British Food Journal

Price strategies for sustainable food products

Paul T.M. Ingenbleek,
Article information:
To cite this document:
Paul T.M. Ingenbleek, (2015) "Price strategies for sustainable food products", British Food Journal,
Vol. 117 Issue: 2, pp.915-928, https://doi.org/10.1108/BFJ-02-2014-0066
Permanent link to this document:
https://doi.org/10.1108/BFJ-02-2014-0066
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

Downloaded on: 09 July 2018, At: 10:53 (PT)

References: this document contains references to 35 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 2223 times since 2015*
Users who downloaded this article also downloaded:
(2013),"Relating price strategies and price-setting practices", European Journal of Marketing,
Vol. 47 Iss 1/2 pp. 27-48 <a href="https://doi.org/10.1108/03090561311285448">https://
doi.org/10.1108/03090561311285448</a>
(2014),"Price-quality relationship in pricing strategies for private labels", Journal of Product
&amp; Brand Management, Vol. 23 Iss 6 pp. 429-438 <a href="https://doi.org/10.1108/
JPBM-06-2014-0627">https://doi.org/10.1108/JPBM-06-2014-0627</a>

Access to this document was granted through an Emerald subscription provided by emerald-
srm:415309 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald
for Authors service information about how to choose which publication to write for and submission
guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company
manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as
well as providing an extensive range of online products and additional customer resources and
services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the
Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for
digital archive preservation.

*Related content and download information correct at time of download.

 The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0007-070X.htm

REGULAR PAPER Price

strategies for
Price strategies for sustainable sustainable
food products
food products
Paul T.M. Ingenbleek 915
Marketing and Consumer Behaviour Group, Wageningen University,
Received 6 February 2014
Wageningen, Netherlands Revised 3 September 2014
Accepted 15 September 2014

Abstract
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

Purpose – Sustainable products often suffer a competitive disadvantage compared with mainstream
products because they must cover ecological and social costs that their competitors leave to future
generations. The purpose of this paper is to identify price strategies for sustainable products that
minimize this efficiency disadvantage.
Design/methodology/approach – The strategies and their determinants from the pricing
environment are derived from an inductive sequential case study of certified food products, such as
organic and fair trade products. Data are collected through desk research and interviews.
Findings – The results reveal six different strategies that build on three basic mechanisms: cost-based
pricing in combination with price fairness, increasing willingness to pay through perceptions of quality
and/or price, and price stability in which costs are compensated for by scale and/or learning effects.
Research limitations/implications – The framework can help companies that offer sustainable
products strengthen their market positions and it can help policy makers that partly rely on markets to
achieve sustainability objectives.
Originality/value – The existing pricing literature on sustainability predominantly takes a consumer
approach. This study breaks new ground by extending this work with a strategic marketing approach
offering a choice set of strategies for managers.
Keywords Marketing, Certification, Sustainability, Environmental-friendly products,
Fair trade products, Price strategy
Paper type Research paper

Introduction
Sustainable development – that is, development in which economic, ecological, and
social aspects go hand in hand (Brundtland et al., 1987) – often comes at a price. In some
situations, new technologies or systems may be both sustainable and cost efficient, but
when these technologies are absent, products produced through more sustainable
production techniques suffer a generic competitive disadvantage in terms of costs.
An extensive study on the Dutch market showed, for example, that organic food
products average a price premium of 60 percent compared with similar products
without organic certification (Baltussen et al., 2006). Ecological economics attributes
such price differences to a hidden subsidy paid by future generations (Hawken, 1994);
future generations have no impact on the price formation but rely on the same natural
resources (see Hawken et al., 2000).
The literature has taken mostly a consumer approach to this issue by examining the
willingness of consumers to pay for environmental friendly (Bjørner et al., 2004;
D’Souza et al., 2006), fair trade (Pelsmacker et al., 2005; Schollenberg, 2012), organic
(Loureiro, et al., 2002; Sedjo and Swallow, 2002), animal-friendly (Hobbs, 2005), and British Food Journal
Vol. 117 No. 2, 2015
pp. 915-928
The author thanks the Dutch Ministry of Economic Affairs, Agriculture and Innovation for © Emerald Group Publishing Limited
0007-070X
funding this research. DOI 10.1108/BFJ-02-2014-0066
 BFJ other sustainable food products. This literature generally finds that consumers state that
117,2 they are willing to pay price premiums for sustainability, but when tested experimentally it
appears that many consumers still choose the cheaper mainstream alternative (Baltussen
et al., 2006). The literature lacks a strategic marketing perspective on how the price
instrument can be used to cover the higher costs induced by sustainability.
This study develops a framework of price strategies for sustainable food products
916 that companies might pursue to cover the costs associated with sustainable development.
It operationally defines sustainable products as products that are certified by
well-respected multi-stakeholder organizations for sustainability in the food and
agribusiness, like Fair Trade and Utz Certified, and that suffer from a competitive
disadvantage in costs when compared to products that do not take measures to preserve
natural and/or social resources. The key research questions involve how companies can
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

manage the price instrument for sustainable products and why marketers of these
products should pursue these strategies. These are typical how and why questions that
can be dealt with in case study research (Eisenhardt, 1989; Yin, 2003). Therefore, this
research uses an inductive approach, searching for price strategies in sustainable
agro-food production. The framework can help companies that offer sustainable products
strengthen their market positions as well as policy makers that partly rely on companies
and markets to achieve sustainability objectives.
The remainder of this paper features a discussion of the case study concepts,
followed by an outline of the study methods. After presenting major results and
providing a discussion, this paper concludes with some directions for further research
and major implications for policy makers.

Background
Our current food system generally overuses natural (and sometimes social) resources,
meaning that to create a product it uses more natural resources than that it replaces
(cf. Fresco, 2012). In the current competitive market system, the short-term benefits are
weighted in that respect stronger than the long-term arguments for preserving the
resources (Shultz and Holbrook, 1999). The marketing instrument “price” is at the heart
of this discussion, because on the one hand, a low price activates the short-term
self-interests of people (Griskevicius et al., 2012), while on the other hand it should
cover the costs for sustainable resource management. Researchers in sustainable
resource management study price, for example, as an instrument to discourage the use
of resources, like water by increasing the price for water usage (Le Gal et al., 2003) and
clean air by increasing the price for use of the road network (Steininger et al., 2007).
The situation for food is different, because consumers have a choice between
a sustainable product and a mainstream alternative. Consumers compare the price of
a product with other products in the assortment (so called external reference prices),
as well as with the acceptable price range in their memory (internal reference prices)
(cf. Miljkovic and Effertz, 2010; Monroe, 2003). From such comparisons, consumers
infer whether a price is high or low, as well as whether it is fair or not (Xia et al., 2004).
In the context of food, for which purchase decisions are made relatively fast, consumers
rely mostly on internal reference prices that are deeply rooted in the memory of the
consumer and therefore difficult to change. Consumers that are highly involved with
a product are in that respect most likely to change their reference prices (Mazumdar,
et al., 2005). For sustainable food products such involvement may in particular be found
among consumers that care about the natural environment (e.g. Latacz-Lohmann and
Foster, 1997). Internal reference prices can also be changed by manipulating the context
 (Monroe et al., 1977). Consumers are, for example, likely to be willing to pay more for an Price
organic vegetable that they use in a fancy dinner with friends during the weekend than strategies for
for a regular week-day meal.
In a context in which consumers make fast decisions, relying on deeply rooted
sustainable
associations in their memory, companies that try to sell a sustainable product have a food products
competitive disadvantage. Prices influence both the consumer’s value perception of the
product, as well as whether and how the costs are covered (Ingenbleek, 2014; Nagle and 917
Hogan, 2006). Together, value perceptions and costs determine the competitive
advantage of a company (Hunt and Morgan, 1995). Without a proper management of
prices, (sustainable) products are therefore unlikely to obtain a position of competitive
advantage. The pricing literature, sees price management therefore as a complex job,
in which managers creatively need to balance a host of different factors, like customer
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

perceptions, competitors’ reactions, and costs (Nagle and Hogan, 2006). Such insights
have, however, not yet been applied to the specific case of sustainable products.
The literature on price strategies, like the marketing literature in general, still assumes
a world in which resources are infinitely available (Kotler, 2011). The food marketing
literature, has to date mostly examined the willingness to pay for sustainable products
(Bjørner et al., 2004; D’Souza et al., 2006; Hobbs, 2005; Loureiro et al., 2002; Pelsmacker
et al., 2005; Schollenberg, 2012; Sedjo and Swallow, 2002), but not yet the broader range
of price strategies that managers can chose from for their sustainable products.
Hence, this study addresses the questions how companies can manage the price
instrument for sustainable products and why marketers of these products should
pursue these strategies.

Case study concepts

In the case study methodology that we describe below, price strategies, the pricing
situation, and the pricing environment are considered as case study concepts. Such
concepts facilitate case analysis and connect case study data to the existing theory in a field
(Eisenhardt, 1989; Yin, 2003). A price strategy is the means by which the firm attempts
to achieve its pricing objectives in the market (Ingenbleek and Van der Lans, 2013).
The objective of a price strategy may also be covering the costs for sustainability.
Price strategies exist within specific pricing situations. Noble and Gruca (1999)
distinguish four situations. First, in new product pricing a firm launches a new product
and chooses to start with either a high price that it decreases over time to capture new
market segments that are willing to pay less (so called price skimming) or a low price to
stimulate widespread adoption of the product (so called penetration pricing) (Noble and
Gruca, 1999). Second, in competitive pricing firms adopt roles as price leaders or
followers in their market, or strive to achieve equal or lower prices than their
competitors. Third, in product line pricing firms sell related products as a bundle or as
different components with separate prices. Fourth, cost-based pricing refers to the price
setting process in which firms may vary the degree to which they base the price on
product costs, rather than market factors (Ingenbleek and Van der Lans, 2013).
Although extreme forms of cost-based pricing neglect market conditions, consumers
often perceive this way of setting a price as fair (Kahnemann et al., 1986; Urbany et al.,
1989). Price strategies for sustainable food products should accommodate these
different situations.
Whether a price strategy is a good choice for a firm depends on the so-called pricing
environment, defined as the internal and external environment of a firm, which consists
of all conditions that may determine the effectiveness and use of price strategies
 BFJ (Diamantopoulos, 1991). The internal environment may influence price strategies
117,2 because the optimal strategy depends on the level of costs and several related factors,
such as experience and scale effects that reduce costs, as well as factory capacity
utilization (Noble and Gruca, 1999). Also the composition of the product line that the
firm offers to its customers (i.e. complementary or substituting products) constitutes
part of the internal environment. The external environment refers to the market
918 conditions that may affect the effectiveness of price strategies, such as the size and
elasticity of demand, market growth, and competition-related determinants such as
market share. It also includes determinants that relate to the perception of the product
by the market, including price transparency, switching costs, product age, product
lifecycle, product differentiation, and the cross-price elasticity. The latter refers to the
ease by which consumers switch from one category to another if prices change (Noble
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

and Gruca, 1999).

Methods
Case selection procedure
To develop a framework of price strategies for sustainable products, this study
employs theory-building case study methods (Eisenhardt, 1989; Yin, 2003). The cases
pertain to groups of sustainable products that are marketed under specific sustainability
standards, like organic products or fair trade products. The competitive disadvantage
that producers face is a consequence of their compliance with these standards. To be as
complete as possible in detecting price strategies, we use multiple case studies and follow
a sequential approach, meaning that we examine one case to detect price strategies, then
another to derive similar and/or different strategies, and so forth, until no additional
strategies emerge (Yin, 2003).
The selection of the product groups relies on the case selection procedure proposed
by Eisenhardt (1989) and Yin (2003). The initial list of product groups emerged from an
investigation of research reports, articles, books, and web sites. In total, three experts
with expertise in different fields of food and agribusiness also offered suggestions to
make the list more complete. The 31 product groups on the list were examined using
desk research methods and weighted against two criteria. The groups had to differ
sufficiently from one another so that the likelihood that they pursue different strategies
is greater. Because certification schemes for sustainable products can be grouped
according to the relative height of their standards (Ingenbleek and Meulenberg, 2006),
we apply a “two-tailed design” (Yin, 2003, p. 52) that starts with a product group with
relatively high standards, followed by one that develops more flexible standards,
followed by another case representing high standards, and so forth. We aimed at
certification organizations with substantial activities in the Netherlands because it
would enable us to collect information from interviews while minimizing traveling
costs. Following these procedures, we identified six cases for analysis (see Table I for
their descriptions). Three experts were consulted on the suitability of these cases with
respect to the guidelines. This required no further changes in the case selection.

Data collection and analysis

The data collection focusses on the price strategies for the sustainable products.
The price strategies are examined in their market contexts (so-called “holistic” case
studies; Yin, 2003). Examining price strategies in their contexts reveals not only the
different strategies but also their determinants in both internal and external
environments. First, intensive desk research was conducted of articles, annual reports,
 Organic Organic agriculture emerged as a response to the emergence of the bio-industry in Price
the 1920s and 1930s. After the Second World War, it grew to a larger scale, and strategies for
certification was introduced to secure its principles. Requirements are based on sustainable
certain principles (e.g. maintenance of soil fertility, no use of chemical pesticides or
artificial fertilizers, animal welfare) and are therefore strict. Producers that meet the food products
criteria may label their products. The product assortment contains more than 400
products in supermarkets and 3,000 products in specialty stores
Barn eggs The barn egg was developed in the early 1970s by stakeholders that united in their 919
disapprobation of caged eggs. The criteria they developed at that time were later
institutionalized in Dutch and EU regulations. The market for barn eggs in the
Netherlands has grown steadily, up to a market share of greater than 80 percent
in 2007
Fair trade Fair trade emerged in the early 1990s when a member of Solidaridad (the founding
organization of World Shops) and a missionary working with coffee farmers in
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

Mexico started the Fair Trade Coffee Initiative. The major requirement is that
primary producers receive a price that covers their costs of living. Later, fair trade
extended to other product categories, such as fruits, chocolates, and textiles
MPS The Environmental Program for ornamental plant cultivation (hereafter indicated by
the Dutch abbreviation MPS) started as a regional initiative in the Dutch flower
production region in 1993. Pilot groups developed a certification scheme to reduce
the environmental pressure of ornamental plant cultivation to improve the image of
the sector. In 1995 the organization became a foundation, and implementation of the
code on the national level began. By 2007, more than 4,000 flower growers had
adopted the standards. MPS is not communicated to the consumer
Dynamic The Dynamic Biological Association was founded in 1937 by producers and
Biological consumers that shared dynamic biological principles. Dynamic biological agriculture
goes further than organic in that it builds on the belief that there is a connection
among plants, animals, the soil, and the cosmos. To put this philosophy into practice,
the Dynamic Biological Association developed its own requirements, controlled by
an independent organization. The approximately 500 products in approximately 25
categories are labeled
Utz Certified Utz Certified started as Utz Kapeh in 1999, when three Guatemalan coffee
producers/exporters gathered with coffee roaster Ahold Coffee Company (with which
they had a long commercial relationship). Utz Certified aims to cater to a mainstream
market with sustainable coffee, cocoa, and other commodities through store and Table I.
A-level brands. Utz Certified sets environmental and social requirements, as well Introduction of cases
as cost-saving arrangements, within the coffee chain. Several (store) brands in the (on sequence of
Netherlands, Sweden, and the USA buy 100 percent Utz-Certified coffee analysis)

research reports, market research presentations, and public sources such as web sites.
Second, interviews were conducted with experts and persons directly involved in the
organizations that develop the sustainability standards. For the cases pertaining to the
organic and biological dynamic, six people provide interviews; the fair trade and barn
eggs cases include four interviewees; and all other cases feature three interviews.
To ensure an objective perspective on the cases, the interviewees represent different
functions in or relationships with the organizations in question (Yin, 2003). For each
case, at least one senior manager involved in strategy making (like a member of the
board of directors or the board of supervision) was interviewed, as well as people with a
general overview of the market and the product line, like consultants, applied
researchers, and project managers. The relatively wide scope of respondents minimizes
the chance of overlooking any price strategies for the product group. The interviews,
which lasted between one and two hours, took place in the interviewees’ offices.
All interviews were taped and transcribed as full transcripts.
 BFJ Following the sequential approach, an initial framework for price strategies for
117,2 sustainable products emerged from the analysis of the first case. Every subsequent
case provided congruencies and differences between new and previous cases. In the
case material we therefore searched for data that matched the emerging theoretical
framework or that diverged from that framework. These were highlighted in the
interview transcripts and desk research materials (e.g. Yin, 2003). When an incongruence
920 occurs, the analysis returns to the data from the preceding cases to gain a deeper
theoretical understanding. Following this iterative process (conceptualization on the
basis of the first case, strengthening theory through congruencies or adapting theory if
an incongruence occurs in the second case, returning to the data of the first case to
determine how the adapted theory matches its data, before turning to the third case, and
so forth), we gradually developed a theoretical framework of price strategies for
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

sustainable products (Eisenhardt, 1989; Yin, 2003).

Results and discussion

The analysis reveals six strategies that occur in the practice of sustainable agro-food
production (see Table II). The subsequent discussion considers the different price
strategies in the context of their pricing situation, namely, competitive, new product,
and product line pricing. The cost-based pricing situation is not discussed separately
because each strategy that falls in the cost-based pricing situation simultaneously also
falls in another situation.

Competitive pricing
The competitive pricing situation contains two strategies, that we labeled “the price is
not fair!” and price stability. Of the first strategy we found two different manifestations
in our data, that have different determinants.
The “the price is not fair!” fits into the competitive pricing situation because the
price of the product is always higher than that of the mainstream alternative. With this
price premium, the sustainable product signals to the consumer that the higher price is
the “fair” price, whereas the lower price of the mainstream product is “not fair”.
The strategy builds on the ethical belief that the product should incorporate all costs of
externalities; thus, the price depends on cost-based pricing practices. The relatively
high standards for sustainability are therefore a determinant of this strategy (Table II).
For example, it was part of the initial strategies through which organic and fair trade
products entered the market, and it continues to predominate products sold under the
dynamic biological label. Barn eggs also employed this strategy for a long time. In
addition to the relatively high standards for sustainability, a low level of differentiation
(except for credence attributes related to sustainable development) represents the key
determinants of the “the price is not fair!” strategy in the pricing environment.
Especially in the early days of the organic and fair trade movements, producers aimed
to show that they could develop a viable, sustainable alternative to mainstream
products, and therefore did not innovate on any attributes other than those related to
sustainable development.
Most producers of sustainable products fail to capture high market shares with this
strategy; even when organic and fair trade products appear in supermarket
assortments. Several respondents argued that respondents are not sufficiently involved
with sustainability to pay the higher price. High involvement becomes even more
important when higher-priced sustainable products appear in direct proximity to the
 Price strategy for Pricing Pricing environment
Price
sustainability Description situation (determinants) strategies for
sustainable
1. The price is not (1) Cost-based pricing Competitive Relatively high standards food products
fair! communicates to pricing Low product differentiation
consumers that the Cost-based High consumer involvement
higher price is the fair pricing Relatively low cross-price 921
price elasticity
(2) Replacing the lower- Decline stage of product lifecycle
priced unsustainable Incentives for retailer
product with a higher
priced sustainable one
2. Price stability Costs for sustainable Competitive Large and visible company
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

development are pricing confronted with sustainable

incorporated into the price competitor
and used to protect the Relatively low standards (that
market may increase over time)
3. Involvement “Skimming” different New product Relatively high standards
skimming market segments on the pricing Low product differentiation
basis of their involvement Cost-based Scale or experience effects
with the sustainability pricing Existence of market segments
issue. Prices decline over with different levels of
time involvement
4. Value-based “Skimming” different New product Product differentiation
skimming market segments on the pricing
basis of their willingness to
pay/quality perceptions.
Prices decline over time
5. Sustainable Offering of several products Product line Complementary products or
bundling at a single price (giving pricing substitutes
consumers an attractive
saving over the sum of
individual items)
6. Donations Charging people for Product line Relatively high standards Table II.
sustainability in the pricing Emotional appeal of credence Overview of price
shopping context and/or a attributes strategies for
non-shopping context sustainability

mainstream products that confirm the lower prices that consumers already had in mind
(Mazumdar et al., 2005). In most cases, producers of sustainable products therefore rely
on the presence of a group highly involved consumers to obtain a permanent foothold
in the market.
For the “the price is not fair!” strategy the costs ultimately determine the price,
because the fair price is the one that covers all the costs incurred for sustainable
development. The strategy also falls within the cost-based pricing situation.
For organic pork, for example, we found that economists developed complex cost
computation models at all levels of the supply chain to determine the selling price and the
profit margins of channel players (see Hoste, 2003). In communications to consumers,
cost-based pricing is a logical approach because consumers perceive it as a fair way to
determine a price (Kahnemann et al., 1986; Urbany et al., 1989).
The second manifestation of “the price is not fair!” strategy (Table II) deals with the
price difference between sustainable and mainstream products simply by convincing
 BFJ retailers to remove mainstream products from their assortments. In the barn eggs
117,2 case, this strategy was particularly successful, and it achieved some success in
several examples from the organic case as well. Retailers benefit from doing
this because it strengthens their reputation and they may have higher profit margins
on the sustainable products. For products that may attract consumers to the store,
all retailers should participate in order not to lose market share. For example, all
922 supermarkets in the Netherlands decided to remove battery eggs from their
assortments by January 2004, eight years before the intended European ban on
battery eggs. One interviewee noted that “It’s a win-win situation. One can increase
prices and margins over the entire egg product range, because there will be no
substitution: the price elasticity of demand is 0. It brings in a higher profit.” In other
words: if consumers experience a price increase for eggs, the chance that they switch
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

to other product categories is very small. If the same consumer experienced

a comparable price increase in pork though, he or she might have switched to beef,
chicken, or another substitute. Thus, low cross-price elasticity provides a basis for
banning unsustainable products from store shelves. In addition, the organic case
provides examples in which products in the declining lifecycle stage can be upgraded
by replacing them with organic products. According to the respondents, unprocessed
onions, and winter carrots had been losing ground to processed (cut) substitutes or
finer products of higher quality, but not important enough in the total shopping
basket to switch between retailers. For retailers, replacing these vegetables with
organic products provides a benefit, because in the worst case scenario, consumers
switch to the higher priced alternative.
The second strategy in the competitive pricing situation is “stability pricing.”
This strategy attempts to improve sustainability without increasing prices.
Instead, any costs for sustainability are covered in their overhead, compensated
for by removing inefficiencies from the supply chain and by reducing costs
through scale advantages. The strategy is mostly used by large companies that
adopt certification from schemes with relatively flexible criteria, such as MPS and
Utz Certified. MPS essentially aims to respond to the concerns of retailers in
European flower markets by preventing negative press about retailers selling flowers
that are not sustainably grown. Thus, MPS protects flower growers from a potential
decrease in their market share. Also in the barn eggs case, we found brand
manufacturers that switched from cage eggs to barn eggs after being put under
pressure by special interest groups. Utz Certified clearly communicates in the press
that it aims to compensate for the costs of sustainable development by reducing
inefficiencies in the supply chain. For example, the CEO of Utz Certified has been
quoted as saying:
It is an integral project in which we reach tools to participating coffee farmers to improve their
business processes. This pays off, because if a coffee farmer implements a solid management
system, he will run his business more efficiently […]. The scale advantages keep prices low.
Our approach is commercial and competitive.
The price stability strategy applies to the competitive pricing situation, because it can
provide price leadership (Noble and Gruca, 1999). In virtually all cases, large and visible
companies follow this strategy after being challenged by new entrants that try to
change the rules of the competitive game by competing on sustainability rather than on
price and quality. With a price stability strategy, the pricing policy of companies
remains unchanged after adopting sustainability certification. It therefore signals to
 competitors that they are challenged by a new type of competition (i.e. sustainability), Price
they persist in leading the market. strategies for
sustainable
New product pricing situation food products
The new product pricing situation reveals two strategies that we, respectively, coined
involvement-skimming and value-based skimming. Both are skimming strategies in
that they start with a high price at product launch and then systematically reduce the 923
price and increasing the market toward segments with a lower willingness to pay
because or consumers are less involved or attach less value to the higher quality that
the product offers (Noble and Gruca, 1999). The pricing literature often contrasts price
skimming with penetration pricing, in which the price initially is low to stimulate
adoption of the product. The study data offer no examples of a penetration pricing
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

strategy, which may be because a low price contradicts the objective of covering the
higher costs associated with sustainable production. In line with our findings, the
pricing literature reports that a cost disadvantage is a determinant for a skimming
strategy (Noble and Gruca, 1999).
The involvement-skimming strategy relates to the “the price is not fair!” strategy in
the competitive pricing situation in that companies introduce their sustainable products
at a high (cost-based) price. Consumers that are highly involved with sustainability are
willing to pay more for a sustainable product, while those with lower levels of
involvement pay less as they perceive sustainability as less beneficial. Hence we see the
relatively high sustainability standards and low levels of product differentiation as
determinants of an involvement-skimming strategy, just like they are determinants of a
“the price is unfair!” strategy. The high level of consumer involvement is, however, not a
determinant of involvement-skimming, because over time the high introduction price is
decreased in search of market share beyond the segment of highly involved consumers.
Another determinant of an involvement-skimming strategy is therefore the presence of
market segments that differ in their level of involvement with sustainability.
One respondent described how retailers and suppliers of sustainable products might
disagree about the profitability of an involvement-skimming strategy:
Last month the [products] of [a major brand] were offered at 89 cents at [a large retailer], while
our [sustainable products] were sold for 2.79. That difference is not in the purchasing price,
that’s the retailer’s margin. The price difference in the purchasing price may be 25%, but
certainly not 300%. You can tell that the retailer is using this segment to earn high margins.
In contrast, retailers in the United Kingdom and Switzerland don’t do that. There you see a
different positioning of [sustainable] products and considerable growth numbers.
The price decrease in involvement-skimming is enabled by scale and/or learning effects
(Noble and Gruca, 1999). Public policy makers, for example, supported organic
agriculture in its breakthrough from specialty stores to mainstream supermarkets by
providing financial support to projects. This support required a scale increase that, in
several cases, also enabled decreased fixed costs and eventually price levels.
In a value-based skimming strategy, credence attributes are accompanied by other
quality attributes, which together increase consumers’ quality perceptions and
willingness to pay. This higher willingness to pay should cover the extra costs for
sustainability, along with the costs of other attributes. The strategy therefore
represents a third manner to cover the costs for sustainability, next to changing price
fairness perceptions as in a “the price is not fair!” strategy and absorbing costs
elsewhere in the chain. Because the combination of attributes offers a differentiation
 BFJ from existing products, differentiation can represent a determinant of this strategy. In
117,2 all cases we found examples of such differentiated products, like processed food
products that were upgraded with organic ingredients or barn eggs instead of cage
eggs as an incremental product innovation. Over time, the market then gets “skimmed”
from the most quality-sensitive segment to ultimately the most price-sensitive segment.

924 Product line pricing situation

The product line pricing situation offers two strategies to cover the costs of externalities.
First, in a sustainable bundling strategy, companies combine several sustainable
products into a bundle that they offer at one price, such as in the organic case, in which
vegetable packages composed on a weekly basis were offered to consumers. As in a
traditional product bundling strategy, the bundle price offers a gain for the consumer
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

(who gets more organic products for a price that is lower than that to purchase all items
separately) as well as for the seller (because the consumer likely would not purchase all
items if they were not offered in a bundle). As an antecedent to this strategy, the bundle
must contain substitutes or complementary products (e.g. different types of vegetables
that complement and substitute for one another) (Noble and Gruca, 1999).
The second strategy in the product line situation is coined donations strategy. The
best example of this strategy is the “adopt-a-chicken” campaign for organic eggs.
The campaign asks consumers to donate a certain amount of money for “their” chicken
and, in exchange, pick up the chicken’s eggs from time to time at a nearby store.
The donations strategy applies to a product line pricing situation because it offers the
same product in the form of two different market offerings that apply to two different
purchase moments. In the preceding example, the eggs sold both directly through
stores, where people paid for the eggs, and through the adopt-a-chicken arrangement.
Whereas the food attributes of the product are central to the shopping context,
credence attributes are central in the donation context. The donations strategy
therefore approaches people in their role as citizens rather than consumers. Instead of
charging the consumer a higher price while they are shopping, people can make a
donation in the relaxed atmosphere of their own home to support sustainable
production. The strategy therefore builds on the phenomenon that consumers’
willingness to pay depends on the purchasing context (Monroe et al., 1977).

Conclusions and implications

This study analyzes cases that suggest price strategies for sustainable products that
enable producers to minimize the potential competitive disadvantage they suffer
because they must cover the extra costs for sustainability. In general, this study breaks
new theoretical ground by complementing the pricing literature on sustainability
with a managerial perspective. The study inventoried strategies that are in use in
managerial practice, and placed them in a theoretical framework that provides a
rationale for the strategies and for the conditions under which they are likely to occur.
The study finds three theoretical principles upon which prices for sustainable
products are managed. The principle that was already known in the literature, was to
add the extra costs for sustainable management of natural resources simply to the price
paid by the consumer. This principle motivated a host of studies on consumers’
willingness to pay for sustainability (e.g. D’Souza et al., 2006; Hobbs, 2005; Pelsmacker
et al., 2005). The framework developed in this study accommodates this principle in
“the price is not fair!” strategy for competitive pricing and the involvement-skimming
 strategy for new products. This study further extends the rationale of this principle in Price
that it adds, what one might call, a “reversed” price fairness argument to it. The strategies for
existing literature on price fairness concerns the question when consumers perceive the
higher price as unfair (Xia et al., 2004). In the situation of price strategies for
sustainable
sustainability, the higher price is the fair price, and the sustainability attributes of food products
products (like labels for organic or Fair Trade certification) communicate the fairness of
that higher price. 925
The study also finds two other principles for managing the prices of sustainable
products, namely, stability pricing on the basis of efficiencies in other domains that
incur costs, and increasing willingness to pay by influencing perceptions of quality
and/or price. Stability pricing on the basis of scale and learning effects is particularly
apparent in the competitive (stability pricing) and product line (sustainable bundling)
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

contexts, as well as in the later stages of the involvement strategy in the new
product pricing context. The latter strategy thus represents a combination, because the
organization covers the costs of externalities by both skimming highly involved
segments that will pay more for sustainability and enjoying scale and experience
effects. Increasing willingness to pay is found in value-based skimming strategies
where the willingness to pay is a consequence of product differentiation on a number of
product attributes, as well as in donation strategies where the willingness to pay stems
from a change of the payment context.
The framework offers factors that may determine whether or not managers will opt
for such a specific price strategy for a sustainable product. These determinants may
not only vary between companies, but also between product categories. In that respect,
the framework also allows to make predictions regarding the presence of a strategy in a
certain product category. For example, sustainable bundling is likely to appear in
product categories that consist of complementary items, like ready to eat meals. In
markets where product differentiation is relatively common, think, for example,
about the yoghurt shelf in an average western supermarket, value-based skimming
is likely to be the common strategy. In such markets, consumers are used to comparing
products in a large assortment on their attributes, and sustainability can simply
become part of this game by associating it with quality attributes like taste.
The antecedents of the price strategies for sustainability can also be interpreted as
conditions under which these strategies are effective. In that respect, the framework
also has normative implications in that the strategies can help companies to strengthen
their market performance without giving up their ambitions regarding sustainable
resource management. Although the normative aspects of the framework still should
be examined in future research, it is probably worthwhile for managers to realize that
they can do more than simply adding costs for sustainable management to the
consumer price. They can check the framework for alternative strategies and check
which of the determinants in the framework describe characteristics of their market, in
order to find a strategy that may be suitable for their situation. Building on the
framework of price strategies, managers responsible for marketing sustainable
products can also creatively develop their own variations of strategies. In particular,
the donations strategy seems to offer potentially many variations that could stimulate
sustainable development, such as alliances between producers of sustainable products
and charity organizations (e.g. supporters of the charity organization might receive
coupons for discounts on sustainable products).
The framework is unique in that it offers price strategies for sustainable products.
It thus offers not only implications for managers, but also for policy makers that aim to
 BFJ strengthen sustainable development. Price strategies for sustainable products may
117,2 help to start and continue a process that creates a more sustainable market. A process
of continuous improvement in sustainable development may initiate, in which small
players set the higher standard for sustainability, and large players implement their
more flexible standards at a much larger scale. When, for example, companies that
enter the market with sustainable products challenge market leaders by signaling that
926 their higher prices are more fair because they cover social and ecological costs, market
leaders may respond with a stability pricing strategy and implement their own,
generally more flexible, standards for sustainability. The results thus reveal not only
the state of the art of price strategies for sustainable products but also a process by
which market development and sustainable development may become more aligned.
Finally, this study has several limitations that offer directions for future research.
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

First, this study is limited to the agro-food industry. Additional research should
investigate whether the same strategies appear in other industries that develop and
launch sustainable products, such as automobiles and consumer electronics.
Preferably, such a research effort would be quantitative in nature and test the
framework of price strategies for sustainable products and their determinants over a
range of different industries. Second, whereas the analysis reveals determinants
that predict the use of price strategies for sustainable products, it does not examine the
normative aspects of these strategies. Further research therefore should examine
whether the determinants discussed herein lead to the strategic choices that are the
most profitable for companies that offer sustainable products and witness these
circumstances in their pricing environment. Third, this study does not address strategy
implementation, a key question, because implementation often requires a joint effort
by different parties. For example, channel members must collaborate to remove
inefficiencies from the supply chain for involvement-skimming strategies; community
stakeholders should provide legitimacy to the high prices paid by consumers in
“the price is not fair!” strategies.

References
Baltussen, W.H.M., Wertheim-Heck, S.C.O., Bunte, F.H.J., Tacken, G.M.L., Galen, M.A., Bakker, J.H.
and de Winter, M.A. (2006), An Organic Price Experiment: Boundaries Ahead? Agricultural
Economics Research Institute, The Hague.
Bjørner, T.B., Hansen, L.G. and Russell, C.S. (2004), “Environmental labeling and consumers’
choice – an empirical analysis of the effect of the Nordic Swan”, Journal of Environmental
Economics and Management, Vol. 47 No. 3, pp. 411-434.
Brundtland, G.H., et al. (1987), Our Common Future; World Commission on Environment and
Development, Oxford University Press, Oxford.
D’Souza, C., Taghian, M. and Lamb, P. (2006), “An empirical study on the influence of
environmental labels on consumers”, Corporate Communications: An International Journal,
Vol. 11 No. 2, pp. 162-173.
Diamantopoulos, A. (1991), “Pricing: theory and evidence-a literature review”, in Baker, M.J. (Ed.),
Perspectives on Marketing Management, John Wiley & Sons, Chicester.
Eisenhardt, K.M. (1989), “Building theories from case study research”, Academy of Management
Review, Vol. 14 No. 4, pp. 532-550.
Fresco, L. (2012), Hamburgers in Paradise, Food in Times of Scarcity and Abundance,
Prometheus, The Hague.
 Griskevicius, V., Cantú, S.M. and van Vugt, M. (2012), “The evolutionary bases for sustainable Price
behavior: implications for marketing, policy, and social entrepreneurship”, Journal of Public
Policy & Marketing, Vol. 31 No. 1, pp. 115-128.
strategies for
sustainable
Hawken, P. (1994), The Ecology of Commerce, Harper Collins, Dunmore, PA.
food products
Hawken, P., Lovins, A. and Lovins, L.H. (2000), Natural Capitalism: Creating the Next Industrial
Revolution, Rocky Mountain Institute, Snowmass, CO.
Hobbs, J.E. (2005), “Traceability in the Canadian red meat sector: do consumers care?”, Canadian 927
Journal of Agricultural Economics, Vol. 53 No. 1, pp. 47-65.
Hoste, R. (2003), Fair Price, Tasty Price, Foundation Agri-Chain Knowledge, Den Bosch.
Hunt, S.D. and Morgan, R.M. (1995), “The comparative advantage theory of competition”, Journal
of Marketing, Vol. 59, April, pp. 1-15.
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

Ingenbleek, P.T.M. (2014), “The theoretical foundations of value-informed pricing in the service-
dominant logic of marketing”, Management Decision, Vol. 52 No. 1, pp. 33-53.
Ingenbleek, P.T.M. and Meulenberg, M.T.G. (2006), “The battle between ‘good’ and ‘better’:
a strategic marketing perspective on codes of conduct for sustainable agriculture”,
Agribusiness: An International Journal, Vol. 22 No. 4, pp. 451-473.
Ingenbleek, P.T.M. and Van der Lans, I. (2013), “Relating price strategies and pricing practices”,
European Journal of Marketing, Vol. 47 No. 1, pp. 27-48.
Kahnemann, D., Knetsch, J.L. and Thaler, R.H. (1986), ‘Fairness and the assumptions of
economics”, Journal of Business, Vol. 59, October, pp. 285-300.
Kotler, P. (2011), “Reinventing marketing to manage the environmental imperative”, Journal of
Business, Vol. 75 No. 4, pp. 132-135.
Latacz-Lohmann, U. and Foster, C. (1997), “From ‘niche’ to ‘mainstream’ - strategies for marketing
organic food in Germany and the UK”, British Food Journal, Vol. 99 No. 8, pp. 275-282.
Le Gal, P.-Y. Rieu, T. and Fall, C. (2003), ‘Water pricing and sustainability of self-governing
irrigation schemes”, Irrigation and Drainage Systems, Vol. 17 No. 3, pp. 213-238.
Loureiro, M.L, McCluskey, J.J. and Mittelhammer, R.C. (2002), “Will consumers pay a premium for
eco-labelled apples”, Journal of Consumer Affairs, Vol. 36 No. 2, pp. 203-219.
Mazumdar, T., Raj, S.P. and Sinha, I. (2005), “Reference price research: review and propositions”,
Journal of Marketing, Vol. 69, October, pp. 84-102.
Miljkovic, D. and Effertz, C. (2010), “Consumer behavior in food consumption: reference price
approach”, British Food Journal, Vol. 112 No. 1, pp. 32-43.
Monroe, K.B. (2003), Pricing: Making Profitable Decisions, McGraw-Hill, New York, NY.
Monroe, K.B., Della Bitta, A.J. and Downey, S.L. (1977), “Contextual influences on subjective price
perceptions”, Journal of Business Research, Vol. 5, December, pp. 277-291.
Nagle, T.T. and Hogan, J.E. (2006), The Strategy and Tactics of Pricing: A Guide to Profitable
Decision Making, Prentice Hall, Englewood Cliffs, NJ.
Noble, P.M. and Gruca, T.S. (1999), “Industrial pricing: theory and managerial practice”,
Marketing Science, Vol. 18 No. 3, pp. 435-454.
Pelsmacker, P., de, Driesen, L. and Rayp, G. (2005), “Do consumers care about ethics? Willingness
to pay for fair-trade coffee”, Journal of Consumer Affairs, Vol. 39 No. 2, pp. 363-385.
Schollenberg, L. (2012), ‘Estimating the hedonic price for fair trade coffee in Sweden”, British
Food Journal, Vol. 114 No. 3, pp. 428-446.
Sedjo, R.A. and Swallow, S.K. (2002), “Voluntary eco-labeling and the price premium”, Land
Economics, Vol. 78 No. 2, pp. 272-284.
 BFJ Shultz, C.J. II and Holbrook, M.B. (1999), “Marketing and the tragedy of the commons: a synthesis,
commentary, and analysis for action”, Journal of Public Policy & Marketing, Vol. 18 No. 2,
117,2 pp. 218-229.
Steininger, K.W., Friedl, B. and Gebetsroither, B. (2007), “Sustainability impacts of car road
pricing: a computable general equilibrium analysis of Austria”, Ecological Economics,
Vol. 63 No. 1, pp. 59-69.
928 Urbany, J.E., Madden, T.J. and Dickson, P.R. (1989), “All’s not fair in pricing: an initial look at the
dual entitlement principle”, Marketing Letters, Vol. 1, January, pp. 17-25.
Xia, L., Monroe, K.B. and Cox, J.L. (2004), “The price is unfair! a conceptual framework of price
fairness perceptions”, Journal of Marketing, Vol. 68, October, pp. 1-15.
Yin, R.K. (2003), “Case study research design and methods”, 3rd ed., Applied Social Research
Methods Series, Vol. 5, Sage Publications, Newbury Park, CA.
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)

About the author

Dr Paul T.M. Ingenbleek is an Associate Professor of Marketing at the Wageningen University,
the Netherlands. His work focusses on the interface between strategic marketing and sustainable
development in the agro-food industries, and on strategic marketing in developing countries.
His research has been published in among others Food Policy, British Food Journal, Journal of
Macromarketing, International Journal of Research in Marketing, Journal of Public Policy &
Marketing, and Journal of Product-Innovation Management. Dr Paul T.M. Ingenbleek can be
contacted at: paul.ingenbleek@wur.nl

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com
 This article has been cited by:

1. Luis Noguera-Artiaga, Leontina Lipan, L. Vázquez-Araújo, Xavi Barber, David Pérez-López,

Ángel A. Carbonell-Barrachina. 2016. Opinion of Spanish Consumers on Hydrosustainable
Pistachios. Journal of Food Science 81:10, S2559-S2565. [Crossref]
2. 2015. Putting a price on sustainability. Strategic Direction 31:7, 8-10. [Abstract] [Full Text] [PDF]
3. Faruk Anıl Konuk. Competitive Strategies in Retailing in Emerging Economies 66-89. [Crossref]
Downloaded by Management Development Institute At 10:53 09 July 2018 (PT)