Socio-environmental multi-labelling and consumer willingness to pay

Abstract

The objective of this article is to assess the impact of a gradual increase in the number of labels appearing on some food products on consumer valuation of the given product. Three empirical studies were designed to measure the effects of using labels to differentiate food products (Organic Farming, Fairtrade, and Label Rouge (a French label that concerns organoleptic quality)) on the willingness of 519 French consumers of honey to pay a premium. These three studies shed light on a complementarity effect, often dominating the effects of redundancy and information overload. This effect differed depending on the features and the number of associated labels, and was influenced by consumer trust in the labels. These findings should encourage producers to associate their products with labels on packaging when they are consistent in terms of reputation but complementary in terms of attributes.

Does willingness to pay increase with the number and strictness of sustainability labels?

“…Moreover, it is independent of the number of participants (Alfnes and Rickertsen, 2011). Accordingly, and in line with related research conducted by Dufeu et al (2014), Shi et al (2013) and Sirieix and Tagbata (2008), the study at hand is based on a BDM laboratory experiment.…”

“…Fourth, as labels are only imperfect sustainability signals, trust and knowledge appear to be relevant for the evaluation (Costanigro et al, 2014;Sirieix et al, 2013). Above and beyond this, questions concerning the influence of the number and combination of individual labels arise, and the number of studies dealing with the effects of multilabeling is growing (e.g., Costanigro et al, 2014;Dufeu et al, 2014;Jongmans et al, 2014;Sirieix and Tagbata, 2008;Sirieix et al, 2013). Theoretically, following a notion of magnitude variation raised by normative theory, if single sustainability labels yield a percentage increase on consumer WTP, more labels with additional sustainability information should yield an even greater effect.…”

“…In a like manner, the phenomenon of information overload induces similar results (i.e., premiums do not rise with an increasing number of labels). If the cost of processing additional information provided by another label is higher than the expected utility from internalizing it, consumers might disregard that extra information (Bougherara et al, 2007;Dufeu et al, 2014;Eppler and Mengis, 2008). As a third anomaly of consumer behavior, divergences between attitudes and actual behavior, driven by a lack of environmental awareness, emotional involvement or locus of control, are regularly discovered (Irwin and Spira, 1997;Kollmuss and Agyeman, 2002;Luchs et al, 2010;Vermeir and Verbeke, 2006).…”

“…Costanigro et al (2014), however, find, in their experimental auction of local and organic apples with 109 participants, that multiple labels induce a disproportionate increase in WTP if the visible information is combined with good taste (literally). Dufeu et al (2014) compare contingent valuation with the BDM mechanism for eliciting WTP for honey with up to three quality, organic and fair trade labels of 519 customers in online surveys and face-to-face-interviews. They show that generally, increasing the number of labels increases WTP.…”

“…Closely connected to this, it is also questionable whether premiums for individual labels accumulate if several labels are presented together on a product. Studies dealing with this question regularly identify substitution and complementary effects between different labels, depending on consumer associations with these particular labels, as well as on other product attributes (Dufeu et al, 2014;Gracia et al, 2014;Onozaka and Mc Fadden, 2011). Yet, there are also findings supporting behavioral economic concepts like embedding or information overload effects and attitude-behavior gaps (Bougherara et al, 2007;Irwin and Spira, 1997;Jongmans et al, 2014).…”