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Type: Thesis
Title: Consumer willingness to pay premiums for the benefits of organic wine and the expert service of wine retailers.
Author: Ogbeide, Osadebamwen Anthony
Issue Date: 2013
School/Discipline: School of Agriculture, Food and Wine
Abstract: This thesis investigates two major topics independently with outcomes that stand alone but can have influence on each other. Australian consumers’ interest in the consumption of organic products is increasing as they are receptive to the perceived health and environmental benefits that are linked to them. However, producers and consumers face challenges understanding the value of the health and environmental attributes. While consumers and producers express interest in organics, gaps exist in their common interest. Producers require premiums for their products to compensate for potential higher production costs or lower yields. Understanding how much consumers are willing to pay (WTP) for the benefits related to organic products is a challenge. The role of expert service in wine retailing is important. Many studies document the value information provision creates in purchase situations. This service provision to consumers is a key factor encouraging purchase decisions and gaining interest and engagement. It can be important for retailers to provide an environment that extends this service to consumers. Training employees in wine knowledge is vital as they form the frontline between the wine purchase and the consumers. This service comes with a cost that is usually passed on to consumers and it is of interest to determine consumer willingness to absorb this cost. The primary objectives of the study are twofold: (1) to determine which factors affect consumers’ willingness to pay an additional ‘premium’ price for organic wines benefits, and (2) to determine which factors affect consumers’ willingness to pay a premium for the expert services that retail wine stores provide in increasing consumer wine knowledge generally including the health and environmental considerations of organic wines. An online survey was carried out in all the states and territories of Australia. Respondents were obtained from IMPACTLIST mailing list by random selection of list members that met the pre-requisite criteria. The potential respondents were emailed a questionnaire through the Adelaide Qualtrics online data collection software. The Stata 12 statistical software was used to analyse the sample and variable frequency statistics, factor analysis of the variables used for the regression model and the ordered probit regression and marginal effect analyses. On average, the premiums or willingness to pay (WTP) respondents indicated were approximately 23% for both environmental (WTPe) and health (WTPh) benefits. The expert service provision is usually free or nonexistent in retail stores; therefore no price reference exists for the base price and was assumed to be $0.00. For the expert service of the sales outlets (WTPs), respondents indicated WTP of $0.60. The proposed hypotheses were tested using the ordered probit model and all except two were accepted. The social demographic variables presented a mixed outcome. Overall for WTPe, consumers’ knowledge of organic wine was found to be significant, and will determine the WTPe of organic wines. The marginal effect of knowledge indicated that the probability of paying $0.00 premium for environmental benefit decreased as the knowledge of consumers about organic wine increased. For WTPh, the relationship between knowledge and WTP was similar in direction to WTPe but different in magnitude. The consumers’ motive indicated negative significance to WTPe and was not significant but positive for WTPh. The consumer attitude was positive and significant in WTPe and WTPh and an increase in the consumers’ attitude decreases the unwillingness to pay premium for both environmental and health benefits. However, the consumer perceived risk was negative and significant in WTPe and WTPh. The consumers’ perceived risk was not significant in determining WTPs. For WTPe, WTPh and WTPs, risk reduction strategy was positive and significant in determining WTP. The study further shows that 66.0% of respondents had purchased organic wine prior to the survey. However, questions about their knowledge of the environmental and health considerations associated with organic wines indicated that most consumers were lacking in organic product knowledge. This implies that sensitisation and enlightenment programs that are geared toward these factors may be effective in helping consumers move toward more organic wine consumption. From this study, it is of note that the environmental and health attributes weigh differently in the consumers’ mind, and this influences their willingness and the amount of premium to be paid. The study acknowledges this and measured the WTP a premium for these attributes instead of the product itself. It was found that more consumers are willing to pay for the health attribute than an environmental one, and would pay somewhat higher premium for the former. It is the study recommendation that the distinctive attributes of the organic product should be used to measure consumer WTP rather than the present situation, in which organic wines are considered a commodity. Another contribution is the investigation of the WTP a premium for expert service provided by retail sale outlets. Previous studies emphasise the importance of service in differentiating retail sale outlets and creating customers’ relationships. This study investigates and measures consumers’ WTP for expert service provision in Australia and the factors that impact on consumers’ need for expert service.
Advisor: Ford, Christopher Michael
Stringer, Randy
Dissertation Note: Thesis (Ph.D.) -- University of Adelaide, School of Agriculture, Food and Wine, 2013
Keywords: consumer; environmental; expert service; Health; organic; premium; wine; WTP
Provenance: This electronic version is made publicly available by the University of Adelaide in accordance with its open access policy for student theses. Copyright in this thesis remains with the author. This thesis may incorporate third party material which has been used by the author pursuant to Fair Dealing exceptions. If you are the owner of any included third party copyright material you wish to be removed from this electronic version, please complete the take down form located at:
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