Price Premium for Green

I came across a study conducted byThe Yale School of Forestry and Environmental Studies
through SigSigmaPricing blog. The study’s goals were:

To understand the perceptions of eco-labels and environmentally-friendly products held by Americans and Canadians. Are American and Canadian consumers interested in purchasing environmentally-friendly products? Do they prioritize environmental concerns over price and quality?

One key finding from this study is

many Americans say they are willing to pay more for “green” products. Half responded that they would “definitely” or “probably” pay 15% more for eco-friendly clothes detergent (51%) or an automobile (50%). Four in ten say they would spend 15% more on “green” computer printer paper (40%) or wood furniture (39%).

The price premium results are not something a marketer can act on. There are a few issues to note about the study:

  1. This study was conducted by telephone survey and hence measure attitudes and not actual behaviors
  2. The survey question was very specific and could be interpreted as leading –  here is their question
  3. I’m going to read the same list of products and this time, thinking about your current financial situation, please tell me whether, the next time you make a purchase, you would definitely, probably, probably not, or definitely not pay up to 15% more for an environmentally-friendly product. First… [READ EACH ITEM.]

    The 15% number came directly from the survey and not derived from responses and most could be tempted to say yes despite their actual behavior at the point of purchase.

If we need to find the true price premium customers are willing to pay for green products then either a conjoint analysis that exposes willingness to pay or a mini-market study that measures customer behavior is needed.