Traditionally, food and other agricultural products were judged primarily on two sets of attributes: appearance attributes and experience attributes. Appearance attributes are conveyed to the consumer through physical aspects of the product, such as color, size, and uniformity; while experience attributes are conveyed only through consumption or use of the product, such as the product's taste. Recent trends in the market for food and agricultural products including rising consumer disposable income, increased separation between agricultural producers and consumers, and increased consumer demand for information about agricultural production methods, have given rise to the importance of a third set of attributes: credence attributes.
Credence attributes, including geographic area of production, are product attributes that cannot be detected through visual inspection, use, or consumption of the product, and as such, can only be conveyed to the consumer through labeling or certification practices. Previous studies have shown that consumers place value on the information provided on product labels and from packaging certification claims. Examples include “Made in Nevada,” “Certified Organic,” and “Kona Coffee.”
Additionally, these studies have shown that consumers are willing to pay a premium for labeled products.
Nevada Grown Native Plants
To date, the market for native plant products in Nevada is mainly supplied by producers in nearby states, including California, Arizona, Idaho, Utah, and Montana, with only 17% of total purchased native plants and seeds coming from Nevada suppliers (Curtis, Cowee, and Slocum (2005). Although the native plants grown in nearby states are native to Nevada, those plants started in Nevada are better adapted to the climate and ecosystem of the Great Basin. In the high desert climate that characterizes Nevada, plants must be conditioned to survive cold winters, hot, dry summers, and early frost conditions. This fact sheet provides an overview of a study which examined the relationship between consumer willingness to pay (WTP) and the inherent attributes of certified locally grown (NevadaGrown) native plant products. Such attributes include natural appearance or similar appearance to surrounding landscapes; resistance to drought, which reduces water usage and expenditure; and overall hardiness of the plant, which reduces plant mortality and replacement expenditures.
Data for this study were collected through a mail survey of randomly selected households in Reno, Las Vegas, and Henderson, Nevada metropolitan areas. Two hundred and fifty (250) valid surveys were collected.
Demographics and Preferences
Table 1 shows the sample statistics for a variety of questions asked to determine what the average respondent "looks" like. The majority of the respondents (65%) lived in northern Nevada. Eighty-four percent (84%) of respondents identified themselves as their household’s primary shopper for landscaping and gardening materials. Often the person responsible for purchases has a greater knowledge of native plant products and pricing. The majority of respondents, 85%, owned their home, and the average home value was in the range of $200,000-$300,000. Average household income was $55,700, and the average household size had 2.2 members. A slight majority of respondents, 52%, were male, and 52% of respondents said they had a four year college degree.
Table 1: Sample Statistics
Respondents were asked where they shop for landscaping and gardening supplies (Table 2, more than one choice possible). The majority of respondents, 65%, said they purchase these materials at home improvement stores, such as Home Depot or Lowe's. Over half of respondents, 55%, purchase their landscaping and gardening supplies at nurseries, while another 20% purchase their supplies at discount stores, such as Wal-Mart or Kmart. Another 6% of respondents said they purchase their landscaping and gardening materials from landscaping companies, while fewer than 1% of respondents said they shop at warehouse stores (such as Costco), or through the Internet or mail order (these results not shown).
Table 2: Purchase Locations
Respondents were asked to rate the importance of the price of a plant versus the origin of the plant (where the plant was grown) when considering a plant purchase. Table 3 shows that while over half of the respondents, 58%, rated price as being all important, 31% of respondents felt price and origin were equally important, and 11% felt that origin was all important. This is encouraging news for Nevada's native plant and seed producers.
Table 3: Importance of Price vs. Origin
Respondents were then asked the same question, only this time with the importance of price against the importance of supporting the local community. Table 4 shows that respondents felt price was less of a motivating factor when considering community support. While 28% of respondents felt price was all important, 50% of respondents felt price and community support were equally important, and 22% felt community support was all important. Again, this is encouraging news for local growers, as it indicates that many consumers of native plant products in Nevada are not motivated by price alone, and may place additional value on local products.
Table 4: Price vs. Community Support
Willingness to Pay
The remaining section of the survey provided respondents with a description of a one-gallon native plant product and set the price of this product as $5.00. Respondents were then given a description of the same native plant product, differentiated from the first plant only by a "Nevada Grown" label, proving the designation of origin of the product. Respondents were then offered a series of ten randomly ordered "bids," ranging from a price of $5.00 (the base price) to $10.00 (double the base price), for the "Nevada Grown" plant. Respondents were then asked to respond to each bid: "definitely yes;" "probably yes;" "not sure;" "probably no;" or "definitely no."
The data from the bidding section along with the demographic information and native plant preference data was then used to estimate the respondents' willingness to pay for the “Nevada Grown” labeled native plant.
Table 5 shows the estimates of respondent willingness to pay for “Nevada Grown” native plants and seeds. When respondents were allowed to express their uncertainty as to whether or not they would be willing to pay the offered amount, the average willingness to pay amount was estimated at $5.71. Considering the base price for the hypothetical plant was $5.00, this premium represents 14.2% of the base price. When respondents were forced to make a definite decision as to whether or not they would pay the offered amount, willingness to pay was estimated at $5.39. With the base price of $5.00, this represents an average willingness to pay premium of 7.8%.
Table 5: Willingness to Pay Estimates
To better understand the drivers of the survey respondents’ willingness to pay for the locally labeled plants, several respondent factors were also analyzed. Table 6 shows the effect of the significant factors on respondent willingness to pay. If the respondent was the primary shopper for landscaping and gardening supplies, he/she would be willing to pay 102% more for the locally-grown plant over the standard plant. If a respondent had a household income of $60,000 or more, he/she would be willing to pay 102% more for the local plant. If the respondent valued the natural appearance of native plants, he/she would be willing to pay 124% more for the local plant product than for the unlabeled plant. If the respondent valued the drought resistance of native plants, he/she would be willing to pay 100.2% more for the local native plant product. Finally, if a respondent strictly valued the origin of the plant over the price of the plant (meaning the respondent felt origin was all important), he/she would be willing to pay 132% more for the labeled local plant over the standard plant.
Table 6: Effect of Factors on WTP
This purpose of this study was to examine consumer propensity to purchase origin certified native plant products, as well as determine the consumer demographics, preferences for local products, and beneficial plant attributes that influence WTP. Data were collected through a mail survey of residential consumers in the state of Nevada. The results of this study indicate that residential consumers in Nevada are willing to pay an extra $0.71 for the “Nevada Grown” plant when allowed to express uncertainty, and an additional $0.39 when not given the option to express uncertainty. These results indicate that consumers are indeed looking to conserve water, and hence, lower their landscape watering costs. This is evidenced by the significance of draught resistance in both models as a positive influence on consumer WTP. Additionally, consumers may have a higher level of confidence in the hardiness of a locally-grown plant, which has an increased probability of surviving the high desert climate of the Great Basin.
Local native plant producers, distributors, and retailers should strongly consider having their products origin-certified, as such certification is likely to bring price premiums in the marketplace. Increased consumer information and marketing materials targeted at the beneficiary attributes of native plants may also improve market share and pricing with residential consumers.
Curtis, K.R. and M.W. Cowee. “Consumer Willingness to Pay for Water Conserving Native Plants in Residential Landscaping.” In review.
Curtis, K.R., M.W. Cowee, and S.L. Slocum, (2005). “Nevada Wildland Seed Cooperative Feasibility Assessment.” University of Nevada Center for Economic Development (UCED) Publication 2005/06- 10.