A new study from the Telfer School explores the idea that consumers of organic food tend to be health-focused or socially-conscious but not all of them are equally “organic.” This can translate into variations in their willingness to pay premium prices in relation to food categories and the type of organic food consumer they represent, the research shows.
The research by Professors Leila Hamzaoui-Essoussi and Mehdi Zahaf presents a detailed profile of Canadian organic food consumers. Among the notable findings: Most are willing to pay a premium of up to 45% for organic food products, on average, but beyond that point, the number of consumers willing to pay a premium drops significantly.
A survey of consumers identified differences in purchasing patterns, motivations, and reasons to buy organic food. The reasons were linked to health, taste, food quality, and the environment; they also included connection to the local economy. “All of these aspects should come into play when marketers and policymakers determine positioning and marketing strategies in order to reach these segments,” the researchers say.
Tracking consumer demand, willingness to pay more
Analysis of survey data from people who bought organic foods at supermarkets, organic food stores and farmers’ markets made it possible to identify three distinct consumer segments. (1) People who rarely buy organic food (IOFC, or inexperienced organic food consumers) do not describe themselves as socially conscious consumers, are not motivated to buy organics, and are not willing to pay any premium price. (2) Habitual consumers (TOFC - trust organic food consumers) tend to be socially conscious and are motivated to buy organics out of concern for the local economy or the environment. Urbanized and highly educated, they spend about $100-400 per month on groceries and are willing to pay up to a 120% premium price for organic food.
More intriguing is a middle segment (3) that buys organic food products between 3 to 10 times per year (SOFC - sporadic organic food consumers). This variety-seeking group does not perceive significant differences between organic food and conventional food, but occasionally buys organics mainly for health reasons. They rely on the information available at the point of purchase because unlike habitual consumers, they do not collect information to build their knowledge of organics.
The results underlined different purchasing patterns and consumer rationale. Organic food products are most likely to be purchased by TOFC for principle-oriented values such as sustainability, or by SOFC as a result of egocentric values such as health. The importance of the product attributes (food mileage, taste, quality, etc.) and willingness to pay vary with the consumer segment. Willingness to pay a premium price varies by food category and by consumer type.
“Providing a greater understanding of the profile of each consumer segment will help producers and distributors better address the specific values underlying their consumption,” the researchers say.
Professors Hamzaoui-Essoussi and Zahaf’s work was supported by major grants from the Social Sciences and Humanities Research Council and from the Ontario Ministry of Agriculture, Food and Rural Affairs. “Canadian Organic Food Consumer’ Profile and Their Willingness to Pay Premium Prices” was recently published in the Journal of International Food & Agribusiness Marketing.