Sustainable products often suffer a competitive disadvantage compared with mainstream products because they must cover ecological and social costs that their competitors leave to future generations. The purpose of this paper is to identify price strategies for sustainable products that minimize this efficiency disadvantage.
The strategies and their determinants from the pricing environment are derived from an inductive sequential case study of certified food products, such as organic and fair trade products. Data are collected through desk research and interviews.
The results reveal six different strategies that build on three basic mechanisms: cost-based pricing in combination with price fairness, increasing willingness to pay through perceptions of quality and/or price, and price stability in which costs are compensated for by scale and/or learning effects.
The framework can help companies that offer sustainable products strengthen their market positions and it can help policy makers that partly rely on markets to achieve sustainability objectives.
The existing pricing literature on sustainability predominantly takes a consumer approach. This study breaks new ground by extending this work with a strategic marketing approach offering a choice set of strategies for managers.
The author thanks the Dutch Ministry of Economic Affairs, Agriculture and Innovation for funding this research.
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