© 2009 Danielle S Thomasufdcimages.uflib.ufl.edu/UF/E0/02/45/17/00001/thomas_d.pdf3-2 Bar graph showing income breakdown of panelists from Day 1 and Day 2. .....31 3-3 Bar graph showing

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TASTE TEST OF ORGANIC VERSUS CONVENTIONAL PRODUCTS AND WHAT INFLUENCES THE CONSUMERS’ DECISION TO PURCHASE

By

DANIELLE S. THOMAS

A THESIS PRESENTED TO THE GRADUATE SCHOOL

OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF

MASTER OF SCIENCE

UNIVERSITY OF FLORIDA

2009

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© 2009 Danielle S Thomas

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To my family

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ACKNOWLEDGMENTS

I would like to thank everyone on my committee. They have all worked very hard in

helping me put this thesis together. Especially big thanks are due to Dr. House, whose patience

and willingness to help has really made this process much easier. I would like to thank Dr. Gao

for his tireless efforts in helping me with SAS, without him I would have no analysis. Thanks go

out to Dr. Sims for his help in running the taste test at the Food Science Sensory Lab. Thanks

also go out to Lorenzo, who helped me write my survey in the necessary computer program. To

Kristina, thanks are due for her wonderful editing.

My family also deserves thanks; they have always been there for me. Thanks go out to my

parents for all of their love and support and to my brothers for always listening. Also, to Adam,

thank go out for all of your love and support. These past few months have been much easier with

you supporting me and urging me to fight and finish strong.

Lastly, I would like to thank the Food and Resource Economics Department and the

University of Florida for giving me the chance to pursue this research. Thanks go out for the

monetary support and the support of all of the Food and Resource Economic and Food Science

professors who have helped me in five years at UF.

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TABLE OF CONTENTS page

ACKNOWLEDGMENTS ...............................................................................................................4

LIST OF TABLES ...........................................................................................................................7

LIST OF FIGURES .........................................................................................................................8

ABSTRACT .....................................................................................................................................9

CHAPTER

1 INTRODUCTION ..................................................................................................................11

Organic Demand .....................................................................................................................11 Problem ...................................................................................................................................12

Objective ..........................................................................................................................12 Testable Hypotheses .........................................................................................................13

Thesis Outline .........................................................................................................................13

2 LITERATURE REVIEW .......................................................................................................16

Demand for Organic Products ................................................................................................16 Conjoint Analysis Research ....................................................................................................19

3 DATA .....................................................................................................................................21

Introduction .............................................................................................................................21 Science of Sensory Evaluation ...............................................................................................21 Data Collection Process ..........................................................................................................22 Data .........................................................................................................................................24

Demographic Profile of Panelists ....................................................................................24 Organic Purchase Behavior ..............................................................................................25 Sensory Test Results ........................................................................................................27

Carrots .......................................................................................................................27 Orange juice ..............................................................................................................29

Summary Results of Conjoint Analysis Questions ..........................................................30

4 THEORETICAL MODEL ......................................................................................................43

Conjoint Utility Theory ..........................................................................................................43 Logit Model ............................................................................................................................43 Model Specification ................................................................................................................44

5 EMPIRICAL MODEL............................................................................................................47

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Introduction .............................................................................................................................47 Analysis of Model ...................................................................................................................47

Carrots .............................................................................................................................48 Orange juice .....................................................................................................................50

6 CONCLUSION.......................................................................................................................56

Summary .................................................................................................................................56 Hypothesis Summary ..............................................................................................................57 Study Limitations....................................................................................................................58 Further Research .....................................................................................................................59

APPENDIX

A SURVEY INSTRUMENT DAY 1 AND DAY 2 ...................................................................60

B CONJOINT ANALYSIS QUESTIONS FROM DAY 1 AND DAY 2 .................................73

LIST OF REFERENCES ...............................................................................................................77

BIOGRAPHICAL SKETCH .........................................................................................................78

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LIST OF TABLES

Table page 1-1 Total foods and organic foods consumer sales and penetration, 1997-2005. ..............15

3-1 Conjoint questions and percentage of panelists who selected each choice. (Day 1) ....38

3-2 Conjoint questions and percentage of panelists who selected each choice. (Day 2) ....40

4-1 Definition of carrot and orange juice variables from logit models. .............................46

5-1 Carrot logit model with factor score. (Model 1)..........................................................53

5-2 Price premium for organic carrot product based on different demographics. X indicates a 1 used for the dummy variables. ...............................................................53

5-3 Orange juice logit model with factor score. (Model 1) ................................................54

5-4 Price premium for organic orange juice product based on different demographics. X indicates a 1 used for the dummy demographic variables. ............................................55

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LIST OF FIGURES

Figure page 1-1 Organic food category share. ............................................................................................15

3-1 Bar graph showing the age breakdown of panelists for both Day 1 and Day 2. ................31

3-2 Bar graph showing income breakdown of panelists from Day 1 and Day 2. ....................31

3-3 Bar graph showing the race/ethnicity breakdown of panelists from Day 1 and Day2. .....32

3-4 Bar graph showing what percent of organics the panelists purchase from Day 1 and Day 2. .................................................................................................................................32

3-5 Bar graph showing what organic products panelists purchase from Day 1 and Day 2. ....33

3-6 Bar graph showing what factors influence decision to buy from Day 1 and Day 2. .........33

3-7 Attribute averages of carrots from Day 1. .........................................................................34

3-8 Averages of attributes for organic carrots split by gender. ................................................34

3-9 Averages of attributes for conventional carrots split by gender. .......................................35

3-10 Averages of carrot attributes for males. .............................................................................35

3-11 Averages of carrot attributes for females. ..........................................................................36

3-12 Attribute averages of orange juice from day 2...................................................................36

3-13 Averages of attributes for organic orange juice split by gender. .......................................37

3-14 Averages of attributes for conventional orange juice split by gender. ..............................37

3-15 Averages of orange juice attributes for males. ...................................................................38

3-16 Averages of orange juice attributes for females ................................................................38

3-17 Bar graph showing frequency of choices picked for each question (Day 1). ....................40

3-18 Bar graph showing frequency of choices picked for each question (Day 2). ....................42

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Abstract of Thesis Presented to the Graduate School of the University of Florida in Partial Fulfillment of the

Requirements for the Degree of Master of Science

TASTE TEST OF ORGANIC VERSUS CONVENTIONAL PRODUCTS AND WHAT INFLUENCES THE CONSUMERS’ DECISION TO PURCHASE

By

Danielle S Thomas

May 2009 Chair: Lisa House Major: Food and Resource Economics

The previous research on willingness to pay does not take into account the consumer’s

taste preference for each product. The purpose of this research was to test if there was a taste

difference or explicit preference for an organic product versus a conventionally produced

product. For this research participants were asked their taste preference for a product and then

asked conjoint questions about their willingness to pay. Participants were given either a sample

of an organic orange juice and a conventional orange juice or an organic baby carrot and a

conventional baby carrot. The participants were then asked to taste each product and rate how

much they liked or disliked the overall flavor and other attributes, such as texture, sweetness, etc.

Once the participant picked which product they preferred the most they were given conjoint

questions which asked what product they would buy based on the characteristics of price and

production. They also used their preference for one product or the other to answer the questions.

The purpose of this type of test was to determine if participants are purchasing the product based

on their preference (taste) or on price or production method. The results of the rating taste test

were analyzed using descriptive statistics and an Analysis of Variance. The results of the carrot

rating test showed many significant differences between the attributes of the two products.

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Overall the Analysis of Variance showed a significant difference between the overall

appearance, color, overall flavor and sweetness. When the results were separated between males

and females there were very few significant differences between the products attributes. The

results of the ranking test showed that there was no overall significant difference between the

panelist’s preferences for the two products. The results of the orange juice test showed very few

significant differences between the attributes. Overall the only attribute that had a significant

difference between the products was the sweetness; this attribute was also significant when the

results were separated into males and females. The results of the questions using conjoint

analysis were analyzed using a model that was created with eighteen variables and then from this

model the willingness to pay was calculated. For the carrots the largest price premium was $0.79

and the largest discount needed to purchase the product was $0.25. In the model used for the

orange juice data the price and whether the product was organic or not were both significant. The

significance of the price variable can be attributed to the large price difference between organic

and conventional orange juices. The demographic interaction variables were also significant. The

price premiums calculated for organic orange juice were much larger and were strongly

influenced by the race of the consumer. The largest price premium was $1.15 and the largest

discount rate was $1.56. The implications for this research show that it is possible to test

willingness to pay using a taste test. It adds an extra attribute that participants will take into

consideration when they are choosing which product to purchase, which is not often found in

previous research on a consumer’s willingness to pay.

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CHAPTER 1 INTRODUCTION

Organic Demand

The demand for the organic food market is expanding rapidly. Zepeda and Li (2007) found

the demand for organic food products is growing at a rate of 10-20% annually while the demand

for conventional food products only grows at a rate of 2-4% annually. The organic food industry

represents 2.5% of total U.S. food sales, totaling $14.6 billion in 2005 (Heiman and Peterson

2008). With many large food companies such as Tyson and General Mills now producing

organic products, more than two-thirds of U.S. households buy some organic products. “Once

you have Kraft marketing an organic product… you really can't be more part of the mainstream

than that,” said Don Montuori, editor of Packaged Facts, an industry publication. The certified

organic production is increasing at an average of 11% from 3,587 farms in 1992 to 8, 035 farms

in 2003 (Heiman and Peterson 2008). Table 1-1 shows the growth of organic products and its

penetration into the market.

Organic produce is considered a “gateway” product with consumers who are entering the

organic market (Dettmann 2008). Many consumers purchase organic produce before widening

their purchases to include other organic products. Figure 1-1 shows what percentage of organic

food categories the consumers purchase from. Almost 40% of consumers choose to purchase

organic fruits and vegetables. For this study organic carrots and organic orange juice were used.

The products were chosen based on the data which shows almost 40% of consumers choose to

purchase organic fruits and vegetables.

The growth in the demand for organic foods can be attributed to many different factors.

Today’s consumers who desire a healthier way of life are looking for healthier food products to

fit into their new lifestyle choice. Organic foods are perceived by the consumer to be healthier

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for them and for the environment. Since organic foods lack any pesticides the average consumer

believes they are healthier. They are also healthier for the environment because the soil and

water runoff from these plants does not contain any of the inorganic matter that is used to grow

conventional products. Recent food scares and the growing introduction of genetically modified

organisms into the food supply have also aided in the increase in demand for organic products. It

is not required to label any genetically modified organisms (GMO’s) and many consumers must

purchase organic products to ensure they are not eating any GMO’s. This growing demand for

organic foods will require the supply of organic foods to grow. Understanding the types of

consumers who purchase organic produce is extremely important to producers, processors and

retailers.

Problem

Objective

The overall objective of this study is to determine what factors influence the consumers’

decision to purchase a product while shopping. The factors will be determined using both a taste

test and conjoint analysis including price information. The specific objectives of this study are

To determine any sensory differences between an organic product and a conventional product, through the use of a taste test.

To determine the panelists preference for one product over another.

To determine the influence of both taste and price on the consumers willingness to pay for the organic product.

To achieve these objectives, consumers will be surveyed using a sensory evaluation where

they will be asked to taste an organic product and a conventional product. While tasting they will

be asked to rate five characteristics about the products: overall appearance, color, overall flavor,

texture or mouthfeel and sweetness. The results of these questions will explain whether the

panelists found the organic product or the conventional product to appear or taste better. The

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second part of the taste test requires the panelists to choose which product they prefer more than

the other. The survey will then ask the panelists why they choose to purchase organic products

and what food categories they purchase organic foods from. These responses will verify the

results from the literature about why consumers choose to purchase organic foods.

To determine how price influences the consumer’s decision to purchase organic food,

conjoint analysis will be used. The panelists will be asked which of the two products they would

purchase based on the taste or their preference, the price and whether it is produced organically

or conventionally. The results of this test will show what has more of an influence on the

decision to purchase, price, taste or how the product is produced.

Testable hypotheses

From the stated objectives hypotheses can be determined.

In determining the sensory differences between the products, there will be no significant differences between the attributes of the products.

The preferences for the products will have a fifty-fifty split with no significant difference between the products the panelists choose.

The price of the product will have more of an influence on the panelists’ decision to purchase than the taste or how the product was produced, either conventionally or organically.

Thesis Outline

Chapter 1 introduced the current problems in the organic food market. It discussed why

the producers need to be more knowledgeable about the consumers purchasing their products.

Chapter 2 begins with more information about the growing demand for organic foods. Chapter 2

also explains previous studies that have used sensory analysis to show the taste differences

between organic and conventional products. Other studies explain how the use of contingent

valuation can help in showing how the consumers’ willingness to pay can be found. Chapter 2

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goes on to explain studies done using conjoint analysis as an effective way of finding the

consumers’ willingness to pay for the product.

Chapter 3 begins by explaining the science behind sensory analysis. Chapter 3 then goes

on to discuss the data collection process. How the data was collected and what the panelists were

required to do during the testing process is explained in this section. The summary results of the

data collected are also shown in Chapter 3. Demographic results and organic buying behavior

results are first explained. The results of the taste test are also laid out in Chapter 3. Chapter 3

shows the significant differences between the products. Chapter 3 concludes with summary

results from the questions using conjoint analysis.

Chapters 4 and 5 explain the theory behind conjoint utility theory and the theory behind

logit models. After explaining logit models, the specified logit model for this study is explained.

Each variable used in the model is explained, followed by analysis of the results from the logit

model.

Chapter 6 draws conclusions about the results and analysis. Chapter 6 also summarizes

the testable hypotheses and the results of these hypotheses. Finally, Chapter 6 explains any

limitations to this study.

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Table 1-1. Total foods and organic foods consumer sales and penetration, 1997-2005.

Organic food ($

Mil) Organic food

growth Total food

sales ($ Mil) Organic

penetration

1997 $3,594 Na $443,790 0.81%

1998 $4,286 19.20% $454,140 0.94%

1999 $5,039 17.60% $474,790 1.06%

2000 $6,100 21.00% $498,380 1.22%

2001 $7,360 20.70% $521,830 1.41%

2002 $8,635 17.30% $530,612 1.63%

2003 $10,381 20.20% $535,406 1.94%

2004 $11,902 14.60% $544,141 2.19%

2005 $13,831 16.20% $566,791 2.48%

Adapted from Nutrition Business Journal estimates based on OTA’s 2006 Manufacturer Survey, annual Nutrition Business Journal surveys of manufacturers, SPINS, and other sources.

Organic Food Category Share, 2005

15%

10%

14%

39%

5%

13%

2%

2%

Dairy

Bread and Grains

Beverages (incl. non-dairy)

Fruit and Vegetables

Snack Foods

Packaged/Prepared Foods

Sauces/Condiments

Meat/Fish/Poultry

Figure 1-1. Organic food category share. Adapted from OTA’s 2006 Manufacturer Survey.

Category and growth estimates derived from survey responses, Nutrition Business Journal’s organic industry model, SPINS retail data, and other sources.

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CHAPTER 2 LITERATURE REVIEW

Demand for Organic Products

The demand for organic foods has increased dramatically in the last twenty years. Some

research has shown that an increase in the demand for organic food products is due “to concerns

about the environment, health, genetically modified foods and the recent series of highly

publicized food scare” (Zepeda and Li 2007 p. 17). Zepeda and Li, 2007, analyzed a 2003

consumer survey with probit and ordered probit models to determine who is buying organic food

and why. In order to estimate their variables for the model they used Weinstein’s Precaution

Adoption Process. This process "offers insights into how individuals make behavior changes"

(Zepeda and Li 2007 p. 19). The process uses five stages to show what an individual goes

through before actually changing their behavior. The five stages for the model are information or

awareness (the consumer needs to be aware of organic foods), personal connection (the

consumer must perceive a need for the product), intention to act, opportunity to act and act on

the preference. Zepeda and Li chose to drop the second stage and focus only on personal benefits

and costs of changing behavior. From their data they found significant demographic

characteristics that affect the consumers’ decision to purchase organic produce or not. The most

significant characteristics were religious affiliation, education level and age. Lack of religious

affiliation, higher levels of education and younger age respondents were more likely to buy

organic products.

However, Rodriguez, Lacaze and Lupin, 2007, found the opposite. In their study,

“consumers with lower educational instruction considered fresh organic products as of higher

quality than conventional ones” (Rodriguez, Lacaze and Lupin 2007 p. 191). Those consumers

who felt personal health and family health were the most important issue were 7% less likely to

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purchase organic products. Those interested in convenience also typically did not buy organic

products. Surprisingly, economic variables such as income or amount of food expenditures had

no affect on purchasing organic products. The conclusions of this study indicate that there is less

interest in purchasing organic products because it is not as readily available to purchase as

conventional foods. The increasing availability of organic foods in conventional shopping venues

will likely increase the consumption of these products.

Some who purchase organic products do so because of a perceived higher quality and

taste. Lester, Manthey and Buslig, 2007 led a study that researched the differences between

organic and conventionally grown whole grapefruit and juice. They compared the production

inputs, market quality, consumer acceptance and human health-bioactive compounds. In this

study Lester, Manthey and Buslig grew the grapefruits so that there would be no doubts about

how they were produced. The purpose of this study was to determine if there would be a sensory

difference due to the different production methods. The study found that the organic grapefruit

had a thinner rind and was considered to be a better quality whole fruit compared to the

conventional fruit.

However, they also tested the juice from each fruit and found that the juice from the

conventional fruit was less bitter and tart. Consumers accepted this juice over the juice from the

organic fruit. The study used a group of untrained panelists to taste test the juice. The juice was

graded on sweetness intensity, tartness, and overall acceptability. The observations of the whole

fruit proved that whole “grapefruits marketability qualities are greatly affected by production

system inputs” (Busli, Lester and Manthey 2007, p 4477).

Another test of quality was done at the University of Alberta. This study also controlled

the products they would be using for a sensory test. The purpose of this study was to “examine

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the size and the determinants of the price premium a sample of consumers are willing to pay for

organic wheat bread” (Boxall, et al. 2007). This study performed sensory tests with both trained

and untrained panelists. Boxall, et al. also used a contingent valuation method to determine the

panelist’s willingness to pay for the wheat bread.

These two studies combined show that sensory variables can play a significant role in

consumers’ decision of their willingness to pay for food products. At the end of the sensory test

in the Boxall et al. study, the consumers were asked if they would be willing to pay some amount

more for the organic bread over the conventional product. The results of the study found that

increasing prices reduced the probability that the consumer will purchase the organic bread. The

average price the respondents were willing to pay was $1.50. This question provides evidence of

what the consumer is willing to pay for the product. Findings have shown that contingent

valuation methods can “induce overstatement of real economic value due to hypothetical biases”

(Boxall, et al. 2007).

Rodriguez, Lacaze and Lupin, found that consumers’ perceptions about organic food

quality are “more accurate willingness to pay predictors” than other demographic characteristics

such as age or gender. This study found that for organic, leafy vegetables consumers would be

willing to pay more for the product if available. A difficulty of performing this type of test in

Argentina is their small organic food supply. Of the organic food grown in this country, 94% is

exported (Rodriguez, Lacaze, Lupin 2007, p. 188). This study also found that for most products

consumers were willing to pay a premium for the organic product for health issues. There is

more confidence in the lack of health risks in organic products. This could be due to Argentina’s

inability to regulate fresh food production. Consumers believe that organic food will be more

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regulated since Argentina was one of the first Developing Countries to have a national regulation

for organic foods (Rodriguez, Lacaze, Lupin 2007 p. 188).

Conjoint Analysis Research

One of the better ways to test a consumer’s willingness to pay is to use a method known

as conjoint analysis. A study by Wang and Sun used conjoint analysis to determine the consumer

preference and demand for organic food in Vermont. The major purpose of their study was to

“examine consumer preference and valuation of organic food and to provide information that is

needed for the organic food industry to expand its market and improve its profitability” (Wang

and Sun 2003 p. 2). Conjoint analysis was used to assess the consumer’s evaluation of important

attributes and the relative importance of each attribute. This study chose to investigate the

consumer’s willingness to pay for organic apples and organic milk because they are the most

important farm products in Vermont. According to Wang and Sun “conjoint analysis has been

used extensively in marketing research to estimate the impact of selected product or service

characteristics on customer preferences for the product or service.” They conducted a mail

survey which included four major sections: general questions about the purchasing behavior of

organic foods; a conjoint valuation of apple profiles, a conjoint valuation of milk profiles, and a

section on the opinions about the organic food industry and demographic information about the

respondent’s household. Wang and Sun’s study found that there were significant differences in

the average ratings between the people who have purchased organic food and people who have

not purchased any organic food. The results from the conjoint analysis also showed that price

was an important attribute for Vermont consumer’s followed by production method and location

for apple consumers and production method and certification for milk consumers.

This study used conjoint analysis to determine the consumer’s willingness to pay for

organic products based on certain attributes. However, they collected their data in a mail survey

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which implies that the consumer may have never tasted the product before. The purpose of this

study is to determine the consumer’s willingness to pay for organic products using taste as an

additional attribute in determining the consumer’s preference.

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CHAPTER 3 DATA

Introduction

This chapter introduces the purpose of sensory evaluation and its relevance to this study.

The chapter goes on to explain the method of data collection. The chapter also reports the

summary statistic results from the demographic data, the taste test and the paired comparison

test. The chapter ends by explaining how the conjoint analysis was done and the summary

results of the questions asked in the survey.

Science of Sensory Evaluation

Sensory evaluation has been conducted for centuries. The methods developed serve

economic interests; the results of the tests can determine the worth of a commodity or even its

acceptability. “Sensory testing evaluates alternative courses to select the one that optimizes value

for money” (Meilgaard, Civille and Carr 2007). Using humans in sensory analysis is necessary

because there is no machine that can accurately predict how a consumer will perceive the

product in the store. Only human sensory data can provide the best model for how consumers

may perceive and react to food products in real life. Sensory evaluation is a “scientific method

used to evoke measure, analyze, and interpret those responses to products as perceived through

the senses of sight, smell, touch, taste and hearing” (Lawless and Heymann 1999). The uses of

sensory evaluation are used as a set of techniques to accurately measure the human responses to

foods and to minimize the biasing effects of brand identity and other information that may

influence the consumers’ perception of the product.

Sensory tests are most commonly used for product development and improvement. They

can also be used in cost cutting, quality control, and processing or packaging concerns. Before a

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company can make any advertising claims about their products they must first test it and analyze

the results.

The three main types of sensory testing are discrimination tests (are the products

different), hedonic (likeability or preference of the products), and descriptive (quantifying

specific characteristics of the products). Before determining what type of test should be used it is

necessary to determine the project and test objectives. In this study the objective was to

determine both the likeability and the preference for the products. This type of test uses untrained

panelists to collect the data. The results of the sensory test should reflect the opinions and

perceptions of consumers who might buy the product in the general population.

Data Collection Process

Sensory evaluation surveys were conducted with 200 people over a two-day period. The

surveys averaged fifteen minutes in length, with panelists answering questions about the taste

characteristics and willingness to pay for carrots or orange juice.

The survey was pre-tested prior to data collection. The majority of the questions for this

survey were formed using examples from previous research. Many of the demographic questions

and response choices were taken from the U.S. Census to ensure the proper descriptors were

used in the responses. Questions on the organic buying behavior of the respondents were based

on previous research about organic product consumption. Conjoint analysis questions were

developed. The survey instrument is shown in Appendix A.

The survey was conducted at the University of Florida Sensory Lab. The survey begins

with a standard introduction of the research to the panelist. Following the introduction the

panelists are asked a series of demographic questions and questions about the panelists

purchasing behavior of organic products. A set of questions about the taste characteristics of the

23

products and the panelist’s preference for the products followed the demographic question. The

final section of the survey was a series of questions using conjoint analysis.

The sensory evaluation was conducted on November 6th and November 7th, 2008. On the

first day of the survey, respondents were presented with an organic baby carrot and a

conventional baby carrot; each carrot was labeled with a random 3-digit code. The samples are

labeled with a 3-digit random number so that the panelists do not form judgments based the

labels but rather on their sensory experiences. Panelists were asked to rate the samples based on

five different characteristics: overall appearance, color, overall flavor, texture, and sweetness

using a 9-point hedonic scale ranging from dislike extremely (1) to like extremely (9). A paired

preference question was used at the end of the taste test to determine the panelists’ preference of

one product over the other. The panelist was forced to choose which product they preferred after

tasting them one final time.

On the second day, orange juices were tested, with each panelist receiving a sample of

organic orange juice (Uncle Matt’s Organic Orange Juice) and a sample of conventional orange

(Simply Orange) juice. The panelists were asked to rate the samples on five different

characteristics: overall appearance, color, overall flavor, mouthfeel, and sweetness using the

same 9-point hedonic scale as in the carrot test. Once the panelists were finished rating the

characteristics, they were asked to rank the samples from most preferred to least preferred.

The last series of questions answered by panelists were questions about their willingness

to pay for the products. The questions used conjoint analysis and preference, production method

and price were used as the categories for purchasing decisions. For the carrot test the panelists

answered nine questions asking which product the panelists would be willing to purchase based

on the three characteristics. The prices were chosen based on the actual prices of the products in

24

the stores. There were eleven conjoint analysis questions for the orange juice test. The prices

were chosen the same way as for the carrot test. There were more conjoint questions for the

orange juice survey because the price difference between the organic and conventional products

was much bigger than the price difference between the organic and conventional carrots. The

significant price difference between the products made it necessary to have more price options

for each question and therefore more questions were needed. An example of the conjoint

question would be, “if you had the opportunity to purchase a 1.75 liter (about ½ gallon) of

orange juice with the following properties, which would you select,” and the following options

would be listed as sample 270, conventional, $2.94 or sample 978, $2.94 or neither. For every

question the panelists were given the option to purchase neither of the choices. The properties of

each option were placed using a statistical computer program that randomly ordered the

characteristics by price and production method. The questions using conjoint analysis can be

seen in Appendix B.

Data

Demographic profile of panelists

For the carrot test conducted on day one, there were 100 panelists, of which 54% (n=54)

were male and 46% (n=46) were female. This compares to the average University of Florida

population, which contains 54% females and the U.S. general population, which contains 51%

females. Of these 100 panelists, 84% (n=84) were under the age of 30. This differed slightly by

gender, with 20% males (n=11) over age 30 compared to 11% females (n=5). Figure 3-1 shows

the total age breakdown of the panelists. Over 60% of the panelists had an income of less than

$20,000 a year (Figure 3-2). The majority of the sample was white, non-Hispanic (54%,n =54)

followed by 19% who identified themselves as white, Hispanic and 19% who identified

themselves as black, Hispanic (Figure 3-3)

25

On the second day of testing 99 panelists completed the survey (one participant withdrew

before the end of the survey).The gender of the panelists was 57.5% male (n=57) and 42.4%

female (m=42), very similar to the results from day one (Table X). Of the 99 panelists, 84.8%

(n=84) were under the age of 30. For males, 19.2% (n=11) were over 30 and 9.5% (n=4) females

were over 30 (Figure 3-1). Over 80% of the panelists had an income of under $20,000 (Figure 3-

2). More than half of the panelists were white, non-Hispanic (53.5%, n=53), 19.2% (n=19) were

white, Hispanic, 18.1% (n=18) were black, Hispanic (Figure 3-3).

Organic purchase behavior

Panelists were asked if they currently purchase organic food items, and if so what

percentage of their food items purchased are organic. Eighty-two panelists (82%) responded that

they purchase at least some organic foods during their trips to the grocery store. More than a

third of the panelists (31%) responded that more than 10% of the food they purchase is organic

(Figure 3-4). On day two 83.2% of the panelists (n=83) responded that they purchase at least

some organic foods during their food shopping and 65.6% of the panelists (n=65) responded that

during their trips to the grocery store at least 10% of the food they purchase is organic (Figure

X).

Panelists who indicated they purchase organic products were then asked to select from a list of

product categories to indicate which types of organic foods are purchased (Figure 3-5). Of the

eighty-two panelists who said they do purchase organic foods, 68.3% (n=56) purchased organic

fruits and 61.0% (n=50) purchase organic vegetables. Thirty-six (44.0%) of the panelists indicted

they purchase organic dairy products, and 37.8% (n=31) purchase some type of organic juice.

For meats, processed foods and other products, less than 30% of those that purchased organic

foods indicated they selected organic products in these categories. Panelists were asked to

identify other organic food products purchased. The majority of other items purchased were

26

grains, pastas and eggs. For day two, 73.5% (n=61) purchase fruits and 63.8% (n=53) purchase

vegetables. More than a third of the panelists chose dairy (42%) and juices (37.3%) as an organic

product they purchase. Twenty-one panelists (25.3%) purchase meats and 20.5% (n=17)

purchase processed foods. Eight of the panelists chose (8.6%) other and wrote in that they

purchase items such as oats, herbs and nuts.

Next, panelists who purchased organic products were asked why they purchase organic

products by selecting from a list of nine factors that might influence their decisions to purchase

organic products (Figure 3-6). The list included: taste, the use of fewer pesticides, more

nutritious, cost, to support local farmers, the emergence of Genetically Modified products, recent

food scares, food safety and other reasons. On day one more than 50% of the panelists indicated

they purchase organic products for the taste (57.3%) and reduced use of pesticides (51.2%). The

next reasons most selected were because organic products are more nutritious (39.0%), cost

(37.8%) and food safety (33.0%). Nearly one quarter (24.4%, n=20) of the panelists chose the

support of local farmers as at least one reason they choose to purchase organic products. Less

than 14% of the panelists chose the emergence of Genetically Modified products (13.4%), recent

food scares (9.6%) and other (3.7%) as reasons for purchasing organic products. Of the three

panelists (3.7%) who chose other as a factor that influences their decision to purchase, one of the

panelists responded they purchase due to a training on organic foods, another purchases because

they have a small child and the third purchases because of the nutrients and ingredients. The

results of day two were similar to day one. On day two, more than 45% of the panelist who chose

to purchase organic products chose taste (59.0%), less use of pesticides (48.2%), and more

nutritious (48.2%) as factors that influence their decisions to purchase. Of the panelists who do

purchase organic products, 38.6% (n=32) chose cost as a reason they choose to purchase organic

27

products. Twenty-one of the panelists (25.3%) chose that food safety is one of the factors that

influence their decisions to purchase. Less than 10% chose the emergence of Genetically

Modified products (6.02%), the recent food scares (4.8%) and other (4.8%) as factors that

influence their decision to purchase organic products. Those who chose other listed having a

small child, the use of antibiotics in non-organic products, and health reasons as factors that

influence their decision to purchase organic products.

Sensory test results

Carrots

The third section of the survey contained the questions on the taste test of carrots or

orange juice. The average overall appearance for the organic carrot was 7.13. The average

overall appearance for the conventional carrot was 6.73 (statistically significant difference at the

95% confidence level). Interestingly, there were significant differences by gender when rating

appearance of the organic carrots versus the conventional carrots. The average rating by males

for overall appearance was 6.9 compared to 7.4 for females. Average ratings by males for the

conventional carrot was 6.8 (not statistically different from the organic ratings), but for the

females the average for the conventional carrot decreased to 6.7 (statistically significant

difference. Figures 3-7 through 3-11 show the averages for this attribute.

The average color rating for the organic carrot was 7.35 and for the conventional carrot

the average color was 7.14 (statistically significant difference at the 95% confidence level).

There was no significant difference between the products by gender (Figures 3-7 through 3-11)

The average overall flavor for the organic carrot was 7.1 and for the conventional carrot it

was 6.6 (significant difference at the 95% confidence level, Figure 3-7). For males, the average

overall flavor was 7.1 for the organic carrot and 6.5 for the conventional carrot (a statistically

28

significant difference). Females rated the average overall flavor a 7.1 for the organic carrot and

6.8 for the conventional carrot; there was no significant difference between the products (3-8

through 3-11).

Average texture for the organic and conventional carrot was 6.9 and 6.5, respectively

(Figure 3-7). There was no statistically significant difference between the products or by gender.

Average sweetness for the organic and conventional carrots was 6.9 and 6.5, respectively

(statistically significant difference). There were statistically significant different preferences for

males, but not females, with males rating the average sweetness 7.1 for the organic carrot and 6.2

for the conventional carrot and females rating the average sweetness 6.7 and 6.8 for the organic

and conventional carrot, respectively (Figures 3-7 through 3-11).

The average total ratings of the products were also calculated. The total average rating by

the panelists for the organic product was 35.41 out of a total 45 score. The maximum rating for

the organic product was a 45 and the minimum was a 17. For the conventional carrots the

average rating by the panelists was 33.82. The maximum rating of the conventional carrot was a

44 and the minimum was 17.

When the panelists finished rating the five attributes of the carrots they were asked to

choose which of the two samples they preferred the most. Forty-seven of the panelists (47%)

chose the organic carrot as the most preferred and fifty-three panelists (53%) chose the

conventional carrot as the most preferred. These results show no significant difference between

the products. There was also no difference in overall preference by gender, with 52% (n=28) of

males rating the conventional carrot as preferred compared to 48% (n=26) for the organic carrot.

Twenty-five (54%) females preferred the conventional carrot and 21 (46%) preferred the organic

carrot.

29

Orange juice

On day two, the third section of the test also asked the panelists to taste the products and

rate the listed attributes. The average overall appearance of the organic and the conventional

orange juice was 7.09 and 7.11, respectively (no statistically significant difference). There were

no significant differences between the products by gender (Figures 3-12 through 3-16).

Average color for the organic orange juice was rated a 7.35 overall and the conventional

was rated a 7.27 (no statistically significant difference).There was no significant difference

between the products by gender (Figures 3-12 through 3-16).

Average overall flavor of the organic and the conventional orange juice was rated a 6.65

and a 7.05, respectively (no statistically significant difference). There was no statistically

significant difference between the products by gender. (Figures 3-12 through 3-16).

Mouthfeel was the next characteristic rated; this attribute is used for liquids in lieu of

texture. The average mouthfeel was rated a 6.72 by all panelists for the organic orange juice and

a 6.57 for the conventional orange juice. From the overall data and from the results of the data

separated into male and female there were no significant differences between the products

mouthfeel (Figures 3-12 through 3-16).

Average sweetness for the organic and conventional orange juice was 6.59 and 7.19,

respectively (there was a statistically significant difference). The males rated the organic orange

juice a 6.55 and the conventional a 7.13 (statistically significant). The females rated the organic

orange juice a 6.64 and the conventional orange juice a 7.26 (no statistical significance; Figures

3-12 through 3-16).

For the orange juices the average total ratings were also calculated for each panelist. The

total average rating for the organic orange juice was 34.4 out of a possible 45. The maximum

average rating was 43 and the minimum average rating was 21. The results of the average ratings

30

for the conventional orange juice were 35.19 for total rating by panelists. The maximum rating

was 45 and the minimum rating was 19.

At the end of the survey the panelists were finally asked to choose which product they

preferred most over the other. Fifty-eight of the panelists (58.5%) preferred the conventional

orange juice and forty-one (41.4%) of the panelists preferred the organic orange juice (no

statistically significance). There was no significant difference between the genders, 54.4% of

males (n=31) preferred the conventional orange juice to the organic orange juice and 62% of the

females preferred the conventional orange juice over the organic orange juice.

Summary results of conjoint analysis questions

In the conjoint analysis section, panelists were presented with choices between two

“products” with the price, production method, and flavor identified, or they would choose no

preference.

For each question from day one the first choice was the organic sample. The differences

between each questions first choice were the production method and the price. The second

choice for each question listed the conventional sample listed along with varying prices and

different production methods. For question one over half of the panelists said they would

purchase choice two (n=58). More than a third of the panelists chose option one (n=36).

The results of the orange juice conjoint questions show the frequency of panelists who

chose each option for each question. For the first choice of each question the organic sample was

listed. For the second choice the conventional sample was listed. In this model the frequency of

panelists who chose to purchase neither product was much higher. For questions one, eight, nine

and ten more than 25% of the panelists chose to purchase neither product (n=36, n=31, n=42,

n=27) respectively.

31

Age of Panelists

2

31

43

7 5 5

0 2 03 2 0

3

33

40

85 5

0 2 1 0 2 00

510

15

2025

30

35

4045

50

under

18

18-20 21-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-65 over

65

Age Brackets

Fre

qu

en

cy

Day 1

Day 2

Figure 3-1. Bar graph showing the age breakdown of panelists for both Day 1 and Day 2.

Income of Panelists

64

13

4 2 2

15

80

13

4 2

0

10

20

30

40

50

60

70

80

90

under

$20,000

$20-$35,000 $36-$50,000 $51-$75,000 over $75,000 Decline to

Answer

Income Brackets

Fre

qu

en

cy

Day 1

Day 2

Figure 3-2. Bar graph showing income breakdown of panelists from Day 1 and Day 2.

32

Race/Ethnicity of Panelists

0

10

20

30

40

50

60

White,

non-

Hispanic

White,

Hispanic

Asian Black,

Hispanic

Native

American

or Alaska

Native

Black,

non-

Hispanic

Native

Hawaiian

or Other

Pacific

Islander

Race/Ethnicity Category

Fre

qu

en

cy

Day 1

Day 2

Figure 3-3. Bar graph showing the race/ethnicity breakdown of panelists from Day 1 and Day2.

Percent of Organics Panelists Purchase

0

10

20

30

40

50

60

0% less than

10%

10%-25% 26%-50% 51%-75% More than

75%

Categories

Fre

qu

en

cy

Day 1

Day 2

Figure 3-4. Bar graph showing what percent of organics the panelists purchase from Day 1 and

Day 2.

33

What Organic Products Panelists Purchase

010

20304050

6070

Fruits

Veg

etab

les

Mea

ts

Dai

ry

Pro

cess

ed F

oods

Juices

Oth

er

Product Categories

Fre

qu

en

cy

Day 1

Day 2

Figure 3-5. Bar graph showing what organic products panelists purchase from Day 1 and Day 2.

Factors that Influence Panelists Decision to Purchase

0

10

20

30

40

50

60

Taste

More

Nutr

itio

us

Support

Local

Farm

ers

Recent

Food

Scare

s

Oth

er

Factors

Fre

qu

en

cy

Day 1

Day 2

Figure 3-6. Bar graph showing what factors influence decision to buy from Day 1 and Day 2.

34

Averages for Attributes of Carrots

6

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

Overall

Appearance*

Color* Overall Flavor* Texture Sweetness*

Attribute

Avera

ge

Organic

Conventional

Figure 3-7. Attribute averages of carrots from Day 1. * indicates significance at 95%

Averages of Organic Sample Attributes split by Gender

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

Overall

Appearance

Color Overall Flavor Texture Sweetness

Attributes

Avera

ge

Male

Female

Figure 3-8. Averages of attributes for organic carrots split by gender.

35

Averages of Conventional Sample Attributes split by Gender

5.6

5.8

6

6.2

6.4

6.6

6.8

7

7.2

7.4

Overall

Appearance


Attributes

Avera

ge

Male

Female

Figure 3-9. Averages of attributes for conventional carrots split by gender.

Average for Attributes for Carrots from Males

5.6

5.8

6

6.2

6.4

6.6

6.8

7

7.2

7.4

Overall

Appearance

Color Overall Flavor* Texture Sweetness*

Attributes

Hed

on

ic S

cale

Organic

Conventional

Figure 3-10. Averages of carrot attributes for males. * indicates significance at 95%

36

Average of Attributes for Carrots from Females

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

Overall

Appearance*


Attributes

Hed

on

ic S

cale

Organic

Conventional

Figure 3-11. Averages of carrot attributes for females. * indicates significance at 95%

Averages for Attributes of Orange Juice

6

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

Overall

Appearance

Color Overall Flavor Mouthfeel Sweetness*

Attributes

Avera

ge

Organic

Conventional

Figure 3-12. Attribute averages of orange juice from day 2. * indicates significance at 95%

37

Averages of Organic Sample Attributes split by Gender

6

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

Overall

Appearance

Color Overall Flavor Mouthfeel Sweetness

Attributes

Avera

ge

Male

Female

Figure 3-13. Averages of attributes for organic orange juice split by gender.

Averages of Conventional Sample Attributes split by Gender

5.8

6

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

Overall

Appearance


Attributes

Avera

ge

Male

Female

Figure 3-14. Averages of attributes for conventional orange juice split by gender.

38

Averages for Attributes for Orange Juice from Males

6

6.2

6.4

6.6

6.8

7

7.2

7.4

Overall

Appearance

Color Overall Flavor Mouthfeel Sweetness*

Attributes

Hed

on

ic S

cale

Organic

Conventional

Figure 3-15. Averages of orange juice attributes for males. * indicates significance at 95%

Averages of Attributes for Orange Juice from Females

5.8

6

6.2

6.4

6.6

6.8

7

7.2

7.4

7.6

Overall

Appearance


Attributes

Organic

Conventional

Figure 3-16. Averages of orange juice attributes for females

Table 3-1. Conjoint questions and percentage of panelists who selected each choice. (Day 1) Sample Production method

given in question Price Choice

Question 1 311 (organic) 890 (conventional) Neither

Organic Conventional

$2.29 $1.69

36% 58% 6%

39

Table 3-1. Continued. Sample Production method



Organic Organic

$1.99 $1.69

61% 33% 6%


Organic Organic

$1.69 $1.99

56% 36% 8%



$1.69 $1.99

45% 51% 5%


Organic Organic

$1.39 $2.29

50% 40% 10%


Conventional Organic

$2.29 $1.39

51% 40% 9%

Question 7

311 (organic) 890 (conventional) Neither

Conventional Conventional

$1.99 $2.29

48% 36% 16%



$1.69 $1.69

49% 46% 5%



$1.39 $1.99

51% 36% 9%

40

Figure 3-17. Bar graph showing frequency of choices picked for each question (Day 1).

Table 3-2. Conjoint questions and percentage of panelists who selected each choice. (Day 2) Sample Production method


Question 1



$6.34 $6.34

31% 33% 36%

Question 2


Organic Organic

$5.49 $2.94

44% 46% 10%



$5.49 $3.49

39% 47% 14%

Question 4



$4.04 $2.94

37% 57% 6%

41

Table 3-3. Continued. Sample Production method



Organic Organic

$3.49 $4.04

48% 36% 16%


Organic Organic

$2.94 $5.49

48% 37% 15%



$6.34 $3.49

46% 42% 12%



$5.49 $4.04

31% 38% 31%



$4.04 $6.34

34% 24% 42%



$3.49 $5.49

42% 31% 27%



$2.94 $2.94

45% 51% 4%

42

Figure 3-18. Bar graph showing frequency of choices picked for each question (Day 2).

43

CHAPTER 4 THEORETICAL MODEL

Conjoint Utility Theory

Conjoint analysis is commonly used to measure price effects. Consumers use price as a

signal for both quality and also as a monetary constraint on choice. Price effects are measured

using conjoint analysis by “describing a number of product alternatives on a small number of

attributes, including price, and collecting some kind of preference data for those product

alternatives” (Gustafsson, Hermann and Huber 2000 p. 47). The economic theory of consumer

behavior says that the consumer will maximize their utility by allocating a limited budget to

alternative products. Conjoint measurement will use the consumer’s perception of prices to

determine if they will purchase a product based on certain attributes including price. In this

research a type of paired profiles comparison test was done to determine the consumer’s utility

for purchasing organic products based on the price and the taste of the sample. In a paired profile

comparison the participant is given two choices (product profiles) and is asked to decide which

of the choices they prefer most. For this survey the participants were also given a third option of

neither if they did not prefer either of the first two choices. Random Utility Theory is used to

enhance the researchers understanding of the consumer’s decision making processes. The term

random is used to account for the randomness of consumers’. There is no way for researchers to

“look” into the consumers head and determine the consumer’s real attractiveness to the choices

and their alternatives. Since the true feelings cannot be measured or observed by researchers,

tests like conjoint analysis are developed in order to give insight into the consumers’ preferences.

Logit Model

Logistic regression is a model used for predicting the probability of an occurrence of an

event. Depending on if the outcomes of the model can be ranked or not gives either an ordered or

44

non-ordered model. In this survey the model will predict the probability of the participant

choosing to purchase either an organic product or a conventional product. These two different

outcomes cannot be ranked, making the model for this research a non-ordered Logit model.

Model Specification

The model created to explain the results of this test includes eighteen variables. The first

two variables are price and org. These are the basic variables that show both how much price and

how the product is produced affect the consumers’ decision to purchase. The model also includes

many interaction variables. The interaction variables are interacted with either price or

production (organic or not). The organic variable is a dummy variable where one equals organic

and zero equals conventional. The other dummy variables included in the model are age (where

one equals over 30 and zero equals under 30), gender (one equals male and zero equals male),

the race variable white (where one equals white and zero equals not white), and the race variable

hisp (where one equals Hispanic and zero equals non-Hispanic). The dependent variable for this

model is whether the respondent will choose to purchase the product or not. If y=1 then the

respondent will choose to purchase the product and if y=0 the respondent will choose not to

purchase.

U(A,B)=β1price+β2org+β3orateorg+β4orateprice+β5crateorg+β6crateprice+β7genderorg+

β8ageorg+β9whiteorg+β10hisporg+β11incorg+β12genderprice+β13ageprice+ (4-1)

β14whiteprice+β15hispprice+β16incprice+β17expendorg+β18expendprice

U(C)= β0+β1price+β2org+β3orateorg+β4orateprice+β5crateorg+β6crateprice+β7genderorg+

β8ageorg+β9whiteorg+β10hisporg+β11incorg+β12genderprice+β13ageprice+ (4-2)

β14whiteprice+β15hispprice+β16incprice+β17expendorg+β18expendprice + ε

The variables in this model are explained in Table 4.1. The variables orateXorg and

crateXorg are the sum of all the organic attributes rated during the taste test for each panelist and

45

the conventional attributes rated during the taste test, respectively. Each of these variables is

interacted with both org and price. The demographic variables are also interacted with org and

price. These interactions were used to show what has more influence on the consumers’ decision

to purchase: the demographics or price or the demographics or if the product is organic or not.

46

Table 4-1. Definition of carrot and orange juice variables from logit models. (Model 1 and 2) Variable Definition Price Price of product Org If product is organic or conventional Orateorg An interaction of the total of all organic

attribute ratings times if product is organic or conventional

Orateprice An interaction of the total of all organic attribute ratings times price

Crateorg An interaction of the total of all conventional attribute ratings times if product is organic or conventional

Crateprice An interaction of the total of all conventional attribute ratings times price

Genderorg An interaction of gender times if product is organic or conventional

Ageorg An interaction of age times if product is organic or conventional

Whiteorg An interaction of if white or not times if product is organic or conventional

Hisporg An interaction of if Hispanic or not times if product is organic or conventional

Incorg An interaction of if income is below 30,000 or over times if product is organic or conventional

Genderprice An interaction of gender times price

Ageprice An interaction of age times price Whiteprice An interaction of if white or not times price Hispprice An interaction of is Hispanic or not times

price Incprice An interaction of if income is below 30,000

or over times price Expendorg An interaction of amount spent on organic

products times if product is organic or conventional

Expendprice An interaction of amount spent on organic products times price

47

CHAPTER 5 EMPIRICAL MODEL

Introduction

This chapter begins with an analysis of the logit model used to explain the results of this

study. The model used includes data from both the sensory test and the questions using conjoint

analysis. This chapter explains which variables are significant and which variables have an

influence on the consumers’ intent to purchase a product.

Analysis of Model

The logit analysis examined the consumers intent to purchase the product based on

production method of the actual product tasted, production method identified to respondent (may

or may not match actual production method) and price. The study had 100 usable responses for

the carrot model and 99 usable responses for the orange juice model. The dependent variable

represented whether or not the consumer indicated they would choose the specified product in

the conjoint questions of the survey (1 if yes, 0 if no). The model used was the same model for

both the carrots and the orange juice data. The only difference between the two models is the

sum of the attribute characteristics. For carrots the panelists were asked to rate the overall

appearance, color, overall flavor, texture and sweetness. For orange juice the attributes were the

same except for texture, instead the panelists were asked to rate mouthfeel.

The coefficients of each variable in the model show whether or not the variable

influences the dependent variable (the consumers’ decision to purchase). If the parameter is

negative, then that independent variable negatively influences the consumers’ decision to

purchase the product. If the parameter is positive then the independent variable will positively

influence the dependent variable. Most of the eighteen variables used in this model are interacted

with dummy variables. Expenditure is a dummy variable equal to zero if the consumer purchases

48

indicated they purchase organic products less than 10% of the time and one if they purchase

more frequently. Age (equal to 0 if under thirty or one if over thirty), gender (zero if female, one

if male),race (white (1) or non-white (0)), ethnicity (zero if non-Hispanic, one if Hispanic), and

income (zero if less than $30,000 and one if $30,000 or greater) are other dummy variables.

Equation 5-1 shows how the consumers’ willingness to pay is calculated. This equation uses the

coefficients from all of the eighteen variables calculated in the conjoint analysis. The willingness

to pay calculated will show whether the consumer who fits the given demographics is willing to

pay either a premium for the product or will need a discount to purchase the product. If the

consumer is willing to pay a premium for the product the willingness to pay will be positive and

show that the consumer is willing to purchase the product at the base price but would also pay

more than the base price for it. If the willingness to pay calculated is negative the consumer is

not willing to purchase the product unless they are given a discount on the product. The

consumer is not willing to purchase the product at the base price given in the store. They would

need the product to be on sale a certain amount before they would consider purchasing the

product.

WTP= -(β2+β3orate+β5crate+β7gender+β8age+β9white+β10hisp+β11inc+β12genderprice

+β13ageprice+β17expend)/(β1+β4+β6+β12+β13+β14+β15+β16+β18) (5-1)

Carrots

Few variables are significant in the model for carrots. Price, production method and

rating of the products tastes were all insignificant in influencing the decision to purchase the

product. Only two variables were significant in the model at the 95% confidence level. One was

significant at the 90% confidence level. One significant variable was the interaction term

between age and price, the other was the interaction between race and price. The coefficient for

ageXprice was negative and significant. This can be interpreted as if price is held constant and

49

the consumer is over thirty, the respondent is less likely to purchase the product. The coefficient

for whiteXprice was positive and significant indicating if the consumer is white and the price is

held constant, they are more likely to purchase the product. The coefficient for HispanicXprice

was negative and significant at the 90% confidence level, indicating if the consumer is Hispanic

and the price is held constant they are less likely to purchase the products.

The willingness to pay a price premium for the organic carrots was also calculated. The

price premium was calculated by using the coefficients from the regression analysisin equation

5-1 and the average ratings of each product.This identifies the willingness to pay (or discount

needed) based on different demographics.

Holding everything constant except for age allows us to see the influence of age on the

base female case. In this case, the discount is $0.15, indicating a female in the older age

group with the base characteristics will pay less than a female with the same characteristics in

the lower age group.Assuming the age of the panelist is under 30, they are female, they have

an income of less than $30,000 they are not white or Hispanic and they spend 10% or less on

organic foods, the panelists would be need a $0.16 discount on the base price in order for the

panelist to purchase the organic product.

If the panelist was a male and all other characteristics were kept the same as above the

consumer would need a $0.25 discount on the original price to purchase the product.

However, if the panelist is male and over 30, all other factors remaining the same, the

consumer would be willing to pay a $0.07 price premium for the product. This indicates that

holding all other things constant, a male over the age of 30 will pay $0.32 more for the

organic product than a male under the age of 30.

50

Another variable that was significant was race. When the base is changed from non-

White to White the premium they need a t$0.10 discount in order to purchase the organic

product.

The largest price premium a consumer would be willing to pay would be if the

consumer was male, over 30, had an income of less than $30,000 was white, Hispanic and

spent more than 10% on organic products during shopping trips. If the consumer fit these

characteristics the results show that they would be willing to pay a $0.69 over the base price

to purchase the organic product. If the consumer is a male, under 30, with an income of less

than $30,000, white and spends 10% or less on organic products they would need a $0.19

discount on the product to purchase. If the consumer is female and the previous factors remain

the same as above then the consumer would need a $0.10 discount on the product to purchase

it.

Orange juice

The results of the model using the orange juice are very different than that of the carrots.

In this case, the price and production methods are both significant at the 95% confidence level.

The price variable is negative, indicating that as price increases, likelihood to purchase the

product decreases. This is the expected relationship for price. The variable representing

production method is positive, indicating that if the product is organic, the consumer is more

willing to purchase the product.

The rating from the taste test was also significant at the 95% confidence level when

interacted with price and at the 90% level when interacted with production method. The variable

orateXprice (the interaction term of the sum of the organic attribute ratings and price) was

significant and positive indicating that as the ratings of the attributes increase (the respondent

likes the product better) and the price is constant, the respondent is more likely to indicate a

51

willingness to purchase the orange juice. The variable orateXprice was positive. This can be

interpreted as the ratings of the attributes increase and the price remains constant this variable

will have a positive influence on the consumer’s decision to purchase. The variable whiteXorg

has a negative coefficient; if the product is organic and the consumer is white this variable will

have a negative influence on the consumer’s willingness to purchase the product. The HispXorg

variable also has a negative coefficient; if the consumer is Hispanic and the product is organic

this variable will also have a negative effect on the consumers’ decision to purchase. The

variable incXorg shows the interaction between income and an organic product; the coefficient is

positive. If the income is over $30,000 and if the product is organic the consumer will be more

willing to purchase the product. The variable ageXprice has a positive coefficient; if the

consumer is over thirty and as price is held constant the decision to purchase will increase. The

coefficient of the variable whiteXprice is positive also; if the consumer is white and the price is

kept constant the consumer will be more willing to choose the product. The final significant

variable in this model is the variable incXprice. The coefficient of this variable is negative; as

price is held constant and if the consumers’ income is more than $30,000 there will be a negative

influence on the consumer’s willingness to purchase the product.

In order to determine the consumer’s willingness to pay for the organic orange juice the

price premium was calculated using equation 5-1 and the coefficients from the logit model (4-1).

The results from the willingness to pay equation show the price premium that the consumer is

willing to pay for the organic product. In some cases, depending on the consumer’s

demographics they may require a discount of the base price on the organic product in order for

them to purchase it. The coefficients from table 5-3 were used in equation 5-1 to calculate the

price premiums. Using the coefficients and the average hedonic ratings of each product the

52

willingness to pay price premium can be calculated based on different demographics. Assuming

the age of the panelist is under 30, they are female, they have an income of less than $30,000

they are not white or Hispanic and they spend 10% or less on organic foods, the panelists would

be willing to pay $0.94 extra for the organic product. If the panelist was a male and all other

characteristics were kept the same as above the consumer would be willing to pay a $1.15 price

premium for the organic orange juice and if the panelist is male and over 30, all other factors

remaining the same, the consumer would be willing to pay a $0.86 price premium for the

product. The orange juice results also show some demographics that would need a discount on

the organic product to purchase it. If the consumer is female, over 30, white-Hispanic with an

income of less than $30,000 and spends 10% or less on organic products they would not be

willing to purchase the organic product unless the original price was discounted $1.56.

53

Table 5-1. Carrot logit model with factor score. (Model 1)

Variable Coefficient Standard Error b/std.er. p-value

PRICE -0.6209 0.5943 -1.045 0.2961

ORG -0.3339 0.7935 -0.421 0.6738

ORATEORG 0.0271 0.0254 1.068 0.2855

ORATEPRICE 0.01633 0.0186 0.878 0.3802

CRATEORG -0.0222 0.0224 -0.991 0.3218

CRATEPRICE -0.0091 0.0171 -0.569 0.5694

GENDERORG -0.07349 0.2147 -0.342 0.7322

AGEORG 0.2538 0.3302 0.769 0.4420

WHITEORG 0.05333 0.2523 0.211 0.8326

HISPORG 0.3174 0.2255 1.407 0.1594

INCOORG -0.04385 0.2386 -0.184 0.8241

GENDERPRICE 0.0366 0.1613 0.227 0.8207

AGEPRICE -0.5971* 0.2288 -2.610 0.0090

WHITEPRICE 0.5265* 0.1834 2.870 0.0041

HISPPRICE -0.2988** 0.1679 -1.779 0.0752

INCPRICE -0.1247 0.1789 -0.697 0.4859

EXPENDORG 0.1189 0.2748 0.433 0.6652

EXPENDPRICE 0.2832 0.1945 1.456 0.1454 Note: * and ** indicate the variable is statistically significant at the 95% and 90% levels respectively, based on the t-value for OLS. Table 5-2. Price premium for organic carrot product based on different demographics. X

indicates a 1 used for the dummy variables. Age=0 if

under 30

Gender=0

if female

White=0

if not

white

Hisp=0

if not

Hispanic

Inc=0

if under

$30,000

Expend=0

if 10% or

less

Price

Premium

-0.16 x -0.25 x x 0.07 x x x 0.13 x x x x 0.54 x x x x x 0.69 x x x x x x 0.63 x x -0.19

54

Table 5-2. Continued.

Table 5-3. Orange juice logit model with factor score. (Model 1)

Variable Coefficient Standard Error b/std.er. p-value

PRICE -0.7568* 0.1608 -4.706 0.0000

ORG 2.4100* 0.8031 3.001 0.0027

ORATEORG -0.0339** 0.0199 -1.701 0.0890

ORATEPRICE 0.0129* 0.0039 3.264 0.0011

CRATEORG -0.0179 0.0169 -1.052 0.2928

CRATEPRICE 0.0037 0.0034 1.079 0.2805

GENDERORG 0.1352 0.1953 0.692 0.4888

AGEORG -0.1884 0.3170 -0.594 0.5524

WHITEORG -0.8157* 0.2382 -3.424 0.0006

HISPORG -0.6298* 0.2209 -2.851 0.0044

INCORG 0.6900* 0.3022 2.283 0.0224

GENDERPRICE -0.0659 0.0395 -1.669 0.9510

AGEPRICE 0.1511* 0.0663 2.279 0.0227

WHITEPRICE 0.1224* 0.4712 2.598 0.0094

HISPPRICE 0.0360 0.4420 0.814 0.4156

INCPRICE -0.2384* 0.0595 -4.006 0.0001

EXPENDORG 0.4304 0.2682 1.604 0.1086

EXPENDPRICE 0.0831 0.0511 1.627 0.1038 Note: * and ** indicate the variable is statistically significant at the 95% and 90% levels respectively, based on the t-value for OLS.

Age=0 if

under 30

Gender=0

if female

White=0

if not

white

Hisp=0

if not

Hispanic

Inc=0

if under

$30,000

Expend=0

if 10% or

less

Price

Premium

x x 0.23 x x x 0.25 x x x x x 0.48 x x x 0.63 x x 0.31 x -0.10

55

Table 5-4. Price premium for organic orange juice product based on different demographics. X indicates a 1 used for the dummy demographic variables.

Age=0 if

under 30

Gender=0

if female

White=0

if not

white

Hisp=0

if not

Hispanic

Inc=0

if under

$30,000

Expend=0

if 10% or

less

Price

Premium

0.94 x 1.15 x x 0.86 x x x -0.39 x x x x -1.36 x x x x x -0.70 x x x x x x 0.36 x x -0.10 x x -0.60 x x x 1.03 x x x x x -0.30 x x x -1.56 x x -1.28 x -0.31 x x x 0.47 x -0.02

56

CHAPTER 6

CONCLUSION

Summary

The results from the conjoint analysis show us what factors are important in determining

the consumers’ decision to purchase a product. The coefficient of each variable shows whether

that variable will have a positive or negative influence on the consumer’s decision to purchase.

The significance of each variable was also calculated. This value explains how important that

particular variable will be to the consumer’s decision to purchase.

The results from the carrot model show very few significant variables. The price variable

of the carrot model was insignificant. This can be attributed to the price difference between the

organic baby carrots and the conventional baby carrots. The price premium for organic baby

carrots was $0.30. This difference may not be large enough to have an influence on the

consumer’s decision to purchase the vegetable. The organic variable of the carrot model was also

insignificant.

The significant demographic variables from the carrot model were interacted with price.

The ageXprice variable had a negative effect on the consumer’s willingness to purchase the

product. In this case, the price of the product would have a bigger effect on the consumer’s

decision to purchase than the age of the consumer, unless the consumer is less than thirty years

of age in which case this variable will have no affect on the consumer’s willingness to buy. The

whiteXprice variable had a positive influence on the consumer’s willingness to purchase the

product. As price is held constant and if the consumer is white they will be more willing to

purchase the product. However, if the consumer is any other race but white, this variable will

have no influence on the dependent variable. The price premiums for the organic carrots were

small, but in most cases positive. Most consumers were willing to pay a price premium for the

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organic carrot over the conventional carrot. The largest price premium willing to be paid was

$0.69. This small price premium may be a result of the actual price difference between organic

and conventional carrots. The price difference is usually about $0.50 in the market.

The results from the orange juice model showed remarkably different results. There were

many more significant variables found in this model. For orange juice, the price variable had a

Documents

© 2009 Danielle S Thomasufdcimages.uflib.ufl.edu/UF/E0/02/45/17/00001/thomas_d.pdf3-2 Bar graph showing income breakdown of panelists from Day 1 and Day 2. .....31 3-3 Bar graph showing