Many companies have made significant investments in socially responsible products.
Environmentally safe cleaning products, fair trade coffee, and sustainable seafood are just a few examples. But are today’s cost-conscious consumers willing to pay a premium for those social and environmental benefits? According to a new study from the Stern School of Business, the answer is yes.
Professor Russ Winer, chair of the Stern School of Business’s marketing department, along with Stern Ph.D. student Stephanie Tully, examine the willingness to pay for socially responsible products in their new paper, “Are People Willing to Pay More for Socially Responsible Products: A Meta-Analysis.” In the largest study of its kind, Winer and Tully examine two dependent variables across 83 research papers—the proportion of people who are willing to pay extra for socially responsibly products (e.g., jeans made from recycled materials) and the actual percentage premium that people are willing to pay for those goods.
They found that a whopping 60 percent of consumers are indeed willing to pay extra for socially responsible products and, on average, those consumers were willing to pay a 17.3 percent premium for them. The percentage premium was slightly lower for socially responsible goods that are durable (e.g., furniture) vs. non-durable (e.g., toilet paper).
According to the study, consumers are willing to pay the highest premium for goods that provide benefits to humans (e.g., good labor practices), followed by purchases that benefit animals (e.g., bigger cages), followed by goods that are environmentally friendly.