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Why consumers fail to put their money where their mouth is: A study of organic coffee
Marketing research efforts often rely on surveys to determine what consumers want, complemented by data on observed purchases. The extent to which survey answers predict real market decisions, however, has been debated for decades. This paper investigates the relationship between survey responses and field data, using three years of household panel data on retail coffee purchases in Sweden. The data are obtained from an annual survey requiring households to indicate whether they try, to the extent feasible, to buy products that carry organic and Fairtrade labels. The results indicate that even households that say they try hard to purchase these products in fact buy mostly conventional coffee. This paper investigates this discrepancy using an estimated structural demand model of household coffee purchases that combines both survey and field data. The study finds that hardcore organic (Fairtrade) households want to buy organic (Fairtrade) coffee but do not because it is not available from their preferred brand. Moreover, the high price of organic coffee is the main deterrent for households with a more moderate desire to purchase organic/Fairtrade.
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Richard Friberg is Jacob Wallenberg Professor of Economics at the Stockholm School of Economies and an adjunct professor at the Norwegian School of Economics. His work on retail competition has been published widely and he also works as a consultant in this field. His research has also focused on risk management and he is the author of ‘Managing Risk and Uncertainty: A Strategic Approach’ (MIT Press).
Mark Sanctuary is Wallander Postdoctoral Research Fellow at the Department of Economics, Stockholm School of Economics. Mark obtained his PhD from Stockholm University. His research interests include environmental economics, trade economics and marketing. Methodologically, Mark applies econometric techniques to detailed microeconomic datasets to test competing theories of consumer and firm behaviour.
CitationFriberg, Richard and Sanctuary, Mark (2021, January 1). Why consumers fail to put their money where their mouth is: A study of organic coffee. In the Applied Marketing Analytics: The Peer-Reviewed Journal, Volume 6, Issue 3.