Determinants of Consumers’ Willingness to Pay More for Sustainable Products

The term “sustainable products” refers to products that meet the needs of the present while reducing environmental impacts and the waste of natural resources across their life cycles, so as not to compromise the ability of future generations to meet their own needs. It is interchangeably used with eco-friendly products, environmentally friendly products, or green products in most cases.

The success of a sustainable product strategy depends on consumers’ acceptance of the product and their willingness to pay for it.  Sustainable products are usually priced higher than their conventional counterparts because the cost of producing the former is likely higher due to several reasons:

  • Many sustainable products require substantial initial investment (Hoalst‐Pullen et al., 2014), particularly those that cannot be manufactured using preexisting infrastructure.

  • Sustainable products often begin as small-scale productions, which can hinder the attainment of economies of scale until the product gains widespread popularity.

  • In many industries, it is common practice for sustainable product producers to obtain third-party certifications to demonstrate their commitment to sustainability. However, it’s worth noting that this certification process can be quite costly.

  • In many cases, adopting ethical practices can result in higher costs.

Given the inherent higher price for many sustainable products, the key to realizing their positive environmental potential often lies in consumers’ willingness to pay a premium for them. Academic studies have identified some key determinants of consumers’ willingness to pay a price premium for sustainable products. These determinants include, but are not limited to:

  • Consumers’ environmental concern: A consumer’s environmental concern refers to their general attitude toward preserving the environment (Ellen et al., 1991). It has been documented as a strong predictor of pro-environmental behaviors, including purchasing sustainable products.

  • Environmental knowledge, including general environmental knowledge, and knowledge about how to assess the environmental impact of a product. The production, consumption, and disposal of a product can generate significant environmental impacts. Knowing the environmental impacts of a sustainable product compared to its conventional counterpart is a main driver of consumers’ willingness to pay a premium for the former.

  • Perceived consumer effectiveness (PCE). PCE refers to the degree to which consumers believe that their actions can positively affect the environment. A number of academic studies have identified a lack of PCE as the main barrier to translating environmental concerns into pro-environmental behaviors (Wei et al., 2018, Park and Lin, 2020).

  • Norms and social influence. Social norms and the behavior of other people (e.g., family members, friends, and colleagues) can influence a consumer’s pro-environmental purchasing behavior (Otto et al., 2021).

  • Financial incentives. Tax credits, rebates, savings programs, and other forms of financial incentives can lower the cost of switching to sustainable products and increase consumers’ willingness to pay a premium for these products.

Academic research has identified certain moderators that interact with consumer characteristics to jointly influence consumers’ willingness to pay a premium for sustainable products. For example, Wei et al. (2018) found that customer participation in product design and delivery improves their willingness to pay a premium for the product, even when they have low environmental concern and knowledge.

Does the Type of Environmental Concern Matter?

It is also important to understand which type of environmental concern has the greatest influence on consumers’ purchasing decision. Royne et al. (2011) examined the seven dimensions of environmental concern identified in Zimmer et al. (1994), including 1) concern for waste, 2) concern for wildlife, 3) concern for the biosphere (i.e., concern for the earth and the air), 4) concern for popular issues (i.e., concern for popular issues with recent visibility in the popular press), 5) concern for health, 6) concern for energy, and 7) concern for environmental technology. The findings of the research suggest that the concern for waste stands out as the most significant determinant of consumers’ willingness to pay more for sustainable products.


In conclusion, there are various determinants that influence consumers’ willingness to pay more for sustainable products, ranging from personal values and beliefs to financial incentives and marketing strategies. Understanding these determinants is crucial for businesses that seek to develop sustainable products and increase their market share. By highlighting the benefits of sustainable products and addressing consumer concerns, companies can build brand loyalty and gain a competitive edge in the marketplace. Ultimately, it is up to both businesses and consumers to work together to create a more sustainable future for our planet.



References:

Ellen, P. S., Wiener, J. L., & Cobb-Walgren, C. (1991). The Role of Perceived Consumer Effectiveness in Motivating Environmentally Conscious Behaviors. Journal of Public Policy & Marketing 10(2): 102–117. https://doi.org/10.1177/074391569101000206

Hoalst-Pullen, N., Patterson, M., Mattord, R., Vest, M. (2014). Sustainability Trends in the Regional Craft Beer Industry. In: Patterson, M., Hoalst-Pullen, N. (eds) The Geography of Beer. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-7787-3_11

Otto, S., Hildebrandt, J., Will, M. et al. (2021).  Tying Up Loose Ends. Integrating Consumers’ Psychology into a Broad Interdisciplinary Perspective on a Circular Sustainable Bioeconomy. J Agric Environ Ethics 34 (8). https://doi.org/10.1007/s10806-021-09851-6

Park, H. J., & Lin, L. M. (2020). Exploring attitude–behavior gap in sustainable consumption: comparison of recycled and upcycled fashion products. Journal of Business Research 117: 623–628. https://doi.org/10.1016/j.jbusres.2018.08.025

Royne, M. B., Levy, M., & Martinez, J. (2011). The Public Health Implications of Consumers’ Environmental Concern and Their Willingness to Pay for an Eco-Friendly Product. Journal of Consumer Affairs 45(2): 329–343.  https://doi.org/10.1111/j.1745-6606.2011.01205.x

Wei, S., Ang, T., & Jancenelle, V. E. (2018). Willingness to pay more for green products: The interplay of consumer characteristics and customer participation. Journal of Retailing & Consumer Services 45: 230–238. https://doi.org/10.1016/j.jretconser.2018.08.015.

Zimmer, M. R., T. F. Stafford, and M. R. Stafford (1994). Green Issues: Dimensions of Environmental Concern. Journal of Business Research 30 (May): 63–74. https://doi.org/10.1016/0148-2963(94)90069-8

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