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Consumer Perspectives on Fairtrade Prices

Author

Listed:
  • Monica M. Popa Sârghie

    (Edwards School of Business, University of Saskatchewan)

  • John Pracejus

    (University of Alberta)

Abstract

Worldwide consumer support of disadvantaged producers from developing countries has been encouraged through a variety of options, including the acquisition of Fairtrade-certified products. Prior studies showed that consumers’ purchases of Fairtrade products are driven by moral incentives and economic factors. Among the economic factors, only cursory research attention has been paid to a key aspect influencing purchases: the specific price of the Fairtrade item as compared to the price of non-Fairtrade items in the same product category. The price difference between Fairtrade and non-Fairtrade items can range anywhere from 0% to 70% or higher. This aspect is becoming ever more important in light of recent calls toward setting a price premium level of 100%, up to 200% in some categories, to reflect the changes in producers’ working conditions and living standards triggered by the global pandemic. Our studies suggest that such increases may not have the desired outcome. We hypothesize a negative relationship between the price premium and consumers’ willingness to pay (WTP) for Fairtrade items, testing this proposition in six cross-cultural studies. Our studies involve surveys administered to cross-sectional samples of consumers from the United States, from Canada, and samples of students from large North American universities. The surveys assessed consumers’ willingness to buy Fairtrade products using 7-point Likert scales (1 = “very unlikely to choose the Fairtrade product†; 7 = “very likely to choose the Fairtrade product†at the specified price premium level), for various product categories. Linear mixed-effects models for repeated measures (within-participants data) were employed for the key analyses. The significant finding of a negative relationship between the price premium and WTP supports our Hypothesis in each study, underscoring that as the Fairtrade premium is set at increasing levels (from 0% to 2%, 10%, and 25% higher price for the Fairtrade items), consumers’ average willingness to pay is significantly diminished, decreasing from 6.43 (MWTPat0%premium) to 5.56 (MWTPat2%premium) to 4.19 (MWTPat10%premium) to 2.95 (MWTPat25%premium) in Study 1; from 6.15 (MWTPat0%premium) to 5.37 (MWTPat2%premium) to 4.08 (MWTPat10%premium) to 2.98 (MWTPat25%premium) in Study 2; from 6.16 (MWTPat0%premium) to 5.34 (MWTPat2%premium) to 3.89 (MWTPat10%premium) to 2.27 (MWTPat25%premium) in Study 3, and from 6.39 (MWTPat0%premium) to 5.62 (MWTPat2%premium) to 4.45 (MWTPat10%premium) to 3.22 (MWTPat25%premium) in Study 4. These findings highlight actionable policy implications of marketing Fairtrade products to consumers, with a focus on the price component of the marketing mix. From a theoretical perspective, our research sheds light on the less-than-straightforward consequence of Fairtrade premium increases: we propose and show that the economic model is more applicable than the contributions/donations model in the context of Fairtrade. We emphasize that Fairtrade should not be regarded conceptually as just a special case of social contributions, because general helping theory is not able to account for the particularities of Fairtrade. Also, the impact of the price premium level on Fairtrade purchases is shown to have a different direction compared to the field of cause-related marketing purchases, revealing notable conceptual and empirical distinctions between these fields.

Suggested Citation

  • Monica M. Popa Sârghie & John Pracejus, 2022. "Consumer Perspectives on Fairtrade Prices," Journal of Emerging Trends in Marketing and Management, The Bucharest University of Economic Studies, vol. 1(1), pages 27-36, November.
    • Handle: RePEc:aes:jetimm:v:1:y:2022:i:1:p:27-36
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    References listed on IDEAS

    as
    1. Basu, Arnab K. & Hicks, Robert L., 2008. "Label Performance and the Willingness to Pay for Fair Trade Coffee: A Cross-National Perspective," Discussion Papers 44336, University of Bonn, Center for Development Research (ZEF).
    2. Arnould, Eric & Plastina, Alejandro & Ball, Dwayne, 2009. "Does Fair Trade Deliver on Its Core Value Proposition? Effects on Income, Educational Attainment, and Health in Three Countries," Staff General Research Papers Archive 39169, Iowa State University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fairtrade; Fair Trade; marketing mix; consumer behavior; price.;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy

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