Green marketing: Consumers’ Attitudes towards Eco-friendly Products and Purchase Intention in the Fast Moving Consumer Goods (FMCG) sector. Authors: Magali Morel Francis Kwakye Supervisor: Peter Hultén Student Umeå School of Business Spring semester 2012 Master thesis, one-year, 15 hp Abstract The research study is on the green marketing but specifically on consumers’ attitudes and purchase intention of eco-friendly products. It has been the global concern for the purpose of the preservation of the polluting and degradation of environment. Many studies have been done on the green marketing exploring the importance of the topic and relationship to the attitude and purchasing behavior of the consumers of eco-friendly products. Through the vital information provided by the expertise, competent and experience researchers, companies have understood the importance of green marketing in order to produce eco-friendly products and these provided much rich information for the literature studies of the thesis The objective of this research was looked into and explored the influencing of the four traditional marketing-mix elements, satisfaction and word of mouth (WOM) on attitude and purchasing intentions of consumers on eco-friendly products specifically fasting moving consumer goods (FMCG) or non-durable ones. The purpose of the study was to obtain information from consumers’ point of view. Furthermore, one perspective of the study was to look into the comparison of the Swedish and the Non-Swedish their attitudes towards eco- friendly products. A questionnaire provided to obtain the views of the Swedish and others nationalities, how they are influenced by the marketing-mix elements (4P), satisfaction and WOM concerning green attitudes and purchase intention of eco-friendly products. A quantitative approach was adopted for the study by using a questionnaire, one paper version and another online version the total sample was composed of 174 respondents, 81 were collected through internet by using Google.doc surveys and Facebook and 93 by using standard paper questionnaire form. Furthermore, convenient sample was used to collect data so the chosen boundary was Umeå University and its residents. Our findings indicated that consumers who already bought eco-friendly products and those who are satisfied by these previous purchases were willing to repeat purchases. Indeed satisfaction goes with purchase intention. Furthermore the importance of WOM and Advertising about green products the fact that consumers believe in green claim explain the variance of the purchase intention. Positive attitudes concerning willingness to pay an extra price for green products are also correlated with purchase intention. However we discovered also that positive attitudes towards green products do not always lead to action i.e. purchase of these products. Our findings demonstrated that there were differences in attitudes and purchase intention toward green products between mainly the women and men and between the Swedish and the Non-Swedish. Keywords: Green marketing, marketing-mix, word of mouth, satisfaction, attitude, consumer intention. I Acknowledgment This thesis was made in spring 2012, for the marketing department of Umeå School of Business and Economics: We would like to thank and express our profound gratitude to those who contribute and assist greatly to the completion of this thesis. Most especially, Mr Peter Hultén, his advice, supervision and feedback which contributed positively to the success of the thesis. As our supervisor, his encouragements assisted us to carry out this research study in the right direction. We would like also to say a special thanks to our family and our friends who encouraged us to do our best. Finally, we acknowledge the assistance of the respondents of our questionnaire who devoted their precious time to answer us which had gone a long way for the completion of the research study. Without them the findings and analysis would not be completed. We thank them for sharing their experience and expertise on this study. Magali and Francis II Table of Contents 1. Introduction .................................................................................................................................................. 1 1.1 Background .............................................................................................................................................................. 1 1.2 Problem discussion ............................................................................................................................................... 2 1.3 Research gap ............................................................................................................................................................ 3 1.4 Purpose of our study ............................................................................................................................................ 5 1.5 Delimitations ........................................................................................................................................................... 5 1.6 Thesis outline .......................................................................................................................................................... 6 2. Literature review......................................................................................................................................... 7 2.1 Comments about the authors ............................................................................................................................ 7 2.2 Green Marketing ..................................................................................................................................................... 7 2.3 Marketing-Mix ......................................................................................................................................................... 8 2.3.1 Definition .......................................................................................................................................................... 8 2.3.2 Product .............................................................................................................................................................. 9 2.3.3 Price ................................................................................................................................................................. 10 2.3.4 Promotion ...................................................................................................................................................... 11 2.3.5 Place ................................................................................................................................................................. 12 2.4 Word of Mouth ..................................................................................................................................................... 13 2.5 Satisfaction ............................................................................................................................................................ 14 2.6 Attitudes ................................................................................................................................................................. 15 2.6.1 The Functional theory .............................................................................................................................. 15 2.6.2 ABC Model ..................................................................................................................................................... 16 2.7 Purchase Behavior and Green consumer .................................................................................................. 17 2.7.1 Purchase Behavior ..................................................................................................................................... 17 2.7.2 Green consumer .......................................................................................................................................... 18 2.8 Limitations ............................................................................................................................................................. 19 2.9 Model and Hypotheses ..................................................................................................................................... 19 3. Methodology ............................................................................................................................................... 21 3.1 Philosophical assumptions ............................................................................................................................. 21 3.1.1 Epistemological consideration.............................................................................................................. 21 3.1.2 Ontological consideration ....................................................................................................................... 21 3.2 Research approach ............................................................................................................................................. 22 3.2.1 Deductive approach................................................................................................................................... 22 3.2.2 Quantitative research ............................................................................................................................... 23 III 3.2.3 Criticisms of quantitative research ..................................................................................................... 23 3.2.4 Research Design .......................................................................................................................................... 23 3.2.5 Research type ............................................................................................................................................... 24 3.3 Data collection method ..................................................................................................................................... 25 3.3.1 Sampling ......................................................................................................................................................... 25 3.3.2 Limitations .................................................................................................................................................... 27 3.3.3 Choice of survey method ......................................................................................................................... 27 3.4 Factor analysis ..................................................................................................................................................... 30 3.5 Quality criteria ..................................................................................................................................................... 31 3.5.1 Generalization .............................................................................................................................................. 31 3.5.2 Reliability ....................................................................................................................................................... 31 3.5.3 Validity ............................................................................................................................................................ 31 3.6 Ethical considerations ...................................................................................................................................... 32 4. Data analysis and findings .................................................................................................................... 33 4.1 Demographic findings ....................................................................................................................................... 33 4.2 Quality Measurement ........................................................................................................................................ 34 4.2.1 Independent and ANOVA test ............................................................................................................... 34 4.2.2 Simple correlations and new variables ............................................................................................. 39 4.2.3 Cronbach’s alpha ........................................................................................................................................ 40 4.2.4 Multiple Regression ................................................................................................................................... 41 5. Discussion ................................................................................................................................................... 46 5.1 Marketing-mix factors towards green attitudes .................................................................................... 46 5.1.1 Product ........................................................................................................................................................... 46 5.1.2 Price ................................................................................................................................................................. 47 5.1.3 Promotion ...................................................................................................................................................... 48 5.1.4 Place ................................................................................................................................................................. 49 5.2 Word of mouth towards green attitudes................................................................................................... 50 5.3 Satisfaction towards green attitudes .......................................................................................................... 51 5.4 Attitudes and purchase intention ................................................................................................................ 52 5.5 Identity of our green consumer .................................................................................................................... 54 6. Conclusion and Further Research ...................................................................................................... 55 6.1 Practical Implications ....................................................................................................................................... 55 6.2 Limitations ............................................................................................................................................................. 56 6.3 Managerial implications ................................................................................................................................... 56 6.4 Further research ................................................................................................................................................. 57 IV REFERENCES ................................................................................................................................................... 58 APPENDIXES: Appendix 1 – Questionnaire English version Appendix 2 – Questionnaire Swedish version Appendix 3 – Frequency tables Appendix 4 – Cross tabulations Appendix 5 – Means comparison Appendix 6 – Independent and paired sample t-test Appendix 7 – ANOVA Appendix 8 – Correlations Appendix 9 - Multiple regression – Normal P-Plot List of tables Table 1 - Composition of our sample by gender and by nationality………………………………………….34 Table 2 - Pearson coefficient of our new variables.…………………………………………………………………40 Table 3 - Cronbach’s alpha of our new variables…….………………………………………………………………41 Table 4 - Multiple Regression- Correlations……………………………………………………………………………43 Table 5 - Multiple Regression - Model summary and ANOVA…………………………………………….…….44 Table 6 - Multiple Regression – Coefficients…………………………………………………………………………...45 List of figures Figure 1 - Thesis outline………………………………………………………………………………………………………….6 Figure 2 - Our conceptual model……………………………………………………………………………………………20 Figure 3 - Composition of our sample by age and by status……………………………………………………..34 Figure 4 – Our revisited model………………………………………………………………………………………………53 List of abbreviations AMA: American Marketing Association CPG: Consumer Packaged Goods FMCG: Fast Moving Consumer Goods WOM: Word of Mouth ABC: Affect Behavior and Cognition SPSS: Statistical Package for the Social Sciences EF: Eco-friendly (in the tables/appendixes) V Preface It is time to think consumer goods from “cradle to cradle” (expression cited in Cradle to Cradle: Remaking the way we may think, McDonough and Braungart, 2002) as instead of from “cradle to graves”. VI 1. Introduction The objective of this introduction is to present a general background about green marketing and the reasons which encouraged us to study this topic and our research questions are also outlined. 1.1 Background « We need things consumed, burned up, worn out, replaced, and discarbed at an ever increasing rate » is a Victor Lebow’s quotation (an American retail analyst from 1948) cited in The Green Marketing Manifesto (Grant, 2007, p. x (10)). This sentence is no longer at issue… …since about thirty years, environmental concerns such as the global warming and the resource exhaustion have been important issues. Indeed, according to the OECD, in 2050, the world energy demand will be 80% higher than actually, leading to a 50% rise of greenhouse gases emissions. Due to this realization consumers and companies have started to change their habits. A large- scale quantitative survey made in May 2007 by Vizu Study, showed that 74% of the American thought that global warming is important and more than the half of them (51.9%) think that is extremely important (Grant, 2007, p. 41). Another study about the European attitudes towards sustainable consumption (based on a sample of 26,500 respondents) made in April 2009 demonstrated that more than 80% of European citizens thought that “a product’s impact on the environment is an important element when deciding which products to buy” (Flash Eurobarometer 256 – The Gallup Organisation, 2009). Green marketing has rose attention due to the environmental deterioration and it becomes a global problem (Kumar, 2011, p. 59). Nowadays, the American Marketing Association (AMA) divides the definition of green marketing in three aspects (marketingpower.com): as “the marketing of products that are presumed to be environmentally safe” (retailing definition) as “the development and marketing of products designed to minimize negative effects on the physical environment or to improve its quality” (social marketing definition) and finally as “the efforts by organizations to produce, promote, package, and reclaim products in a manner that is sensitive or responsive to ecological concerns” (environments definition). Companies have using green marketing for many reasons such as green policies are profit- making; the business world is more and more implicated in the social responsibilities. Furthermore consumers have been changing of attitudes and due to the government and the competitive pressures it is essential for firms to consider the “green” adjective to marketing strategies (Ghosh, 2010, p.83). According to a press release made by Mintel (organization of food and drink market researches) in November 2010, the consumer packaged goods (CPG) or FMCG sector should follow twelve trends, among these trends some of them concern the environment such as “redefining natural” or “sustainability” such as respect the regulation to 1 say that a product is natural or not and for example continue to reduce packaging (mintel.com). These trends show that the FMCG sector is going to change and become greener. An eco-friendly product is supposed to reduce the impact of its consumption on the environment thanks to the use of making-processes, components and recycling techniques which are less harm for the natural environment than those of conventional products (nationalgeographic.com). According to a survey made by the Gallup organization in 2009, around one of fifth of European interviewees think that the action which has the greatest impact on solving environmental problems was “to buy products produced by eco-friendly production” just after “minimizing waste and recycling” action (Flash Eurobarometer 256 – The Gallup Organisation, 2009, p. 7). Furthermore for example in the CPG sector between January 2009 and April 2009 “458 new products hit the market with claims of being eco- friendly” in the United States, compared to 2008, this market is “three times higher in 2009” (corporate-eye.com). Another example in the United States showed that “between 2005 and 2009 green cleaners grew 229%” (marketwire.com). The market of green products is more and more increasing. In this thesis “eco-friendly” as well as “green” products will be used to mention environmental products. 1.2 Problem discussion The deterioration of the environment led to the adoption and the development of consciousness of consumers’ attitude towards eco-friendly products in order to preserve the planet (Luck et al., 2009, p. 2). They therefore, deem it expedient to take measures towards protecting the environment which has become their personal attitude towards eco-friendly foods (Solomon, 2010, p. 209). Consumers patronize the products and their aims are to make sure the contribution is supporting sustainable environment and contribution the guiding of the climate change (Hartmann & Apaolaza-Ibáñez, 2006, p. 676). However, it has become global struggling to achieve the purpose of the environmental protection so companies are using various means to persuade the consumers’ segments who are environmentally conscious to change their attitudes from the conventional products towards green products and also satisfy their needs (Kumar, 2011, p. 59). Some of the previous researchers have emphasized on the four concepts on the “demographics, green lifestyle (Solomon at al 2010, p. 401) green attitudes and green behavioral intentions in the context of the low involvement product category” (Florenthal and Arling, 2011, p.35). There are many studies about the consumer behavior concerning the environment but most of them are concentrated on one or two marketing-mix elements and they do not make a link with the factors that companies use to make consumers buy green products and their attitudes towards these products. Furthermore, previous findings concerning consumers’ attitudes towards eco-friendly products are conflicting e.g. some studies found that consumers think conventional products have high quality compared to eco-friendly ones but in other studies results show the opposite (Vernekar and Wadhwa, 2011, p.67). In some studies we can find that consumers are willing to pay more for green products and in other studies it is not the case or the extra price has to be low (De Pelsmacker et al., 2009; Pirani and Secondi, 2011; Purohit, 2011; Vernekar et al., 2011). 2 These finding led us to make up our own opinion about this subject: consumers’ attitudes toward green products and purchase behavior. Indeed the aim of this study is to examine factors which influence the purchase of eco-friendly products in a broad way, in order to demonstrate what factors used by companies from the marketing-mix elements (the product, the price, the place and the promotion) have an influence on green purchase behaviors and if some are more important than others. Furthermore others factors which do not depend of the companies but more of the consumer point of view will be examined. These factors are the word of mouth and the satisfaction. Finally even if previous studies were made as well in industrialized countries as developing ones, we found few Swedish studies about this topic especially concerning the FMCG sector. So we chose as location of researches Umeå city. This city has an international dimension; around 50 languages are spoken in this area (umu.se). Moreover due to the fact that Swedish people are really concerned by environmental issues for example Sweden is one of the first countries among the 27 European countries where consumers are ready to pay more for green products (Pirani and Secondi, 2011, p.69) so we wanted to show if there were differences between Swedish and non-Swedish people. 1.3 Research gap Many literatures and surveys which examine the consumer behavior cover on different subjects and disciplines and determine the factors influencing the green marketing attitudes towards purchase of the products. For example the impact of price consciousness, the quality consciousness, the environmental consciousness and the brand loyalty have been studied in a survey made in New-Zealand (Gan et al., 2008, p. 96). But this survey did not take into account other factors such as the promotion of the eco-friendly products or the influence in the purchase decision of word of mouth. Finally, this survey is only focused on the New-Zealand population. Another recent survey made on a sample composed of more than 1,000 American people in February 2012 reveals that only 44% of the respondents trust the environmental claim of firms and 42% of the respondents are discouraged to buy environmental products because they think that the price is superior to that of conventional products (Cone Green Gap Trend Tracker, 2012, p. 1). The purpose of the thesis is to provide an overview of the green marketing related issues and models for the attitude of the consumers towards eco-friendly products especially in the FMCG sector. Some approaches tried to suggest the consumer behavior on green marketing could be explained by investigating consumers’ attitudes towards their purchasing behavior (Solomon et al. 2010, p.208-209). Solomon at al. (2010, p. 208) investigated the consumerism on the “lifestyles of health and sustainability” (LOHAS) on the green consumers impact on the consumer and business market. This is a new segment of the market in which researchers are having a keen interest to cover the areas of their attitude towards environment which lead to their purchasing behavior. Our purpose is to look into the green marketing in the view of the consumers’ attitudes towards purchase of green products. Therefore we will analyze the four marketing mix elements, word of mouth and satisfaction and how they influence the attitudes of the 3