Sustainable New Product Success -

Sustainable New Product Success

-Does the Brand make a difference?

by

Annette Kloske

Sustainable New Product Success

-Does the Brand make a difference?

Submitted to the:

Faculty of Economics and Business, Marketing University of Groningen

Supervisor: dr. Jenny van Doorn

Data of the Author:

Student Number S2417871

Table of Contents

Abstract   II  

List  of  Figures   III  

List  of  Tables   IV  

1.   Introduction   1  

2.   Literature Review   5  

2.1.   Success and Failure of New Product Introduction   5  

2.2.   Consumer Reactions to Sustainable Products   6  

2.3.   Corporate Associations and their Significance for Sustainable New Product Introductions   8  

3.   Conceptual Model and Hypotheses   12  

3. 1.   Conceptual Model   12  

3. 2.   Hypotheses   14  

3.2.1.   Impact of Sustainable Label on the Success of New Product Introductions   14   3.2.2.   Effect of a Brand’s Price - quality associations on Sustainable New Product Introductions   15   3.2.3.   Effect of Brand Innovativeness on Sustainable New Product Introductions   16   3.2.4.   Effect of CSR Associations on Sustainable New Product Introductions   17  

4.   Methodology   20  

4.1.   Data Collection and Measures   20  

4.2.   Model   26  

5.   Results   29  

6.   Discussion   38  

7.   Research limitations and future research   40  

8.   Acknowledgement   42  

9.   References   43  

APPENDIX A: CORRELATION TABLE   54  

APPENDIX B: MEASURES   55  

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Figure  1:  Conceptual  Model  ...  13  

Figure  2:  Distribution  Unit  Sales  ...  27  

Figure  3:  Interaction  Plot  Price-­‐Quality  Brand  and  Product  Type  ...  33  

Figure  4:  Interaction  Plot  Brand  Innovativeness  and  Product  Type  ...  34  

Figure  5:  Interaction  Plot  CSR  Efforts  and  Product  Type  ...  35  

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Table  1:  Demographics  ...  23  

Table  2:  Measures  and  Reliability  ...  25  

Table  3:  Results  (1)  ...  31  

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Faced with intense competition and constantly changing consumer preferences, companies have to develop new products to survive and ensure company growth (Lee & Connor, 2003; Gielens & Steenkamp, 2007). The number of new products entering the market has substantially increased; for instance, in the US, the number of new SKU in grocery stores has increased by 50% over the last seven years, with an upward tendency (Food Marketing Institute, 2009; Chatterjee, Küpper, Mariager, Moore & Reis, 2010). However, launching new products is not always crowned with success; in fact, quite the opposite is the case (Goldenberg, Lehmann & Mazursky, 2001; Golder & Tellis, 1993; Steenkamp & Gielens, 2003). With three out of four new products failing in the first year of introduction, companies suffer substantial drawbacks (O’ Reilly, 2014).

Of all consumer packaged goods entering the market, it is evident that sustainable products, i.e. organic and fair-trade products, have been particularly numerous (e.g. Storelli, 2014; Food Marketing Institute 2009; Moore, 2004). An organic label marks products that are produced in line with strict production and packaging labeling guidelines for inter alia European Countries (Guilabert & Wood, 2013), while fair-trade labels are related to goods from developing countries that have been produced following social guidelines (Fairtrade, 2011).

by 7% between 2012 and 2013 (Fairtrade Deutschland, 2013; Statista, 2014). In the same vein, Kotler (2011) promises increasing market share for environmentally friendly products, while Marian, Chrysochu, Krystallis and Thøgersen (2014) have estimated the global organic food market will grow by 250% within the next decade. Retailers and manufacturers alike can benefit from the potential behind the sustainable products (Gupta & Pirsch, 2008; Du, Bhattacharya & Sen, 2007). Higher margins for sustainable products and an improved image make sustainable new product introductions appear a more attractive opportunity than conventional new products (Gupta et al., 2008; Bezawada & Pauwels, 2013; Olsen, Slotegraaf & Chandukala, 2014).

Nonetheless, market shares for sustainable products in Europe remain low. In 2009, Poland and Hungary were characterized by low market shares ranging between 0.1% and 0.3%, whereas Switzerland and Austria demonstrated moderately higher market shares of 5.2% and 6.0%, respectively (Kilcher, Willer, Huber, Frieden, Schmutz & Schmid, 2011). Research has shown that although consumers hold positive attitudes towards sustainable products, barriers such as price premiums, unconvincing quality, and inconvenient availability hamper sustainable consumption (Saba & Messina, 2003; Bezwada & Pauwels, 2013; Bourn & Prescott, 2002; Gleim, Smith, Andrews & Cronin, 2013). This therefore raises the question of whether it is wise to launch sustainable new product introductions and what factors drive the sales of new sustainable product introductions.

introduction, research is very limited at present. To date, only one study has particularly investigated sustainable new product introductions by focusing on their effects on consumers’ brand attitude. In contrast to previous findings, which pointed at negative effects of sustainable products like green washing or quality issues, Olsen et al. (2014) find that sustainable new products enhance consumers’ attitude towards brands, thus demonstrating a positive effect (Laufer, 2003; Bourn & Prescott, 2002). This article aims to extend prior research by addressing several brand-specific aspects in the realm of new sustainable product introductions with respect to new product success.

We particularly focus on brands as they significantly influence consumers’ decision-making (Aaker & Keller, 1990; Steenkamp & Gielens, 2003). This study also follows the call for more research concerning the effects of new sustainable products on firm performance (Barczak, 2012). Our research builds on a model first introduced by Brown & Dacin (1997). This model is built on two general types of associations that consumers hold with a company: (1) corporate ability (CA) and (2) corporate social responsibility (CSR), whereby the former is defined as a corporation’s expertise in producing and delivering high quality products and goods and CSR in a broad sense is referred to as a managerial obligation to willfully preserve both the interest of society as a whole and the organizations (Brown & Dacin, 1997; Keith & Blomstrom, 1975). Extending the work of Brown & Dacin (1997), we further examine two dimensions of CA, i.e. quality and innovativeness. Previous research has shown that these associations influence consumers’ product evaluation and thus they are also thought to influence a new product's success on the market (e.g.Berens, van Riel & van Bruggen, 2005; Brown & Dacin, 1997).

influenced by the associations that consumers hold towards brands with respect to price -quality, innovativeness and CSR efforts.

This research contributes to the existing literature in several ways. First, we add to the literature on new product development by investigating the success of new sustainable product innovations. Second, we contribute to brand extension literature, by investigating whether certain brand associations – with respect to price - quality, innovativeness and CSR – affect the success of sustainable new product introduction. Gaining knowledge on this front would allow brand managers to decide whether or not a certain brand image is appropriate for launching a sustainable new product introduction thus allowing some companies to save vast amounts of money on development and launching costs.

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Research recognizes new product introduction makes up an important part of marketing activities among companies, helping them to strengthen their market position, increase their market share and value and ensure their survival in the marketplace (Gielens & Steenkamp, 2007; Banbury & Mitchell, 1995; Chaney & Devinney, 1992; Lee et al., 2003). To develop and launch new products, firms invest large amounts of money, which is lost if markets are unreceptive (Pauwels, Silva-Risso, Srinivasan & Hanssens, 2004; Krishnan & Zhu, 2006; Gielens & Steenkamp, 2003; Holak & Lehmann, 1990). To the chagrin of companies, many times investments costs are lost as the majority of new products fail (White, 2006; Sivadas & Dwyer, 2000). New products’ success has generally been found to depend upon a number of factors, including the strategy employed by the firm and the marketplace characteristics (Henard & Szymanski, 2001). Under the latter, market potential refers to the anticipated growth in customers and, more generally, to the customer demand indicating that the success of new products is dependent on their acceptance by the consumers. However, from a consumer’s perspective, adopting or trying a new product is usually accompanied by risk, particularly in the case of low product knowledge (Rogers, 1995).

characteristics, (2) marketing communication, (3) category characteristics and (4) marketing strategy.

In their study, they found consumers’ innovativeness to be positively related to new product adoption, while their susceptibility to the normative was negatively related. Furthermore, marketing communication tools such as advertising, features and displays encouraged new product adoption. Categories characterized by a high density of existing brands, aggressive competitive reactions and high stockpile tendencies negatively affected the success of new product. In contrast, categories marked by high impulse buying rates facilitated its success. With respect to marketing strategies, the authors found the degree of novelty of a product, the distribution coverage and the type of brand launching the new product to be crucial to its success. More specifically, they found that strong brands are more successful in launching new products than weak brands. The authors argue that strong brands prosper from a higher level of awareness, positive associations, high and constant advertising expenditures and marketing communication efforts in the form of features and displays, serving as a signal of quality for the new products, which in turn is crucial in consumers’ purchase decisions.

In 2007, Gielens and Steenkampextended their previous research by investigating the acceptance of newly introduced products in a cross-cultural study. They confirmed their previous findings with respect to innovativeness of the product, the type of brand introducing it on to the market and the category characteristics already discussed.

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development, extensive research has been carried out to investigate drivers of and barriers to sustainable consumption (e.g. Gleim et al., 2013; McEachern & McClean, 2002; Zanoli & Naspetti, 2003).

With respect to drivers of sustainable consumption, health was found to be a strong motive (Zanoli & Naspetti, 2003; Chen, 2009; McEachern & McClean, 2002). Additionally, consumers perceive the taste of sustainable products to be better than that of conventional food, which in turn is one of the most important aspects when deciding to buy sustainable products (Kihlberg & Risvik, 2007; Magnusson, Arvola, Koivisto Hursti, Åberg & Sjödén, 2001). Furthermore, food safety plays a significant role in a consumer’s decision to purchase sustainable products over non-sustainable (McEachern & McClean, 2002).

However, despite the fact that consumers hold positive attitudes towards and give good reasons for sustainable product consumption, the overall market share of sustainable products remains low (Saba & Messina, 2003; Kihlberg & Risvik, 2007; Marian et al., 2014; Magnusson et al., 2001, Willer & Lernoud, 2014). This phenomenon sparked a new stream of research aiming to investigate the intention-behavior gap in the realm of sustainable consumption. Vermeir & Verbeke (2006) found sustainable products’ low availability and consumers’ uncertainty towards the label to act as barriers for sustainable consumption. Luchs, Naylor Irwin & Raghunathan (2010) found that the “sustainability liability” might hinder consumers’ sustainable consumption as such products are often negatively evaluated on strength attributes, i.e. attributes associated with power, which are nonetheless desired in products related to cleaning, for example.

Nonetheless, the question arises concerning whether these findings might influence consumers’ decision-making with respect to new sustainable products in comparison to their non-sustainable counterparts. Newman, Gorlin & Dhar (2014) were the first to focus their investigation on the effect of sustainable attributes on quality perceptions of innovations. The authors demonstrate that a company’s intention behind the development of a new product influences the consumers’ evaluation of it. The authors showed that the consumers’ purchase intention is hampered when they perceive a new product to be intentionally developed in a sustainable way as opposed to when the sustainability of the innovation is perceived as a positive yet unintended by-product. They base their results on the consumers’ lay theory about resource allocation. According to the consumers’ lay theory, a firm’s resources are zero-sum, such that a new product’s advantage in one product dimension will be detrimental to another dimension. With respect to intended vs. unintended sustainable enhancement, consumers believe that when sustainability is an intended new product attribute, the resources necessary to achieve this are taken at the expense of the overall product quality.

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As said, consumers hold two distinctive coexisting corporate associations: (1) corporate ability and (2) corporate social responsibility (Brown & Dacin, 1997). Depending on the associations that corporations want to convey, they will concentrate on a highly skilled workforce, outstanding research and development, manufacturing expertise, innovation and customer orientation or environmental friendliness, social commitment and corporate philanthropy.

The positive effect of CSR associations on consumer behavior has been studied extensively. For example, Gupta & Pirsch (2008) examined the effect of CSR efforts on retail store image. They found that CSR activities enhance retail store image by simultaneously increasing consumers’ levels of satisfaction and loyalty. Klein & Dawar (2004) found a positive effect of CSR in times of product harm crisis. More specifically, they found CSR activities to have a knock on effect on product evaluations in crises such that CSR initiatives can prevent a brand from suffering serious damage.

Du et al. (2007) examine the effect of CSR on a brand level. In their study, they investigate the benefits of a brand’s strategic positioning on CSR, i.e. not only engaging in CSR activities but also incorporating CSR into its core business strategy. They find that if consumers are aware of a brand’s CSR, they not only believe that the brand is socially responsible but also that those brands excel in CSR-unrelated dimensions, such as CA, i.e. the ability to produce high quality products. Furthermore, they find that consumers’ CSR beliefs enhance their long-term loyalty and advocacy behavior. Thus, overall research suggests a positive effect of CSR on consumers’ decision-making.

Apart from treating CA as a whole, it can be broken down into two dimensions: (1) expertise in producing new products, i.e. innovativeness, and (2) producing new products of high quality. (1) Associations of a corporation/brand’s innovativeness involve a consumer’s perception concerning its ability to regularly introduce novel products that match and satisfy his/her needs well (Schumpeter, 1934; Danneels & Kleinschmidt, 2011; Park, Jaworski & MacInnis, 1986; Reichheld & Sasser, 1990). An innovative company can be associated with a “first mover”, namely a pioneer that is known to launch product innovations first within the market and earn profits accordingly (Kerin, Varadarajan & Peterson, 1992; Carow, Heron & Saxton, 2004).

encompass the belief in pioneering brands being more reliable, more trustworthy, of higher quality, more sophisticated and generally superior. Positive attitudes and perceptions towards innovative brands are suggested to aid positive behavioral intentions, i.e. purchase preferences and actual behavior.

With respect to the (2) high quality aspect of the CA, we refer to literature on strategic positioning, which suggests that quality and price are the two dimensions in which brands/corporations compete (Lemon & Nowlis, 2002; Verhoef, Langerak & Donkers, 2007). Concentrating on the industry of CPG research divides brands with respect to these two dimensions into two groups: quality leaders, which concern brands of high quality at high prices, and price leaders, which offer low quality at low prices (de Wulf, Odekerken-Schröder, Goedertier, & Van Ossel, 2005; Lemon & Nowlis, 2002). As research in consumer behavior considers them as pivotal motives, particularly in low involvement situations as in the industry of CPG, we adhere to this distinction (Zeithaml, 1988; Russell & Bolton, 1988; Quelch & Harding, 1996; Lemon & Nowlis, 2002).

1990). This so-called “halo effect”, a term originating from cognitive psychology, has been proven by studies conducted in the fields of brand extension, which have found quality brands to be more successful in introducing new products because consumers plausibly believe that new products are also of high quality (Thorndike, 1920; Han, 1989; Aaker & Keller, 1990; Bottomley & Doyle, 1996).

It should be noted that consumers can hold associations on different levels, i.e. the corporate or company level, the brand level or both. Like Du, et al. (2007), we use company and brand interchangeably to apprehend the spectrum of company-brand relationships, i.e. corporate brands to individual brands.

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Since research has shown that consumers evaluate products differently based upon whether they are sustainable, we assume that a sustainability label influences the success in terms of sales of a new product introduction (Yiridoe, Bonti-Ankomah & Martin, 2005). As previously mentioned, sustainable consumption has become a strong market trend and research likewise estimates a growing market share for these types of products (Marian et al.,

2014). This in turn is a promising sign for new sustainable product instructions: with an increasing demand, the new sustainable product might fall on fertile ground. However, important decision-making attributes such as quality might be at stake, given that quality issues have been found to hinder sustainable consumption and thus might be an obstacle to the success of new sustainable product introductions (e.g. Bourn & Prescott, 2002).

new product introductions. In particular, we examine the influence of consumers’ associations regarding a brand’s CA and CSR efforts in this respect, whereby CA is differentiated into brand quality and brand innovativeness.

We chose CSR as a factor in our model with previous research having highlighted that in addition to demonstrating rewarding behaviors such as loyalty and advocacy, consumers also evaluate new products differently (Du et al., 2007; Brown & Dacin, 1997; Madrigal, 2000). Since quality is one of the key dimensions in which brands compete in the market place, as well as a major driver of consumers’ purchase intentions (Lemon & Nowlis, 2002; Tsiotsou, 2006), we opted to include a brand’s quality motivations in our model. Finally, brand innovativeness was chosen since these brands are likely to be considered industry pioneers through constantly developing new products. Consequently, this fosters their prestigious and distinctive status compared with rival brands, thus rendering them attractive for consumers. Figure 1 displays our final model.

FIGURE 1: CONCEPTUAL MODEL

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3.2.1. IMPACT OF SUSTAINABLE LABEL ON THE SUCCESS OF NEW PRODUCT

INTRODUCTIONS

Given the option of two or more alternatives, consumers are able to balance their respective costs and benefits to maximize utility (Homans, 1958). The costs of new products include expenditure on the product itself, as well as the cost of seeking out and evaluating a product. When the perceived ratio of benefits to costs, i.e. the value assigned to a product, is greater for one of the alternatives, consumers will engage in desirable behavior, i.e. choosing that particular product (Geller, 1992; Chang & Wildt, 1994).

Translating this notion to consumer decisions between sustainable new products and non-sustainable ones, the sustainable new product needs to hold greater value than that of its non-sustainable alternative. Due to the typically higher prices of sustainable products, this is often an obstacle to sustainable consumption (e.g. Gleim et al., 2013). However, in times of new product introductions, the higher price could also be perceived as a quality indictor, thus positively driving consumers’ purchase intentions (Taylor & Baker, 1994; Rao & Monroe, 1989). Additionally, Bearden and Shimp (1982) found that consumers use price as an extrinsic cue to reduced perceived risk, enhancing their affective response to new products. Nonetheless, the benefits still need to stand in optimal relation to the price to ensure the greater attractiveness of a sustainable product (Cooper, 1994).

The potential benefits of a product include performance or quality; however, several studies have suggested that consumers doubt both the quality and performance of sustainable products in certain categories (van Doorn & Verhoef, 2011; Luchs, Naylor, Irwin &

that the perceived price/benefits ratio (i.e. value) of the sustainable new product introduction is less optimal from consumers’ perspective. In contrast, given that new non-sustainable products are usually lower in price, the product quality is not as readily questioned, thus presenting a more desirable option for consumers (Cooper & Kleinschmidt, 1995).

Furthermore, consumers try to avoid engaging with extensive information and elaborative cognitive processing, particularly in low involvement situations such as CPG (Petty & Cacioppo, 1986). Therefore, while noting the higher prices of sustainable products, consumers might fail to consider the health advantages offered by the environmentally-friendly production processes for which they are paying a premium, such as the use of fewer pesticides (Bourn & Prescott, 2002).

Vuylsteke, Vackier, Verbeke & van Huylenbroeck (2004) argue that despite consumers’ positive attitudes towards sustainable products, low involvement might hinder consumers from changing their habits from non-sustainable products to sustainable ones, thus predicting their choice for a non-sustainable new product over a sustainable one. Consequently, we formulate the following hypothesis:

H1: Sustainable new product introductions are less successful in terms of unit sales than non-sustainable new product introductions.

3.2.2. EFFECT OF A BRAND’S PRICE - QUALITY ASSOCIATIONS ON SUSTAINABLE NEW

PRODUCT INTRODUCTIONS

products prior to their purchase, they employ such associations to evaluate the brand’s new products (Aaker & Keller, 1990). This transfer of associations can be particularly important for new sustainable products, with research showing that consumers are likely to doubt the quality of new sustainable products (Newman et al., 2014). This is rooted in consumers’ lay theory that a brand’s resources to develop a new sustainable product are zero-sum, i.e. resources used to develop the product in a sustainable way reduce those available to create a product of good quality (Chernev, 2007, Newman et al., 2014).

Therefore, choosing brands known for their quality products could reflect a risk reducing strategy for consumers in the case of uncertainty about the quality of a new sustainable product. Indeed, research supports the idea that people’s positive brand associations, particularly with respect to quality, are transferred to their new products (Aaker & Keller, 1990). In turn, this can offset negative quality associations concerning sustainable new product introductions. Furthermore, with quality being a key factor in consumers’ purchase decisions, it is plausible that consumers might opt for known quality brands when they hold suspicions about the sustainability aspect of the product being detrimental to its quality (Tsitsou, 2006; Erdem, Swait & Louviere, 2002). Therefore, we hypothesize the following:

H2: Stronger high price- high quality associations with a brand enhance the success of sustainable new products in terms of unit sales.

3.2.3. EFFECT OF BRAND INNOVATIVENESS ON SUSTAINABLE NEW PRODUCT

INTRODUCTIONS

thus fostering an image of being experienced and sophisticated in this respect (Alpert et, al. 1994; 1995). Indeed, such a reputation can prove valuable given consumers’ natural tendency to assume that sustainable new products lack the quality of their non-sustainable counterparts, based upon the notion that resources invested into making the product are zero-sum (Newman et al., 2014). Accordingly, such connotations of vast experience and sophistication should enable innovative brands to elicit credibility among consumers in terms of spending resources effectively, whereby they are able to regularly introduce well-enhanced new products that meet their consumers’ needs. In fact, research suggests that consumers’ positive associations developed based upon a brand’s previous successful products are transferred to its new products (Aaker & Keller, 1990). Therefore, we formulate the following hypothesis:

H3: Stronger innovativeness associations with respect to a brand enhance the success of sustainable new product introductions in terms of unit sales.

3.2.4. EFFECT OF CSR ASSOCIATIONS ON SUSTAINABLE NEW PRODUCT

INTRODUCTIONS

long-standing sustainable products, but also to those that are new to the market (Newman et al., 2014).

A second important notion with respect to new products is Du et al.’s (2007) claim that consumers demonstrate stronger advocacy behavior towards CSR brands than those competing on other dimensions, such as product leadership. Overall, CSR brands have a competitive advantage with respect to consumers trying new products, given that consumer advocacy behavior encompasses the willingness to explore new offerings.

Next, because CSR brands are positively associated with good causes, we expect consumers to believe that sustainable new product introductions are linked with good ethical and/or environmental standards. The importance of trust in the sustainability of a product is highlighted by the lack of trust in the certification of sustainable products and the sustainability of the product itself being cited as barriers to sustainable consumption (e.g. Gleim et al., 2013; Krystallis, Chryssohoidis & Perrea, 2008). Our assumption is based upon previous research showing that the fit between associations and the products enhances product evaluations (Madrigal, 2000). More importantly, Madrigal (2000) states that a company’s CSR associations also affect the product-relevant attribute, namely the evaluation of its sustainability in this case, thus indicating that associations held with a company are transferred to product attributes; indeed, this is in line with findings from brand extension literature (Aaker & Keller, 1990). Research in this area has examined brand associations such as quality being transferred to the appraisal of a product, whereby the “fit” between the brand association and the product is considered to moderate the relationship. Maheswaran et al. (1992) additionally ascertained that brand associations are particularly influential in low involvement situations such as the consumer packaged goods industry.

products (Pivato, Misani & Tencati, 2008). This implies that the fit between company associations and the product (1) affects the transfer of associations towards the latter, while (2) it simultaneously enhances trust in the product’s sustainability, which is important given that trust has been found to be one of the major barriers to sustainable consumption, as mentioned earlier. Based on the aforementioned arguments we formulate the following hypothesis:

H4: Stronger CSR associations with respect to a brand enhance the success of sustainable new product

introductions in terms of unit sales. Covariates

We include in eight covariates in our model that can be classified as marketing and market factors. As marketing factors, we first include price promotions as a covariate. Price promotions are a classical marketing instrument, which stimulate the sales of products. They have been shown to exert a dramatic and immediate impact on product sales, partly caused by consumers’ brand switching (Gupta, 1988). Next, we incorporate both current and lag advertising expenditures of brands, as advertising not only directly affects product sales, but also has a long-term effect (van Heerde, Gijsenberg, Dekimpe & Steenkamp, 2013). In line with the supply/demand theory, we argue that the relative price of a product affects its sales, since lower prices induce higher demands. Next, we include distribution as a covariate in our model, as it is an essential part of a product’s marketing mix and has been highlighted as an important dimension for a new product’s success (Cooper, 1979). Additionally we control for advertising activities of brands within the same category, as Steenkamp & Gielens (2003) have shown that heavy simultaneous advertisement for competing products in the same category was found to significantly lower a new product’s success. Again, we also include the lag version as we assume the effect to endure over time, following van Heerde et al. (2013).

Steenkamp, 2007). We also include a product’s purchase frequency, as it was found to affect a new product’s success in the market (Cooper & Kleinschmidt, 1987). Next, we control for the time at which a product was introduced on to the market, as well as for seasonal effects and unit sales from the previous month (Rogers, 1979; Radas & Shugan, 1998).

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Our hypotheses were tested by a combination of two data sets. The first data set encompassed data with respect to different brand dimensions such as price - quality, innovativeness and CSR efforts; the second one contained the current sales data of the new products.

New product success. We collected sales data on 883 new products that were launched in

the Netherlands between 2008-2010. These products were introduced by 66 brands in 12 categories, including a wide range of food and household care products.

Overall, 55 (6.6%) of these products were sustainable and 826 (93.4%) were non-sustainable, encompassing both organic and fair-trade products. Over the observation period, 306,215 new product introductions were sold, of which 294,125 were non-sustainable new product introductions and 12.090 were sustainable new product introductions.

The success of new products was measured with respect to their unit sales over a period of 12 months, as industry analysis considers the first twelve months to be a critical time frame for determining the success or failure of a product in the CPG industry (Ernst & Young and AC Nielsen, 2000).

and were less commonly placed on price promotion. Furthermore, we find a negative correlation between sustainable products and category advertisement, implying that new sustainable products were introduced in categories in which competitors spend less money on advertisement campaigns. The correlations were below 0.400, with three exceptions: that between lag unit sales and unit sales (0.857), lag own advertisement and own advertisement (0.624), and lag category advertisement and category advertisement (0.646).

Brand dimensions. To measure consumers’ associations towards a brand’s quality,

innovativeness and CSR efforts, an online survey via an internet panel (Panel Wizard) was carried out between 20.11.2014 and 25.11.2014. An internet panel in combination with the online survey was chosen as our research instrument in the first place, since it allows for the collection of data over a short period, covering a large geographical area. Similar approaches were also employed by previous studies (e.g. Du et al. 2007). As part of the survey, participants were presented with (1) demographic related and (2) brand related questions. (1) Demographic questions referred, for example, to the participants’ age or family status. With respect to (2) the brands, each participant was asked to rate 20 randomly chosen brands (66 brands overall) in terms of their price-quality perception, which were measured on a three-point scale. Additionally, each participant assessed five randomly chosen brands on the remaining brand dimension, i.e. consumer associations on brands’ innovativeness and CSR efforts. We limited the number of brands assessed to 20 and five per participant, respectively, to avoid tiring the respondents (Lavrakas, 2008). In Table 2, we report the descriptive statistics and reliability for our brand dimensions and covariates; Appendix B contains sources and specific items. All of the alphas exceeded the critical value of 0.7 (Nunnally & Bernstein, 1994).

TABLE 1: DEMOGRAPHICS

Characteristics No. % of Total

Gender

Men 249 50.90

Women 240 49.10

Age (in years)

< 30 85 17.40 30-39 75 15.30 40-49 89 18.20 50-59 88 18.00 > 59 152 31.00 Highest education Low 166 33.90 Middle 199 40.70 High 124 25.40 Family situation

Single person household. 105 21.50

Multi-person household without children under the

age of 18. 242 49.50

Multi-person household with children. Age youngest

child up and including 12 years. 90 18.40 Multi-person household with children. Age youngest

child between 13 and 17. 52 10.60

Covariate. Covariates employed in the framework of this study are measured as follows:

Lag unit sales, indicates the number of unit sales of the preceding month. The relative price is measured as a ratio of a new product’s introduction price to the average price of products within one category. The covariate category competition implies the number of SKUs within a category at the time of introduction, whereas promotion specifies whether a product was placed on a price promotion in a given month and is measured as a dummy variable. Next, we included advertising data provided by AC Nielsen in our model, encompassing a brand’s own advertising expenditure in a given month. Additionally, we incorporated the lag version, representing a brand’s advertising expenditure from the previous month.

The sum of advertising expenditure within a category is taken to measure the covariate category advertising; again, its lag represents expenditures in the preceding month. Purchasing frequency indicates the average purchasing frequency within a category. The weighted distribution of a product measures the availability of a product in relation to the weight of a channel within a category. To control for seasonal effects, we incorporated month dummies. Finally, the variable time implies the number of months for which a product has been on the market after its launch.

TABLE 2: MEASURES AND RELIABILITY

Variable Mean SD Min Max Cronbach's alpha Main Variables

unitsales 28.80 57.00 0.00 875.00 n.a.

sust. Product 0.07 0.25 0.00 1.00 na.

Brand Measures

high price/ high quality 2.34 0.17 1.67 2.81 n.a.

brand innov. 3.42 0.27 2.83 3.75 0.88

corp. soc. resp. 3.23 0.17 2.77 3.59 0.88

Covariates

lag unitsales 26.53 55.18 0.00 875.00 n.a.

rel. price 1.36 0.87 0.08 6.25 n.a.

distribution 0.85 0.17 0.21 1.00 n.a.

ln(cat. competition) 5.59 0.40 3.61 6.29 n.a.

promotion 0.48 0.50 0.00 1.00 n.a.

ln(own adv.) 5.11 5.92 0.00 15.07 n.a.

lag ln(own adv.) 5.12 5.92 0.00 15.07 n.a.

ln(cat. adv.) 13.43 2.85 0.00 15.74 n.a.

lag ln(cat. adv.) 13.43 3.00 0.00 16.00 n.a.

ln(purch. freq.) 2.79 0.88 1.00 4.00 n.a.

month dum* 0.08 0.28 0.00 1.00 n.a.

time 6.50 3.45 1.00 12.00 n.a.

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In order to decide on the appropriate model that should be used, two aspects have to be considered: (1) the structure of the data and (2) the measure of the dependent variable. With respect to (1), we find our data to be panel structured. Accordingly, the same products are observed over several points in time, leading us to the application of a panel data analysis. (2) Our dependent variable is count data, which differ from other types of data in that the counts are non-negative and discreet numbers (Cameron & Trivedi, 1986). Two well-known models applied for count data are the Poisson model and the negative binomial model (Hausman, Hall & Griliches, 1984; Chin & Quddus, 2003). In contrast to the negative binomial distribution, the Poisson distribution assumes that the mean and the variance are equal (Greene, 2008a); nonetheless, this assumption is difficult to confirm, particularly for a large data set with a large number of observations. The case of extra variation, in which the variance is larger than the mean, is called overdispersion. Owing to overdispersion, standard errors will be underestimated, thus creating an overconfidence in results. If overdispersion is a feature, the alternative negative binomial model with additional free parameters will provide a better fit since the extra parameter adjusts the variance independently of the mean.

with t (10595) = 72,63 and p < 0,01, we find our dependent variable to be overdispersed, leading us to choose the negative binomial model over the Poisson model.

FIGURE 2: DISTRIBUTION UNIT SALES

Based upon the tests above, we concluded that a random negative binomial model best fits the requirements for our research (i.e. with respect to the testing variables) and the structure of our data.

Functional formula: 𝑃 𝑦_!" 𝒙_𝒊𝒕𝑢_! = Γ 𝑦!"+ 𝜗 Γ 𝑦!"+ 1 Γ 𝜗 𝑟!" ! _{1 − 𝑟} !" !!"   with: 𝜆_!" = exp 𝛼 + 𝒙_𝒊𝒕!_{𝜷 ,}   𝑟!"= 𝜗 𝜗 + exp 𝜎𝑢! 𝜆!".    

Whereby 𝑢! is a normally distributed error term with an expected value of 0, a

standard distribution 𝜎 and a dispersion parameter 𝜗 (Greene, 2008c). This model is applied to the following variables:

𝑢𝑛𝑖𝑡𝑠𝑎𝑙𝑒𝑠_!"= exp  (𝛽_!  + 𝛽_!sust_!+ 𝛽_!𝑙𝑎𝑔𝑢𝑛𝑖𝑡𝑠𝑎𝑙𝑒𝑠_{! !!!} + 𝛽_!𝑟𝑒𝑙𝑝𝑟𝑖𝑐𝑒_!+ 𝛽_!  𝑤𝑑𝑖𝑠𝑡𝑟_!+  

𝛽!log 𝑐𝑎𝑡𝑐𝑜𝑚𝑝!" + 𝛽!log 𝑜𝑤𝑛𝑎𝑑𝑣!" + 𝛽!loglag 𝑜𝑤𝑛𝑎𝑑𝑣!(!!!) + 𝛽!log 𝑐𝑎𝑡𝑎𝑑𝑣!" +   𝛽!log lag 𝑐𝑎𝑡𝑎𝑑𝑣! !!! + 𝛽!"log 𝑝𝑢𝑟𝑓𝑟𝑒𝑞! + 𝛽!!𝑞𝑝!+ 𝛽!"𝑏𝑖!+ 𝛽!"𝑐𝑠𝑟!+  

𝛽!" 𝑠𝑢𝑠!×𝑞𝑝! + 𝛽!" 𝑠𝑢𝑠!×𝑏𝑖! + 𝛽!" 𝑠𝑢𝑠!×𝑐𝑠𝑟! + 𝛽!"!!"𝑑𝑚𝑜𝑛𝑡ℎ!"+ 𝛽!"𝑡𝑖𝑚𝑒!"+ 𝑢!")

where

𝑢𝑛𝑖𝑡𝑠𝑎𝑙𝑒𝑠  _!" = number of unit sales for product (i) in period (t)

𝑠𝑢𝑠𝑡_! = dummy variable for product (i) taking the value 1 if sustainable product and 0 if otherwise

𝑙𝑎𝑔𝑢𝑛𝑖𝑡𝑠𝑎𝑙𝑒𝑠_!(!!!) = number of unit sales for product (i) of the previous period (t-1) 𝑟𝑒𝑙𝑝𝑟𝑖𝑐𝑒! = relative price of product (i)

𝑤𝑑𝑖𝑠𝑡𝑟_! = weighted distribution of product (i)

log  𝑐𝑎𝑡𝑐𝑜𝑚𝑝!" = log category competition for product (i) in period (t)

laglog 𝑜𝑤𝑛𝑎𝑑𝑣  ! !!! = log own advertisement expenditure of a brand for product (i) of the previous period

(t-1)

log  𝑐𝑎𝑡𝑎𝑑𝑣!" = log advertisement expenditure in category of a product (i) in period (t)

laglog 𝑐𝑎𝑡𝑎𝑑𝑣!(!!!) = log advertisement expenditure in category of a product (i) of the previous period

(t-1)

log  𝑝𝑢𝑟𝑓𝑟𝑒𝑞! = log purchasing frequency for product (i)

𝑞𝑝! = quality/price perception of a brand for product (i) 𝑏𝑖_! = associations of a brand’s innovativeness of a product (i) 𝑐𝑠𝑟_!   = associations of a corporate social responsibility of a product (i)

𝑑𝑚𝑜𝑛𝑡ℎ_!" = dummy variable taking the value 1 of month for product (i) in period (t) and 0 if otherwise

𝑡𝑖𝑚𝑒!" = number of months a product (i) has been introduced in period (t)

5.

R

Our data set is balanced in the sense that we have an even number of observations per product. The negative binomial model encompassed 10.5961 _{observations, nested in 883}

products. The Wald test has been found to be significant for our model, indicating that the model is good and all coefficients are significantly different from zero.

The output also provides a likelihood ratio test, comparing our panel estimator with the pooled estimator, an estimator of the negative binomial with a constant dispersion. As the test proved significant, the panel estimator has to be chosen over the pooled estimator.

Next, to test whether the full model, i.e. our model including the predictor variable, explains the variation in our data set better than the null model, also known as the intercept only model, we conducted a likelihood ratio test. LR = -2(LLIO- LLFM), with LLIO being the

log-likelihood of the intercept only model and LLFM the log-likelihood of the full model,                                                                                                                                        

respectively. The degrees of freedom are equal to the number of the constraints, i.e. additional parameter, in our case 272_.

LR = -2(LLIO - LLFM).

LR = -2 (-39,374.92 + 37,057.72) = 4,634.40

Since the result of the likelihood ratio test lies well above the critical value of 49.64 (p = 0.05), we can be sure that our model performs significantly better in terms of explanatory power compared with the intercept only model. In addition to the log-likelihood ratio test, the Bayesian Information Criteria (BIC) and the Akaike Information Criteria (AIC) are two measures to test the relative quality of statistical models given a certain data set. Both measures penalize the complexity of the model. The AIC measure penalizes the number of parameters less strongly than the BIC does, tends to prefer more complex models and is suitable for smaller samples. Unlike the AIC, the BIC penalizes much more for the number of parameters included in a model and should be the preferred measure for large sample sizes (Burnham & Anderson, 2002). Nonetheless, both the AIC and the BIC have decreased values from the intercept only model to the full model (AICFM = 74,179.44; BICFM = 77,412.03) and

the intercept only model (AICIO = 78,755.83; BICIO = 78,777.64). Tables 3 and 4 provide an

overview of our results with respect to our variables.

TABLE 3: RESULTS (1)

Variable Expected Coef SD P

Main Effect

sust. Product - -4.206* 2.073 0.042

Interaction Effects

high price /high price -1.083** 0.128 0.000

sust. prod. x high price/high quality + 1.624** 0.558 0.004

brand innov. 0.090 0.099 0.365

sust. prod. x brand innov. + -1.154** 0.418 0.006

corp. soc. resp. 0.024 0.141 0.865

sust. prod. x csr + 1.355* 0.533 0.011 Covariats lag unitsales 0.003** 0.000 0.000 relative price 0.140** 0.020 0.000 distribution 2.387** 0.104 0.000 ln(cat. competition) 0.226** 0.043 0.000 promotion 0.907** 0.018 0.000 ln(own adv.) 0.000 0.001 0.853

lag ln(own adv.) 0.002 0.001 0.247

ln(cat. adv.) -0.005 0.003 0.178

lag ln(cat. adv.) 0.000 0.003 0.924

ln(purch, freq.) -0.040 0.022 0.066

constant -0.804* 0,405 0,047

Dependent variable: unit sales; log-likelihood: -37,057.722 Wald chi2(29) = 5,473.31 p < 0.001; r = 1.66; s = 7.52 **Significant at p< 0.01. *Significant at p< 0.05

TABLE 4: RESULTS (2)

Variable Expected Coef SD P

month 02 -0.085** 0.028 0.002 month 03 -0.095** 0.028 0.001 month 04 -0.146** 0.029 0.000 month 05 -0.067* 0.029 0.022 month 06 -0.140** 0.030 0.000 month 07 -0.075* 0.030 0.011 month 08 -0.103** 0.031 0.001 month 09 -0.067* 0.030 0.024 month 10 -0.061** 0.029 0.036 month 11 -0.111* 0.029 0.000 month 12 -0.050 0.029 0.079 time -0.013** 0.002 0.000 constant -0.804* 0,405 0,047

Dependent variable: unit sales; log-likelihood: -37,057.722 Wald chi2(29) = 5,473.31 p < 0.001; r = 1.66; s = 7.52 **Significant at p< 0.01. *Significant at p< 0.05

As we can see from Table 3 , a sustainable claim on a new product to negatively influence unit sales (𝛽 = -4.206, p < 0.05), i.e. sustainable products achieve fewer unit sales than their non-sustainable counterparts, thereby corroborating hypothesis 1.

The moderating effect of high price – high quality brands was found to be significant (_{𝛽 =} 1.624, p < 0.01). Figure 3 visualizes the effect. Brands that are perceived to be of higher quality are marked with a red line and can be seen to reach higher sales figures for sustainable new product introductions, which is consistent with hypothesis 2.

FIGURE 3: INTERACTION PLOT PRICE-QUALITY BRAND AND PRODUCT TYPE

FIGURE 4: INTERACTION PLOT BRAND INNOVATIVENESS AND PRODUCT TYPE

FIGURE 5: INTERACTION PLOT CSR EFFORTS AND PRODUCT TYPE                    

Tables 3 and 4 also present the outcome for our covariates. Price-quality perception towards a brand exhibits a negative impact on the outcome (𝛽 = -1.083, p < 0.01). The more customer perception tends towards “high quality/high price”, the fewer unit sales that can be observed. This corresponds to supply/demand theory where low prices foster high numbers of sales. The main effect of brand innovation is insignificant with 𝛽 = 0.090, p > 0.05, likewise the CSR measure with (_{𝛽 = 0.024, p > 0.05).}  

category advertising expenditures as well as purchasing frequency were not found to have a substantial relation to the outcome.

In order to assess the predictive power of the model, the expected number of unit sales were calculated and plotted against the true values. The model tends to underestimate unit sales. However, as shown in Figure 6, there is a strong positive correlation between the predicted and observed values (r = 0.56, p < 0.001).

Robustness Check

We performed several tests to check for the robustness of our model. First, we examined the VIF values for the variables included in our model. The resulting values ranged between 1.06 and 2.56, thus implying that multicollinearity was not a problem (Hair, Anderson, Babin & Black, 2010). However, as we found high correlations between some variables, we excluded lag unit sales, lag category advertisement and lag own advertisement from the model and re-estimated the coefficients. All critical effects remained significant and in the same direction.

Second, we performed an OLS analysis for panel data, which did not fit with respect to our dependent variable (count data), as OLS also allows outcome variables to be negative and non-integer. The main effect, namely unit sales of sustainable vs. non-sustainable products was found to be negative, albeit insignificant with 𝛽 = - 42.715, p > 0.05. The moderating effects of quality perception and associations towards a brand’s innovativeness were both significant with 𝛽 = 20.562, p < 0.05, and 𝛽 = - 15.816, p <0.05. CSR associations had an insignificant – yet still positive – effect on unit sales of sustainable products in this model with 𝛽 = 13.914, p >0.05.

Third, we employed a negative binomial regression, without accounting for the panel structure of our data. In so doing we found the main effect to be positive and insignificant with 𝛽 = 0.178, p > 0.05. Moreover, the moderating effect of the brand’s quality/price perception was not found to be significant (𝛽 = -0.024. p >0.05). However, associations with respect to a brand’s innovativeness and CSR proved significant with 𝛽 = - 0.898, p < 0.05, for brand innovativeness and 𝛽 = 0.813, p < 0.05 for CSR, respectively.

6.

D

Despite an ever-increasing number of new products appearing in local supermarkets, only a limited number achieve success in the marketplace (Food Marketing Institute, 2009;

Chatterjee, et al., 2010, Goldenberg, et al., 2001). To align themselves with consumer trends and developments, companies are particularly eager to launch sustainable products.

Prompted by a consideration of recent developments, we investigated whether launching sustainable new products reflects a suitable strategy in terms of ensuring new product success. Moreover, we incorporated several brand dimensions, given that brands have been found to significantly influence new products’ success (Steenkamp & Gielens, 2003).

With the aim of exploring whether the label affects the success of new products, we developed a framework based on Brown et al (1997), according to which a sustainable label directly influences the unit sales of sustainable new product introductions. We assumed the proposed relationship to be subject to a consumers’ associations regarding the price-quality, as well as the innovativeness and the CSR efforts of a brand.

Overall, we were able to confirm three of our four hypotheses. With respect to our main question, we found that sustainable new product introductions are less successful than their non-sustainable counterparts in terms of unit sales. This finding confirms our theory-based proposition that consumers might equate sustainable new products with lower quality, following the notion that the resources needed to develop new sustainable products could have been detrimental to the product’s overall quality (Newman et al., 2014).

concerns (Chaudhuri et al., 2001). Next, contrary to our prior belief, consumers’ associations with respect to a brand’s innovativeness were found to have a negative influence on the unit sales of sustainable products. Accordingly, brands that are less strongly associated with being innovative generate more unit sales of sustainable new product introductions than those considered as leaders in developing new products. However, this unexpected result could be influenced by the fact that our study incorporated well-established brands, with research suggesting that such brands do not benefit from introducing sustainable products (Olsen et al., 2014). Indeed, although well-established brands have developed a level of expertise that boosts their perceived credibility in developing innovative products, consumers might consider developing sustainable new products separately to the identity-related perception for these brands, thus causing the negative effect found in our study. Following this argument, younger innovative brands might finding themselves better able to successfully introduce sustainable new products, given that their image is not yet deeply rooted in consumers’ minds.

As expected, consumers’ associations concerning a brand’s CSR efforts positively moderate its success with launching sustainable new products on the market. Therefore, our results suggest that companies with a record of thinking beyond their own welfare by giving back to society enjoy greater success in this respect.

Implications for Retailers and Manufacturers

Since shelf space is limited and shelf warmers deter retailers from increasing revenues and remaining competitive, retailers are encouraged to offer an appealing range of products to their clients. From a manufacturer’s perspective, it is essential to invest development costs into products wisely to minimize financial drawbacks through failing products. The current trend towards sustainable consumptions and the increased market share of such products prompts our conclusion that following this trend reduces the risk of product failure and shelf warmers. Nonetheless, sustainable product introductions are only appealing under certain conditions; for instance, although brands with an image of high quality might indeed benefit from launching a sustainable new product, those competing on price should ignore the trend and refrain from investing in sustainable products, according to our result. Moreover, this notion also applies to brands that enjoy an innovative image among consumers, whereas brands that are perceived as being actively involved in CSR are better able to make a sustainable new product a success in terms of unit sales.

7.

R

Our study has several limitations, which also present opportunities for future research. Given that our study only explores the success of sustainable new product introductions in 14 categories and a single country, future research could expand the range of both factors. It would also be interesting to investigate whether the age of an innovative brand affects the success of its sustainable new products.

labels. Accordingly, research should investigate whether the number of claims presented on a product affects its success on the market.

8.

A

I would like to use this opportunity to express my deep gratitude to everyone who supported me on my never – ending journey of my master thesis. I am very thankful for constructive criticism and great guidance provided by my first supervisor Jenny van Doorn. Next, I would also thank my boyfriend Rob van den Ham and my mother Karin Kloske, who stood by my side, helped me, and gave good advise through the course of the master thesis. Additionally, I would like to thank Bernhard Weyres who believed in me and is a great inspiration for my life in so many ways. Finally, I want to thank my father Andreas Kloske who obviously was the one who passed on the extreme desire to succeed.

9.

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