An empirical comparison of methods for measuring consumers’ willingness to pay

A valid procedure for measuring consumers’ willingness to pay (WTP) is crucial in designing optimal pricing policies or for estimating demand for new products. Understanding potential sources of differences in WTP estimates that emerge from value elicitation studies constitutes an important step in research on how managers should estimate consumers’ WTP. This research presents an empirical analysis of two potential sources of differences and discusses possible means of mitigating them. We find substantial and significant differences between the WTP reported by subjects when payment of the stated price is real or hypothetical. Notwithstanding the dichotomy between real and hypothetical WTP, we find significant differences among the WTP estimates of a broad range of value elicitation methods.     

Label performance and the willingness to pay for Fair Trade coffee: a cross‐national perspective

In this paper, we investigate how label information detailing the performance of the Fair Trade labelling programme with respect to coffee affect consumers' willingness to pay in the US and in Germany. We provide respondents (university students in the US and Germany) information regarding the hypothetical benefits of the Fair Trade coffee programme on its intended beneficiaries on the production side [the revenue gains to participating marginal farmers (scope of the programme)] and, using stated preference conjoint methods, test how this performance criterion relates to the willingness to pay for Fair Trade coffee. Our empirical results identify a ‘threshold’ property of performance‐based labels. In effect, the willingness‐to‐pay for performance‐based Fair Trade labelled coffee exhibits an inverted U shape in the sense that the willingness to pay is positively related to the scope of the programme, but only up to a critical level. Thereafter, the willingness to pay declines as the income gains to participating growers increase further. Interestingly, this inverted U property is exhibited by both the US and German respondents with different critical thresholds.     

Effects of social responsibility labelling and brand on willingness to pay for apparel

This study examined changes in consumer willingness to pay (WTP) for apparel products as labour‐related information and brand were added. Tobit analysis of auction bids from 121 university students for t‐shirts showed men, Hispanics and consumers who believe in social responsibility and fair trade had significantly higher WTP once labour‐related labelling was added. The amount and complexity of information did not matter, leaving substantial leeway to companies in crafting their message. Adding brand significantly increased WTP for two better‐known brands while not changing WTP for the social responsibility messages. Results suggested brands can benefit from stressing social responsibility‐related attributes of products.     

An exploratory study of environmental attitudes and the willingness to pay for environmental certification in Mexico

This paper explores how environmental attitudes of consumers in Mexico influence their willingness to pay a premium (or, marginal WTP) for environmentally-certified products. In addition, we also challenge the theoretical assumption that the relationship between environmental attitudes and purchasing is linear. We test our hypotheses with an analysis of marginal WTP based on a survey of 301 Mexican consumers. Using conjoint analysis to determine marginal WTP, we find support for the idea that as attitudes become more pro-environmental, they more than proportionally boost marginal WTP. We conclude our paper by discussing implications for research and practice that focus on environmental segments of consumers.     

The interaction effect of socioeconomic status and emotions on willingness to pay

The aim of this work is to determine whether the interaction of emotions and socioeconomic status affects a consumer’s willingness to pay. For this purpose, we used an online survey of cheese preferences among primary grocery shoppers in Chile. Through a conjoint analysis, we find that socioeconomic status and emotions, and their interactions, are the significant and relevant variables that explain changes in willingness to pay with regard to cheese texture and color. Moreover, the willingness-to-pay results change relevantly when socioeconomic status is interacted with negative emotions.     

Consumers' willingness to pay for conventional,organic and functional yogurt: evidence from experimental auctions

This research is aimed at investigating consumers' willingness to pay (WTP) for conventional, organic and functional yogurts in two different information treatments. The basic information treatment provided respondents with yogurts labelled conventional, organic or functional while the second treatment included additional information. To elicit values for these specific products, 100 Italian consumers participated in an experimental auction using the Vickrey fifth‐price sealed‐bid mechanism. Findings reveal that providing additional information through a specific health claim increases consumer's perceived value of the functional yogurt, while for the organic counterpart additional information on organic regulation does not add much to the premium. Moreover, our study shows that specific socio‐demographic variables (as gender, age, presence of kids in the household and the need to follow a specific diet) positively affect WTP for functional and organic yogurts.     

Organic consumers’ preferences and willingness‐to‐pay for locally produced animal products

In Germany, a large share of organic animal products is being produced with imported protein feedstuffs. Products labelled as ‘local’ are also often produced with imported feed. At the point of purchase, animal products are not usually labelled with any information on the feed that was used to produce it. Therefore, it remains unclear what consumers think about the use of imported feed, in particular in the case of products labelled as ‘local’. The aim of the present research study was to analyse whether the use of local feed represents an option for successful product differentiation in the organic animal products market. Discrete Choice Experiments and computer assisted personal interviews were conducted with 597 organic consumers in Germany to investigate their preferences and willingness‐to‐pay for local organic animal products produced with local feed. The choice experiments revealed a strong preference for local feed. The outcome of our investigation also shows that the provision of information on feed imports into Germany can be an important tool for promoting organic animal products produced with local feed. The results suggest the use of local feed could be an option for successful product differentiation in the organic animal products market, especially if effort is put into raising consumer awareness of current organic feed importation practices.     

Private-label branding and willingness to pay: evidence from an auction experiment

The competitive pricing of private-label brands is a strategy used to gain a competitive advantage. Notwithstanding the introduction of many private-label brands – i.e. private-label brands with a name identical to that of a firm (own-name brands) and private-label brands with a name distinctive from that of a firm (other-name brands) – that compete with national brands, identifying equitable prices that reflect brand value remains difficult. This study aims to determine the appropriate price of private-label brands by measuring consumers’ willingness to pay. An experimental auction method measures ‘actual’ willingness to pay in a non-hypothetical setting. The study was conducted in Thailand, which has the lowest price discrepancy between national brands and private-label brands. The results show that the willingness of consumers to pay for both types of private-label brands is higher than that for un-branded products. However, there is no significant difference in the premium between own-name and other-name private-label brands. Unlike leading and second tier national brands, consumers are willing to pay a discounted price for both own-name and other-name private-label brands; for the latter, they are willing to pay a more steeply discounted price. The finding of this study regarding the amount that consumers are willing to pay for an own-name private-label brand is consistent with the current market price strategy, whereas the current market price strategy for other-name private labels is inconsistent with the amount participants are willing to pay. The study shows that to appropriately price their products in a manner that yields the highest returns, retailers must determine how much consumers are willing to pay.     

South African consumers' willingness to pay a premium for Karoo Lamb: The influence of subjective and objective knowledge,label information and demographics

In South Africa, Karoo Lamb is a prestigious product associated with free range production. This study examined the influence of subjective and objective Karoo Lamb knowledge, the importance of label information, and demographics on consumers' willingness to pay a premium for Karoo Lamb products. A panel of 355 consumers who had previously purchased lamb/mutton products completed an online questionnaire. The importance of Karoo Lamb label information, subjective Karoo Lamb knowledge and population group had a significant positive impact on willingness to pay a premium for Karoo Lamb. Objective Karoo Lamb knowledge and other demographics did not have a significant impact.     

The no-choice option and dual response choice designs

Choice set designs that include a constant or no-choice option have increased efficiency, better mimic consumer choices, and allow one to model changes in market size. However, when the no-choice option is selected no information is obtained on the relative attractiveness of the available alternatives. One potential solution to this problem is to use a dual response format in which respondents first choose among a set of available alternatives in a forced-choice task and then choose among the available alternatives and a no-choice option. This paper uses a simulation to demonstrate and confirm the possible gains in efficiency of dual response over traditional choice-based conjoint tasks when there are different proportions choosing the no-choice option. Next, two choice-based conjoint analysis studies find little systematic violation of IIA with the addition/deletion of a no-choice option. Further analysis supports the hypothesis that selection of the no-choice option is more closely related to choice set attractiveness than to decision difficulty. Finally, validation evidence is presented. Our findings show that researchers can employ the dual response approach, taking advantages of the increased power of estimation, without concern for systematically biasing the resulting parameter estimates. Hence, we argue this is a valuable approach when there is the possibility of a large number of no-choices and preference heterogeneity.     

Demand shifts and willingness to pay in applied trade models

Emerging issues facing open economies, including global value chains and non-tariff measures, have important implications for demand that are often not well suited for analysis with the supply-side mechanisms commonly found in economic models – namely taxes and productivity. The aim of this paper is to provide a methodological approach for implementing demand-side changes. Specifically, the approach adapts the Armington equation to model a change in consumers' willingness to pay for imports. To illustrate, we estimate the impacts of the World Trade Organization's Trade Facilitation Agreement (TFA). Estimated ad valorem equivalents of the TFA are applied as demand-side shocks to consumers' willingness to pay in a global applied general equilibrium model and the results compared to those obtained using Samuelson's iceberg approach. We find that the iceberg approach results in a technical change which increases the productivity of imports, raising real GDP, while the willingness-to-pay approach causes a smaller rise in real GDP, although trade increases further. The impact on the terms of trade differs significantly between the two mechanisms, with prices falling as costs fall, under the iceberg method, and rising with increased willingness to pay. Our results clearly show that the choice of mechanism matters.     

Ethical product premiums: antecedents and extent of consumers' willingness to pay

Corporate social responsibility is now high on the strategic agendas of major retailers, as consumers demonstrate growing ethical awareness and concern. However, evidence regarding consumers' willingness to pay the price premiums often associated with ethical products is inconclusive. Studies have adopted various survey-based and experimental methods, focusing upon different product categories, each with particular ethical issues. This study included a Zaltman Metaphor Elicitation Technique (ZMET) exploratory investigation then a mail survey of 1000 consumers, indicating willingness to pay ethical premiums across 6 categories. Demographics proved to be poor predictors, although education explained some variance in willingness to pay. Ethical motivations, measured within the framework of the Decisional Balance Scale, proved stronger antecedents, providing guidelines for the communication of ethical attributes. Implications for retailers and opportunities for researchers are discussed.     

The effect of information on consumers' willingness to pay for natural and organic chicken

This study examined the effect of definitions for organic and natural on willingness to pay a premium for organic over natural chicken. Data were collected using surveys and experimental auctions that were conducted before and after information was presented. Before information, approximately two‐thirds of participants inaccurately equated the requirements of natural with those for organic. After information, nearly 50% increased their premium, while 30% decreased their premium. Logistic regression results showed that consumers who had overestimated the requirements for natural were most likely to have an increased premium after information, with significantly higher bids for organic. For those who decreased their premium after information, awareness of consuming genetically modified (GM) foods was a key variable. The non‐genetically modified (non‐GM) requirement of organic appears to be of low value to some consumers. Overall, consumer confusion regarding organic and natural standards may be having substantial impacts on the two markets.     

Measuring consumer's willingness to pay for organic and Fair Trade products

Previous research has extensively studied consumer's environmental and social concerns. However, measuring the value of the environmental or social dimension of a product remains a challenge. This paper proposes to partially fill this gap by measuring the double ‘Fair Trade and organic’ labels' value using an experimental method – the Becker‐DeGroot‐Marschak's mechanism. Two ‘organic and Fair Trade’ and two conventional chocolate products were tested on a sample of 102 consumers. Results show that organic and Fair Trade labels increase consumers' willingness to pay, and allow the identification of three consumers clusters. The first cluster represents people insensitive to the label. For the second cluster, the ‘organic and Fair Trade’ labels' influence on the improving image of the products is positive and important. And finally, for the third cluster, the valuation of the ‘organic and Fair Trade’ label is determined by the product's taste. Our research contributes to a better understanding of consumers' valuation of Fair Trade and organic labels, leading to our conclusions, which offer managerial implications with respect to this market (importance of taste and usefulness of double labels).     

Consumers' willingness to pay for corporate social responsibility: Theory and evidence

In an era when consumers believe that businesses should engage in corporate social responsibility (CSR), it is vital to understand how it affects consumers' willingness to pay (WTP) for the goods and services offered by such businesses. There is a need for an in-depth study into the relationship between CSR and WTP, and to identify the mediators and the moderators affecting this relationship. To investigate this, we conducted a systematic literature review based on a preliminary search result of 116 unique articles indexed on this topic in four bibliographic databases—Scopus, Google Scholar, Dimensions and Web of Science—published over the previous seven decades. The findings confirm the overall positive effect of CSR on WTP. This study also reveals the indirect effect between CSR and WTP, mediated by variables like Brand Trust, Brand Loyalty, Brand Love, Customer Satisfaction, Brand Attitude, Purchase Intention and Brand Equity. The relationship is impacted by moderators, including demographics, cause-based aspects, company characteristics, personal aspects and types of products. The theory explaining the evidence of each of these aspects provides a deeper understanding of the relationship between CSR and WTP, and the intervening variables. Based on these, a conceptual framework of this relationship involving all the variables is developed. The Theory, Context and Method (TCM) framework is employed to identify gaps and systematically make recommendations for future research. The findings of this study will aid marketers in developing pricing strategies based on a thorough understanding of consumer behaviour in terms of CSR perceptions. Scholars can use this study's conceptual framework to examine previously unexplored relationships. As the literature on CSR and its influence on consumers' purchase behaviour grows, this comprehensive systematic literature review on the effects of CSR on WTP fills an important gap.     

Customer perceived value,satisfaction, and loyalty: the role of willingness to share information

This study proposes and tests an integrative model to examine the relationships among customers’ willingness to share information, satisfaction, perceived value, and loyalty in a retailing context. This study extends research on customers’ willingness to share information from trust and privacy concerns toward key outcome measures such as perceived value, customer satisfaction, and loyalty, and is thus among the first to model customers’ willingness to share information with companies in robust theoretical retailing frameworks. The proposed relationships were tested using data from two retailing contexts – groceries (N = 429) and do-it-yourself (DIY) (N = 895). Findings from the two samples suggest that both perceived value and satisfaction are significant determinants of customers’ willingness to share information with a company. Although some differences emerge in the two studies, structural modeling largely supports the hypothesized framework and positions customers’ willingness to share information as an important antecedent of their loyalty intentions and behavior. This study provides practitioners with preliminary insight into the relationship between willingness to share information and perceived value, customer satisfaction, and customer loyalty. This study advances retailing research, as it is one of the few empirical studies investigating the role of customers’ willingness to share information in driving loyalty and its relationship with perceived value and satisfaction in a retailing context.     

(Dynamic) willingness to pay and e-commerce: Insights from sparkling wine sector in Russia

Although economic theory clearly provides reasons for a hedonic price function to change over time, this is not how it is traditionally approached empirically. For wine, which is one of the most widely used implications of hedonic price analysis, such time invariance can be traced down to the issues of data availability and price rigidity in the food and beverage sector. The development of e-commerce changes both these premises, providing reasons for more frequent price adjustments and making price data available at each point of time. Is willingness to pay for particular product attributes indeed time-invariant? In this paper, daily price quotes from the largest online grocery market in Russia are used to address this question using sparkling wines as an example. The results indicate that time invariance might be a rather strong empirical assumption, suggesting that the time dimension should be included into hedonic price studies whenever the data allows for it.     

The new WTP: Willingness to participate

A key concept underlying competitive strategy is that of WTP, representing the consumer's ‘willingness to pay’ a premium price for goods or services. Through branding and other efforts, companies strive to push their message out and create a high willingness to pay, whereby consumers feel there are few or no substitutes for what these companies are selling. Social media, however, are making push-based marketing anachronistic. Users of social media typically eschew professional communications forced on them by faceless and impersonal organizations, in favor of more personal conversations. These individuals seek greater engagement with their preferred brands, and involvement—with or without the company's approval—in creating brand personalities. Their affinity for these preferred brands might well auger the dawn of a new WTP: willingness to participate. This article presents a model of consumer engagement through social media, and argues for re-conceptualizing WTP by utilizing a series of examples which show how companies that engage consumers via social media (e.g., Facebook, Twitter, YouTube) stand to reap the benefits of long-term competitive advantages.     

Brakes to organic market enlargement in Spain: consumers’ and retailers’ attitudes and willingness to pay

In Spain, consumption of organic products has not kept pace with production. Up till now, foreign markets have been a natural destination for excess supply. However, world trade liberalization might cause important commercial problems to Spanish producers that could be partially solved by enlarging the domestic market. The goal of this paper is to assess the opportunity for such enlargement focusing on two main aspects: consumers’ and retailers’ attitudes and willingness to pay for organic products. Concerns about health, natural diets or environmental issues could stimulate consumption, while retailing dynamism and competition to gain new market segments might favour distribution. Both aspects are investigated through two surveys addressed to consumers and retailers in two Spanish towns. The results confirm that only a small proportion of consumers and distributors show attitudes that might favour demand expansion. The most sensitized segments are willing to pay more for organic products, but this premium is still very far from the prevailing gap between conventional and organic food products.     

Modelling the antecedents of consumers' willingness to pay for eco-labelled food products

The purpose of this paper is to model the antecedents of consumers' willingness to pay for eco-labelled food products. This research utilizes the Theory of Planned Behaviour to model the impact of consumers' awareness of eco-labels, environmental concerns, beliefs in the environmental ability of eco-labels, and presence of children on their willingness to pay for eco-labelled food products. This study uses structural equational modelling and PROCESS macros, to test the moderated mediation model on a sample of 333 online responses. Findings suggest the impact of consumers' environmental concerns and eco-label awareness on their willingness to pay for eco-labelled food products is partially mediated by consumers' belief in the environmental ability of these eco-labels. The relationship is further moderated by the presence of children living in the household. This study establishes the value of consumers' beliefs in the environmental ability of eco-labels and implies that communication strategies need to be carefully refined to provide consumers with more information about eco-labels and to emphasize the environmental ability of eco-labels utilized within the food industry as this can have an impact on their willingness to pay for these products, especially for consumers, who have children in the same household.