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It is a good day when the research starts to show what many of us have been intuiting for a while - that some consumers will pay more for goods with more socially or environmentally responsible approaches.
As Ray Fisman reports in a recent Slate article, Harvard researchers Michael Hiscox and Nick Smyth studied how consumers shopped (in Manhattan's ABC Carpet store), and how their purchase decisions changed a bit, when fair labor practice certification was involved.
The results? When the certification was mentioned, sales went up, and then - get this:
"A few weeks later, Hiscox and Smyth were back in the stockroom, marking up the prices on the labeled towels and candles by 10 percent. Quite remarkably, this increase made people buy even more towels and candles (a 20 percent increase for towels and 30 percent for candles). The authors suggest this may be because the higher prices made the products' fair-labor claims more credible."
Certainly, as the article mentions, the usual customer buying from ABC Carpet in Manhattan is high-income and liberal-minded. We can't assume that middle American, middle income shoppers will necessarily behave in the same way. At least, not yet.
But, do shopping trends in urban east and west coast markets eventually emerge in the middle of the country? Hmmm.
Why do you suppose Wal-Mart is so busy working on sustainability issues in Arkansas...
P.S. The Hiscox/Smyth study is not yet published, but this link to it was published in the Slate piece.
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Comments
Ah, ABC Carpet. To anyone outside of NYC it sure sounds like a drab store with a bad name, eh? (It would to me).
But it's not. Its window displays put Macy's and Saks to shame. I once bought a carpet there...but being a full-time business school student at the time, I was directed to the basement section where the "remnants" were ;-).
I'm very interested in seeing if this trend applies to the mainstream, Andrea--and really appreciate your sharing these case studies with us. Here's my question: take Target, that gives approx. $3million weekly to local communities. That’s a case where shoppers pay what they’d regularly pay (as I understand) and Target takes the hit on profits and thusly, purchases are more ‘meaningful’, or give back to shoppers’ communities.
It ‘seems’ this will be the way this trend will go (meaning co’s will take the hit to profits but the ROI is both goodwill and, hopefully, more customer loyalty). So those donations/hit to profits equate to a marketing investment. VERY interested in your thoughts…I’m just making assumptions here (but do hope this trend increases!).
Posted by: CK | 10.24.07
It shows people are willing to pay a premium for something beyond themselves.
I signed up to pay more through my electric company for only energy from sustainable sources. I am happy to pay more for this.
Who am I to just be burning up un-renewable resources? It seems quite a conceit for me think I am more important than future generations.
I hope though, that companies do not take advantage of this because many "green" consumers like me do research and verify claims. There is also a lot of communication between green consumers so a company could have their rep hurt if they were found to be taking advantage of concern for the environment and future generations.
Posted by: Neil Anuskiewicz | 10.24.07