(London, Ontario) –Do consumers care
enough to reward ethical companies and
punish unethical companies? Are they
willing to pay more for a fair trade cup
of coffee and less for a t-shirt that
lacks organic cotton?
Researchers at the Richard Ivey School
of Business have found a strong
relationship between a company’s ethical
behaviour and a consumer’s
willingness-to-pay. The study “Reward or
Punish?” by Remi Trudel and June Cotte
reveals that consumers use corporate
social responsibility in evaluating
their willingness to pay for a product.
They suggest that companies should be
increasingly interested in behaving
ethically as there are economic benefits
for companies that behave in a socially
responsible manner. The ethicality of a
company’s behaviour is an important
consideration for consumers and
influences how much they are willing to
pay for a company’s products.
There
are important implications revealed in
the findings of this research.
First,
there are rewards for companies that act
in a socially responsible manner.
Consumers are willing to pay
substantially more for ethically
produced goods. When consumers are given
information about the social behaviours
of a company, they are willing to reward
companies for ethical behaviour. This
can be seen in coffee companies which
are able to charge more for fair trade
coffee compared to other roasts.
Secondly
and perhaps more importantly, the
research warns companies of more serious
consequences of unethical behaviour.
Consumers actually punish companies for
unethical behaviour, for example a
company that exploits foreign workers,
by expecting to pay proportionately less
for those unethically-produced goods.
Consistent with positive-negative
asymmetries, the notion that individuals
react more strongly to negative
information, the research found that
there is a stronger punishment for
unethically-produced goods and a smaller
reward pattern for ethically-produced
goods. The expectation to pay less for
unethically produced goods is far
greater than consumers’ willingness to
pay more for ethically produced goods.
The era
of self-interested companies trying to
maximize wealth at any cost appears to
have been supplanted by an era of
corporate social responsibility. This
research represents an important step
towards understanding consumer
psychology by demonstrating that
consumers can influence the price a
company can charge for a product.
Remi
Trudel can be reached at 519-936-2194 or
rtrudel@ivey.ca; June Cotte can be
reached at
jcotte@ivey.ca.
About the Richard Ivey School of
Business, The University of Western
Ontario
The Richard Ivey School of Business at
The University of Western Ontario (www.ivey.ca)
offers undergraduate (HBA)
and graduate degree programs (MBA,
Executive MBA and
PhD) in addition to non-degree
Executive Development programs. Ivey has
campuses in London (Ontario), Toronto,
and Hong Kong. Ivey recently redesigned
its curriculum to focus on
Cross-Enterprise Leadership – a holistic
issues-based approach to management
education that meets the demands of
today’s complex global business world.
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For more
information, please contact:
Dawn Milne, Communications Specialist,
Richard Ivey School of Business:
519-850-2536,
dmilne@ivey.ca
Mary Weil, Manager, Media & Public
Relations, Richard Ivey School of
Business: (416) 203-0664,
mweil@ivey.ca
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