Organic Agriculture – Consumer and MarketMaster Thesis

By Lorenzo Locci

Supervisors :

Drs. Ynte van DamProf.dr.ir. JCM Hans van TrijpMarketing and Consumer Behaviour Group

Improve the Effectiveness ofSustainability Food Labels

- A Bounded Rationality Approach

1 Introduction 1.1 Problem Statement and Description 1.2 Research Questions 1.3 Methodology2 Bounded Rationality Approach 2.1 Bounded Rationality and Heuristics 2.2 The Process of Choice 2.3 Limitations of Non-compensatory Decision Rules 2.4 Conceptual Model3 Hypotheses 4 Materials and Methods5 Results6 Discussion7 Conclusion

Table of Contents

1 Introduction

• Increasing demand for sustainability.• Green, organic, fair trade, ecological, and locally

produced products are emerging in the market. • Labels differentiate these products from the

mainstream ones.• Different type of Sustainability labels

Focus mostly on to third party, type I and type III, certifications.

• Attitude-Behaviour Gap = a lot of concerns, positive attitude, but disappointing sales

• Why?– Higher Prices– Lack of consumer knowledge– Difficulty in obtaining Information

• Questioning the effectiveness of S. Food Labels• Labels proliferation = Consumer confusion• Few studies

1.1 Problem Description

I. How to improve the effectiveness of sustainability food labels?

II. When are consumers more likely to notice sustainability labels?

III. What would make sustainability labels more satisficing?

1.2 Research Questions

• Literature study on: bounded rationality and heuristics, grocery behaviour, shopping environment, food labelling and packaging.

• Research on current European labels and their use.

• Qualitative consumer research.

1.3 Methodology

Bounded rationality and adaptive behaviour account for:- Cognitive limitations - Imperfect choice environment- Limited time

Individuals make good-enough choices rather than trying to determine the best option because of the costs of acquiring information.

2 Bounded Rationality Approach

• Satisficing heuristics:model of sequential search for alternatives with costs.

• Fast and frugal heuristics:selective search, rational ignorance, use of simple tactics/criteria.

- One-Reason Decision Making non compensatory strategies - Recognition Heuristic disjunctive and/or conjunctive decision rules

2.1 Bounded Rationality and Heuristics

• Satisficing criteria of choice• Selective search• Easy trade-off• Decision Rule• Refine tactics

2.2 The Process of Choice

• Principle of completing perceptions.

• Dual-Process (Kahneman): - System 1, automatic and heuristic-based - System 2, rule-based and logical

2.3 Limitations of Non-compensatory Rules

Criteria of Choice

Distinctive Product

Attribute(s)

- Price - Brand - Origin - Durability - Nutrition - Labels

Adaptation Level

Motivation

Type of Consumer

Knowledge and Past

Experience

Evaluation

Satisficing Not Satisficing

Consider another

alternative

Consider another attribute

Feedback

Selection

Refine Evaluation

Priority Ordering

Involvement

Potential Need

Satisfaction

Set of Considered Alternatives

“Consumer side – Desired goal” “Choice environment – Current state”

“Formation of trial – Progress towards the goal”

2.4 Conceptual Model

H1: The recognition principle is likely to be the first driver of participants’ choices.

H2: The process of refine evaluation is reduced under time pressure.

H3: Familiars with sustainable products are more likely to use sustainability as a primary criterion;non familiars are more likely to use sustainability as a secondary reason.

3 Hypotheses

H4: Familiars are more likely to mention labels and to have a higher level of abstraction in inferences;non-familiars are less likely to mention labels and more likely to have a lower level of abstraction in inferences.This tendency is enhanced under time pressure.

H5: Non-familiars will prefer product alternatives with simple presentation of information, few labels (preferably textual) and few claims;familiars will infer more from detailed information, abundance of labels.Under time pressure, abundance of sustainability information may be preferred also for non-familiars.

• Qualitative Consumer Research• Think-Aloud protocol• 20 Dutch speaking students, familiar with green

products and non-familiar.• Time pressure manipulation• Coding Category: statements of decision criteria,

mentions of sustainability, level of abstraction in inference, information usability...

4 Materials and Methods

H1 40% mention Recognition in1 st quotes (2 out of 5) 40% mention Recognition in 1st quotes (2 out of 5)H2 H4 70% of the all the inferences are Low level of abstraction 39% of the all the inferences are Low level of abstractionH2 H4 30% is High level of abstraction 61% is High level of abstractionH2 Average of 2.5 Criteria of choice used by each participant Average of 4 Criteria of choice used by each participantH3 Order of Criteria of Choice: Order of Criteria of Choice:

1st Recognition, 2nd Health, 3rd Price, 4th Taste, 5th Organic, 6th Origin 1st Health, 2nd Recognition, 3rd Taste, 4th Price, 5th Organic, 6th OriginH3 All quoted coded Dc Org had positive valence (Dc Org +) All quoted coded Dc Org had positive valence (Dc Org +)H4 9 Mentions of Sustainability Labels (S.L.) 13 Mentions of Sustainability Labels (S.L.)H5 No thoughts about information usability Reported explicit preference for less busy packages H1 20% mention Recognition in1st quotes (1 out of 5) 80% mention Recognition in1st quotes (4 out of 5)H2 H4 92% of the all the inferences are Low level of abstraction 77% of the all the inferences are Low level of abstractionH2 H4 8% is High level of abstraction 23% is High level of abstractionH2 Average of 3 Criteria of choice used by each participant Average of 4.5 Criteria of choice used by each participantH3 Order of Criteria of Choice: Order of Criteria of choice: Not

1st Recognition, 2nd Health, 3rd Origin, 4th Taste, 5th Price, 6th Organic 1st Health, 2nd Recognition, 3rd Taste, 4th Price, 5th Organic, 6th Origin FamiliarH3 All quoted coded Dc Org had negative valence (Dc Org -), few (Dc Org +) All quoted coded Dc Org had negative valence (Dc Org - )H4 3 Mentions of Sustainability Labels (S.L.) 4 Mentions of Sustainability Labels (S.L.)H5 Scepticisms and mistrust when facing high amount of labels Excessive amount of labels and claim discourage information search

Time Pressure No Time Pressure

Familiar

5 Results

H1 Accepted

The first alternative recognized is likely to be inspected first because, and it is more likely to be chosen.

H2 Accepted

Under time pressure, the information items consulted and the numbers of criteria tend to be less, and the level of abstraction in inference tends to be lower.

H3 Not Accepted

Organic (together with origin) seem to be secondary.This criterion has a positive valence for those familiar and a negative valence for non-familiars.

5.1 Hypotheses testing

H4 Partially accepted Familiars are more likely to mention labels and to have a higher level of abstraction. Non-familiars are less likely to mention labels and more likely to have a lower level of abstraction.This tendency is not enhanced under time pressure.

H5 RejectedSimple presentation of sustainability information is always preferred, even under time pressure. Textual labels were generally more attended than pure figure labels.

• Sustainability Labels in their Context Food choices are low involvement, frequent, time and budget constraints. Recognition helps consumers in their short cut decision making (H1)

Exposure from typical grocery store and advertisement. Recognition is mostly for products not sustainability labelled products

• Cost of Acquiring Information Tendency to under-search and to stay with the default choice Minimizing cognitive effort, especially under time pressure (H2)

Sustainability is a secondary, with difference between familiars and non-familiars (H3)

Familiars spent more effort in their choice process (H4)

• Changing Current Choice Consumers refine their tactics, and criteria, and consult additional information when current behaviour is not satisfactory.

6 Discussion

• Improve the Current Use of Sustainability LabelsThe way the information is presented and the format influences the effectiveness of labels.

6 Discussion

Abundance of S. Labels:- more chances to recognize some logo- overall impression of sustainable and high qualityBUT- too overwhelming, thus, avoided (H5)- attempt to give a greener image to a product

Better few Labels and claims:- requires less cognitive recourses- may help to inferring other relating attributesBUT- consider consumer knowledge beforehand- label format (text, figure)

Confusing label information:- difficult to interpret and misleading- higher cost of acquiring information- harder to compare more and less sustainable products

6 Discussion

II. When consumers consider products outside their habitual set of choices, variety seeking, and when time is not pressing, sustainability and S. labels can play a role as secondary reason of choice.

III. In these situations, consumers would benefit more in their inference from easy presentation of sustainability information, few labels (preferably textual) and claims.

ThusI. The effectiveness of sustainability food labels can be improved by providing labels information in an easily understandable manner that considerably reduces the time and the degree of cognitive effort spent in acquiring and processing information.

7 Conclusion

Thanks for your attention

AND

… any questions?