Agro-sphere determinants of green branding: eco-consumption, loyalty, and price premium

Abstract

This research is devoted to the determinants of green branding in the agro-sphere. The existence of competition between regular and green brands in the agricultural sector has necessitated the determination of the degree of influence of green branding on the formation of consumer loyalty in order to understand the effectiveness and feasibility of such practices among agricultural producers. Previous research in the study of green branding has not focused on the factors studied influencing the level of consumption of organic products or the factors influencing the size of the price premium for green brands. In this study, the influence of green branding on the loyalty of consumers of the eco-market was determined on the basis of a comparison of integrated indicators of satisfaction and importance of the regular brand and green brands by an expert survey of 250 respondents in five supermarkets in Kyiv (Ukraine). In the example comparing the coefficients of consumer loyalty of eggs of the eco-brand and the regular brand, it was found that the rate of consumer loyalty to the eco-brand exceeded the rate of consumer loyalty to the regular brand by 3%. It was established that the size of the price premium of a green brand is determined by such factors as consumer loyalty, availability of organic certificates, costs of green advertising, additional cost of organic products, average profitability of the industry, and average income of consumers. Based on cluster and discriminant analysis, green brands were divided into three levels of price premium: “high”, “medium”, and “low.” Discriminant equations for each cluster according to the level of price premium were constructed. Such equations make it possible to assign a new object of analysis (a new brand) to a certain classificational price category. The current study proves the feasibility and economic and statistical validity of the impact of green branding on consumer loyalty in the agricultural sector. The study has significant implications for brand management by providing empirical evidence that can improve brand managers’ strategic decisions in determining the level of price premium.