Demand for Eco-labeled Product
Eco-labels identify products that are produced in an environmentally friendly way which provide businesses an opportunity to differentiate their products, encourage environmentally conscientious consumerism, and capture additional market share1Global Ecolabelling Network. (2004). Introduction to Ecolabelling. Accessed August 2020. Available at https://globalecolabelling.net/assets/Uploads/intro-to-ecolabelling.pdf. Demand for eco-labeled products is increasing with 457 eco-labels in 199 countries across 25 industry sectors2Ecolabel Index. (2020). Ecolabel Index. Accessed August 2020. Available at http://www.ecolabelindex.com/. Around 2019, sales of eco-labeled product in United States increased by 4.6% to $50.1 billion3Organic Trade Association. (2020). U.S. Organic Industry Survey 2020. Available at https://ota.com/organic-market-overview/organic-industry-survey. As demand increases, more formats of eco-labels are introduced. Several studies have shown that consumers are willing to pay premiums for eco-labeled products but the premium amount varies when different labels/logos are used 4Janssen, M., Hamm, U. (2012). Product labelling in the market for organic food: Consumer preferences and willingness-to-pay for different organic certification logos. Food Quality and Preference. 25 (1), 9–22 5Van Loo, E.J., Caputo, V., Nayga, R.M.J., Meullenet, J.-F., Ricke, S.C. (2011). Consumers’ willingness to pay for organic chicken breast: Evidence from choice experiment. Food Quality and Preference. 22 (7), 603–613.
The objective of Rihn et al. ‘s (2019) study is to investigate how consumers’ preferences, visual attention, and willingness-to-pay for fruit-producing plants are influenced by eco-labels and their formats. The formulated hypotheses for this study are:
H1: Respondents will direct more visual attention to the eco-label logos than the eco-label presented as text.
H2: Respondents will value fruit-producing plants with eco-labels over those without eco-labels.
H3: Respondents will value graphic (logo) eco-labels more than text eco-labels.
H4: Visual attention to the eco-label logos will increase utility and willingness-to-pay more than visual attention to the eco-label text.
Rihn et al. (2019) use a total of 94 participants aged 18 years or above and had purchased plants within 12 months before the experiment were recruited in Florida in November 2017 but only 82 were included in the analysis due to incomplete answers and outlier bids during the auction. Three types of plants (blueberry, papaya, banana) were used to encourage participants to submit bids reflecting their preference changes based on eco-label changes rather than just the plant type. Three eco-labels were used in this experiment, those eco-labels are industry-specific eco-label, GMO (genetically modified organism) eco-label, and heirloom certified eco-label. Each eco-label was represented as logo, text (logo and descriptive text for industry-specific eco-label), and absent (without logo or text). Hence, there are 81 (34) possible product combinations for the auction. Second price auction (the winner pays the second highest bid) was used because multiple bids were submitted during the same time.
To measure visual attention, participants used Tobii X2-60 Eye Tracking cameras during the bidding process. The metric used to measure visual attention was fixation counts. A fixation is defined as the moment when the eye is relatively still and focused on a specific area for 200–500 ms6Behe, B.K., Campbell, B.L., Khachatryan, H., Hall, C.R., Dennis, J.H., Huddleston, P.T., et al. (2014). Incorporating eye tracking technology and conjoint analysis to better understand the green industry consumer. HortScience : A Publication of the American Society for Horticultural Science. 49, 1550–1557 7Orquin, J.L., Mueller Loose, S. (2013). Attention and choice: A review on eye movements in decision making. Acta Psychologica 144, 190–206. Information acquisition only occurs during fixations8Pieters, R., Warlop, L., Wedel, M. (2002). Breaking through the clutter: Benefits of advertisement originality and familiarity for brand attention and memory. Management Science. 48, 765–781.
Random effects tobit models were used to estimate the relationship between the dependent variable (WTP bids) and independent variables (product attributes, visual attention, and demographic characteristics). Participants could bid $0 (if they didn’t want the product) to infinite. The model can be conveyed as:
Model 1 included dummy variables for the independent variables and demographic variables. The dummy variables are blueberry, papaya, banana, industry eco-label logo, industry eco-label text, non-GMO eco-label logo, non-GMO eco-label text, heirloom eco- label logo, heirloom eco-label text, and eye tracking. Each eco-label had an absent level. Model 2 included visual attention metric and same variables as model 1 except eye tracking variable. A positive significant coefficient indicated that additional visual attention increased participants’ willingness-to-pay.
From the experiment process, blueberry has the largest number of fixation count with mean of 7.45, followed by banana with mean of 6.32, and papaya with mean of 5.79. Industry eco-label logo with additional text has highest number of fixation count with mean of 5.83, followed by the non-GMO eco-label logo with mean of 2.36 fixations, the non-GMO eco-label text with mean of 2.20 fixations, the industry eco-label logo with mean of 2.02 fixations, the heirloom logo with mean of 1.7 fixations, and then the heirloom text with mean of 1.24 fixations. Significance test shows that the eco-label logo captured more fixations than the eco-label text for non-GMO and heirloom eco-label. Industry eco-label with logo and text also captured more fixations than industry eco-label with only a logo.
From the tobit models, participants have higher willingness-to-pay for blueberry than papaya and banana. Participants are willing to pay $0.80 more for fruit-producing plants with the industry eco-label logo compared to plants without the industry eco-label. With additional text accompanying the logo, participants’ willingness-to-pay increased further to $1.16. This result suggests that additional text is helps participants understand the logo and further strengthen the eco-label logo impact. Participants willingness-to-pay also increase by $1.11 for plants with the non-GMO eco-label logo and $0.76 more for plants with the non-GMO text label when compared to plants without the non-GMO eco-label. However, participants’ willingness-to-pay only increase by a mild $0.73 for plants with heirloom text eco-label compared to plants without the label. Fixations do not significantly impact willingness-to-pay.
Mean visual attention results indicate that more visual attention is directed towards eco-label logo than eco-label text. Econometric analysis shows that participants prefer fruit-producing plants with eco-labels over those without eco-labels. Respondents prefer non-GMO eco-label logo over the text version. However, heirloom eco-label had a limited impact on respondent’s willingness-to-pay. This may relate to respondents’ perceptions and knowledge on the eco-label itself. There is also additional visual attention to eco-label logo over eco-label text.
Investing in a recognized logo that attracts visual attention is beneficial in improving consumer preference and willingness-to-pay of the products. Firms may benefit from using eco-labels that are positively perceived and well established because consumers already have positive associations and valuations for those labels. The results of Rihn et al.’s (2019) study highlight the value in branding and promoting eco-labels in order to improve consumer and firm awareness of the eco-label.
Rihn, A., Wei, X., & Khachatryan, H. (2019). Text vs. logo: Does eco-label format influence consumers’ visual attention and willingness-to-pay for fruit plants? An experimental auction approach. Journal of Behavioral and Experimental Economics , 82(July), 101452. https://doi.org/10.1016/j.socec.2019.101452
Editor: Natsumi J. Putri, Azaria Hashina
Illustrator: Yosia Manurung
|↵1||Global Ecolabelling Network. (2004). Introduction to Ecolabelling. Accessed August 2020. Available at https://globalecolabelling.net/assets/Uploads/intro-to-ecolabelling.pdf|
|↵2||Ecolabel Index. (2020). Ecolabel Index. Accessed August 2020. Available at http://www.ecolabelindex.com/|
|↵3||Organic Trade Association. (2020). U.S. Organic Industry Survey 2020. Available at https://ota.com/organic-market-overview/organic-industry-survey|
|↵4||Janssen, M., Hamm, U. (2012). Product labelling in the market for organic food: Consumer preferences and willingness-to-pay for different organic certification logos. Food Quality and Preference. 25 (1), 9–22|
|↵5||Van Loo, E.J., Caputo, V., Nayga, R.M.J., Meullenet, J.-F., Ricke, S.C. (2011). Consumers’ willingness to pay for organic chicken breast: Evidence from choice experiment. Food Quality and Preference. 22 (7), 603–613|
|↵6||Behe, B.K., Campbell, B.L., Khachatryan, H., Hall, C.R., Dennis, J.H., Huddleston, P.T., et al. (2014). Incorporating eye tracking technology and conjoint analysis to better understand the green industry consumer. HortScience : A Publication of the American Society for Horticultural Science. 49, 1550–1557|
|↵7||Orquin, J.L., Mueller Loose, S. (2013). Attention and choice: A review on eye movements in decision making. Acta Psychologica 144, 190–206|
|↵8||Pieters, R., Warlop, L., Wedel, M. (2002). Breaking through the clutter: Benefits of advertisement originality and familiarity for brand attention and memory. Management Science. 48, 765–781|