Faculty of Economics and Business
Master Thesis
MSc Business Administration
Entrepreneurship and Management in the Creative Industries
Can our Social Blindfold be Removed by Transparency?
- The Sustainable Fashion Industry -Sophie Cécile Weggen 10661344
August 2015
First supervisor: E. Dirksen MSc Second supervisor: Dr. J.J. Ebbers
Abstract
In light of the increasing attention for sustainability and the fact that the actual sustainability of products is hard to verify, this research sets out to find a marketing tool to help the sustainable fashion industry grow. In order to do so, this study draws from transparency literature. As a result a new transparency type is proposed: full disclosure transparency. This new type not only reveals information about the distribution of proceeds among the actors in the production process, it also reveals the profit the firm makes and if it is shared, how it is shared. By increasing the amount of information and its sensitivity, consumers will have the information they need to assess the true sustainability of the product.
Additionally, moderating effects of the reputation of the seller and the fairness of the distribution were examined. The ultimate research question this thesis attempts to answer is: does the use of full disclosure transparency increase the willingness to buy sustainable fashion products?
To answer the research question an experiment in the form of an online survey was created. Potential participants were targeted through social media and e-mail. This resulted in 107 participants filling out the survey.
The study found no significant results, which means that, based on this study, full disclosure transparency did not have the ability to increase the consumers’ willingness to buy a sustainable fashion product. Also, there were no moderating effects of the reputation of the seller and the fairness of the distribution. Despite the insignificant results, some intersting trends and implications are uncovered and discussed. To eventually find a marketing tool which aids sales in the sustainable fashion industry, this thesis provides avenues for future research.
Table of Content
1 Introduction ... 5
2 Literature Review ... 8
2.1 The Sustainability Trend ... 8
2.2 Pillars of Sustainability ... 12
2.3 Transparency ... 14
2.4 Full Disclosure Transparency ... 18
2.5 Other influential factors ... 23
2.5.1 Reputation of the Seller ... 23
2.5.2 Distributional fairness ... 25
3 Data and Method ... 28
3.1 Research Design ... 28 3.2 Data Collection ... 29 3.3 Sample ... 32 3.4 Variables ... 35 4 Results ... 38 4.1 Descriptive Statistics ... 38 4.1.1 Dependent Variable ... 38 4.1.2 Sustainable Personality ... 40 4.2 Recognition ... 41
4.2.1 Reputation of the Seller ... 41
4.2.2 Fairness of the Distribution ... 42
4.3 Correlations ... 43
4.4 Hypotheses ... 44
4.4.1 Hypothesis One ... 45
4.4.2 Hypothesis Two ... 46
4.4.3 Hypothesis Three ... 47
4.4.4 Inclusion of Control Variables ... 48
5 Discussion ... 51
5.1 Hypotheses ... 51
5.2 Practical Implications ... 55
5.3 Limitations and Future Research ... 56
5.3.1 Limitations ... 57 5.3.2 Future Research ... 58 6 Conclusion ... 60 7 References ... 62 8 Appendices ... 68
Statement of Originality
This document is written by Sophie Cécile Weggen who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
1
Introduction
Since the late seventies the attention for ‘the bigger picture’ of consumption has grown. Not only the consumer’s being as a result of consumption is considered, but also the well-being of the people who produced the consumed product and the effects of production and consumption on the environment are contemplated. Not surprisingly, this change in thought has had an effect on the marketing field. What changed in the field of marketing is summarized by Kotler (2011). In this article the author notices that before the turning point marketers based their strategies on an assumption of interminable resources and zero environmental costs. Today, these strategies are no longer suitable, and therefore need to be adapted to the present.
One of the most important differences between traditional, not sustainable, products (i.e. products which are not marketed as being sustainable) and sustainable products (i.e. products of which the production has a positive social and/or environmental impact and are marketed that way) is the price. Prices for sustainable products are generally substantially higher than for not sustainable products. The most pertinent reason for this is that in order to produce sustainably, a firm must take on higher costs, which are calculated in the price. One industry in which the divide between sustainable and traditional products is especially large, is the sustainable fashion industry. Fashion falls into the category of luxury products, this product category is very sensitive to price differences.
Most consumers are hesitant to buy sustainable products. What is often heard is that the main reason for choosing the unsustainable variant over the sustainable one is the impossibility of assessing whether the extra money spent is actually passed on to the workers in the producing countries or invested in actual ‘green’ materials. In other words, consumers
are sceptical and have no trust that the firms are not trying to maximize their own profits at the expense of someone else.
In my opinion, people in the West are no longer able to ignore that our level of consumption is untenable. First, our consumption level is untenable because of environmental issues, which were brought to the attention of the masses by e.g. Al Gore and his film An Inconvenient Truth. His message concerns topics such as climate change, deforestation and decreasing biodiversity. And second, because of social issues, such as child labour, poor working conditions in foreign countries and discrimination. In other words: keeping up production in the traditional sense, cannot be regarded as being ethical in this 21st century. In my opinion producers as well as consumers should be more aware of their own responsibility in these matters.
An important instrument in changing the nowadays mostly pessimistic expectations about the future of our world is to change the current consumption pattern. I strongly believe that this will not be accomplished by creating rules, laws or any other external motivational force. I believe that one way to achieve this new consumption pattern is by facilitating the information needed to make a well-advised decision for sustainable products. Enabling people to assess the level of sustainability increases their trust and is one step forward in growing the sustainable industry. Finding a marketing tool which can achieve a more well-advised choice for sustainable products is the aim of this thesis. Only by helping the consumer see the neccessity of sustainability and giving them all the information they need to assess the true sustainability of the product, can future consumption patterns change.
Transparency literature has shown that increasing transparency has the ability to increase a consumer’s trust. In short, by providing the consumer with more sensitive information about its product, a firm is perceived as open, honest and more truthful than when more information is cloaked. To my knowledge transparency literature has never been aplied
to sustainable products, yet because of its ability to increase trust, expected is that this marketing tool is especially suitable for sustainable products, in particular for the sustainable fashion industry. Nevertheless, some of the literature suggest that too much information can harm the consumers willingness to buy the product. More information requires more effort to process the information and reasoning from this consumers may quickly lose interest. When this is the case more information does not necessarily create more trust and less scepticism, and therefore will not be able to help the sustainable industry increase willingness to buy.
Taking both views into consideration, this research proposes that by conveying even more sensitive information than has been tested until now, the willingness to buy sustainable fashion can be increased. The new type of transparency proposed in this study is called: full disclosure transparency. Expected is that the negative effects of more information will not occur for full disclosure transparency due to the fact that consumers actually need information to assess the sustainability of the product. In a traditional firm full disclosure transparency might therefore not have the proposed benefit. All in all, the research question answered in this thesis is: does the use of full disclosure transparency increase the willingness to buy sustainable fashion products?
In the following chapter the existing theories on transparency, and other effects which influence the effectivity of full disclosure transparency, are considered. Second, the research design is described into great detail. Next, in chapter 4, the results following from the experiment are outlined. In chapter 5, the results of the study, its limitations, and ideas for future research are discussed. And last, a short conclusion will draw this thesis to a close.
2
Literature Review
Standing on shoulders of giants, the saying goes. This chapter will explore the scientific field and will discuss the previous research discoveries that have been made. First, the current sustainability trend is examined. Second, the decision to focus on one type of sustainability is explained. Then, what the literature has discovered about transparency so far, is considered. What effects of full disclosure transparency are to be expected according to the current theories, is discussed third. Lastly, the effects of the reputation of the selling firm and the fairness of the distribution of proceeds over the different actors in the production process are considered.
2.1 The Sustainability Trend
When looking at society, people are continuously changing, their values change, their ideas change and in turn their behaviour changes. Because people change, the field of marketing changes at the same speed. According to the American Marketing Association (2013), marketing is defined as “the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society at large” (see https://www.ama.org/AboutAMA/Pages/Definition-of-Marketing.aspx). The core of this definition is an offer that contains value. What the consumer values can be basic things like quality, design and feel. Yet, according to Kotler (2011) a new dimension of value has been added to the arena, namely sustainability. And therefore, new ways of presenting this impalpable value need to be discovered.
compromised in order to produce cheap products (Robinson, 2004). Around this time the concept of sustainable development was developed (Clark & Munn, 1986). This concept is an attempt to combine growing concerns about the environmental issues with socio-economic issues (Hopwood et al. 2005). The United Nations define sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet theirs” (see http://www.un-documents.net/ocf-02.htm).
Because of the increased attention for labour rights and pollution of the environment, not complying to sustainable development standards can create scandals which potentially harm a firm’s reputation. An example of this can be found in the collapse of a garment factory in Bangladesh which killed over 1.100 people in 2013 (see http://www.bbc.com/news/world-asia-22476774). Western retail firms such as H&M, Gap, Walmart and Inditex (owner of Zara) used this factory for the low cost production of their garments. The firms have been heavily criticized for attributing to this tragedy. As a result most of the firms which produced in the collapsed facility have signed a landmark agreement to pay for fire- and safety improvements in order to restore their damaged reputation (Frynas, 2005) (see http://www.theguardian.com/sustainable-business/dhaka-factory-collapse-businesses-held-responsible). The harmful effects of these sustainability scandals for a firm’s reputation are spreading more rapidly today because of new technologies. Through the use of smartphones and wireless internet, within minutes, seconds even, it is revealed what happens at the other side of the world. In addition, social media offer people the ability to share and openly criticize these scandals (Osunde & Shu’Aibu, 2014).
All in all, sustainability is becoming a key matter for firms (Clarke & Clegg, 2000). The social climate we are in today is one of increased attention for people’s values and opinions, the well-being of foreign workers, the environment we live in and how both are affected by the choices we make. Consumers are more concerned with where they spend their
money, on what and what their contribution is to the issues present today and in the future. Their concern for these issues changes their involvement in the purchase of the product (O’Cass, 2000). In short, many consumers try to minimize their impact on the natural environment and violations of labour rights in emerging markets by adapting their spending patterns (Kotler, 2011).
As shortly discussed above, Kotler (2011) wrote an article in which he considered a new dimension in the marketing field, namely sustainability. Some years have passed since Kotler wrote this article. Nonetheless, on the basis of the continuous increase in research articles on sustainable marketing and the increase in the number of environmentally and socially sustainable products, it is fair to say that this dimension is still applicable to the current market.
Sociological theories such as the dual concern model describe that buyers are not only cconcerned about themselves when making decisions, they are also socially conscious (Filley, 1975; Carlsson et al. 2005; Maxwell, 2002). Reasoning from this, consumers will be more likely to buy a sustainable product than a product that is produced in a traditional manner. This argument is strengthened by Kotler (2011) who suggests that an increasing number of consumers will be prone to buy from firms that incorporate sustainability in their offerings. Diamond’s (2005) Home Depot experiment shows that consumers prefer sustainable products over not sustainable products. In this experiment a home improvement store (Home Depot) priced plywood that contained a Forest Stewardship Counsil (FSC) label, the more sustainable choice, 2% higher than plywood that did not contain the FSC label. It turned out that 37% of the customers chose to pay the higher price. In other words, these customers’ willingness to pay increased at least 2%.
If willingness to pay more for sustainable products is at one side of the spectrum, than boycotting non-sustainable products is on the other. Yet, it has been shown that 80% of people refuse to buy from firms which are seen as polluters, firms of which it is suggested that they do not comply to social sustainability standards, or firms that consumers’ feel take advantage of the sustainability movement to market their products and earn a higher profit (Laroche et al. 2001).
That incorporating sustainability into the values of a firm can benefit a firm can be illustrated by some successful examples. Patagonia, a firm which produces outdoor sports gear, decided to use only organically grown cotton in the spring of 1996. Since then the firm has incorporated sustainability on other levels as well and has been able to grow immensely (Chouinard & Brown, 1997). Other examples of firms which have made a successful business model with sustainability are Toms 1 (http://www.toms.com), Mipacha 2 (http://www.mipacha.com) and People Tree3 (http://www.peopletree.co.uk).
While reading this chapter until here it may seem as though there are no obstacles to using sustainability in marketing. Yet, sustainability is an intangible attribute which means that consumers lack the information they need to verify the qualtiy of the intangible aspect of the product (Nelson, 1970). This will lead consumers to be suspicious of ulterior motives (Webb & Mohr, 1998). For instance consumers suspect that the sustainability angle in marketing is just used to generate more profit. As a result of this expectation consumers become sceptic which undermines the credibility of the advertisement claim. As a result consumers are less likely to respond to sustainable marketing (Kim & Lee, 2009). When
1 Toms is a for-profit firm which designs shoes and eyeware. For each pair of shoes or sunglasses sold, the firm
gives one pair of shoes, or an eyesight restoration operation for free to a child in a developing country.
2 Mipacha is a for-profit firm which produces shoes in Peru according to the Western labour condition standard. 3 People Tree is a for-profit firm which aims to produce 100% according to the World Fair Trade Organization's
consumers are truly sceptical, they might even respond by warning their friends or boycotting the firm all together (Day & Bodur, 1978).
One way to remedy the effects of scepticism is by increasing the transparency of the firm. How this works will be discussed in subchapter 2.3. But first, what this thesis considers in terms of sustainability is discussed.
2.2 Pillars of Sustainability
Many studies have written about sustainability, and many different classifications have been used. In this research classification according to the Three Pillars of Sustainability is used (see http://www.un.org/en/ga/president/65/issues/sustdev.shtml). In this subchapter the three pillars will be discussed. On top of that, it will be discussed why one of the pillars, the social sustainability pillar, is of bigger importance in the sustainable fashion industry, and thus of bigger importance in this research.
Needless to say, the Three Pillars of Sustainability approach distinguishes three types of sustainability: economic, social and environmental. According to the Johannesburg Declaration on Health and Sustainable Development (2002) the pillar of economic sustainability is about economic growth and equity. This means creating jobs, generating incentives that work with human nature instead of against it, promoting and creating a structure which incorporates the costs of externalities into the price of a product. Social sustainability is the most ambiguously defined pillar, it is about human rights, labour rights, community development, protection and safety for employees but also communities as a whole (Hitchcock & Willard, 2011). Environmental sustainability is about conservation of
natural resources and the environment (Johannesburg Declaration on Health and Sustainable Development, 2002).
This research will not consider economic sustainability because this is of importance in the macro economy. This research does not look at the economy as a whole but considers the effects for individual firms, which is the micro economy. In other words, the first pillar of sustainability will be outside the scope of this thesis.
Even though environmental sustainability is a well-known topic, here the focus is on social sustainability. The empirical setting in this research is the sustainable fashion industry. In this industry child labour, violations of labour rights and safety agreements are issues which get a lot attention in the media. One of the reasons these violations occur is due to the rise of the fast fashion industry. This industry has more than two seasons per year, sometimes even close to 21, the products have a short shelf-life, and are low in quality, meanwhile the prices are even lower (Corbellini & Saviolo, 2014; Jin, 2004). In order to be able to have a thriving business while on the other hand offering clothes for almost nothing is due to the fact that production takes place in emerging economies. As a counter reaction the sustainable fashion industry has taken a rise. This industry sets itself apart from the fast fashion industry by doing exactly the opposite. Especially the way firms in the sustainable industry approach labour conditions and safety is what sets these industries apart.
Concluding, the issues connected to social sustainability are more pressing in the fashion industry than issues connected to the other pillars of sustainability. Also, the issues as discussed above get more attention in the media and therefore are taken up highly by consumers. For these reasons this research will consider social sustainability when it speaks of sustainability.
2.3 Transparency
As discussed in subchapter 2.1 increasing transparency is a manner of providing consumers with additional information regarding the product in order to take away their suspicion of ulterior motives and scepticism regarding the true sustainability of the product (Webb & Mohr, 1998; Kim & Lee, 2009). How and why transparency works is considered in this subchapter.
In general, humans do not value risk, they are risk averse and value certainty (Carlsson et al. 2005). This is true for every aspect of our lives, but it is especially visible when making economic decisions. In order to assess risk, one needs information (Nelson, 1970). For intangible aspects of products this information cannot be obtained from the product itself. Because of this, consumers will turn to the seller for information. The seller can decide whether or not to give the consumer the accurate information, which gives the seller most of the power in the transaction (Labrecque et al. 2013; Varadarajan & Yadav, 2000). Yet, when they do not give the consumer the information he needs, or the consumer is suspicious, he will turn to an information search. This search will be discussed in subchapter 2.4.
Sustainability is such an intangible aspect of products. Whether a product is produced sustainably has to be communicated by the seller, otherwise the consumer has no way of knowing how the product is produced. However, a seller can be untruthful and sell the product as being sustainable while in fact it is not. This makes it difficult to identify a real sustainable product (Pickett-Baker & Ozaki, 2008). Accordingly, to reassure a consumer of the sustainability of the product means that the seller has to be more forthcoming than simply stating that the product is sustainable. This reassurance can be given by revealing sensitive information, because by revealing sensitive information, trust is gained (Wortman et al. 1976;
Bertini & Gourville, 2012). This is as true in relationships between people, as it is in relationships between firms and people.
Transparency has been known to increase the trust and goodwill consumers have in the firm (Bertini & Gourville, 2012). To achieve this trust increase for sustainable products, increasing transparency in the price setting is most logical for two reasons. First, a price can be used as an external indicator of intangible aspects of products (Zeithaml, 1988; Rao & Monroe, 1989). Consumers infer the quality of the intangible aspect of the product from the height of the price. This means that more attention is paid to the price in sustainable products than in not sustainable products (Ben Youssef & Abderrazak, 2014). Second, since the price of a sustainable product is generally higher, this will also increase attention for the price (Völckner et al. 2012). This increased attention will make it likely that the potential buyer picks up on the extra information that has been given.
The MacMillan Dictionary states “ a transparent process, activity, or organization does not try to keep anything secret”. In addition, this dictionary also states that transparency is
“simple, clear and easy to understand” (see
http://www.macmillandictionary.com/dictionary/british/transparent#transparent__2). As discussed in the previous subchapter, people prefer transparency. For service websites it has been suggested that people in fact do prefer transparency, which in other words means that people value transparency (Buell & Norton, 2011). Yet it can be clearly illustrated by the experiment conducted by Ellsberg (1961). In this experiment subjects were asked to rate loteries according to their preference. Subjects could choose between two loteries, one where their chance of winning the lottery was given (50%), and one where this information was held back. It turned out that subjects preferred the lottery where they were given the extra information even though their chances at winning could be higher in the second lottery. In
other words, subjects preferred the transparent lottery over the untransparent one even though their chance of winning the lottery could be higher in the second lottery.
Transparency can be acieved in multiple ways. The sensitivity of the information given to the consumer can vary a great deal and can be used to create different types of transparency. In the remaining part of this subchapter the existing types of transparency are discussed. These types of transparency need to be considered in light of a baseline, the all-inclusive price. This is the traditional price as we all know it: one price to obtain the product and services that come with it. As described in the attribution theory, people search for causal explanations when a sudden or negative event occurs (Folkes, 1988; Weiner 1985). This is the case when consumers find out that the product they want to buy is more expensive than the product of another retailer. When this happens they infer that this might be due to a higher quality or the sustainability of the product. In other words, a higher price only hints to the cause of it.
The first type of transparency discussed here is operational transparency. This is when a firm reveals part of its operating process to customers (Buell et al. 2014). It can tell the customer which machines have been used, or how the distribution of the product has taken place. This way consumers can use this knowledge to form an opinion about the product and decide whether or not they want to purchase it.
The second type, a relatively new concept, is cost transparency. Relative to operational transparency, this type reveals more sensitive information, namely the costs. It discloses what the variable costs of the product are and how these costs have been distributed among the actors in the supply chain (Mohan et al. 2014).
The third type is price transparency. This type reveals which amount of the revenue goes to beneficiaries (Carter & Curry, 2010). It does this by indicating the percentage of the proceeds which goes to the sympathetic actor.
The last type discussed in this paragraph is the partitioned price. This type is divided into two parts, a base price for the product itself, and a surcharge for services rendered with the product. The surcharge is presented additionally, yet it is not optional (Morwitz, 1998; Völckner, 2012; Bertini & Wathieu, 2008).
The different types of transparency as presented above all provide the consumer with more information as opposed to the all-inclusive price. Yet, because of the additional information they have a different effect on someone’s cognitive process. Splitting an all-inclusive price into different parts can be perceived as more expensive than providing the consumer with one all-inclusive price (Thaler, 1979). Reasoning from this, people would prefer an all-inclusive price over any of the transparent prices. Nevertheless, today it is known that there is a benefit in providing the consumer with the additional information and prices. Research suggests that by increasing the transparency the ‘depth’ of analysis of the offer by the consumer is affected. An all-inclusive price guides the consumer towards concentrating on the main attribute of the offer, the product. And when more prices are presented, the consumers’ attention is guided towards the secondary attribute which they might have otherwise overlooked (Bertini & Wathieu, 2008). This secondary attribute can be a service, or the quality of the product. In addition it is expected that this can also be true for the intangible sustainability aspect of a product.
Attracting the consumers’ attention to a secondary attribute is one way to increase the consumers perceived value of the offer. In addition, transparency can also increase the consumers’ trust in the firm by appealing to their information need (Nelson, 1970). As discussed above, the consumers lack part of the information needed to make a satisfactory purchase decision. By increasing transparency they are given this information, thus making it easier to verify the intangible, secondary attribute.
In this subchapter an overview of the different types of transparency and what their effects are, is presented. The next subchapter will discuss the proposed full disclosure transparency strategy, how it works and why it might not work.
2.4 Full Disclosure Transparency
Looking at the all that is discussed above; the effects of transparency in general, today’s marketing environment and the characteristics of the sustainable fashion industry, this thesis proposes a new form of transparency to use in the sustainable fashion industry: full disclosure transparency. This type of transparency starts from cost transparency and takes it one step further by increasing the sensitivity of the information revealed even more. Full disclosure transparency entails that in addition to the distribution of the costs over the different actors in the supply chain, also the generated profit and the distribution of profit sharing is revealed to the consumer. This thesis defines full disclosure transparency as follows: a price setting tool which discloses information on how the proceeds are allocated to the actors in the supply chain, how much profit has been generated and if the profit is shared, according to what distribution this is done.
In order to register the effect of full disclosure transparency a measure for consumer behaviour must be used. For two major reasons the measure of willingness to buy was chosen.
The first reason is that the aim of this study is to provide a marketing tool for growing the sustainable fashion industry, not in monetary value, but in its size and overall impact. Measuring the effect of full disclosure transparency by willingness to buy, can also be seen as a measure for the commitment to the sustainable fashion industry. And commitment, or intent, is long term and will eventually or, in some cases directly, translate into higher sales numbers.
The second reason for choosing this measure is that it is a more fine grained measure which indicates how affected consumers are. Not every consumer might be affected by price setting in such a way that this makes him decide to purchase the product as opposed to not buying. Yet, he might be more affected by the advertisement with full disclosure transparency than by an advertisement without this transparency and this will be reflected in willingness to buy.
Full disclosure transparency should theoretically be able to increase the willingness to buy a sustainable product even more than cost transparency for two reasons. First, as previously discussed, revealing sensitive information increases consumers’ trust in the firm. Second, giving the consumer insight into the allocation of the proceeds and profit increases the price fairness.
The first reason has been discussed in more detail in the previous subchapter. Therefore it will not be comprehensively discussed here. In short, a firm can affect the consumer’s trust by revealing sensitive information. Because the firm reveals this information on its own initiative, the consumer will perceive this as honest, this favours his judgement about the firm’s motive (Wortman et al. 1976). Expected is that full disclosure transparency increases the consumers’ trust and reduces scepticism about sustainable products, which in turn can increase the likelihood of a purchase decision (Kim & Lee, 2009).
The second reason is that full disclosure transparency can increase a consumers’ judgement of price fairness. Price fairness begins with the basic premise that firms are entitled to a reference profit that, from a consumer’s perspective, is a reasonable surplus on top of the costs (Bolton et al. 2003). The first ones to research the relevance of perceived fairness in an economic analysis were Kahneman et al. (1986). They find that parsimony is not the only rationale behind purchase decisions, so is the judgement of price fairness. There are three reference points consumers use to evaluate price fairness: past prices, competitor’s prices and
costs (Bolton et al. 2003). The reference point can be based on looking back over time at past prices, looking across firms to competitor prices, or looking within the firm whether or not the profit made is reasonable in comparison to the costs. Prices compared favourably with the reference point are judged fair, and when they are unfavourable they are judged unfair (Bolton et al. 2003; Zeithaml, 1988).
As discussed in the previous subchapter, more information can guide a consumer to a feature of the product they might otherwise overlook (Bertini & Wathieu, 2008). Full disclosure transparency emphasizes the cost and profit structure, expected is that this will steer the consumers thought process towards using the costs and profit as a reference point for judgement. This opposed to using competitor prices for reference, which will be more likely to result in a lower perceived price fairness since sustainable fashion is generally priced higher than the traditional kind of fashion.
Once full disclosure transparency has increased the consumer’s perceived price fairness and trust, it is expected that this will influence consumer’s willingness to buy. The higher perceived price fairness and the more trustworthy image of the firm have both been shown to spur consumer behaviour. (Huppertz et al. 1978; Kahneman et al. 1986; Diller, 2008; Maxwell, 2002; Oh, 2000).
Why the proposed transparency type is especially suitable for the sustainable fashion industry will be considered here. To start, in the fashion industry consumers are starting to pay more attention to the ethics of fashion production. Consumers are aware of the fact that bad labour conditions, wages below the poverty line and child labour is what is making their clothes cheap. As noted before, the marketing climate is changing, a new, sustainable marketing dimension has arrived (Kotler, 2011). Firms can no longer afford to turn a blind eye to the ethics of fashion since especially in clothes consumers make inferences about the product
from its price (Rao & Monroe, 1988). As a result, more and more fair fashion brands are starting to appear, and more and more foundations are engaged in improving the labour conditions for foreign workers or certifying products which are made under ethical conditions. The second reason is that fashion is considered a luxury product which means that it is characterized by a high price elasticity (Hirschman & Holbrook, 1982; Corbellini & Saviolo, 2014).Because of this any changes in price, or price setting, will have a strong effect on the eventual willingness to buy. The third reason is that nowadays people are buying clothes not out of a basic need, but out of an emotional need. Clothes yield feelings of being beautiul, belonging, or power (Corbellini & Saviolo, 2014). Because of this emotional aspect consumers purchase involvement with clothes is high which means they are more likely to grasp any information regarding the product (O’Cass, 2000; Mittal, 1989). All in all, the sustainable fashion industry possesses the right characteristics to test the proposed full disclosure transparency.
As true of any subject, there is another side to the story which is presented in the previous text. In addition to the literature which suggests that transparency has a positive effect on the willingness to buy, there is literature which suggests that it might have the opposite effect. There are two factors which affect how consumers process and react to prices.
The first factor is the effort that is required to process the price (Morwitz, 1998). Increasing transparency means to increase the information provided to the consumer. Correspondingly, consumers have to invest more effort into deciphering what the given information means, and how they feel about that. It makes the forming of their judgement more complicated. For this reason the information in a full disclosure transparency price might be perceived as information overload (Labrecque et al. 2013). Too much information
has been shown to reduce consumers’ satisfaction and create low decision quality (Botti & Iyengar, 2006).
The second factor is the consumers’ motivation to process a price (Morwitz, 1998; MacInnis & Price, 1987). When information processing takes a lot of effort someone needs to have a lot of motivation to process it all. When they do not have the motivation consumers might respond by disregarding the additional information they have been given, or not accurately processing the information (Johnson & Payne, 1985). If this is the case, there will be no additional positive effect on the willingness to buy of full disclosure transparency as opposed to cost transparency.
In the case of sustainable fashion, a highly motivated consumer is someone who values sustainability and therefore has a higher likelihood of buying a sustainable product than someone who does not value sustainability. And research suggests that when consumers are planning on buying a product, they are more motivated to process the information given (Suri & Monroe, 1995). When this is the case the negative effects of more information will be counteracted.
This leads to believe that too much information can be harmful for the sales numbers of products. Nevertheless, this model is proposed for the sustainable fashion industry, this is a sympathetic cause for which more and more people are willing to invest time and money. Judging from these unique characteristics it is expected that the downside to transparency will not apply to full disclosure transparency. This leads to my first hypothesis:
H1: a sustainable fashion product that is presented with full disclosure transparency, instead
2.5 Other influential factors
The theory suggests that just adding full disclosure transparency is not enough to achieve an increase on willingness to buy. There are other factors involved in generating the hypothesized positive main effect. Reputation of the seller and the fairness of the distribution are factors which moderate the hypothesized effect of full disclosure transparency. They are discussed here.
2.5.1 Reputation of the Seller
In this heading the effect of the reputation of the seller is examined in more detail. As in social life, whether or not someone comes across as credible is of vital importance for the judgement we render, this is also true for economical transactions. Therefore it is expected that there is a moderating effect of the reputation of the seller on the relationship between full disclosure transparency and the willingness to buy.
As previously discussed, trust is of great importance for the credibility of a firm’s sustainable advertisement claim and thus, for the advertisement claim to be included in the consumer’s purchase decision (Kim & Lee, 2009). Therefore, when purchasing a sustainable product the reputation of the seller is considered by the consumers in terms of how much they trust the firm.
Trust, or reputation, is defined as the extent to which another party can be relied on with confidence (Chiou et al. 2002).
To start, intangible aspects of a product are inferred from the product’s price, yet also from the reputation of the seller according to the attribution theory (Campbell, 1999). Campbell (1999) finds that the reputation of the seller is indirectly influencing the inferred profit and motive of the firm which determines the consumer’s perceived price fairness. As
previously discussed, the perceived price fairness is a step in the consumer’s cognitive process of determining their willingness to buy a product. In the case of full disclosure transparency, the profit information is given to the consumer, therefore they do not have to infer it. This leads to believe that in the case of full disclosure transparency the seller’s reputation will influence only the inferred motive of the firm and thus the perceived price fairness.
Carlson and Weathers (2008) find that the reputation of the seller is a boundary condition for partitioned prices with more than two categories of cost allocation combined with an all-inclusive price. This manner of price setting shows close resemblance to the proposed full disclosure transparency manner of price setting. They examine whether more categories of cost allocation communicated through the price setting strategy affects consumers’ perceptions of price fairness. They found that more categories can negatively affect the perceptions of price fairness and purchase intentions in situations where the seller’s reputation suggested untrustworthiness. However, when the firm possessed a trustworthy reputation this effect evaporated.
Judging from these articles, full disclosure transparency is expected to have a stronger positive effect on willingness to buy for firms with a good, trustworthy reputation, than for firms with a bad, untrustworthy reputation.
Yet, the existing literature also presents a possible opposite effect. Consumers process information more thoroughly when they do not trust a firm (Cheema, 2008). Reasoning from this logic, the full disclosure transparency information might be more thoroughly assessed by the consumer when the firm is untrustworthy, thus giving full disclosure transparency a chance to affect them.
Nevertheless, when the firm is not trusted, consumers are more likely to attribute negative motives to the firm’s actions (Kim & Lee, 2009). This counteracts what Cheema (2008) suggests. And therefore expected is, while taking the characteristics of the sustainable industry into consideration, that the reputation of the seller is of particular importance in purchase decisions of sustainable fashion. From this follows the second hypothesis:
H2: the reputation of the seller moderates the relationship between full disclosure
transparency and the willingness to buy in the sustainable fashion industry.
2.5.2 Distributional fairness
As discussed above, people will assess an offer more carefully when more information is available to them (Bertini & Wathieu, 2008). Full disclosure transparency increases the information provided to the consumer and thus the consumer, taking their initial interest in the product into consideration, are also likely to processes this information, which will inherently lead to the consumer judging it. For this reason it is expected that consumers’ perceived fairness of the distribution of proceeds will influence whether a full disclosure transparency price setting has a positive effect on their willingness to buy.
Please note that distributional fairness and price fairness are two different notions. The first is a judgement about whether or not the people who manufactured the product have been fairly rewarded, this is the proposed moderating effect. The second is the final judgement of the consumer about whether or not he thinks the price asked by the firm is worth paying. In other words, price fairness is a step in the cognitive process with willingness to buy as an outcome. And distributional fairness is one factor which creates the perceived price fairness.
In varying levels, people are inequity averse. This means that people will try their best to prevent unfairness from being the result of their decisions, they do not only care about the consequences of their decisions for themselves, but also about the consequences for others (Filley, 1975; Bergh, 2008). As a result, people act against their own utility in order to create a fair outcome for others and themselves (Carter & Curry, 2010). This means that people are willing to pay a higher price, when this generates an outcome which is more fair. To judge whether or not the outcome of a purchase is more fair, the consumer needs the information to do so. Full disclosure transparency gives them the information to assess the fairness of their purchase.
Yet, consumers who are not specifically looking for a fair outcome initially, can be steered into considering the fairness by the pricing format as previously discussed (Bertini & Wathieu, 2008). The pricing format influences the amount of attention consumers invest in assessing the offer. By example, an all-inclusive price discourages thorough assessment of the offer. While the use of a partitioned price steers a consumer’s attention in the direction of a secondary attribute of the offer, in this case the sustainability of the product.
What is discussed in the previous paragraph is true for the partitioned price, but expected is that the same is true for the full disclosure transparency price setting. Because like a partitioned price, the format gives the consumer additional information which needs to be processed and cognitively assessed in order to create a judgement about the fairness of the price in front of them. When the consumer concludes that the actors along the supply chain have been fairly rewarded for their work in the production process it is expected that they will be more willing to buy the product. The opposite will happen when the consumer concludes that everybody was allowed their fair share.
The notion of distributional fairness does not only extend to the allocation of proceeds among the people in the supply chain, it also extends to the distribution of profit, in other words how much of the profit the firm allows themselves. As discussed above, price fairness is constructed by the inferred profit (Bolton et al. 2003). Except in this case the profit is a given and can thus be judged in the same as discussed above for the cost allocations. This leads to the third hypothesis:
H3: the fairness of the distribution moderates the relationship between full disclosure
transparency and the willingness to buy in the sustainable fashion industry.
Concluding – Full disclosure transparency is a proposed tool that can be used by firms to generate attention for social sustainability, which then reduces consumer’s scepticism born from the uncertainty in determining the true sustainability of a product. The cognitive process resulting from using full disclosure transparency is that it increases the perceived price fairness and increases the trust in the firm, which will in turn result in consumer behaviour, being willingness to buy. Expected is that this process will be moderated by the perceived fairness of the distribution and the reputation of the seller.
The next chapter sets out to give an overview of the approach taken to statistically test the hypothesized model.
3
Data and Method
This chapter will focus on the empirical setting of this research. First, the research design will be discussed. Second, the manner of data collection. At last, the composition of the sample and tested variables are considered.
3.1 Research Design
The empirical setting of this research is the pricing strategy in the sustainable fashion industry. When consumers buy sustainable fashion, the distribution of the costs over the different actors in the production process is of particular importance. How much a firm pays its suppliers or employees in foreign countries is a big determinator of how sustainable the product actually is. Revealing this information can be done in multiple ways with different types of transparency (see chapter 2.3).
The first objective of this research is to test whether increasing the detailedness and sensitivity of distributional information in the sustainable fashion industry is increasing consumers’ willingness to buy. The second objective is to test whether the reputation of the seller and the fairness of the distribution have a moderating effect on the relationship between the usage of full disclosure transparency and a consumers’ wilingness to buy.
Experiment - To answer the research question, test the hypotheses and ultimately obtain the two research objectives, a quantitative research strategy is most appropriate. As discussed in the introduction of this thesis, the aim of this research is to enable current and future sustainable fashion entrepreneurs to approach consumers in such a way that they are less sceptic and thereby are more willing to buy sustainable products. To prove that full disclosure transparency is able to achieve this, a significant difference in the willingness to buy as a reaction to cost transparency and the willingness to buy as a reaction to full
disclosure transparency needs to be established. This can be done most effectively through the use of an empirical, quantitative study, specifically an experiment in the form of an online survey. By manipulating the independent variable and the moderating variables, the change in the dependent variable can be attributed to the manipulations in the study (Saunders et al. 2012).
3.2 Data Collection
The aim of this experiment is to present to participants an advertisement which shows a white, sustainably produced t-shirt, all the while manipulating transparency, reputation of the seller, fairness of the distribution and measuring how this affects the participants’ willingness to buy. In order to conduct this experiment the usage of a detailed online survey is most suitable and was therefore used as data source.
The most important reason for using an online survey is that it reduces geographical dependence. This means that this manner of data collection has the ability to reach a larger and more diverse group of people than its offline counterpart. Another important advantage is that anonimity is easier to guarantee. Participants will make the survey at a place of their choosing where they feel that their anonimity is not compromised. This makes them feel more at ease and this results in more open and honest responses (Saunders et al. 2012).
As true of all research methods, there are not only advantages connected to an online survey. One disadvantage is that the information gathered is less detailed. Participants can only pick their answer out of a fixed number of responses, this means that their answer is greatly simplified. Yet, another disadvantage is that people might not pay as much attention to the last questions as they did to the first. (Saunders et al. 2012). The last disadvantage discussed here is the fact that there is little control over how many times participants fill out
the survey. In order to prevent bias resulting from the same participant taking the survey multiple times, the researcher opted for the option Prevent Ballot Box Stuffing. This installs a cookie on the participants’ technological device which later prevents them from taking the survey again.
To approach potential participants social media and e-mail was used. On the social networking website Facebook a message was sent out to connections, asking them to fill out the survey or share the message with their own connections. The original message was shared 13 times which casted a wide net for potential participants. In addition, an e-mail was sent to 83 acquaintances requesting them to participate in the survey.
No incentive was offered other than the chance to improve the knowledge about sustainable fashion industry. The upside to not offering an incentive is that people need to be intrinsically motivated to participate, which will result in more intensively weighed answers and a lower drop-out rate.
Content – In this paragraph the content of the online survey will be discussed. The empircial setting of this research is pricing strategies in the sustainable fashion industry. In the case of this research the setting is tailored to a fictional firm with a fictional name; Basic vs. Kramer. A fictional organisation was chosen in order to control for prior knowledge of the firm.
The first part of the survey was comprised of an introduction to the survey with a general outline of the topic. Participants were informed on how long completion of the survey would take and that it would be anonymous. In addition, what was understood by ‘sustainable’, was explained into detail. In the second part of the survey, the pretest, data on the initial willingness to buy the advertised product was collected. Participants were shown a Basic vs. Kramer advertisement with a white t-shirt for (€19.95), modified to their gender,
and with altered levels of reputation of the seller. They were asked on a scale from 1 to 10, how willing they were to buy the t-shirt. The third part of the survey consisted of 8 items and one question by which a participants’ sustainable personality was measured. In the fourth part of the survey, two more manipulations were entered which resulted in 8 treatments. Participants were randomly assigned to one of the treatments and asked to respond to 22 items and 2 questions. These questions pertained to measuring perceived reputation of the seller and the perceived fairness of the distribution. In the last part of the survey participants were asked 5 more questions pertaining to demographics. Also, they were very much thanked for their participation. The entire survey can be found in appendix A. In total, 42 questions were asked and questions 3, 36, 38, 39, 40, 41, 42 of the survey were not used in this study.
Manipulations – In this paragraph the different manipulations will be discussed in more detail. Three manipulations were created by making advertisements which differed at three points, this resulted in 8 different treatments which will be discussed in more detail in chapter 4.1.1.
Transparency was manipulated into two levels (0=cost transparency and 1=full disclosure transparency). The first level of cost transparency serves as a baseline since full disclosure transparency is what this study proposes. The transparency levels were created through the use of icons representing stages in the production process and the corresponding costs per stage. In the cost transparency condition (see appendix B) six stages were given: cotton, cutting, sewing, painting, finishing and transportation. In addition, the sum of the production costs was given (Mohan et al. 2014). The second level, full disclosure transparency (see appendix C), was created through the use of eight icons, representing the six stages in the production process, overhead costs and the generated profit, with the accompanying € amounts. Also in this condition the total production costs were given, in
addition the percentages of the agreed distribution of the profit between the Fair Wear Foundation and Basic vs. Kramer were presented.
Reputation of the seller was manipulated into two levels by either using no Fair Wear Label or presenting a Fair Wear Label above the price in the advertisement (0=no label, 1=label). A label means that the product on offer is confirmed as meeting the sustainability standards set by the Fair Wear Foundation4 and is an indicator of reputation (Carlson & Weathers, 2008).
Fairness of the distribution was likewise manipulated into two levels (0=unfair distribution, 1=fair distribution) by altering the distribution of the numbers accompanying the icons. In the unfair distribution condition the total production costs (the sum of the six stages in the production process) were €9.90. Additionally in the full disclosure transparency condition, the reported profit was €7.25 of which 10% went to the Fair Wear Foundation and 90% to Basic vs. Kramer. In the fair distribution condition the production costs were €15.90. And in the full disclosure transparency condition a profit of €1.25 was showed, of which 50% went to the Fair Fashion Foundation and 50% to Basic vs. Kramer.
3.3 Sample
There were no restrictions to the collection of participants. Everybody buys, will buy, or has bought clothes in their life and thus the data people provide is of use to this study. As described in the previous subchapter, the method of data collection was an online survey created in Qualtrics. To bring the survey to the attention of potential participants, a link to the survey was spread through the social media site Facebook, by the researcher and close
4 The Fair Wear Foundation is “an independent, non-profit organisation which works with companies and factories to imporve labour conditions in garment workers” (see
acquaintances. In addition, 83 potential participants were requested to fill out the survey through an e-mail.
Over a period of three weeks, responses were collected. At the end of this period 190 participants had started the survey. Of those who started, only 107 participants finished the survey by filling out all the questions. The reasons for dropping out of the survey are probably numerous, yet a lot of people who started the survey reported back and noted that there were technical problems when using the Qualtrics website. The survey would not fully load or the advertisements were not displayed in the right way. Because of this obstacle a number of participants droped out, which resulted in a lower response rate (56.32%) than anticipated.
Age - The age of the participants was recorded through the use of one item with four possilble answers (1 = younger than 20, 2 = 20-35, 3 = 36-60 and 4 = 60 or older). The answers responded to categories which represent four broad stages of life. The category ‘younger than 20’ corresponds to adolescence. The category ’20-35’ corresponds to early adulthood. The category ’36-60’ corresponds to mature adulthood. And the last category ’60 or older’ corresponds to late adulthood.
Of the 107 participants who filled out the entire survey, 13 participants (12.15%) stated that they were younger than 20, 54 participants (50.47%) reported to being between the ages of 20 and 35, 38 participants (35.51%) indicated that they were between the ages of 36 and 60 and only 2 participants (1.87%) categorized themselves as being over 60 years old.
The age groups in the sample are distributed very different from the Dutch population as a whole (see table 1). There are a number of reasons for this discrepancy. First off, the manner of data collection was through social media and e-mail, which means that the survey was advertised mostly to acquaintances who are in the same age group as the researcher (20-35). Secondly, by making use of an online survey there is a risk of few participants in the age
group of ‘older than 60’. Elderly people have less experience with computers and generally do not actively participate in social media. The third, and most obvious, reason for the difference between the sample and the Dutch population is the sample size. A small sample size is more likely to result in discrepancies between the population and the sample than a larger sample size.
Table 1 Distribution of ages in the Netherlands in 2014 compared to sample in %
Age <20 20-35 36-60 >60
Dutch Population in 2014 22.64% 19.76% 35.01% 22.21%
Sample (N=107) 12.15% 50.47% 35.51% 1.87%
Source: CBS 2014
Gender - The gender of the sample was collected by one question with two possible answers: male or female (1 = male and 2 = female). Of the 107 participants who filled out the survey 37 (34.58%) reported to be male and 70 (65.42%) reported to be female. The distribution of gender in the sample showed a discrepancy with the distribution of the Dutch population (see table 2). Taking into account the manner of data collection the distribution of the sample is what can be reasonably expected. In addition, the small size of the sample (N=107) also attributes to the uneven distribution of gender. The most pertinent reason for this discrepancy is that, in general, women are more involved in buying fashion than men are (O’Cass, 2000). Therefore it is more likely that a woman instead of a man will be pursuaded to fill out this survey.
Table 2 Distribution of gender in the Netherlands in 2015 compared to sample in %
Gender Male Female
Dutch Population in 2014 49.50% 50.50%
Sample (N=107) 34.58% 65.42%
Potential bias – The sampling procedure, being collecting data through the use of social media, specifically Facebook, and by sending out e-mails, has been justified above. This does not mean that there is zero risk at bias in the sample. Due to self-selection, the number of people with a sustainable lifestyle can be overrepresented in the sample. People might feel like they have a chance at helping the sustainable fashion industry. This might also affect how they answer certain questions. The effect of self-selection in this experiment might be strenghtened due to the absence of a financial or materialistic incentive to fill out the survey.
As discussed previously there is a risk at bias which is created through targeting people through social media. Active users on Facebook are younger than the average Dutch person. In addition, only a small group of elderly people are active on Facebook and possess enough technological understanding to successfully complete the online survey. This means that most of the people who came into contact with the message about the survey were in the ’20-35’ category and only a few in the category ‘>60’ were able to finish the survey. And the fact that this study focuses on fashion can create a bias since this attracts more women than men.
3.4 Variables
The dependent variable was collected using an experiment which was conducted in the form of an online survey. The independent variable and the two moderator variables were manipulated between participants, which created 8 different treatments. In addition, two control variables were collected. This subchapter gives a description of the variables used in this study.
Dependent variable – The process of data collection set out to collect one dependent variable: willingness to buy. Participants’ willingness to buy a sustainable, white t-shirt for €19.95 was
measured on a scale from 1 to 10. The first time participants were asked this question without any additional information about the distribution of the proceeds. The second time they were asked exactly the same question, but now in one of the 8 transparent conditions. The aim is to see if the if the full disclosure transparency is able to positively influence consumers’ willingness to buy.
Independent variable – The independent variable in this experiment is transparency. As discussed in subchapter 3.2 this variable was altered in two levels: cost transparency and full disclosure transparency.
Moderator variable – In this study two moderator variables are tested: the reputation of the seller and the fairness of the distribution. Like the independent variable, these variables were manipulated at two levels. Reputation conditions were altered by either showing a Fair Wear Label or no Fair Wear Label. And the fairness of the distribution was manipulated by changing the allocation of costs over the actors in the supply chain into either a fair distribution or an unfair distribution.
Control variables – This study controlled for two variables: sustainable personality and consumer’s initial willingness to buy.
A sustainable personality can be an important predictor of willingness to buy. People with high sustainability values have been shown to adjust their behaviour accordingly. They buy more sustainable products than someone with less sustainable values (Thøgersen & Ölander, 2002). In addition, participants with a sustainable personality might be more motivated to assess the extra information they have been given than participants who do not have these values. The variable sustainable personality was measured by 9 items and one
question asking the participants: would you buy more sustainable clothes if you had more money? (1=agree, 2=disagree, 3=I only buy sustainable clothes). The items were all designed to find out how participants think about sustainability, whether they implement a sustinable lifestyle, and how they feel about sustainable fashion. There were five items which had to be corrected due to reverse coding. The question was also coded in a meaningless way for which it was corrected. And due to the uneven answering possibilities in the questions, this scale needed to be standardized into z-values. After excluding three items from the scale it could be concluded that the scale was internally reliable (Cronbach’s Alpha α=.71).
Additionally, a control was performed for participants’ initial willingness to buy. In other words, to exclude the variance which can be attributed to other things than the manipulation in the experiment, such as the fact that the participants simply just liked or not liked the style of the t-shirt. The variable of initial willingness to buy was created by asking the participants how willing they were to buy the the advertised t-shirt, on a scale from 1 to 10. This variable was collected in the pretest.
Measurement – In order to test the hypotheses this study makes use of ANOVA and ANCOVA analyses. The IBM SPSS program (version 23) was used for all the statistical anlyses in this thesis.
