When consumers buy things, they are purchasing more than the item itself. This is why, for example, although Wal-Mart has had many initiatives to sell diamond engagement rings, the initiatives have mostly been without great success.
Wal-Mart could prove that based on all conventional standards, the famous 4Cs – color, clarity, cut and carat weight – it was offering diamonds at a far better deal than one could get from mainstream jewelers.
Yet engagement rings wouldn’t sell. Presumably this is because part of the experience for a man in proposing is being asked, “Where did you get this?” And part of the experience for the woman is her friends and family asking, “Where did he get it?” If announcing the source as Wal-Mart is a downer, then even a better price may not sway consumers.
But do considerations such as food safety also affect value perception? It is a fascinating question and when we learned of some intriguing research going on at the University of Delaware, we fought hard to get a presentation at The New York Produce Show and Conference. We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more.
John Bernard, Ph.D Professor, Applied Economics and Statistics
College of Agriculture & Natural Resources
University of Delaware
Q: We’re excited to welcome you to The New York Produce Show and Conference and to join our unique exchange program where we invite professors from premier universities to reach out and disseminate the results of their research, and their students come to gain contacts and consider careers in the industry.
Your main research areas are in consumer willingness to pay for local and organic products, farmer adoption of new technology and experimental economics. What is the focus of the latest research you’ll be presenting?
A: Organic is a common topic for study and something the Perishable Pundit has covered from many angles. Organic foods can be found from farmers markets to supermarkets, to such disparate outlets as Whole Foods and Wal-Mart. However, little is known about the effect of the retail outlet on consumer perceptions and willingness to pay for organic foods. Also what the influence could be of the Food Safety Modernization Act (FSMA) and its exemptions for smaller farms or farms primarily selling to end consumers.
Q: Ben Campbell of University of Connecticut, a tenured speaker at the New York Produce Show, has presented fascinating research on consumer perceptions and misperceptions of local and organic, and consumer reactions at the store level. [Editor’s note: you can read a preview of Ben’s topic for this year’s show here]. Now you’re introducing new consumer perception research exploring the topic with a different slant.
A: For our study, we decided to take a targeted approach to examine the influence of retail outlet and FSMA information on consumer perceptions of organic grape tomatoes. We conducted field experiments in two states, Delaware and Illinois, to address differences in perceptions based on the outlet that carried the product. And then when consumers received FSMA information.
We looked into what people think about organic and in what conditions are they willing to pay for organic. Do people view organic produce the same when it comes from a Wal-Mart versus a farmer’s market, for instance?
Q: And if their perception of the product is different based on the retailer carrying it, does it impact what they think it is worth?
A: Yes. That’s the goal. All these people are interested in organic food, but are they treating organic as generic and not caring where it comes from. Do they think it’s the same at Whole Foods as at Target?
We conducted field experiments to address differences in perceptions first based on outlet, and second, whether food safety information would alter those perceptions.
We went out in the field and set up booths in parks and other locations, selling organic grape tomatoes. We told people where we bought them, and had them bid on the products to see how much money they were willing to pay based on where they came from. Perceptions and willingness to pay for the tomatoes varied significantly by outlet, with farmers markets receiving the most favorable evaluations and supercenters the least. The product coming from a farmers market generated a much higher price than even a regular supermarket.
Q: Were the organic grape tomatoes you presented as coming from different outlets really all the same?
A: We bought them from the different outlets, but the tomatoes were the exact same brand and packaging. However, we took them out of the clamshells, so participants wouldn’t know this. A student had to drive an hour away to get those tomatoes from a Whole Foods store, and they looked just like the ones from Wal-Mart. My students found it hysterical that the participants thought the Wal-Mart tomatoes were so different and not nearly as good.
Q: Did you also examine the marketing effect different packaging, labels and branding could have on perceptions? For instance, a natural, farm stand-style bag, a fancy colorful clamshell, a no frills, utilitarian container, etc.?
A: No, not for this research. We try to eliminate variables and extract one issue at a time. We had 207 people who we pulled in to participate in the study with us. For these types of field experiments, people have limited time so we need to stay focused. Participants didn’t see the package. We just said, here are pints of organic grape tomatoes, and held an auction, how much are you willing to pay for each.
We’re currently expanding the study, which we already started last month, but that’s still too early to talk about. It’s more about the displays than the packaging, how product is arranged and merchandised. We recently videotaped people at the stores to see how long they spent at the display and their reactions. My students have to go through the videotapes of 150 people we recorded and try to figure everything out.
Q: We’ll have to do a follow up interview on your findings, or perhaps that can be part of your presentation at our next show, something to look forward to…
A: Jim Prevor has been trying to get me to the show for five years, so I’m glad to finally be here, and ready to make up for lost time!
Q: Can you tell us more about the methodology, how the field experiments worked exactly?
A: We set up booths in local parks, and near farmers markets, places where we could grab people as they walked by us, and ask them if they’d like to be a part of our study, it would take five to ten minutes to do. We asked demographic background questions, and said we’re auctioning off a pint of organic grape tomatoes from different locations, and asked how much they would pay for a pint from a farmer’s market, a fresh format such as a Whole Foods Market, a traditional supermarket, and a supercenter like a Wal-Mart or a Target. So they gave us four different bids, one for each of those outlets.
And then, it’s a little complicated to explain… we have an envelope that’s sealed, and the participant gets to open the envelope to see which of those four auctioned items actually count if the auction was real. If people buy lots of tomatoes, they might not care as much after they buy one pint. So the auctioneer says which one of the four options counts, and the one from the farmer’s market is the one we’re actually going to sell to them.
And then they compare their bid to the price on the piece of paper in the envelope. If their bid was higher than the one on the paper, then they get to keep the tomatoes, and if their price was lower, then we just thank them for participating. I’ll be able to show this visually at the show and it will become clearer.
Q: Where did you go from there?
A: We have a second part of the study. We were interested to find out if the FSMA exemptions would change people’s opinions about the different organic tomato options. We provided them information on the FSMA and what it was going to cover, and had them give their four bids again.
Q: Could you clarify what food safety information you described to participants?
A: First we gave them an overview, the prevention plan and responding to outbreaks, but then we told them about the two exemptions, if the farms have sales of less than $25,000 a year, or if their sales are less than $500,000 but most of their products are sold directly to consumers, which would apply to the farmers markets.
Maybe people would think differently of the products sold at farmers markets knowing the products would be exempt from the new food safety rules, whereas the big places like a Wal-Mart supercenter are not going to be exempted and will have to implement these more stringent standards. Maybe they would and feel better about buying products at supercenters than they did before we learned about this.
Q: It is ironic farmers markets may have less stringent food safety requirements but are perceived to be safer. Rick Stein of FMI also points to consumer misperceptions of farmers markets in a pre-show interview piece highlighting his micro-session on FMI’s Power of Produce report on consumer behavior before, during and after purchase.
A: We do ask food safety questions before and after we give participants the FSMA information. How safe do you think product is when coming from a farmer’s market, from a fresh format, a supermarket, and a supercenter? And we ask them how likely you think the products you buy from these outlets would be exempt under the FSMA rules, to see again if they change opinions. We told them about the exemptions and let them interpret those exemptions in their own way.
It changed safety perceptions of farmers markets noticeably. Participants ranked the safety high at farmers market at first before the FSMA information, and much lower after. The perception originally was low for food safety at supercenters before the FSMA information, but after supercenters ranked just as high as farmers markets.
People were telling us they don’t want exceptions; they want the new food safety rules to apply to everybody. That was good news for the big retailers. Supercenters certainly benefit if consumers feel better about the safety of their product.
Q: Did that translate to higher bids for their products too?
A: That’s the bad news. It actually didn’t change so much the amount people were willing to pay for the products.
Q: Did it discourage some people from buying products from farmers markets?
A: We required them to put in a bid, and they couldn’t put 0, but there was a dip in how much they were willing to pay at the farmer’s market, and a little bit more from a supercenter but not a lot; it wasn’t significant enough for me to say there was a difference.
Q: How did bids separate out between the four types of outlets? Were farmers markets and supercenters on the extreme ends of the spectrum? Did the participants tend to rate the farmers markets and fresh formats in the same realm, for instance?
A: We asked them to rate a lot of different things, from the product safety to the quality to the health aspects to the taste based on whether the product was from a farmers market, a fresh format, a supermarket or a supercenter.
We didn’t want to specify a particular store name, so for fresh format, we gave examples of Whole Foods and others in that natural foods store category. Fresh formats and farmers markets in consumers’ eyes are basically in the same category, and anytime there is a difference in ratings, farmers markets win, but usually those two are lumped together. And then there’s a gap and then there’s supermarkets, and there’s another gap before you get down to supercenters, where Wal-Mart and Target as the only two samples we gave for that category.
There’s a pretty big price difference between the supermarkets and the supercenters.
Q: How did you go about getting feedback on the taste rating?
A: Based on perception without tasting, the taste is clearly better in the farmer’s market, hands down number one, followed by the fresh format, which is significantly less than the farmer’s market, and then there’s a giant gap on taste from the fresh format to the regular supermarket, and another huge gap from the supermarket to the supercenter.
Q: Do you then have the participants actually taste the tomatoes to see if their perceptions change?
A: I don’t have them taste the product until the very end, and then I ask them if the taste compared to what they thought it would taste like. I tried to model the difference. The tasting was optional and we don’t have a good complete data set on that. The only way to do that would to have the participants taste all of the options.
It was more for interest, but not statistically valid. We only had 5 to 10 minutes of people’s time, but for those who did taste comparisons at the end, the supermarkets and supercenters tasted a little above what people perceived them to be.
Q: Did you define organic or ask them what it meant?
A: There are many ways to design the study. We told participants all the options were USDA-certified organic, like they would see them labeled in the store or a farmer’s market, whatever their impression of that was. We didn’t want to add any more information. We were catching people as they were walking by to do this, so we tried to make it clean, just what they would see in the store.
Q: When you were asking demographic background information, were you able to get a statistically representative sampling?
A: Some locations were better than others. We had some places that really matched up to the census. Others were near or at least around college towns, so they tended to have slightly higher educations and incomes. We intentionally went to locations to get good racial diversity, and age and gender comes out pretty well correlating to census numbers.
Q: Were there any material differences between the two states, Delaware and Illinois?
A: We controlled for different income levels. We had higher income levels in Delaware than in Illinois. If someone had higher income levels, it did impact answers, as they tended to give higher bids for everything. That’s one of our variables, the amount someone is willing to pay, but controlled for the variances in income levels, so it doesn’t change the rankings.
Q: When you went into this study, did you have preconceived ideas, and did your analysis match up with those?
A: We had our usual inclinations going into the study; this is what we thought, farmers markets would result in better perceptions, and it turned out to be the case, but we were surprised by how far apart the ratings, the degree of difference there. The perceptions of the organic product are really quite a bit lower for supercenters across the board on most of the things we asked about.
For safety, consumers were told all the grape tomatoes offered for auction were USDA-certified organic, but they still thought supercenter tomatoes were less safe. We were suspicious there would be differences, which motivated us to look into this, but why should there be this much difference.
Q: This research is helpful for attendees, both suppliers and retailers, because it highlights some perception image issues they have to deal with. From your perspective, what would you say are the main advantages of people coming to watch your presentation?
A: It would be important to know about these differences, depending on the area you’re looking to market. If you’re a supermarket or supercenter, you can get an idea of what you need to do to strengthen your image and alleviate these misperceptions.
Some people might want to get the word out on the Food Safety Modernization Act rules. In many ways, this looks like a trust issue. What can you do to build up consumer confidence and change the perception, if they go to a supercenter for cheap food, how can it be as good? Some of the differences in perceptions between the outlets were very large. This information can help realign strategies to transform those perceptions.
This study is fascinating, and it is an important point for the industry that consumers change their perception of the product’s source when made aware that some producers are exempt from the Food Safety Modernization ACT (FSMA). Precisely how the industry would market such a matter without hurting itself is most unclear.
At the same time, the study is set up in such a way that supercenters are fighting with one hand tied behind their back.
This is because the researchers removed all branding in this study – but it is precisely branding that is a tool used to persuade consumers that entities without great consumer equity in fresh produce, have great produce. When Bruce Peterson built the Wal-Mart produce department, he specifically made the decision to do things such as carry Chiquita bananas specifically because Wal-Mart had no equity with consumers on selling fresh produce and he wanted to borrow the equity of these brands.
Because this is a tool legitimately available to supercenters and supermarkets, the more interesting question might be if – even when presented with the same brands – consumers will have different perceptions as to taste, quality, safety and sustainability, etc., on produce from different venues.
Whole Foods is working very hard to persuade consumers that product sold at Whole Foods is in some way superior.That everyone may sell certified organic produce, for example, but the fact that the item is in Whole Foods makes it “Organic-Plus.” We pointed out in this piece that, in fact, much of the produce sold in Whole Foods is identical to other stores because it draws mostly on the same supply chain.
We also wonder about the degree to which identifying this as a study to the participants warps the results. These results seem like the “right ones,” meaning the ones that a consumer looking to burnish his reputation would provide. We wonder if the study couldn’t be done at, say, a flea market, with a vendor just selling four types of tomatoes and identifying where they were bought. Indeed, maybe the tomato pricing could be altered to test consumer propensity to purchase at different price levels.
The other question that comes to mind is whether the methodology doesn’t speak to general perceptions of these outlets, rather than specifically to produce at these outlets. It might be useful to segregate what people who primarily buy their food and produce at Wal-Mart say and do on these matters as opposed to people who primarily shop and buy at Whole Foods.
Another tool that this study doesn’t allow for is price. In telling consumers that Sample One is from Whole Foods and Sample Two is from Wal-Mart, one suspects consumers hear that Sample One is expensive and Sample Two is cheap. But in real life, retailers have price points to complicate these perceptions.
What if the consumers were told, “this tomato is from an ‘economy’ selection now being sold at Whole Foods, whereas this other sample is from a new “premium line” being sold at a supermarket? What if packaging was shown that backed up this attempt with the Whole Foods looking generic and the supermarket option looking upscale?
Another question is eating occasion. By making this a “study,” people know they are being watched – isn’t it plausible that people’s willingness to pay depends on circumstances. That if a young bachelor is cooking dinner for a date or his Mom is coming to visit, or a young couple is making Thanksgiving dinner for friends and family for the first time –and in all these eating occasions, the buyers know they will be asked ”where did you get this” – that this might alter willingness to pay than if the buyer will be eating dinner alone that night after work.
As with all good research, this interesting study raises many questions. Come to The New York Produce Show and Conference and engage with Professor Bernard in a discussion of this important study.
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