“We could sell ethically produced goods, fair-trade coffee and chocolate, in addition to offering locally produced organic fruits, vegetables and meat,” she suggests.
Knowing that ethical sourcing is likely to increase costs, the company faces some crucial questions: If it pursues a fair trade and socially responsible differentiation strategy, what sort of consumer will it appeal to? Will consumers pay enough extra in price to recoup the greater cost of production? Do all the products need to be fair trade? If less than 100% of them are fair trade, can the company still maintain its socially responsible positioning?
The leading question
Consumers say they like the idea of purchasing ethically produced goods. But will they pay more for them? How much more?Findings
- Yes, customers will pay a premium for ethically produced goods.
- Conversely, they will punish companies (by demanding a lower price) that are not seen as ethical.
- The punishment exacted is greater than the premium customers are willing to pay.
- Companies needn”t be 100% ethical to be rewarded.
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