A recent study examining the reasons why consumers pay higher prices for certain foods — be it for fashion, social standing or to advance a healthier lifestyle — revealed that food costs may be too high for some consumers.
Dr. Marco Palma, Dr. David Anderson and Meghan Ness, all with the department of agricultural economics at Texas A&M University in College Station, Texas, conducted field experiments to see why consumers pay more for certain foods with perceived premium labeling. The study results were published recently in the journal Applied Economics.
“While nutritional policies promote the consumption of high-quality, healthy food products, the reality is that the cost of healthy and nutritious food may be too high for some consumers to bear, deeming health promotion policies ineffective,” Palma said. “It is precisely that cost differential in food that has opened the door for food to become a symbol of social status.”
The study found that prestige-seeking individuals may be more likely to be early adopters of foods raised with new production technologies or practices “since they are more responsive to labeling attributes.” The results also found evidence linking food choices and diet quality to income.
The study included 201 participants who entered a baseline sealed-bid auction of lettuce varieties with no information available. A second bidding round was conducted after half of the participants were allowed a blind tasting, while the other half received labeling information such as organic, conventional or hydroponically produced lettuce, Palma said.
Having studied the group demographics on income, employment, marital status, education and race, the team was able to establish latent class segmentation of the group based on prestige-seeking food buying behaviors. The four classes designated as part of the experiment were: Class 1, ambitious shoppers; Class 2, utilitarian buyers; Class 3, affluent elitists, and Class 4, prestige lovers.
Prestige seeking among young consumers seemed to be in line with recent work linking Millennials' self-image and conspicuous consumption with materialism. Social media plays a key role, since it is often used as a way to showcase the consumption of prestigious goods in order to project a positive self-image.
The largest segment, the utilitarian class, paid the least and focused on the functionality of the product. The other groups all displayed prestige-seeking behaviors and were willing to pay more.
The buying behaviors illustrate the efficacy of labeling to enable producers to boost product prices when information is provided to the consumer. However, current literature shows evidential links between diet quality and income, indicating the reduced purchase capacity of lower-income shoppers.
“We found that sellers may be able to boost premium prices paid by prestige-seeking individuals through customer education and marketing,” Palma said. “The increasing gap in food prices associated with diet quality may be reflecting the reality of a lower purchase capacity by low-income consumers.”