Segmentation of the Dutch green consumers market / 1
Table of Contents
1Introduction………………………………………………………………………3
2Theoretical framework………………………………………….……………… 6
2.1Segmentation of the green consumer market……….……………………………..6
2.2Motivations to practice environmentally friendly behaviors…………….……….7
2.3Main motivations influencing consumption of organic food………….…………8
2.4Economic motivation…………………………………..………………………….8
2.5Health motivation………………………………...………………………………9
2.6Environmental motivation………………………….…………………………….9
2.7Social motivation…..……………………………………………………………..10
2.8Moderators………………………………………………………………………..11
3Methodology…………………….……………………………………………….14
3.1Choice of product category…..……………………………………………………14
3.2Data collection………..…………………………………………………………..15
3.3Factor analysis…………………………………………………………………….16
3.4Cluster analysis……………………………………………………………………17
3.5T-test implementation………………………….………………………………….17
3.6Analysis of variance ANOVA ……………………………………………………18
4Results………………………….…………………………………………………19
4.1Data preparation…………………………………...………………………………19
4.2Sample’s demographics……………………….………………………………….19
4.3Validity and reliability tests………………………….……………………………22
4.4Segmentation implementation……...……………………………………………..24
4.5Hypothesis testing………………………….…………………………………….28
5Conclusion……………………………………………………………………..…39
5.1General discussion………………………………...………………………………39
5.2Academic implications……………..……………………………………………..40
5.3Managerial and governmental implications….….………………………………...41
5.4Limitations and further research...…..…………………………………………….43
References………………………………………………………………………………..45
Appendices:
Appendix ACluster Analysis Tables…………………………………………………...47
Appendix BEnglish questionnaire used for this research………………………………51
EXECUTIVE SUMMARY
The current worldwide boom in popularity of environmentally friendly products andthe rising of new potential clients waiting to be served has brought for companies new market opportunities to benefit from. However, in order to successfullysatisfy the needs of the upcoming consumer, it is necessary to classify them and recognize the specific features,needs and desiresthat characterize them and make them different to the rest of the market. In other words, segmentation of the green market is indisputably necessary.
One of the most rewarding segmentation would be that based on motivations to consume organic food. If the drivers of consumption are known they can be satisfied, procuring the demand of the products and its success.
Previous studies have proved that the drivers that make individuals consume pro-environmental products are diverse and varied. Today’s increasing attrition of the earth’s shape and the growing shortage of natural resources, can be some of the most obvious motivations. Nevertheless, there existother reasons for their consumption that are not that evident, and go beyond the environmental concern.
This research aims to answer the question:Can we segment the Dutch green consumer market based on motivations to practice environmentally friendly behaviors?With the purpose ofanswering this research question, the motivations, as well as, the segments integrating the market,need to be identified. This purpose will be achieved by the implementation of four different scales, evaluating four principal incentives for consumption: environmental concern, health concern, social and economic motivations.
The analysis can be performed with the data obtained from 601 individuals, interviewed on-line and of-line in The Netherlands. The information is analyzed through, Factor Analysis, Cluster Analysis, T-tests and Analysis of Variance (ANOVA).
The results show that the Dutch market can besuccessfully segmented by the four motivations previously mentioned, which are proven to be significantly different and with individual characteristics.Given the results obtained with this research it is possible to offer valuable managerial information from which effective marketing strategies can be derived. Furthermore also scientific implications are extracted from which new contributions to the marketing field are provided.
1.INTRODUCTION
Market segmentation is one of the most powerful tools that marketers possess to get to know the customers, a tool that offers the possibility to provide the clients those products that they want and need in the most efficient way. The green consumer market is not an exception, its segmentation is necessary not only in order to supply the attributes and characteristics that clients demand from the products, but also, to differentiate them from those of the competitors.
Differentiation is indispensableespecially in times where competition is abundant and consumers are more empowered. Firstly by today’s technology that gives the consumer the possibility to access to a huge amount of information to research, analyze and evaluate the products offered in the market. Secondly, by the fusion of the markets that gives clients the power to select from a rich variety of options offered from all over the world, but most importantly, when price reductions are not sustainable anymore and added value is needed to place the product in a more privileged place. Therefore it is imperative that the clusters composed by the potential green consumers are identified and classified.
Once it is known which motivations would make the potential clients consume organic products, it is possible to segment the market based on these criteria and provide them products with the attributes, benefits and hopefully with the values they need to satisfy when consuming organic food.
The green market associated with marketing emerged in the decade of the 70’s but its popularity has been unstable and fluctuating through the years. Nevertheless, it has regained importance due to the regulations created by the government (Menon & Menon 1997) and as a result of the natural disasters currently occurring, causing an effect on the consumers market (Diamantopoulos et al., 1996). Furthermore, businesses have come to understand the fact that they can profit from practicing “Enviropreneurial Marketing”, which sees environmental obligations as opportunities rather than as threats, while performing marketing strategies that benefit the environment, an at the same time creates the possibility for companies to improve their economic situation (Menon & Menon 1997).
Moreover, segmentation based on the customer’s motivations to consume green products has been one of the most popular approaches by researches to perform the classification of the green consumer market, due to the fact that it provides an insight of the drivers that make consumers practice certain green behavior. If the factors that motivate consumers are known, all the attributes of the product and all the marketing efforts can efficiently be enhanced by excelling those characteristics that specifically satisfy those drivers.
The objective of this research is to segment the Dutch potential green consumermarket in symbolic and representative groups based on their underlying motivations for developing environmentally friendly behaviors. More specifically, in order to present the aim of the research in a more concise but clear manner the following research question was defined:
Can we segment the Dutch green consumer market based on motivations to practice environmentally friendly behaviors?
Furthermore, with the goal of answering the previous stated research question in a deeper and more significant way, it was fragmented into the following sub-questions:
- What are the consumer’s motivations in The Netherlands to develop an environmentally friendly behavior?
- What are the demographic characteristics of the individuals in each segment?
- Can social moral be considered another factor of motivation in the segmentation of green consumers?
- Is cultural background of the environmentally concerned individual related to a specific driving motivation?
For the collection of the data a self-administrated questionnaire will be used. The sample will be randomly drawn in the Netherlands and distributed via social media, emails, during events and in the streets.
The first part of the questionnaire will have questions referring to the demographics characteristics of the respondents.The second part of the questionnaire will be presented in a seven-point Likert Scale, going on a continuum from “Strongly agree” to “Strongly disagree”. The statements that will be presented in this part of the questionnaire aim to disclose the motivations that would make consumers practice environmentally friendly behaviors.
The statements of each scale have been taken from different researches. It is important to mention that certain modifications have been made to the statements to adapt them to this research.
Furthermore, for the purpose of this study the data collected will be analyzed using the program SPSS Statistics using different statistical methods:
First of all, the data will be subject to a Confirmatory Factor Analysis, using the principal component method, in order to determine the underlying features that defined the motivation of each specific group in the segmentation (health motivated, economically motivated, environmentally motivated, socially motivated). Posteriorly, a Cluster Analysis will be executed to determine the segments present in the market and the demographic and psychographic characteristics that distinguish each group.
Finally, multiple T-tests will be performed in order to identify those characteristics that are more valuable for each group and sub groups. In the same way, multiple analyses of variance ANOVA will be executed to evaluate the differences in preferences between multiple groups andthe role of the moderators in the relations.
Conditional to its success, this study will serve as a tool for private and public sectors to direct targeted marketing techniques to the different clusters in the green Dutch market. Managerial and scientific implications are to be drawn from its outcome.
First of all, policy makers can use this knowledge to persuade groups to adopt green practices that benefit the environment and consequently the society as a whole.Secondly, the private sector benefits from this segmentation by being able to direct the right marketing strategy to each of these segments in the Dutch market, providing the products and services that cover their specific needs and wants. More importantly, by emphasizing the attributes that motivate each cluster, firms can stimulate and increase theconsumption of green products and milieu friendly practices (Diamantopoulos et al., 2003).
By recognizing the different motivations existing in the market, marketers can apply “Differentiated Marketing”, in order to profit from the marketing strategies at the maximum level. As Kotler & Levy (1969) stated “when a business organization sets out to serve more than one target group, it will be maximally effective by differentiating its product offerings and communications”. In the same way, by disclosing the motivations of the green consumer, the “Differential Advantages” namely the most valued features of the product can be enhanced, representing added value for the consumers(Kotler & Levy 1969).
2. Theoretical Framework
This chapter is meant to present appropriated theoretical support for each of the hypothesis constructed with the purpose of answering the research question. For its elaboration a substantial amount of papers were reviewed, the revision was done systematically, starting with the analysis of topics about segmentation and the green market in general and later narrowing the focus to the motivations to consume green products, finalizing specifically with organic food. For the creation of the hypothesis a deductive reasoning approach was followed, where different postulates were analyzed.
The body of this chapter consist of firstly the presentation of different approaches taken to segment the green consumer market. Secondly, the motivations of consumer to consume green products are exposed, to be precise: health, economic, social and environmental concern. Additionally, moderators that possibly affect the impact in the relation between the explanatory variables and the consumption of organic food are introduced. Finally a conceptual framework is displayed for a clearer view of the structure of the theoretical construct (Figure 2.1), as well as, a table to present a summary of the supportive theories (Table 2.2).
2.1 Segmentation of the green consumer market
The revision of the literature discloses a vast variety of methods and parameters used to segment green markets. Exploratory and explanatory approaches have been used for this end, as well as the adoption of different scopes and characteristics to categorize the groups in the green market, from the most common approaches, such as, demographic, psychographic and behavioral, to other less common focusing.
To illustrate, Hofstede et al., (1999) executed and international segmentation in the European yogurt marketbasing their research on Means-end theory,which consist on analyzing the linking of product’s attributes to the benefits they bring to the consumers,finally disclosing the individual values that are satisfied (Reynolds & Gutman). The authors were able to determine identifiable segments regarding their valuations to certain product’s attributes and its properties to satisfy certain needs and values. They demonstrated how an organically produced product, not only, provide specific direct benefits,but also, satisfy certain values in the mind of the subjects. In this study The Netherlands was included among the countries researched.
Furthermore, other researchers have preferred to segment the green market by identifying the variables that characterize the environmental consciousness of the consumers: environmental knowledge, attitudes and behavior, which were considered appropriate to portray environmentally friendly purchasing decisions (Diamantopoulos et al, 1996).
Likewise the classification of the market, based on those primary motivations that drive consumers to consume green products, has been previously researched.
2.2 Motivations to practice environmentally friendly behaviors
In order to be able to segment the green market based on consumers’ motivations, heterogeneity of incentives among the individuals integrating the market should be present. In the case of the green market, many researchers have evidenced that pro-environment behaviors are not uniquely driven by purely environmental motivationsbut by different and varied stimuli. According to the literature reviewed so far, the spectrum of motivations to practice environmentally friendly behaviors goes from collective (actions to achieve a social goal) to individual drivers.Environmental, economic, health, political, social concerns (Pereira & Lemke, 2013), status and reputation (Griskevicius et al., 2010) are some of the reasons to purchase green products.
Nevertheless, it is imperative to mention that what has been clearly observed in the papers reviewed is the fact that the motivations to practice pro-environmental behaviors depend on the type of activity performed. The motivations to practice each different green activity as recycling, consumption of energy-saving products, use of public transportation or purchase of environmentally friendly vehicles, among others, are different, and in some cases may appear contradictory. This difference in motivations relies on the variances in the nature and characteristics of the product.
To illustrate this, it can be considered the purchasing of green cars, whose motivation can be driven by the desire to reflect certain status, and the price is required to be high to achieve this need (Griskevicius et al., 2010), in contrast tothe consumption of other energy-saving green product, namely bulbs,which is motivated among other factors, by the desire to save money (Hsueh & Gerner, 1993). Consequently,two products that may appear, according to the common sense, to be pursuing the same goal: the savingg of energy on behalf of the environment, have in both cases other primary motivation but environmental concern.
As a consequence, the segmentation based on motivations of the green market should be individually done per activity or per ecological product category (Laroche et al., 2001; Diamantopoulos et al., 2003).Henceforth, for the purpose of this research, the study will be focused more specifically in the domain of the organic food industry.
2.3 Main motivations influencing consumption of organic food
Furthermore, in the specific case of organic food, the papers collected disclose that the motivations to purchase organic food are also diverse and not as obvious as it may be thought in the first instance. Besides environmental concern, the range of motivations includes:health, taste, food safety, animal welfare, support oflocal economy, sustainability of traditional cooking, feeling of wholesome, evocation of the past and fashionability(Hughner et al., 2007). Consequently, based on the previous stated, it is imperative to consider for this research more than just environmental concern motivation as explanatory factors for the consumption of organic food.
Therefore, given their recurrence in the literature reviewed so far and their significance as explanatory factors of organic food consumption, 4 motivational factors have been considered for this study: economic benefits, health benefits, social moral and environmental concern.
2.4 Economic Motivation
The literature exposes the fact that green consumers are motivated to a certain extent by an economic factor, referringin this research not to the driver to spend less money, but to the desire to economically help other vulnerable groups. More specifically, researchers claim that individuals have an incentive to consume organic food under the idea that it is being produced by local producers and the consumption of their products will help to keep the economy of the local producers in good shape. (Hughner et al., 2007; Pereira & Lemke, 2013).
It is also possible that due to the economic crisis surged in 2008, affecting among others the Netherlands and the whole of Europe and which effect is felt until this day, consumers have turned more conscious about the positive or negative effects of their purchase behavior on the national economy, thereby incrementing the relevance of the economic factor. Under the scope of this study we focus on those consumers that allocate resources on organic food, that even when perceived as luxury products, are believed to help the national economy, making the economic factor an important motivator to consume organic food.
Therefore it is of great relevance for this research to analyze the effect that this factor has at the moment of deciding to purchase organic food. Hence the following hypothesis has been stated:
H1a: Economic benefit is a factor that positively motivates the consumption of organic food.
2.5 Health motivation
One of the most believed benefits that organic food gives to its consumers is undoubtedly the health factor, the idea of consuming products free of chemical substances and artificial methods for growing the food, speaks for itself. Consumers think that the more natural the products are grown, the healthier they are for their body, and hence, the strongest is the motivation to consume green food.
Moreover, it has been claimed that under the scope of the consumption of organic food, selfish reasons stronger motivate its purchase than do philanthropic motivations (Hughner et al., 2007), as exposed by a vast number of researches showing that “health” is the most important motivation driving the consumption of organic food (Hughner et al., 2007; Pereira & Lemke, 2013), which evidently represents a more individual benefit, rather than a noble one.
In the same way, Hofstede et al. (1999) provided evidence based on Means-end chains (MEC’S) theory to support the fact that the product’s attribute of being organically produced is, according to the consumers perception, connected to a health benefit and even to a higher level where values are fulfilled. This was also confirmed by Zanoli & Naspetti (2002).