Information or Prices, Which Is Most Powerful in Increasing Consumer Demand for Organic Vegetables?

Sinne Smed,Laura M Andersen

doi:10.5539/ibr.v5n12p175

Abstract

Based on a unique and very detailed panel dataset covering consumption of organically and conventionally produced vegetables in the years 2005 - 2007, we examine the effects of information about positive health effects of consuming organic vegetables and information about negative health effects of consuming conventional vegetables on demand for organic foods for six different segments of Danish households. Three of these segments are positive towards organics whereas the remaining three segments are negative or indifferent. Using the double hurdle model we estimate partial effects of both directly and indirectly obtained information as well as prices. The results show, that there are larger effects of information for households where the information is in accordance with initial knowledge and attitudes, hence the positive segments react more to information whereas the negative segments react more to prices. “New” consumers can be persuaded to buy organic vegetables by providing information about the negative health effects of consuming conventional vegetables since it increases the probability of an organic purchase. Once consumers have entered the organic marked for vegetables, information that link health and the consumption of organic vegetables will increase consumption. The results are important for firms and producers who want to successfully target information to different consumer groups with the aim of increasing the market share for organic food.

Highlights

Some decades ago, organic foods were aimed at a small dedicated group of consumers with idealistic ideas who bought organic foods in speciality stores
In this paper we focus on the differences in the utility of using conventional versus organic vegetables when preparing meals, and assume that the input of other goods are unaffected by this choice
A Likelihood ratio test is performed to test the Tobit model against the Double Hurdle model (Lin & Schmidt, 1984) which reveals a probability value of 0.0000, the hypotheses that the decision to buy organics consist of just one decision is rejected

Summary

Introduction

Organic foods were aimed at a small dedicated group of consumers with idealistic ideas who bought organic foods in speciality stores. It is important to identify differences in terms of attitudes to organics and food consumption in general between this new type of organic consumer and the traditional dedicated consumer. Studying differences in demand between lifestyle- and attitude-based consumer segments can give insight in the attitudes and motivations behind specific behaviour of various consumer groups (Nie & Zepeda, 2011). This might be helpful in on order to successfully target marketing campaigns. Knowing how to reach different consumer segments by information is important in marketing campaigns aiming at increasing organic food consumption (Nie & Zepeda, 2011). The first decision is whether to be an organic purchaser or not (participation decision) and the second step is, conditional on being an organic purchaser, the amount to purchase (consumption decision)

Conceptual Model

Segmentation and Expected Reactions to Information

Dit 1

Estimation and Results

Discussion and Conclusion