Pricing and Green Advertising: Consumer Behavior Analysis

Overview of the Study

The study by Royne, Martinez, Oakley, and Fox (2012) tests consumer behavior regarding perceptions of pricing and advertising for pro-environmental products. Specifically, it examines the effect that products priced with a .99 ending have compared to products with a .00 price ending. The researchers find in their own review of the literature that the .00 ending has a "heuristic" effect on the consumer, who sees it as indicating that the product has "value," while the .99-priced item is perceived as a bargain. These are the common perceptions that consumers hold regarding pricing (Royne, Martinez, Oakley, & Fox, 2012, p. 96).

However, in their tests, the researchers found that the appeals that price and product carry are influenced by "context," and so it is not always the case that consumers regard the .00-priced item as being of higher quality or the .99 item as a bargain (p. 97). Consumers judge items and their appeals in a contextual manner — a finding the researchers note is supported by Luchs et al. (2010), "who noted that the effectiveness of advertisements with pro-environmental benefits may be context-specific; what is effective for one type of environmentally friendly product may not be effective for another" (p. 97). The context identified in this study was that "environmental skepticism moderated the relationships between the benefit appeal and perceptions of quality and price" (p. 97).

Thus, numerous variables impact the consumer's desire to purchase a product — price is one, but quality and environmental safety (as well as the consumer's own skepticism about environmental-friendliness) also play significant roles. In short, it is a complex relationship of interconnected factors that operate through the consumer's cognitive processes and ultimately determine the purchasing decision.

The study employs a two-part technique: the first part tests one product and the second tests another. The two factors examined in each case are benefit type and price appeal. Benefit type is represented by whether the product carries environmental or personal appeal, and price appeal is represented by whether the product is priced with a .00 or a .99 ending.

The first product tested was a liquid body wash advertised as environmentally friendly. The second product tested was a car wash product.

One problem with the study is that it is too narrow in focus and does not test for other variables or factors that would surely play a part in a consumer's decision to purchase a product. For example, the researchers state that liquid body wash is typically bought by women, and so they chose a car wash product for the second test to achieve a more gender-neutral comparison. Yet gender is not one of the variables studied, and so how much gender impacts the cognitive process remains undetermined. It is possible that gender perception has a significant effect on the results. The researchers, however, limit their testing to their hypotheses regarding appeal type (environmental vs. personal) and price appeal (quality vs. bargain as identified by odd or even price ending).

The researchers acknowledge in their concluding remarks that the study is limited by the fact that they tested only two products with "relatively low involvement" and that "consumers may not perceive quality in the same way for commodity and luxury goods" (p. 97). They further admit that their approach does not produce conclusive results, noting that the student sample "restricts generalizability" and reduces external validity (p. 98). What is significant about the study is that it "is the first study to assess advertising appeals and price endings in the environmental advertising arena" — however, the results and scope of the project indicate that more factors need to be considered and tested before any thorough understanding of this arena can be achieved (p. 98).

Logic Flow for the Hypotheses

The researchers devise several hypotheses for their study. The first hypothesis is: "The perceived quality of an advertised product will be lower when the advertisement uses an environmental benefit appeal than when it uses a personal benefit appeal" (p. 87). This hypothesis is grounded in Prospect Theory, which "suggests that consumers view known personal gains as risk averse and more positive while viewing environmental gains as riskier" (p. 87). The logic for the first hypothesis thus flows directly from the researchers' review of literature on the subject.

The second hypothesis states: "The perceived price of an advertised product will be higher when the advertisement uses an environmental benefit appeal than when it uses the personal benefit appeal." This is based on the logic that environmental appeal is rooted in quality and thus reflected in a .00 price ending, whereas personal appeal is marketed via bargain pricing and a .99 ending. This logic flows from the same theoretical source as the first hypothesis.

The third hypothesis is composed of two parts. The first part states: "Products featured in ads with .00 price endings that emphasize environmental benefits will be perceived as more expensive than those featured in ads with .99 price endings that emphasize environmental benefits or those featured in ads with .00 price endings that emphasize personal benefits." The second part states: "Products featured in ads with .99 price endings that emphasize personal benefits will be perceived as less expensive than those featured in ads with .99 price endings that emphasize environmental benefits or those featured in ads with .00 price endings that emphasize personal benefits." The logic flow for these hypotheses is based on the literature reviewed by the researchers, who cite various studies as the basis for their formulation: "Dehaene and Mehler 1992; Hornik, Cherian, and Zakay 1994; Hultsman, Hultsman, and Black 1989; Huttenlocher, Hedges, and Bradburn 1990; Schindler and Wiman 1989; Tarrant and Manfredo 1993" (p. 88).

The fourth hypothesis is also composed of two parts. The first part states: "Products featured in ads with .99 endings that emphasize environmental benefits will be perceived as lower in quality than products advertised with personal benefits paired with a .99 ending, or products advertised with environmental benefits paired with a .00 ending." The second part states: "Products featured in ads with .00 endings that emphasize personal benefits will be perceived as higher in quality than products advertised with personal benefits paired with a .99 ending, or products advertised with environmental benefits paired with a .00 ending" (p. 89). Again, the logic flow for these hypotheses stems from the literature reviewed and follows the same precedent established by prior research on price, quality, and environmental awareness.

The fifth hypothesis states: "Environmental skepticism will moderate the relationship between benefit appeal and perceived quality. More specifically, when ads include environmental benefits, (a) lower levels of environmental skepticism will result in higher levels of perceived quality, and (b) higher levels of environmental skepticism will result in lower levels of perceived quality" (p. 93).

The sixth hypothesis states: "Environmental skepticism will moderate the relationship between benefit appeal and perceived price. More specifically, when ads include environmental benefits, (a) higher levels of environmental skepticism will result in higher levels of perceived product price, and (b) lower levels of environmental skepticism will result in lower levels of perceived product price" (p. 93). Each of these hypotheses is grounded in previously cited literature, drawing on studies from "Gregory and Di Leo 2003; Mayer, Scammon and Gray-Lee 1993; Shrum, McCarty, and Lowrey 1995," as well as Walker 2011 and Appell 2007, among others (p. 93).

Stimuli Used in the Experiment

The stimuli used in the experiment consisted of the advertising techniques applied to the products. The ads emphasized aspects of each product that correlated with the researchers' focus: the first product used the stimulus of being pro-environmental and represented itself as having an environmental appeal over a personal one. The second product used a personal appeal stimulus, marketing itself as having a more personal benefit. Similarly, the pricing stimuli were "manipulated by presenting each product in the ad as priced with either a .99 or .00 ending" (p. 89).

The stimuli used in the products were thus those directly addressed by the hypotheses. There are no doubt other stimuli present in the products and their advertisements that the study did not examine, which contributes to the limited applicability of the study overall.

Conclusion and Limitations

Nonetheless, the value of the study lies in its exploration of how young college students react to pricing models in conjunction with advertisements depicting two kinds of appeal — personal versus environmental. This information could serve as a foundation for future investigation into how young people approach advertising and the purchasing of different types of products. Due to the limited scope of the study, however, future research should incorporate gender as well as other variables in order to better understand all the factors that influence product purchasing behavior.

References

Royne, M., Martinez, J., Oakley, J., & Fox, A. (2012). The effectiveness of benefit type and price endings in green advertising. Journal of Advertising, 41(4), 85–102.