Customers Say They Will Pay More for Socially Responsible Products, Especially When the Benefit Goes to People

ConversionTully, S.; Winer, R. · 2014Journal of Retailing
Topicswillingness to pay·social responsibility·meta-analysis·price premium·sustainability·fair trade·beneficiary

So far, manufacturers and researchers alike have focused mostly on environmental benefits. A socially responsible product does its ordinary job for the buyer and also benefits others, whether people through fair wages and fair labor practices, animals, or the environment. Imagine your team is choosing whether your next premium coffee or apparel line leads with fair labor, animal welfare or the environment. Which benefit would customers pay the most for?

Customers are willing to pay more for socially responsible products, especially when the benefit goes to people.

Data chart

Most customers are willing to pay more for socially responsible products

Average share of customers willing to pay more across study results, in percent, and average estimated premium across study results, as a percent of the same product's price without the responsible feature.

60%Average share of customers willing topay more17%Average estimated price premium for thesocially responsible version

On average across study results, about 60% of customers are willing to pay more for a socially responsible product, and the estimated premium averages about 17% over the price of the same product without the feature.

Raw averages from 174 study results in published and unpublished papers, early 1990s to about 2009: a 59.7% mean share willing to pay more from 107 results and a 16.8% mean premium from 163 results. Method-adjusted means are about 52% willing to pay more and about 15% premium (exact values 51.6% and 14.8%). The share is adjusted for allowing lower-price responses; the premium also for methods with real financial consequences.

Data chart

Estimated premiums are higher when people or animals benefit

Extra estimated price premium compared with products that benefit the environment, in percentage points of the regular price, after allowing for other differences between studies.

Baseline: benefit to the environmentBenefit goes to people, comparedwith the environment+14 pointsBenefit goes to animals, comparedwith the environment+12 points
  • Estimated premiums are higher for benefits to people or animals than to the environment.

Estimated premiums are higher when products benefit people or animals than when they benefit the environment.

Differences in the estimated premium relative to products that benefit the environment, allowing for product category, certification and survey design; exact values +14.32 and +12.12 percentage points. The people-versus-animal gap was not tested. The animal premium rests on 21 study results; the separate 3-result estimate of the share willing to pay more was not reliably higher than for environmental benefits.

Action guide

  1. Put benefits to people first when positioning your socially responsible products.Lead your advertising with fair wages or fair labor practices ahead of environmental benefits. This may attract more customers as well as support a premium.
  2. Build benefits to people into your products when you want a premium.Most studies so far cover products that benefit the environment, yet the estimated premium is higher for products that benefit people.
  3. Test whether visible socially responsible purchases widen your buyer base.Pilot advertising or displays of other customers' socially responsible purchases to raise social pressure to buy responsibly. The studies did not test either tactic directly, and that pressure is not reliably linked to a larger premium.
  4. Use certification to support your premium.Certified products have a higher estimated premium, but certification does not consistently raise the share of customers willing to pay more. Weigh that gain against the cost of certification.
  5. Require two measures in your pricing research.Ask your insights team for both the share of customers willing to pay more and the premium they would pay, because the two can move differently.
  6. Ask whether your pricing surveys allowed respondents to name a lower price.Surveys that allow only a higher price report a bigger share of customers who say they would pay more, and larger premiums. Check each survey's design before your team sets prices on its results.

Evidence

  • On average across study results, about 60% of customers are willing to pay more for a socially responsible product. The estimated premium averages about 17% over the price of the same product without the responsible feature, including customers unwilling to pay extra. The two are separate measures that do not always move together.
  • The estimated premium is about 14 points higher for products that benefit people than for products that benefit the environment. This comparison and those below allow for other ways the studies differ, such as product category, certification and survey design.
  • The share of customers willing to pay more is about 13 points higher for products that benefit people than for products that benefit the environment.
  • The share of customers willing to pay more is about 7 points higher per point on a 1 to 7 rating of social pressure to buy responsibly. The premium is not reliably higher. The ratings came from one online U.S. survey in 2013.
  • The estimated premium is about 7 points higher for certified products than for products without certification. Certification does not consistently raise the share of customers willing to pay more.
  • In surveys that let customers say they would pay less, the share who say they would pay more is about 18 points lower than in surveys that allow only a higher price. The average premium is about 10 points lower.

Key takeaway

Customers are willing to pay more when the benefit goes to people than to the environment.

Limitations

The studies span the early 1990s to about 2009 and estimate willingness to pay for mainly tangible goods using surveys, auctions and real purchase data. Surveys that allow only higher prices overstate premiums, and the pooled estimates do not establish a universal premium at the shelf.

Source

Tully, S., & Winer, R. (2014). The Role of the Beneficiary in Willingness to Pay for Socially Responsible Products: A Meta-analysis. Journal of Retailing, 90(2), 255 to 274. https://doi.org/10.1016/j.jretai.2014.03.004.

https://doi.org/10.1016/j.jretai.2014.03.004

Exact values behind the rounded figures: a 16.8% mean premium across 163 study results and a 59.7% mean share willing to pay more across 107 results; +14.32 points of premium and +13.49 points of share for people compared with the environment; +12.12 points of premium for animals compared with the environment; +6.67 points in the share willing to pay more per point on the 1 to 7 social-norm rating; method-adjusted means of 14.8% premium and 51.6% willing to pay more; +7.02 points of premium for certified compared with uncertified products; premiums 10.22 points lower and the share of customers who say they would pay more 17.54 points lower in surveys that let people name a lower price than in surveys that allow only a higher price.