There are many ways that sustainable business can be financially successful. One of the first things that comes to mind is that consumers might be willing to pay more for products that are produced in a responsible way. Most consumers would prefer their products not to be made by child labor or to pollute the environment. That said, you don’t need to be exceptionally cynical to worry that people aren’t always as altruistic as we might like. Will consumers actually pay for sustainability?
Understanding Willingness To Pay
Stephanie Tully and Russ Winer tackled with consumers’ willingness to pay (WTP) for socially responsible products in a 2014 paper. This took the form of a meta-analysis — they analyzed past research (which covered 174 unique observations).
Willingness to pay is an especially tricky thing to measure. There are significant self-presentation concerns. People might not tell you what they will really do. To be fair, people won’t necessarily know what they will do. A positive thing for the study is that authors include incentive compatible studies, in which people put their money where their mouth is.
Will Consumers Actually Pay For Sustainability?
So will consumers actually pay for sustainability? Yes they will.
…people are willing to pay a positive and significant premium for socially responsible products. On average, socially responsible products demand a 16.8 percent premium over products without socially responsible features. Further, almost 60 percent of people indicate that they are willing to pay some type of premium for these products. …the results suggest that the majority of consumers are willing to pay extra for benefits that do not directly benefit themselves.
Tully and Winer (2014) page 265
To be clear this result doesn’t suggest that people don’t care about the money as long as you have a good cause. It does, however, suggest that it is reasonable to hope that consumers might pay a little bit more if the cause is a good one. One thing the authors note is that consumers seem keener to pay to help other people than more general environmental concerns. Often people and environmental benefits overlap. So the paper suggests if you have a choice you probably want to construct your message around the people the product is helping rather than the trees it is saving.
For more on sustainable marketing strategy see Sustainable Marketing Strategy | Marketing Thought.
Read: Stephanie Tully, & Russ Winer (2014). The role of the beneficiary in willingness to pay for socially responsible products: A meta-analysis. Journal of Retailing, 90(2), 255–274.
