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CEP lecture 5
Complete transcript of lecture 5 Consumer and economic psychology
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CEP Notes lecture 5 13-12-20181
Today lecture from dr. Jenny van Doorn. She’s from the faculty of Economics and Business. She’s doing interesting research on
sustainable marketing which she tells us about today.
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I am an associate professor in marketing. What does marketing do? Do we do anything good for the world? I see a smile. Not
really, right? What’s your view on marketing? Selling products. Useful products, products we really need? Not always. We’re the
kings and queens of selling stuf that you don’t need. By that, we ruin the planet, that’s marketing.
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So why am I here? Because in the last year you also see that marketeers try to do something good. I am one of those. We don’t
always succeed but at least we try. You see many companies trying to do their business in a more sustainable way. Think about
the Prius, developed by Toyota, or supermarket retailers trying to sell more fairtrade and organic products. So from a marketing
side, there’s a lot happening and if you look at how companies advertise, sustainability is often a big part of it. Of course, that’s
also due to some societal pressure. So these days you also have to do something. However, it’s also a kind of dance between the
consumer and between marketeers. There needs to be some push, some pull from the market because otherwise if the products
are not going to be successful, why would you bother doing it?
The primary difference between push and pull marketing lies in how consumers are approached. In push marketing, the idea is to promote products
by pushing them onto people. For push marketing, consider sales displays at your grocery store. On the other hand, in pull marketing, the idea is to
establish a loyal following and draw consumers to the products
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One company that has made a lot of diference in the last years, even if it sometimes also has been critized, is Unilever. Are you
familiar with the sustainable living plan? That was a project by the CEO of Unilever, Paul Polman. Unfortunately he has to step
down. He pledged that he wanted to improve the wellbeing of people, halve the environmental impact, but still grow. So they put
on many many projects about making the whole supply chain and making the product more sustainable. Some of these projects
were very successful, some of these projects also were less successful and some of them were due to consumers not be very
happy about it. For instance, do you remember these small deodorants? Unilever at some point put compressed deodorants in
the market. So instead of the big ones you have the small ones. I love them, I even changed my deodorant brand and I can tell
you at my age, you don’t change brands so quickly anymore. So I even changed deodorant brand for a small one because they
are very handy to take when you travel and I travel a lot. But if you look closely to the Kruidvat these days, you don’t see them
anymore or at least only one. Any idea why that could happen? Why do people do not want to buy environmental friendly small
deodorants? Unilever told the consumers that it’s exactly the same, you can spray as many times as with the other deodorant.
But people just didn’t buy it. They didn’t believe that there was the same amount of deodorant and they didn’t buy those
deodorants. So when they tried to do something new, something sustainable, it somehow failed. So that’s also the problem that
you have. If you market sustainable products, if you think you do something good for the environment, that can also become
some type of backlash efect that you didn’t think about beforehand. A "backlash" is an adverse reaction to something which has
gained popularity, prominence, or infuencee
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Another reason why many companies engage in sustainable practices these days is that even if we researchers often struggle to
find a very positive efect of these measures, if something goes wrong there is a very strong negativity efect. In many cases,
think for instance of the BP oil spill in the gulf of Mexico some years ago, this had a huge negative impact on BP. However, I also
have to say, for a while. So, what you often see is, if companies engage in negative practices or get in the news negatively, in
terms of sustainability, or as we also call it corporate social responsibility, it has a negative efect, in particular on sales, if
customers manage to just get the good somewhere else. Boycotting BP is not such a big deal. You just fuel your car at another
fuel station. If consumers would have to not fuel their car, instead of fueling it, to make a statement towards this thing
happening, towards BP, that would have been a totally other story. So what you often see is that these things are only
discernable (aanwijsbaar) on sales if it’s easy to find a replacement product and if it’s often only for a limited amount of time. So
also for BP I think the consequences for the oil spill was like this and then it goes just back to normal again. We consumers don’t
have very long memories.
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We often struggle as reseachers to find positive efects of sustainable practices on things like sales, willingness to pay for
products. What we often see is that intentions are not the same as behavior. That is something we all struggle with. We all have
the best intentions to live a sustainable life, to have a healthy lifestyle, and then everything fails, we just go for the cheap
chicken instead of the sustainable one, because the sustainable chicken is so much more expensive. Even if you pledged yourself
to exercise then you go like “the last drinks yesterday were a bit on the late side, so naaah I’m not going”. That’s what everybody
struggles with. European Commission conducted a study and asked people: would you be willing to buy sustainable? 75%, ¾,
said yes. What do you think is the market share of sustainable products? Dutch market, Europe market, doesn’t matter. Market
share of sustainable products worldwide is 4%, in Dutch supermarkets around 6%. Every year you have these statistics about the
sales of organic and fair trade products. They always say there’s a huge growth in the market. It’s true, there is a huge growth in
the market but on a very low level. The percentages of market share depends a bit on how you define sustainable. I usually put
organic and fair trade products together if I look at sustainable products but there are also people that say it should just be
organic or just be fair trade. I usually put them together to have the story a bit more positive actually. I think if you look at
organic products the share is 4.5-5% and fair trade is 1-2%. You know what organic and fair trade is? In the market we also saw a
huge rise of fair trade in the recent years because a few years ago there has been a second fair trade label introduced, UTZ
certified. That is a little less strict than the original level you know in particular from the fair trade store. We saw huge uptake of
that label in the market because Albert Heijn decided to certify all their products with the UTZ. Maybe for you guys that’s not so
interesting but if I look at the generation of my parents, they all drink Senseo with these pads. They often buy them buy them at
the Albert Heijn because it’s cheaper than the Douwe Egberts Senseo pads. So, in this market, you saw a huge increase in fair
trade products. Another thing is that the share of sustainable products difers a lot between diferent markets. So we have
commodity markets with high shares of sustainable production: cofee, cocoa (chocolate), palm oil and tea. Een commodity is
een bulkgoed, een massa-geproduceerd ongespecialiseerd product, veelal een vervangbaar goed als grondstofen en agrarische
producten. Does is surprise you? Did you think this beforehand? Cofee, cocoa, we get it. How about palm oil, that’s really bad
stuf right? How can it be that palm oil is sustainable? It’s weird. Discussed this with manager from Unilever and he told me the
following. What these products have in common is that it’s more easy to certify them because these are produced in a large
scale, that’s why palm oil is in there. Companies are thinking “palm oil has negative connotation of being bad for the
environment so if we use it we want at least use a sustainble palm oil (reason number 1)”. Reason number 2: it’s easy to certify
palm oil as sustainable because it’s produced on a large scale. It’s difcult to certify a sustainable product when it’s small scale.
, What I was wondering when I saw this for the first time is why milk is not here. The first thing that I started buying organic was
milk and you see a lot of organic milk. Milk is not in here because milk may be produced on large scale in the Netherlands but in
other countries not, you would also have to certify the guy in India having 3 cows that give milk. For that reason, globally, cofee,
cacao, palm oil and tea are things where you have large companies and where you can easier certify or make sure that the
production process is in line with the principals of organic and fair trade farming.
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We already found out that market shares of sustainable products are low. Why is that? Why don’t we buy more organic and fair
trade?
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One reason is it’s too expensive. How much more do we have to pay? This is from my own research. I calculated the average
price premium of organic products, from high to low. It’s depending on the category. What’s really expensive are soft drinks,
sweets and candy. The things you usually would buy are pretty much around 20% or lower, that’s good. I also found negative
price premiums, that means that organic is cheaper. The reason for that is that (alcohol for instance), I calculated the price
premium according to the category average. In all these categories like dairy and canned vegetables is that you have non-
organic products and organic products on the same level, but for alcohol it’s a bit diferent in the sense that you have organic
wine but you don’t have organic whiskey. That’s why in the category alcohol the organic products are on average a bit lower
priced than the regular products. What you also see is that it’s not always that bad. For dairy products, so for milk, yoghurt, only
a price premium of 4%. That should be doable even if you have a small budget. But, price is a good reason to not buy organic.
Another reason to withhold you from buying organic or fair trade?
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Another reason is less choice. Very good reason. We have this EKO-telling in the Netherlands where people go to the supermarket
and count the number of available sustainable organic or fair trade options. In the last count in 2013 they found 155 organic and
41 fair trade products available in the average Dutch supermarket. Sustainable products are less convenient. There are 155
organic and 41 fair traide products available in the average Dutch supermarket. Every year they put out this press release that it
was this enormous growth and that the market was totally exploding. What do you think? Is this a lot of choice or not, 155 and
41? Do you know how many items average supermarket has? A regular AH store carries 8,000 to 22,000 diferent products and
AH XL over 30,000 products. So, 155 and 41 are a bit sad, it’s a low number.
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So, price can be an issue, convenience can be as in there’s less choice, there’s less availability and this can be an issue. But to be
honest with you, it’s not the whole story. Let me share an anecdote with you when I started my research. When I came to
Groningen as post doc more than 10 years ago, I started research line on sustainable products and I was totally convinced that
the problem was the price and the availability. So I had this idea of “I would just go and calculate the correct price premium”.
Like you I thought the price premiums for organic or fair trade products are too high. I will just make sure that the retailers know
which is the correct price premium and that will solve everything. If I just put the products on the market at a not too high price,
everybody will buy organic or fair trade because we’re all convinced that it’s superior, right? Then I started this research together
with a group of Dutch retailers. I will get my results and tell the retailers what they have to do, Albert Heijn will follow and
everything will be solved. Boy, was I wrong. Now, I will explain to you why I was so wrong.
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Which product is according to consumers of higher quality? Regular milk or organic milk? What does the average Dutch consumer
think? Difcult to see what the average Dutch consumer thinks right? That was my first pitfall as well. I will explain to you later.
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Regular chocolate and organic chocolate. Which is of higher quality according to the consumer? Students say: both chocolates
are the same, but for the milk the organic is better. Actually, the results of consumers are the same but a bit worse. I did this
study among the average Dutch consumer. That was my first learning that I got from there, because I assumed that everybody is
convinced that sustainable products are better I basically extrapolated from what I thought, from my own convictions, which is
probably not in line with what the average Dutch consumer thinks. I mean, I am one customer of Albert Heijn, but I’m not the
average.
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What I found in my research is the following. Marketeers often classify food in vice and virtue. Vice food is food that you consume
for the immediate pleasurable experience but potentially contributes to negative long-term outcomes, such as weight gain and
alcoholism. Vice food is chocolate, wine, beer. This is food that you eat now because you like it but on the long term you get
either fat or alcoholic or both. Then there’s virtue foods, that’s the food that’s good for you. Milk, vegetables, fruit.
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We found that people were willing to pay more for organic virtue food because they thought it had a higher quality but not for
organic vice food. Because, probably, there’s some type of compensatory relationship between the two. Organic claim signals
that the food is wholesome, that it’s good for you, and that may reduce the amount of enjoyment and pleasure that people see or
experience when they consume the food. The worst was organic beer. Nobody wanted to buy organic beer. They thought is was
horrible. This is all just scenario-based so they didn’t really taste it. They just infered that if beer is organic, it must be totally bad.
So what I learned from that research is 1) not everybody thinks like me and 2) if you put a sustainable claim on the product you
have to be very careful about side-efect, in this case signalling sustainablity for vice products (chocolate, beer) meant that
people infered that this product was of lower quality. And from a marketing perspective, that’s of course not what you want.
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Second comparison. We put baby in the bath. Do you prefer to wash your baby with regular baby shampoo or ecofriendly baby
shampoo? A student in the hall answers: eco friendly. Lecturer asks: why, because you buy everything eco friendly? No. Because
it doesn’t hurt the baby, it’s nice and soft.
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Now clean you house. It’s really dirty. You can better relate to that than to a baby. Are we going to clean the house with regular
cleaning products or with eco-friendly cleaning products? A students says the regular. Why? The regular works better. That’s the
reasoning of the housewives. If you want your house cleaner than clean and your laundry whiter than white, you go for the
chemical bomb. Eco friendly products are not the chemical bomb. And the chemical bomb you are not going to release on the
cute little baby. For the cute little baby you want something gentle.
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