Awareness and concern of widespread global environmental degradation has been growing over the last two decades. Utilisation of natural resources, which contributes to the degradation of the earths environment, has since been under intense pressure to look for alternative materials or their continued use is to comply with certain environment-friendly management standards. Concern over environmental issues has also translated into consumer reluctance in purchasing certain products and their willingness to buy as well as pay more for products seen as less harmful to the environment.
A number of studies on consumer demand and willingness to pay for environment-friendly products have covered products like apples (Loureiro et al., 2002) to wood items (Ozanne and Smith, 1997). Environmental certification of wood products, as a consequence of environmental certification of forest management practices, has its origin from the global concern for the widespread deforestation in the tropics during the eighties. The recognition that forests must be managed in a sustainable manner was formalized in the deliberations of the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992 (Vertinsky and Zhou, 2000).
At this conference, an international commitment was made to work towards the sustainable management, conservation and development of all types of forests. Wood products entering the international trade are expected to be manufactured of timbers originating from forest areas certified to be managed on a sustainable or environment-friendly practice. The consumers are also expected to demand and pay a price premium, for environmentally certified wood products stemming from the growing environmental consumerism in the major world markets (Mainieri et al., 1997; Strong, 1998; Vertinsky and Zhou, 2000).
Consumers in the developed countries are reported to be concerned with the environmental impact of the products they purchase (Vlosky and Ozanne, 1997; Rowlands et al., 2002; Bigsby and Ozanne, 2002; Moon and Balasubramaniam, 2003) and an increasingly large number of individuals in these markets are willing to pay more for environment-friendly products (Gronroos and Bowyer, 1999; Laroche et al., 2001). A variety of such products, including wood items, are now being offered to consumers especially in North America and Europe (Yam-Tang and Chan, 2000).
While much has been written on consumers in the developed countries, there
is hardly any empirical data collected regarding consumer willingness to pay
more for environmentally certified wood products in other markets. To provide
a preliminary insight into this area, this study is undertaken to determine
how much more the consumers in a developing country, like Malaysia, are willing
to pay for such wood products. The methodology used in the study is explained
in the following section. The third section presents and discusses the results
of the study. Finally, the concluding part summarizes the major points of the
MATERIALS AND METHODS
A self-administered questionnaire was used to gather the data for this study. The questionnaire was distributed to systematically-sampled adults in a shopping mall. These adults were selected randomly based on a previously determined criterion that every fifth adult who passed the interviewer were to be solicited. However, only those who have indicated their willingness to participate in the survey were given the questionnaire. A short description on environmental certification of wood products was first presented to the respondents. Prior to indicating the amount of premium they would be willing to pay for environmentally certified wood products, with a base price of RM100 (about US$25), the respondents were asked whether they would be willing to pay a price premium for such wood products. Demographic information was also collected, whereby the respondents were asked to indicate their gender, age, ethnic group, highest education attained and monthly gross household income at the time of completing the questionnaire.
A total of 100 completed and usable questionnaires were obtained at the end
of the survey period. Men (59%) outnumbered women (41%) in the sample, with
a large majority of the respondents below 40 years of age. Slightly more than
half of the sample (53%) had attained tertiary education and 48% had a gross
household income of RM1,000 to RM3,000 a month. Some 44% of the respondents
are Malays, followed by Chinese (29%) and Indians (24%). A summary of the demographic
profile of the respondents is shown in Table 1.
characteristics of the respondents|
It is important
to keep in mind that conclusions reported in this paper are drawn about the
sample, not about the population as a whole.
RESULTS AND DISCUSSION
The objective of the study is to determine the price premium consumers would be willing to pay for environmentally certified wood products. Simple frequencies and mean are used to analyze the data on willingness to pay. Only 38% of the respondents have indicated they would be willing to pay a price premium for environmentally certified wood products (Fig. 1). Of these, about 1% indicated that they would pay less than 5% more; 31% said they would pay between 5 to 20% more and 6% indicated that they would pay more than 20% extra for environmentally certified wood products. On the average, those respondents who had indicated their willingness to pay a price premium would pay about 14.4% more for environmentally certified wood products.
The amount of premium that the respondents are willing to pay is relatively high as the price premium for environmentally certified wood products is expected to be in the range from 5-10% (Forsyth, 1998; cited in Vertinsky and Zhou, 2000). However, Veisten (2002) has reported a price premium of less than 2% as for the case of consumers in Britain and Norway. While consumers in the USA, were willing to pay between 4.4 to 18.7% more depending on the value of the wood item considered (Ozanne and Vlosky, 1997).
The remaining 68% of the respondents would not be willing to incur any price
premium for environmentally certified wood products. This is not surprising
as others have also reported that there are indeed consumers who are not willing
to pay any price premium for such wood products (Ozanne and Vlosky, 1997).
willingness to pay a premium for environmentally certified wood products,
with a base price of RM100|
willingness to pay a price premium for environmentally certified wood
products, by demographic variables|
and Bowyer (1999) have also reported that more than 60% of the homeowners surveyed
in their study would not pay any price premium for the inclusion of environmentally
certified wood products in their homes.
Further analysis was conducted to determine if demographic factors influenced
consumers willingness to pay a price premium for environmentally certified
wood products as gender, age, income and education are reported to affect willingness
to pay a premium for environment-friendly products (Mainieri et al.,
1997; Ozanne et al., 1999; Loureiro et al., 2002; Govindasamy
and Italia, 1993; cited in Krystallis and Chryssohoidis, 2005). Even though
the analysis shows no statistically significant differences in the number of
those would and would not be willing to pay a price premium by demographic variables,
some interesting figures are noteworthy (Table 2).
A much higher percentage of female respondents (41%) have indicated they would
pay more for wood products that are environmentally certified than males (36%).
Laroche et al. (2001) reported that gender influences willingness to
pay more for environment-friendly products with females outnumbering males in
their study of consumers in Canada. Several other studies have also concluded
that females are more pro- environment and willing to pay more for environment-friendly
products than males (Mainieri et al., 1997; Ozanne and Smith, 1998; Magnusson
et al., 2001; Loureiro et al., 2002; Moon and Balasubramaniam,
2003). Ozanne et al. (1999) reported that women in the USA are more likely
to say that they would seek out and pay more for environmentally certified wood
Respondents in the high household income (45%), middle aged (50%), with a higher secondary education (43%) and of Indian ethnicity (54%) are willing to pay more for environmentally certified wood products than others in their respective demographic groups. These demographic factors, however, are believed not to have an influence on consumers willingness to pay a higher price for environment-friendly products (Laroche et al., 2001). Ozanne and Smith (1997) also reported that demographic factors, with the exception of gender, are weak predictors of consumer willingness to pay for environmentally certified wood products.
This study examined Malaysian consumer willingness to pay a price premium for environmentally certified wood products. Despite the large number of respondents expressing their reluctance, it is important to keep in mind that the study found that 32% of the respondents would have been willing to pay more for environmentally certified wood products. These respondents indicated that they would pay premiums averaging 14.4% to obtain environmentally certified wood products. As demographic factors do not to influence consumer willingness, future studies may consider factors like their knowledge, values, attitudes and behaviour as these variables are found to influence consumer willingness to pay more for environment-friendly products (Laroche et al., 2001).