Premium Consumers Research Articles

Qualitative and quantitative cues in consumers' valuation of food safety: Evidence from Lebanon

AbstractIn this work, we explore consumers' behavior toward the joint provision of qualitative and quantitative food safety information. To this end, we conduct a choice experiment involving a representative sample of 700 households from Beirut, Lebanon, designed around the purchase of a high risk Middle Eastern traditional street food, “shawarma.” The surveyed household sample was divided among two treatments where one was provided with additional quantitative risk reduction information, hence labeled “informed” versus the other which is labeled as “uninformed”. Accordingly, we compare the willingness to pay (WTP) values between both informed and uninformed respondents given typical risk reduction levels using mixed‐logit. The analysis illustrates that consumers were less likely to choose more expensive products—all else being equal—with the average consumer preferring to buy shawarma sandwiches from “round the corner” shops as opposed to walking for more than 10 min, driving or ordering delivery. However, when food safety attributes were introduced preference shifted significantly toward food safety certification in all iterations as compared to no certification. This preference is independent of whether risk reduction information was provided. Nevertheless, once quantitative risk reduction information was shared, the results revealed a decrease in preference for food safety certificates. Accordingly, our results query the validity of incomplete risk information in food safety certifications and challenge some of the implications of risk communication on consumers' choice highlighting the need for improved and well‐defined risk communication strategies.Practical applicationsBased on our results, we foresee a merit for public authorities in Lebanon to review and upgrade the current food safety monitoring and certification services and couple them with assertive and well‐publicized risk reduction communication strategies. On the other hand, we suggest that the cost associated with these services should be heavily discounted or subsidized to benefit small and street food vendors. This will provide a powerful incentive for them to substantially improve on their food safety and hygiene practices. Given the evidence on the high premiums consumers are willing to pay for safer foods and transparent risk communication, such an incentive will become more persuasive for small food vendors. Accordingly, this will establish a robust market for street food safety in general and street foodborne risk communication in particular with considerable welfare gains to street food vendors which will ultimately shape consumer behavior.

The effect of CAFE standards on vehicle sales projections: A Total Cost of Ownership approach

We conduct a Total Cost of Ownership analysis to estimate the impacts that the 2017–2025 Corporate Average Fuel Economy (CAFE) standards will have on sales of light duty vehicles (cars and light trucks). Vehicle sales are an important macroeconomic indicator that can impact both the economic outlook of the automobile industry as well as the efficacy of the CAFE standards. Our analysis focuses on the relative impacts of three determinants of the net premium consumers' face when deciding whether to purchase a new vehicle, namely: 1) consumers' valuation of fuel savings, 2) fuel price variation over time, and 3) gross price premium of the vehicle due to the Federal Standards. We find that uncertainty about consumers’ valuation of fuel savings leads to greater variation in estimated vehicle sales impacts than uncertainty about the gross price premium or fuel prices. Specifically, the estimated sales impacts for model year 2025 range from −7% to +3% and −4% to +5% for cars and light trucks, respectively, when we vary assumptions about valuation of fuel savings. The range of estimates is −6% to −2% and −2% to 0.5% for cars and light trucks, respectively, when we vary the gross price premium and −4% to +1% and −1% to +3% for cars and light trucks, respectively, when we vary fuel prices for model year 2025. These percentages are computed relative to a baseline scenario where CAFE standards remain fixed at 2016 levels. Our findings highlight the importance of more carefully examining the uncertainty introduced through consumer valuation of fuel economy in the mid-term reviews of the CAFE standards.

An exploratory analysis of US consumer preferences for North American pawpaw

The North American pawpaw (Asimina triloba (L.) Dunal) is a high-value native specialty fruit crop that offers multiple opportunities for commercial value-added products. A survey was conducted to obtain a better understanding of consumer preferences for pawpaws as fresh and value-added food products. The survey was distributed to 524 individuals who were members of the North American Pawpaw Growers Association, attendees of the 2016 International Pawpaw Conference at Frankfurt, Kentucky, and participants at the 2017 Ohio Pawpaw Festival, Albany, Ohio. Respondents were asked to self-identify their positions (consumers or producers) in the pawpaw market. Those who self-identified as consumers were asked to take the survey. A total of 192 responses were collected. Survey results indicated that the majority of the respondents consume fresh or value-added pawpaw products at least once a year. They reported strong preferences for the flavor and texture of fresh pawpaws. Price, origin, and type of production process had statistically significant impacts on consumers’ purchase preferences. The characteristic that most influenced demand was local production—consumers were willing to pay a premium of $5.20/kg for locally produced pawpaws compared to pawpaws of unknown region of origin. Consumers also preferred certified organic and pesticide-free pawpaws to fruit produced using chemical fertilizers, pesticides, and herbicides. The average price premiums consumers were willing to pay for certified organic and pesticide-free fruits were $4.19 and $3.28/kg, respectively. Providing information about the region of origin, organic and pesticide-free production processes can potentially increase consumer demand for pawpaws and their share of the fresh and value-added fruit market.

The use of food quality and prestige-based benefits for consumer segmentation

PurposeThe purpose of this paper is to identify consumer segments based on the importance of food quality and prestige benefits when buying food for a special occasion; dinner party with friends.Design/methodology/approachUsing cluster analysis, the importance of food quality benefits (quality, taste and health) and prestige benefits (prestige quality, hedonic, uniqueness, price and social) were investigated. The consumer segments were profiled using individual consumer characteristics (involvement in luxury, willingness to pay and socio-demographics).FindingsFood quality benefits are the most important benefits when buying food for a party with friends and the authors identified four distinct consumer segments based on 20 different food quality and prestige benefits: perfectionists, premium, luxury seeking and value focussed. Three of the four consumer segments (perfectionists, premium and luxury seeking) find conventional food quality benefits important but differ in the importance they attribute to the different prestige benefits. The value focussed segment is not driven by prestige consumption but wants high quality at an affordable price.Research limitations/implicationsThis study demonstrates that consumers are driven by different food and prestige benefits when buying food for a special occasion.Originality/valueThis study suggest some important differences between premium consumers, looking for food quality and hedonic benefits, and luxury seeking, with a relatively higher focus on prestige quality, uniqueness and social benefits. This study also identifies a significant distinction between perfectionists and value focussed consumers. Both segments are focussed on food quality benefits but differ in their focus on value and prestige benefits.

Additional Pertalite Policy and Gasoline Consumption Patterns in Indonesia

The transport sector is the largest contributor to CO2 emissions in Indonesia. To reduce the emissions, a policy of adding pertalite is applied which aims to allow consumers to switch into higher quality gasoline. This paper examines the impact of the implementation of the policy of adding pertalite. The approach uses the fixed effect of the panel data estimation method. In the period 2010-2015 Pertamax prices have a negative impact on Pertamax and Premium consumption. Meanwhile, the prices and revenues of selling Premium have a positive impact on consumption of Pertamax and Premium. For the period of 2016, the impact of the Pertamax prices increase would be a decrease in Pertamax and Premium consumption. Changes in the pattern of gasoline consumption are possible because of the difference in price and supply constraints for each type of gasoline. Therefore, the government should control the supply of gasoline and the differences in gasoline prices so that more Premium consumers will switch to Pertalite, and Pertalite consumers will switch to Pertamax.

Why we need more data on the dental insurance market

Why we need more data on the dental insurance market

Recycling Irrigation Water on Ornamental Nursery Operations: Could Consumer Premiums Compensate for Grower Adoption Costs?

The U.S. nursery and greenhouse industry is facing twin challenges of reduced water availability and increased pressure to mitigate pollution from horticultural production. Water-recycling technology (WRT) has been adopted by some nursery producers to improve crop water productivity and to enhance water supply security. This study estimated the economic feasibility of WRT adoption if producers received some portion of retail price premiums for eco-labeled products. Three annual bedding plants, Geraniums (Pelargonium spp.), Petunias (Petunia spp.), and Chrysanthemums (Chrysanthemum spp.) and three broadleaf evergreen plants, Azaleas (Rhododendron spp.), Holly (Ilex spp.), and Boxwood (Buxus spp.) were analyzed based on their sales in the study region of Virginia (VA), Maryland (MD), and Pennsylvania (PA). Of the eight case study nurseries and two synthesized nurseries examined, five showed increased net costs with recycling. However, in almost all cases for which at least a portion of a retail consumer premium was returned to growers, the premium was adequate to compensate for recycling investment costs.

Demand for farm animal welfare and producer implications: Results from a field experiment in Michigan

This study utilizes a Becker-DeGroot-Marschak (BDM) mechanism to assess Michigan consumer demand for animal welfare practices. Results are examined in the context of changing farm production costs and producer marketing margins. We find that while consumers are willing to pay significant premiums for animal welfare standards, failing to account for the costs associated with producing the entire animal under the new system could lead to suboptimal policy that negatively affects producer welfare. Our results suggest that consumer premiums for animal welfare are product specific and that WTP estimates should not be generalized to the entire animal. We discuss policy implications of our findings and highlight the importance of considering producer costs when evaluating consumer demand for farm animal welfare practices.

Measuring consumers' interest in instant fortified pearl millet products: a field experiment in Touba, Senegal.

In Africa, food-processing industries are emerging fast, especially for cereals. New low-cost extrusion cookers give small enterprises an opportunity to enter the market for processed cereal products, in particular instant, fortified and flavoured mixes. Before engaging in the marketing of these products, consumers' interest needs to be assessed. This study used a combination of affective tests and experimental auctions with 200 consumers in Touba, Senegal, to evaluate four new products with conventional pearl millet flour as the control: instant pearl millet flour, instant pearl millet flour with added dry mango and carrot powder (naturally fortified), and the previous products with added conventional chemical micronutrient fortificants. During affective tests, consumers made little distinction between the five products in appearance, aroma, taste and overall appreciation. The experimental auctions showed that, without providing additional information on the products, there was no difference in 'willingness to pay' (WTP) between them. However, after that information is provided, consumers were willing to pay a modest premium for instant flour, and a large premium for added mango and carrot extract and for added micronutrients, but were not willing to pay a premium if those micronutrients came from natural sources. Income increased overall WTP, while education increased WTP for instant flour. There is a potential market in low-income African countries for instant and fortified cereal food products, but likely in the higher income and education groups. The increased cost needs to be compared to the premiums consumers are willing to pay. In the next step, the new and promising products could be tested in pilot markets, with target consumers. © 2017 Society of Chemical Industry.

Dampak Aspek Emosional Konsumen terhadap Brand Loyalty

The preferences of millennial generations for premium Sneakers products are increasing especially in major Asian cities. Previous research has shown that millenials are very concerned about how the others perceive to them. The consumed product is part of the attribute that can strengthen his/her identity. The proximity of identity itself and the product will increase consumer commitment to the brand. This research is aimed to find out how far the influence and linkage between emotional aspect (self-concept connection, brand love, and emotional attachment) to brand loyalty in the willingness and sense of consumer ownership toward the brand in premium Sneakers product. An empirical study was conducted to examine the conceptual model constructed in this study. The instrument used was adapted from the previous researcher, then purified through pilot testing, then testing the validity through face validity and expolatory factor analysis approach. The empirical studies found three emotional aspects that strengthen brand loyalty to premium Sneakers consumers. Brand love has the most significant impact on brand loyalty. The existence of shifting loyalty, consumers feel loyal to various brands. Loyalty shifts from being loyal to one brand, being loyal to the lifestyle of premium consumer Sneakers. Although the study population needs to be expanded, this finding helps brand managers formulate effective brand strategies to achieve long-term viability for the company. https://doi.org/10.21632/ajefb.1.1.47-62

Willingness to pay for local food?: Consumer preferences and shopping behavior at Otago Farmers Market

New Zealand (NZ) survey data from Otago Farmers Market (OFM) provide new expenditures-based measures of local food preference. Discounts applied by consumers to non-local food items (e.g., from USA, China, or elsewhere in NZ) are reported. Some consumers have lexicographic preferences; they are unwilling to purchase non-local food at any price. Others are willing to substitute non-local for local food when priced appropriately. Tobit and Fractional Probit models describe how consumer characteristics affect willingness to pay (WTP) for local food. The mean consumer's premium in WTP when a produce item is “local” ranges from 2.1 to 8.0% and is positively associated with age and income.

How previous positive experiences with store brands affect purchase intention in emerging countries

PurposeBrand experience is a key factor that helps elucidate why consumers choose a given brand among others. The purpose this paper is to investigate how previous experience with store brands affects store brand purchase intention in two emerging markets and whether the cultural context moderates the relationships between store brand positive or negative cues and store brand purchase intention.Design/methodology/approachA store-intercept survey undertaken in the Latin American context generated 769 usable responses from consumers of two metropolitan cities (Brasilia and Bogota), respectively, in Brazil and Colombia. The questionnaires were collected in four well-established retail chains by professional investigators. Structural equation modelling was used to test a series of proposed hypotheses.FindingsOverall, this paper reveals that consumers in Latin America do care about brand experience when shopping. More specifically, the results indicate that previous positive experience with store brands has a positive effect on consumer purchase intention in both countries investigated. In Brazil, store brand price perceptions mediate rather strongly the relationship between previous experience with store brands and purchase intention. In contrast, this effect is weak in Colombia. Store brand perceived risk has significant mediation effects in Brazil, but no mediation effects in Colombia. The authors also underline heterogeneous moderation effects of the cultural context, suggesting that common perceptions of Latin America as a culturally homogeneous region are stereotypical.Research limitations/implicationsRespondents were consumers of only two Latin American emerging countries (Brazil and Colombia) and shoppers of two retail chains in each country. Caution should therefore be exercised when generalising the results to other emerging markets.Practical implicationsThe paper offers recommendations on how to standardise/adapt brand experience management in different Latin American markets. Overall, retailers should go beyond the transaction itself and establish true differentiation using different store brand ranges. However, due to differences in cultural contexts, marketing communication should adopt different approaches to each country: emphasise the price advantages of store brands in Brazil, but focus on other factors such as quality in Colombia. Because they are culturally bound, risk perceptions towards store brands should also be managed carefully. It would be possible to target premium consumer segments with standard store brands in Colombia while a more sophisticated approach is necessary in Brazil (e.g. co-branding or launching more premium store brands).Originality/valueBy employing three theoretical frameworks (learning theory, cue utilisation theory and culture theory), this research investigates the effect of previous experience with store brands on purchase intention in two emerging countries that are geographically close but culturally different. It highlights direct and indirect processes of brand experience and underlines significant structural path differences between the two Latin American countries investigated in terms of consumption behaviour towards store brands.

Consumer Choices and Motives for Eco-Labeled Products in China: An Empirical Analysis Based on the Choice Experiment

Based on choice experiments conducted via face-to-face interviews with 435 participants in four provincial areas of China (Shanghai, Zhejiang, Jiangsu, and Guangdong), Chinese consumers’ preferences and motives for purchasing eco-labeled rice are examined in this study. The heterogeneous effects of each motivating channel are also investigated. The results reveal positive correlations between premiums for eco-labeled rice and consumers’ concerns about food safety and the environment, suggesting that health benefits and environmental considerations are the two critical motivations. The willingness to pay for eco-labeled rice does not increase with consumers’ knowledge of the different production standards indicated by each eco-label. Individual characteristics that determine each class are further explored through a seemingly irrelevant regression to identify the target group of consumers for policy-makers.

Real-Time Bidding in Online Display Advertising

Display advertising is a major source of revenue for many of the online publishers and content providers. Historically, display advertising impressions have been sold through pre-negotiated contracts, known as reservation contracts, between publishers and advertisers. In recent years, a growing number of impressions are being sold in real-time bidding (RTB), where advertisers bid for impressions in real-time, as consumers visit publishers’ websites. RTB allows advertisers to target consumers at an individual level using browser cookie information, and enables them to customize their ads for each individual. The rapid growth of RTB has created new challenges for advertisers and publishers on how much budget and ad inventory to allocate to RTB. In this paper, we use a game theory model with two advertisers and a publisher to study the effects of RTB on advertisers’ and publishers’ strategies and their profits. We show that symmetric advertisers use asymmetric strategies where one advertiser buys all of his impressions in RTB whereas the other advertiser focuses on reservation contracts. Interestingly, we find that while both advertisers benefit from existence of RTB, the advertiser that focuses on reservation contracts benefits more than the advertiser that focuses on RTB. We show that while RTB lowers the equilibrium price of impressions in reservation contracts, it increases the publisher’s total revenue. Despite many analysts’ belief that, because of being more efficient, RTB will replace reservation contracts in the future, we show that publishers have to sell a sufficiently large fraction of their impressions in reservation contracts in order to maximize their revenue. We extend our model to consider premium consumers, publisher’s uncertainty about the number of future visitors, and effectiveness of ad customization.

Real-Time Bidding in Online Display Advertising

Display advertising is a major source of revenue for many online publishers and content providers. Historically, display advertising impressions have been sold through prenegotiated contracts, known as reservation contracts, between publishers and advertisers. In recent years, a growing number of impressions are being sold in real-time bidding (RTB), where advertisers bid for impressions in real time, as consumers visit publishers’ websites. RTB allows advertisers to target consumers at an individual level using browser cookie information, and enables them to customize their ads for each individual. The rapid growth of RTB has created new challenges for advertisers and publishers on how much budget and ad inventory to allocate to RTB. In this paper, we use a game theory model with two advertisers and a publisher to study the effects of RTB on advertisers’ and publishers’ strategies and their profits. We show that symmetric advertisers use asymmetric strategies where one advertiser buys all of his impressions in RTB, whereas the other advertiser focuses on reservation contracts. Interestingly, we find that while both advertisers benefit from the existence of RTB, the advertiser that focuses on reservation contracts benefits more than the advertiser that focuses on RTB. We show that while RTB lowers the equilibrium price of impressions in reservation contracts, it increases the publisher’s total revenue. Despite many analysts’ belief that, because of being more efficient, RTB will replace reservation contracts in the future, we show that publishers have to sell a sufficiently large fraction of their impressions in reservation contracts to maximize their revenue. We extend our model to consider premium consumers, publisher’s uncertainty about the number of future visitors, and effectiveness of ad customization. The online appendix is available at https://doi.org/10.1287/mksc.2017.1083 .

When Past Is Not Prologue: The Weakness of the Economic Evidence against Health Insurance Mergers

The DOJ’s challenges of both Aetna/Humana and Cigna/Anthem mergers in 2016 are fundamentally rooted in a timeworn structural analysis: More consolidation in (where the market is a hotly-contested issue, of course) means less competition and higher premiums for consumers. Following traditional structural playbook, DOJ argues that mergers would result in presumptively anticompetitive levels of concentration, and that neither new entry not divestiture would suffice to introduce sufficient competition. It does not (in its pretrial brief, at least) consider other dynamics (including especially complex and evolving regulatory environment) that would constrain firms' ability to charge supracompetitive prices.The parties contend that things are a bit more complicated than government suggests, that government defines relevant incorrectly, and that there is no correlation between number of insurers in a given county and insurance premium pricing.The trials will, of course, feature expert economic evidence from both sides. But until we see that evidence, we are left to evaluate basic outlines of economic arguments based only on existing literature.A host of mergers' critics have determined that literature condemns mergers, based largely on a small set of papers purporting to demonstrate that an increase of premiums, without corresponding benefit, inexorably follows health insurance consolidation. In fact, virtually all of these critics base their claims on a 2012 case study of a 1999 merger (between Aetna and Prudential) by economists Leemore Dafny, Mark Duggan, and Subramaniam Ramanarayanan, Paying a on Your Premium? Consolidation in U.S. Health Insurance Industry, as well as associated testimony by Dafny, along with a small number of other papers by her (and a couple others). This paper challenges critics' claims, taking a close analysis of Paying a Premium paper as a jumping off point. While our analysis doesn’t necessarily undermine paper's limited, historical conclusions, it does counsel extreme caution for inferring study’s applicability to today's proposed mergers. That said, different markets and a changed regulatory environment alone aren’t only things suggesting that past is not prologue. When we delve into paper more closely we find even more significant limitations on paper's support for claims made in its name, and its relevance to current proposed mergers. In short: extrapolated, long-term, cumulative, average effects drawn from 17-year-old data may grab headlines, but they really don't tell us much of anything about likely effects of a particular merger today, or about effects of increased concentration in any particular product or geographic market.

The impact of instant reward programs and bonus premiums on consumer purchase behavior

This study examines the impact of an instant reward program (IRP) with bonus premiums on consumer purchase behavior. An IRP is a rapidly growing form of short-term program that rewards consumers instantly with small premiums per fixed spending, where these premiums are part of a larger set of collectibles. A supplementary element in many IRPs promotes specific brands with an extra premium, labeled bonus premiums. Bonus premiums are the extra premiums consumers can earn by buying a specific promoted brand, which is a non-price promotion tied to the IRP. Therefore, consumers can earn premiums in two ways: based on total spending and on purchases of promoted brands. To test the effects of these marketing instruments, this study uses Dutch household panel data related to purchases of 23 product categories spanning four supermarket chains. We decompose consumer purchase behavior by modeling the number of shopping trips, category-level purchase incidence, brand choice, and purchase quantity. The results show that an IRP results in incremental shopping trips. Promoting a brand with a bonus premium and price discount compared to just a price discount results in higher choice probabilities for the promoted brand. Finally, the IRP and bonus premium are especially effective for households that collect the premiums, but we also find positive albeit smaller effects for non-collecting households.

Are French consumers ready to pay a premium for eco‐labeled seafood products? A contingent valuation estimation with heterogeneous anchoring

AbstractCould the future French eco‐label for fresh seafood products find its place in the French market? This study employs a contingent valuation method to estimate French consumers’ willingness‐to‐pay (WTP) for eco‐labeled fresh seafood products. We exploit original data from a survey carried out in 2010, where 626 participants responded to a double‐bounded dichotomous choice model, through an ascending or descending bid system. Controlling for shift and anchoring effects in random effect probit models, we significantly improve estimation of WTP and its determinants for the three species studied (monkfish, lobster, sole), in particular when using heterogeneous anchoring. We show that WTP is positively correlated to respondents’ income, and also to their environmental concern, to living alone, to living far from the coast, and to trusting NGOs or public institutions more than producer organizations to implement an eco‐label. We also show that the mean price premiums do not differ between species. Finally, on average, the maximum premium consumers accepted to pay is approximately 10% of the product price.

Consumer attitudes to injurious pecking in free-range egg production

AbstractFree-range egg producers face continuing problems from injurious pecking (IP) which has financial consequences for farmers and poor welfare implications for birds. Beak-trimming has been practised for many years to limit the damage caused by IP, but with the UK Government giving notification that they intend to ban beak-trimming in 2016, considerable efforts have been made to devise feasible housing, range and management strategies to reduce IP. A recent research project investigated the efficacy of a range of IP-reducing management strategies, the mean costs of which came to around 5 pence per bird. Here, the results of the above project's consumer survey are presented: consumers’ attitudes to free-range egg production are detailed showing that, whilst consumers had a very positive attitude towards free-range eggs, they were especially uninformed about some aspects of free-range egg production. The contingent valuation technique was used to estimate the price premium consumers would be prepared to pay to ensure that hens do not suffer from IP: this was calculated as just over 3% on top of the prevailing retail price of free-range eggs. These findings reinforce other studies that have found that whilst consumers are not generally well-informed about certain specific welfare problems faced by animals under free-range conditions, they are prepared to pay to improve animal welfare. Indeed, the study findings suggest that producers could obtain an additional price premium if they demonstrate the welfare provenance of their eggs, perhaps through marketing the eggs as coming from birds with intact beaks. This welfare provenance issue could usefully be assured to consumers by the introduction of a mandatory, single, accredited EU-wide welfare-standards labelling scheme.

Laddering the benefit-link-value of premium products: perception of Indian consumers on consumer packaged goods

The word 'premium' can conjure a plethora of meaning that includes quality, cost, convenience and many more; it varies with segment and product category. The rapid growth of specialty gourmet stores and e-tailing hubs pose a greater challenge in understanding the word 'premium as-perceived-by consumers'. This study explores the perception of consumers towards the so-called premium products; what according to conservative consumers is the real 'premiumness'? The study also attempts to classify the value proposition of consumers towards the premium consumer packaged products as hedonic and utilitarian benefits, across organic and natural shelves of many retail channels and banners, in the conservative markets of India, by laddering the benefit links to values. Purposive sampling for in-depth interview of 60 respondents drawn from three strata with two economic classes is adopted. The study reveals that the high-income group regularly buys premium products but the premium product purchase growth and aspirational effects are stronger in low-income group. The outcome of the study is expected to help the marketers define every variable in the value equation of CPG premium products, according to the customer category.