour. For example, prompting consumers, making their purchases decisions visible, and making them feel like their purchases will make a difference may be more important than having the right sustainability attributes to your products and services.

Communicate how consumers contribute to society with their purchasing decisions.

Avoid segmentation schemes or projects designed to identify the socially conscious consumer. Don’t chase the sustainable consumer as if there is only one kind—figure out which elements are important to your various consumers.

If consumers feel they can make a difference with their consumption they are more likely to act in an ethical way. In one of the studies, consumer efficacy (feeling they can make a difference) was almost six times more important than concern for the environment in predicting environmentally responsible behaviours (Roberts, 1996). Managers should communicate how one consumer’s purchase actually contributes to the broader social goal.

Do not compromise product or service quality or functionality. Messaging should be simple, and make the added benefits clear while noting that there is no trade-off.

Consumers will “punish” a company for unethical practices by more than they will reward ethical practices.

Consumer knowledge of firm sustainability is important. Negative firm behaviours (acting unethically or irresponsibly) have more impact than positive firm behaviours, often because consumers do not know the positive information (they haven’t been told, or they haven’t listened). Managers need to strike the delicate balance between informing consumers of their positive sustainability actions, whilst not being perceived as over-emphasizing modest claims.

 

Figure 2. Model of Socially Conscious Consumerism

 

Figure 2 outlines the model for socially conscious consumerism developed by Cotte and Trudel. Firms’ corporate social responsibility (CSR) actions influence consumers’ attitudes. Consumers’ attitudes shape their intentions, and their intentions affect their behaviour. 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.

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