New or recycled products: How much are consumers willing to pay?

Abstract

Purpose
This paper aims to consider the price premium that consumers state they are willing to pay for products with reused or recycled content. It also aims to address the effect of the impact of product category on consumers' willingness to pay premium prices.

Design/approach/methodology
Willingness to pay was studied for seven different product categories ( n =49).

Findings
Perceived functional risk is an important determinant of the price that consumers are willing to pay for products that have recycled or reused content. It was also found that consumers will switch from a recycled product to a new product within a smaller range of price for products with high functional risk.

Research limitations/implications
The study is exploratory, while it serves its purpose by raising initial questions and finding that this is a complex area that is worth studying. Additional work is clearly required to consider the wide range of potentially relevant variables and a sampling plan that ensures an understanding of the generalisability of findings across the population within a region and across regions.

Practical implications
A technique for understanding consumer willingness‐to‐pay (WTP) is provided and insights into differences are offered between products in terms of WTP for greener products. Practitioners can use this technique to determine the price range and indirectly the profitability of a version of their product based on recycled or reused content.

Originality/value
An understanding of WTP for products with recycled or reused content is developed. This is important as legislation in many countries aims at diverting disposed product from waste dumps to consumers.

Full text

New or recycled products: how much are
consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Telfer School of Management, University of Ottawa, Ottawa, Canada
Abstract
Purpose – This paper aims to consider the price premium that consumers state they are willing to pay for products with reused or recycled content.
It also aims to address the effect of the impact of product category on consumers’ willingness to pay premium prices.
Design/approach/methodology – Willingness to pay was studied for seven different product categories (
n
¼49).
Findings – Perceived functional risk is an important determinant of the price that consumers are willing to pay for products that have recycled or
reused content. It was also found that consumers will switch from a recycled product to a new product within a smaller range of price for products with
high functional risk.
Research limitations/implications – The study is exploratory, while it serves its purpose by raising initial questions and finding that this is a complex
area that is worth studying. Additional work is clearly required to consider the wide range of potentially relevant variables and a sampling plan that
ensures an understanding of the generalisability of findings across the population within a region and across regions.
Practical implications – A technique for understanding consumer willingness-to-pay (WTP) is provided and insights into differences are offered
between products in terms of WTP for greener products. Practitioners can use this technique to determine the price range and indirectly the profitability
of a version of their product based on recycled or reused content.
Originality/value – An understanding of WTP for products with recycled or reused content is developed. This is important as legislation in many
countries aims at diverting disposed product from waste dumps to consumers.
Keywords Consumer behaviour, Recycling, Classes of goods marketed, Payments, Green marketing, Sustainable development
Paper type Research paper
Introduction
Concerns about the natural environment in general have
caused companies as well as consumers to try to minimize the
damages inflicted to the natural environment. There has been
a continued increase in interest in the natural environment.
Citizens identify environmental protection as a priority for
governmental policies (Davis et al., 1995) and this interest has
led to an increase in ethical production and recycling – for
both consumer and non-consumer products (Browne et al.,
2000; Finisterra do Pac¸o et al., 2009). Sensitivity to
environmental issues shifts consumer behavior towards
supporting the growth and diffusion of green marketing and
ecologically-conscious consumer behavior – including:
consumer preference for greener firms, increase in demand
for greener products, greater acceptance of recycled products
(Mobley et al., 1995; Tsen et al., 2006). Recycling presents
opportunities for job creation and for better social behavior
(Ewadinger and Mouw, 2005; Farrell Tucker, 2006; Weeks,
2006). As markets for greener products continue to expand
(Prakash, 2000), many managers view greener product
preferences as creating new niches and opportunities for
product differentiation (Tsen et al., 2006). For many firms,
thechallengeistobalanceconsumers’ environmental
concerns, profitability, and the competitive dynamics of
their target markets (D’Souza et al., 2006; Tanner and
Wolfing Kast, 2003). The most convincing suppor t of the
growing influence of the ecologically-friendly consumer is the
increase in the number of individuals that are willing to pay
more for environmentally friendly products (Bang et al., 2000;
Laroche et al., 2001).
Although an established stream of research exists on the
topic of green marketing, the consumer decision process of
buying environmentally friendly products is not well
understood (Taylor, 2000). Consumers do express strong
concerns for the environment, but their attitudes are often not
reflected in consumption practices and these attitudes have
not yet been explicitly studied. Research to date on the factors
influencing consumption of recycled products shows that:
.recycling and consumption of recycled products are seen
by consumers as a means to “leave the environment as it
is” (Guagnano, 2001); and
.recycled products are positively evaluated by consumers
(Mobley et al., 1995).
Schrum et al. (1994) and Guagnano (2001) indicate that
research on recycling views the key issue as behavioral change.
That is, consumers developing a positive attitude towards
recycled products and expressing social responsibility through
the purchase of green products. More specifically, studies
investigated consumers’ willingness-to-pay (WTP) in order to
protect the environment (Cason and Gangadharan, 2001;
Kirchhoff, 2000), for environmentally-friendly products in
general (Laroche et al., 2001), and more specifically for both
organic food (Krystallis and Chryssohoidis, 2005; Tagbata
and Sirieix, 2008) and renewable energy (Bang et al., 2000).
The literature to date, while interesting offers little insight into
consumers’ WTP for recycled products, or whether the
The current issue and full text archive of this journal is available at
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Journal of Consumer Marketing
27/5 (2010) 458– 468
qEmerald Group Publishing Limited [ISSN 0736-3761]
[DOI 10.1108/07363761011063358]
458

recycled aspect incorporated into some products has a
significant impact on consumer WTP. Consequently, there
is a need for research examining consumers’ WTP for
recycled products versus new/conventional products – made
entirely of new or virgin materials. This research addresses the
issue of the impact of the product category on consumers’
WTP premium prices for recycled products versus new/
conventional products, and the switching behavior of
consumers from recycled to new/conventional products due
to relative price differences.
Literature review and hypotheses
For decades the tendency in many jurisdictions has been an
increase in environmental legislation. Much of this legislation
has been retroactive (for example: Wildavsky, 1995). In
addition to the threat of retroactive legislation, jurisdictions
have been legislating new design standards to eliminate the
use of environmentally undesirable chemicals such as lead or
CFCs (Cook, 1996; EU, 2003a: Liew et al., 2006; UNEP,
1994). An increasing number of jurisdictions are making the
manufacturer responsible for their products at the time of
disposal (Micklitz, 1992; EU, 2003b) – a concept referred to
as product stewardship (Lamming and Hampson, 1996).
Although these regulations are intended to force
manufacturers to take-back product at the end-of-life of the
product, third parties often are paid to take-back and process
discarded products. However, some manufacturers have
implemented product take-back for certain items they
produce. More and far reaching legislation is anticipated, as
the European Union has clearly stated a commitment to
integrate sustainability into all future legislation (American
Chamber of Commerce of Europe, 2004). Although the USA
(DEP, 1998, 2002; Maine, 2005; State of Minnesota, 2003;
State of California, 2003), European Union (EU, 2003b,
Perchards, 2005), and many Asian countries (Shih, 2001) are
discussing and/or implementing regulations that involve reuse
and recycling of products and materials, policy makers have
given limited consideration to the implications of these
regulations to the private sector from the perspective of either
operations or marketing.
The field of operations management has considered many
of the implications of compliance with proposed regulations
relating to product stewardship and sustainability. In fact,
greener operations management has been a field of great
activity, including a number of special issues on the topic (for
example, Kleindorfer et al., 2005; Linton et al., 2007). In
doing so, a number of operational challenges that violate the
techniques and approaches used to traditionally manage
production operations have been identified and solutions
continue to be found for these challenges. As a result there are
many examples in the literature of firms and producing goods
made with recycled or reused parts (Arndt, 2005; Krikke et al.,
1999; Linton and Johnston, 2000). In fact over two decades
ago, Lund (1982) showed that firms engaged in the sale of
products based on refurbished products and reused parts have
higher than average profits. The economic question of
whether it is profitable to sell products based on recycled or
reused parts is increasingly, yes. Consequently, the marketing
questions relating to greener products in general and greener
products comprised of recycled materials or used parts are
increasingly relevant.
Greater awareness of environmental problems, increased
media coverage, impact of major industrial disasters on public
opinion, and the rise of pressure group activities are among
the factors driving environmental concerns (Alsmadi, 2008;
Finisterra do Pac¸o et al., 2009). Consumers are expressing
their increased interest to environmental and social criteria in
the choice of products (Carrigan and Attalla, 2001; Tallontire
et al., 2001), more specifically for products that are less toxic,
more durable, contain reusable materials, and are made of
recyclable materials (Lamb et al., 1994).
This behavioral trend is supported by a number of surveys
(Follows and Jobber, 2000) and shows that between 60 and
90 percent of North American consumers are concerned
about the potential environmental impact of their purchases.
Furthermore, Guagnano (2001) found that over 86 percent of
the respondents are willing to pay extra for a common
household product made from recycled materials. In
summary, many consumers are willing to pay a premium for
green products (Tsen et al., 2006). Consequently, it is worth
obtaining a better understanding of the underlying
phenomena associated with this WTP.
Environmental research in the field of psychology focuses
on psychological constructs such as affect, knowledge, values,
attitudes, and memory as important determinants of eco-
friendly behavior (Mobley et al., 1995; Montoro Rios et al.,
2006; Tsen et al., 2006; Tanner and Wolfing Kast, 2003).
However, exact relationships with such behaviors are still
unclear.
In the domain of green consumerism, research has
attempted to profile green consumer segments using
a variety of variables (D’Souza et al., 2007; Ebreo
et al., 1999; Finisterra do Pac¸o et al., 2009; Mainieri et al.,
1997). The resultant findings are best described as
diverse. There is, however, a strong correlation
between environmental purchase behavior and income,
education, and gender (D’Souza et al., 2007). While
men are more knowledgeable about environmental
issues, women are more concerned about environmental
quality (Diamantopoulos et al., 2003). Overall, Laroche
et al. (2001) conclude that the segment of consumers that
are willing to pay a premium for environmentally friendly
products is of sufficient size to warrant the attention of
marketers.
Environmental concerns have a number of bases and are
acted-out by consumers in a variety of ways. Consumer
altruism is one explanation of recycling participation,
resource conservation, and other pro-environmental actions.
Specific types of environmentally-consciousness behavior
such as purchasing organic (Krystallis and Chryssohoidis,
2005) recycled products (Laroche et al., 2001). Guagnano
(2001), indicate that actions to support the environment
cannot be fully achieved without a market for the recycled
materials:
Consumers may participate in the sor ting and collection of household
materials for recycling, but unless the materials are then converted into
recycled products and purchased by consumers, there is not environmental
benefit.
Consequently, firms that are involved with the conversion of
old product into new product are likely beneficiaries of the
actions of consumers that are altruistic and environmentally
sensitive.
Products: how much are consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Journal of Consumer Marketing
Volume 27 · Number 5 · 2010 · 458 –468
459

A body of research is already dedicated to consumers’ WTP
for environmental friendliness in food production (Baltzer,
2003; Corsi and Novelli, 2003; Fu et al., 1999; Govindasamy
and Italia, 1999) as well as for non-food products (Laroche
et al., 2001; Vlosky et al., 1999). It appears from the work to
date that WTP for environmentally friendlier products is a
general tendency. Despite the increasing availability of
recycled-products, however, there are no studies that have
examined variability in consumers’ WTP for different types of
recycled products. WTP more for environmentally-friendly
products may just be based on the price range that customers
feel is fair for a product. An alternative explanation is that
consumer perception of price and quality for environmentally
friendly products is critical. Kahneman and Knetsch (1992)
suggest that WTP estimates are not a measure of the
economic value of the good, but are expressions of a
“willingness to acquire a sense of moral satisfaction”.
Whetherthisisthecaseforrecycledproductsisan
important research question.
Recycled materials often cost more than their virgin
counterparts (Moore, 1992). Still, consumers not only
evaluate recycling positively, but are also willing to pay a
premium for products aiming at protecting the environment
(Mobley et al., 1995). Therefore, to obtain a better
understanding of consumers’ WTP for recycled products, it
is necessary to first understand differences in the WTP for
recycled and for new/conventional products. Specifically, we
need to consider differences in: type of product, type of usage,
and switching behavior from recycled to new/conventional
product.
Type of product
Vlosky et al. (1999) indicate that determining a consumers’
WTP is a fundamental element of marketing research.
Consumers are willing to pay a premium to ensure product
quality. Price premiums, the excess price paid over the “fair”
price, are justified by the “true” value of the product. Several
studies have investigated the relationship between positive
attitudes of consumers towards the natural environmental and
product purchase or usage intention. The more involved
consumers are with the environment, the more likely they are
to purchase green products (Schuhwerk and Lefkokk-Hagius,
1995). But consumers may differ in their level of willingness
to choose higher-priced environmentally-oriented products.
In some cases recycled products are perceived to be of lower
quality than products made from virgin raw materials (Reid,
1990) and consumers’ quality evaluation of recycled products
have been shown to be moderated by the product category
(see Mobley et al., 1995). These studies suggest that
consumer preference for recycled products could be product
specific, even though, consumers feel positively about buying
recycled products in general. Hence:
H1. Recycled products versus new/conventional products
do not have the same value.
H2. Consumers’ WTP premium price for recycled
products is product specific.
If consumers’ attitude and behavior toward recycled product
is affectively driven, their WTP premium price will not be
influenced by the product category. However, if consumer
evaluations of recycled products are influenced by the type of
product and thus by what consumers believe recycling can do
to the quality of the product, consumers WTP will vary
depending on the product categor y. Consequently, the
product type and perceived risk need to be considered.
Type of product and perceived risk
An increasingly wide range of recycled products is available,
including: cartridges, decorative surfaces, tires, carpets,
computers, cell phones, printers, greeting cards and facial
tissues. According to Mobley et al. (1995), consumers may
evaluate the quality of recycled products based on the type of
use. However, consumer evaluation of product may be related
to the perceived risk associated with the product. For example
a re-treaded tire may be perceived as having a high level of
risk.
Inherent risk is encountered by consumers when
undertaking purchase decisions. It reflects individual
uncertainty about the outcome and consequences of a
purchase (Taylor, 1974). Risk perception may arise from
different types of negative consequences, such as
psychological, financial, performance, physical and social
risk (Jacoby et al., 1974).
Psychological risk is the experience of anxiety or discomfort
arising from anticipated post-behavioral affective reactions
such as worry and regret (Perugini and Bagozzi, 1999) from
purchasing and using the product. We expect that
environmentally conscious consumers will not face this type
of risk as buying recycled products reflects their overall
positive attitudes and behaviors toward recycled versus new/
conventional products. However, the possibility of either
functional or cognitively-evaluated types of risk arise from
objective features of the product such as cost (financial risk),
performance features (performance risk) and possibility of
bodily harm (physical risk) (Dholakia, 2001) remain for
environmentally-oriented consumers.
Each product category has risk inherently associated with it.
These risks may become salient to the consumer when he/she
thinks about the product and decides how much to pay for it.
If consumers anticipate that functional losses result from the
recycled aspect of the product, this will affect the product
evaluation and consumer’s WTP for the product under
consideration:
H3. The level of functional risk associated to the product
category influences consumers’ WTP a premium price
between new/conventional product and product
containing reused or recycled material.
If recycled components are influencing consumers’ evaluation
of recycled products, we expect consumers to be less willing
to pay premium prices for products associated with high
functional risks.
Switching behavior in WTP
We expect consumers to switch from a 100 percent WTP for a
recycled product to a 100 percent WTP for a new/
conventional product when a specific price difference is
reached – the same for switching behavior from new/
conventional to recycled product. As consumers’ evaluation of
recycled products is moderated by product category, the price
they are willing-to-pay might also reflect this variability.
Moreover, as consumers seem to evaluate the quality of
recycled products depending on the type and degree of risk
Products: how much are consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Journal of Consumer Marketing
Volume 27 · Number 5 · 2010 · 458 –468
460

associated with the product, consumers may gradually change
their likelihood of purchasing the recycled product as the
relative price changes between the recycled and new/
conventional product. The magnitude of the relative price
range that involves the consumer potentially purchasing either
the new/conventional product or the product that contains
reused or recycled material will be related to the level of
functional risk associated to the product category of the good
under consideration:
H4. Switching behavior in WTP is stronger for high
functional risk versus low functional risk products.
Having considered the different factors that can affect
consumers’ WTP for recycled products – type of product,
type of perceived risk associated with the product – we
present in the next section the methodology used for
collecting data and testing the hypotheses of this study.
Methodology
To fulfil the goal of obtaining price estimates for products that
are currently unavailable, the expert elicitation literature was
consulted. The methods proposed in this literature are
relevant, because experts are asked to give opinions based on
their domain knowledge on topics such as risk (Evans et al.,
1994; Kerr, 1996) and design, costing and pricing of new
products (Alha and Pohjola, 1995; Dawood, 1996). Studies
on expert elicitation agree that if one obtains a single opinion-
value from an expert the accuracy tends to be lower then if
one obtains a series of opinion-values, these multiple values
should be associated to different probabilities of occurrence
and any associated underlying assumptions should be
obtained and considered (Chervinskaya and Wasserman,
2000; Granger and Keith, 1995; Keeney and Von Winterfeldt,
1991; Kerr, 1996; Ranasinghe and Russell, 1993).
We initially followed the detailed method of data collection
that was used by Ranasinghe and Russell (1993) in their study
of economic risk analysis. This method was adopted and
applied to a pilot study of seven products (paper, single use
camera, toner cartridge, tire, auto part, cell phone, printer/
fax) in a class of graduate students. It was found that asking
potential consumers of a product to state the price that they
are willing to pay for a remanufactured/refurbished/recycled
product instead of a new product xpercent of the time, is
confusing under certain circumstances. More specifically,
participants in the pilot study found stating a price that was
worth paying 25 percent or 75 percent of the time to be
confusing. Consequently, the inter-quartile probabilities were
dropped from the survey and a new survey was created that
considered the highest price one was willing to pay to
purchase a remanufactured product instead of a new product:
0, 5, 50, 95 and 100 percent of the time. In other words
participants were asked to indicate the maximum price they
would pay for a recycled/refurbished product x percent of the
time given a set price (usually $100) for a product made of
virgin material and components. This survey (see the
Appendix) was filled out by 49 graduate students. The
sample consists of student volunteers from classes in three
different graduate programs – environmental economics: 20
students, master in business administration: 19 students, and
environmental law: ten students. As the WTP consistently
decreased as the probability of purchasing the recycled/
remanufactured product increased, it was evident that the
confusion experienced in the pilot study had been alleviated
by eliminating the inter-quartile probabilities.
Results
H1. Recycled products versus new/conventional
products do not have the same value – supported
Value or WTP is compared for purchasing product with new
versus recycled or reused materials. For seven different
products, 49 respondents showed a statistically significant
difference for WTP (see Table I). Tests were conducted using
a paired samples test.
H2. Consumers’ WTP premium price for recycled
products is product specific – supported
Value or WTP for products with recycled or reused content
was compared to each other using a paired sample test to see
if the WTP was different for purchasing the equivalent of
$100 worth of new product. The maximum price that 49
consumers were willing-to-pay for two different products was
compared with each other using a paired samples test. It was
found that 11 out of a possible 21 pairs of the seven products
under consideration had a statistically significant difference
(see Table II).
H3. The level of functional risk associated with the
product category influences consumers’ WTP premium
price – supported
The difference in the relative value for a set of seven products,
new versus recycled product versus product was considered
on a pair-wise basis.
The lower the level of functional risk associated with the
product, the greater the WTP for the product (see Table II).
Consumers are willing to pay a price that is higher for
recycled paper than all the other products considered.
Similarly, consumers are willing to pay a higher price for a
reused single use camera, another product with relatively low
perceived functional use than a refurbished printer/fax,
refurbished cell phone, or refurbished auto part. The WTP
for recycled paper is, however, higher at a statistically
significant level due to the lower perceived functional risk of
paper. The difference in WTP between a single use camera
and a re-treaded tire or a toner cartridge is not statistically
significant. The price that consumers are willing-to-pay for
toner cartridges is higher, at a statistically significant level,
than the price of refurbished cell phones and auto parts. The
WTP of consumers for the ten other product-pairs do not
offer a difference that is statistically significant.
H4. Switching behavior in WTP is stronger for high
functional risk versus low functional risk products –
supported
The difference in price between always purchasing a recycled
product and a new product was considered.
Consumers switch from purchasing to not purchasing
recycled products over a small price range, if the product has
a higher functional risk (see Table III). This hypothesis is
supported by a statistically significant difference in the ranges
between product pairs for 11 out of the 21 possible pairings.
Recycled paper, the product with the lowest functional risk
has a switching range with a larger price differential than any
other product. Our product with the next lowest functional
risk, the single use camera, has a switching range that is larger
Products: how much are consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Journal of Consumer Marketing
Volume 27 · Number 5 · 2010 · 458 –468
461

than: refurbished printer/fax, refurbished cell phones,
refurbished auto parts and refilled toner cartridges. Finally,
the re-treaded tire has a switching range that has a statistically
significantly lower switching range. Further inquiry into these
patterns in the data suggests that the low switching range is
based on a perception of increased functional risk among
certain consumers.
Discussion
To fully consider the implications and importance of this
research,weconsiderthetopic from three different
perspectives. The discussion begins with the implications of
the WTP research to behavior to obtain insight into what
drives the consumer when the consumer considers and
potentially purchases recycled/refurbished products. We then
move up a level, to consider the overall viability of the
product. This leads to the next section, in which the product
is considered from the perspective of its contribution of value
to the overall corporate identity. In doing so, we identify a
series of new questions that should be answered in future
research to further extend theory and practice. Having
addressed the future research needs and limitations,
concluding notes are offered.
Implications from the perspective of the consumer
Conventional products and recycled products do not have the
same value for consumers. In other words, recycled
components of a product affect the evaluation of that
product and thus the consumer’s WTP for that product.
This is an area that calls for additional study, since even a
brief glance at the results suggest that tremendous variation is
possible on a product-to-product and person-to-person basis.
The results of this study suggest that product evaluation
depends on the product category and is reflected in
consumers’ WTP for the different products studied here.
Consumers are more willing to pay premium prices for
recycled paper and single use cameras than for toner, cell
phones and auto parts. This suggests that although consumers
might feel very positive about green products in general, they
Table II Paired-sample test of the difference between the willingness-to-pay (WTP) for two different products based on recycled materials and/or used
parts
Product pairing
t
-statistic Statistical significance
Recycled paper versus refurbished printer/fax 4.9 0.000 *
Refurbished cell phone versus refurbished printer/fax 20.4 0.697
Refurbished auto part versus refurbished printer/fax 20.3 0.732
Re-treaded tire versus refurbished printer/fax 0.2 0.837
Refilled toner cartridge versus refurbished printer/fax 0.9 0.367
Reused single use camera versus refurbished printer/fax 2.8 0.007 *
Recycled paper versus reused single use camera 6.3 0.000 *
Refurbished cell phone versus reused single use camera 23.0 0.005 *
Refurbished auto part versus reused single use camera 23.2 0.002 *
Re-treaded tire versus reused single use camera 21.6 0.126
Refilled toner cartridge versus reused single use camera 21.1 0.289
Refurbished cell phone versus recycled paper 28.7 0.000 *
Refurbished auto part versus recycled paper 29.9 0.000 *
Re-treaded tire versus recycled paper 26.1 0.000 *
Refilled toner cartridge versus recycled paper 26.9 0.000 *
Refurbished auto part versus refurbished cell phone 20.1 0.945
Re-treaded tire versus refurbished cell phone 0.1 0.941
Refilled toner cartridge versus refurbished cell phone 2.6 0.012 *
Re-treaded tire versus refurbished auto part 0.1 0.910
Refilled toner versus refurbished auto part 2.8 0.007 *
Refilled toner versus re-treaded tire 1.2 0.249
Table I Paired-sample test of the difference between the willingness-to-pay (WTP) for products based on new and used materials and/or parts
Product type
t
-statistic Statistical significance
Paper versus recycled papers 23.9 0.000 *
Single use camera versus reused single use camera 26.2 0.000 *
Toner cartridge versus refilled cartridge 23.8 0.000 *
Tire versus re-treaded tire 24.7 0.000 *
Auto part versus refurbished auto part 28.5 0.000 *
Cell phone versus refurbished cell phone 24.6 0.000 *
Printer/fax versus refurbished printer/fax 25.2 0.000 *
Note: *Relations that are statistically significant at the 5 per cent level
Products: how much are consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Journal of Consumer Marketing
Volume 27 · Number 5 · 2010 · 458 –468
462

are considering the recycled aspect differently depending on
the product category.
Consumers show a much lower WTP for products that
present a high level of functional risk. In the case of the
perception of a high level of functional risk for products that
involve recycled content, consumers expect a large price
discount in relationship to new/conventional products.
Recycled paper has the lower perceived functional risk
associated to it (low probability of bad performance, low cost,
and no risk of physical harm to the purchaser or user).
Consequently, some respondents even suggest that they will
pay a large price premium for this greener product. The same
arguments also apply to single use cameras, except consumers
are typically not willing to offer as much additional money to
purchase the greener product. Another important
consideration for comparing greener products is that
recycled paper has been advertised and offered on the
market for a long time compared with other products that
contain recycled content: recycled printers, tires, and auto
parts. Furthermore, for most products that incorporate
reused or recycled materials consumers have limited or no
knowledge of the effects of the non-virgin material to the
functional risk of the product.
A lack of familiarity with the use of recycled material in
certain products and/or a lack of knowledge of the effects of
the materials on product functionality makes consumers
evaluate these products differently from their new/
conventional counterparts and also between different
product categories of recycled products. This is in
accordance with Pickett-Baker and Ozaki (2008), who find
that a major consumer barrier to purchasing green products is
concerns over not being able to assess product performance a
priori.
The marketing literature, however, highlights several risk
reduction strategies that could be used to compensate a high
level of perceived risk and its consequences on WTP, like
using an established brand name (Ailawadi et al., 2003;
Erdem, 1998; Erdem and Keane, 1996) or warranty (Lim,
2001; Tan, 1999). These strategies are expected to perform a
particularly important risk reduction role for recycled
products for which inherent risk may be especially great –
such as automobile tires. Having considered the maximum
price people are willing to pay, we now turn our attention to
the magnitude of the price range that is traversed as a
consumer moves from definitely purchasing to definitely not
purchasing.
The results of the test of a relationship between the
functional risk associated with a product and an effect on the
price range involved in moving from definitely purchasing to
definitely not purchasing shows that functional risk does have
a statistically significant impact. Consumers will switch from a
recycled product to a new/conventional product within a
smaller range of price for a product associated with a higher
functional risk than if the product has a lower functional risk.
It appears that although consumers are positively predisposed
to protecting the environment, consumers make a clear
decision what the price discount must be to accept a higher
functional risk. Recycled paper, the product in this study that
presents the lowest functional risk, has the largest switching
range. That is the difference between the lowest price that is
associated with purchasing 0 percent of the time and the
highest price that is associated with purchasing 100 percent of
the time is greater for paper then for any of the other products
considered. While re-treaded tires, a product perceived to
have high functional risk, presents the smallest switching
range. In the case of re-treaded tires, the functional risk
Table III Paired-sample test of the difference in price switching range for the willingness-to-pay (WTP) for two different products based on recycled
materials and/or used parts
Product pairing Mean difference
t
-statistic Statistical significance
Re-treaded tire versus refurbished printer/fax 26.5 21.4 0.181
Refurbished cell phone versus refurbished printer/fax 22.5 21.0 0.344
Refurbished auto part versus refurbished printer/fax 22.8 21.1 0.286
Refilled toner cartridge versus refurbished printer/fax 2.0 0.7 0.496
Reused single use camera versus refurbished printer/fax 212.8 23.1 0.004*
Recycled paper versus refurbished printer/fax 252.0 23.1 0.003*
Refurbished cell phone versus re-treaded tire 4.0 0.7 0.478
Refurbished auto part versus re-treaded tire 3.7 0.8 0.425
Refilled toner cartridge versus re-treaded tire 8.5 2.5 0.017 *
Reused single use camera versus re-treaded tire 26.3 21.0 0.329
Recycled paper versus re-treaded tire 245.5 23.2 0.002 *
Refurbished auto part versus refurbished cell phone 20.4 20.1 0.914
Refilled toner cartridge versus refurbished cell phone 4.5 1.1 0.258
Reused single use camera versus refurbished cell phone 210.4 22.5 0.016 *
Recycled paper versus refurbished cell phone 249.5 22.9 0.006 *
Refilled toner cartridge versus refurbished auto part 4.9 1.5 0.150
Reused single use camera versus refurbished auto part 210.0 22.4 0.023 *
Recycled paper versus refurbished auto part 249.1 22.9 0.006 *
Reused single use camera versus refilled toner cartridge 214.9 23.3 0.002 *
Recycled paper versus refilled toner cartridge 254.0 23.6 0.001 *
Recycled paper versus reused single use camera 239.1 22.3 0.027 *
Note: *Relations that are statistically significant at the 5 per cent level
Products: how much are consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Journal of Consumer Marketing
Volume 27 · Number 5 · 2010 · 458 –468
463

appears to be a concern that a tire will fail prematurely/
unexpectedly and offer a high risk of harm to the user and the
user’s property – during actual use. So far the discussion of
the hypothesis highlights the need to understand specific
product differences by better categorizing risk. Having
identified this important contribution, the implications to
theory and practice are now considered.
Implications for theory and practice at the product level
WTP is directly related to the level of perceived functional
risk associated with a product category. Companies must
consider the perceived functional risk associated with any type
of recycled product, since this clearly influences sales of the
product category at a specific price level. A firm can lower the
perceived functional risk of product through a variety of
strategies such as association with a well-established brand or
an attractive warranty. Firms such as Nortel Networks
(Linton and Johnston, 2000) have used branding and
guarantees of performance equivalent to new products to
raise customer acceptance of products containing reused
materials and components. For products with high functional
risk, strong brand name might be able to counterbalance the
recycled content of the product and play its risk reduction role
for the consumers. The use of an original equipment
manufacturer’s (OEM’s) reputation and possibly brand
name on both conventional and reused/recycled versions of
products supports this.
In order to determine whether such strategies are either
required or worthwhile, it is critical to understand the relation
between customer perceived and actual risk. If there is a
significant difference between the actual and perceived risk it
is possible to employ strategies to reduce this gap. If, however,
there is no difference between perceived and actual risk or the
cost of reducing the gap is financially prohibitive, then a firm
will not be able to lower the price discount that must be
offered in comparison to the new/conventional version of the
product. It is also important to recognize that a positive
evaluation of recycled products does not always imply a WTP
premium prices. Further consideration is required to
determine if WTP is moderated by the consumer’s level of
involvement and environmental consciousness. If this is the
case, companies might target a specific type of consumer
ready to pay premiums prices for products presenting low as
well as high levels of perceived risk depending on their profile.
In order to easily apply this model to practice, these
theoretical gaps must first be closed.
Implication for the sustainability marketing interface
The findings clearly support that WTP for products varies by
product and that variation is based at least partially on
functional risk – the relative importance to failure. A product
with reused or recycled content with low functional risk and a
relatively high consumer WTP would be an attractive item to
have associated to a corporation’s identity. As the product will
not only bring in a higher price, and presumably be more
profitable, but will also enhance the sustainability and the
external image of the corporation. While a product with high
functional risk will not only be economically less attractive,
but may link the firm with perceptions of poor quality or even
dangerous products. This being the case, the critical questions
become:
1 At what point does the functional risk reach a level where
the production of an additional line of goods based on
reused and/or recycled product move from improving the
corporate identity to offering no contribution or even a
negative contribution to the corporate identity?
2 Where is this point of nil return to corporate identity
represented in terms of WTP?
3 What is the effect of linking the product line that is based
on reused or recycled content to the product brand?
Finally, all firms should carefully examine the relative level of
economic attractiveness of producing a version of their
product with recycled or reused content as a defensive
response to the potential for legislation requiring product
take-back or stewardship. Not only does this offer the
possibility for a line extension strategy to satisfy underserviced
markets, but also this is an area in which marketing can make
important contributions to firm strategy by offering a better
understanding of the possible impact that environmental
legislation can have on the value proposition and profitability
of products
In summary, there are a number of limitations to this
research and opportunities for further research. This study
did not consider product branding. For certain types of
recycled products brand name is likely to be more critical in
counterbalancing perceived functional risk. Consequently,
consideration of the impact of brand name on consumer’s
WTP for recycled products is needed. The linking to brand is
also critical to corporate identity, so one must consider
branding not only from the perspective of the product, but
also the corporate identity. As there clearly are major
differences between consumers in terms of WTP, future
studies should involve socio-demographic profiles of
consumers and psychographic variables to study whether
these factors moderate the WTP. While our sample size is
sufficient for our exploratory study to gain early insights into
the area, future samples should and will need to be larger in
order to allow for the consideration of product-related and
consumer-related variables. A final concern is that what
people state they are willing-to-pay and what people are
actually willing-to-pay may not be the same. There is a need
to better understand how stated preference and behavior are
related and can be calibrated. Future consideration of
linkages between the availability of product based on reused
and/or recycled content, its purchase by consumers, and the
perception of a firm’s corporate identity is also warranted.
Conclusion
This study has taken an initial important step in
understanding the marketing of products that contain
recycled and/or reused materials. While increasing interest
by consumers in greener more sustainable products offers
sufficient reason to warrant consideration, new environmental
laws and regulations in many regions and countries make this
both timely and a priority. The manufacturing and
operational issues associated with the incorporation of
reused and recycled materials are increasingly being
addressed by both academe and practice. Consequently, the
missing piece is understanding the marketing of products
based on recycled and reused materials. Therefore, the
importance and relevance of this topic will continue to grow.
Through our consideration of the stated WTP of 49
consumers for seven different types of products, we have
found that there is tremendous variation in both relative price
Products: how much are consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Journal of Consumer Marketing
Volume 27 · Number 5 · 2010 · 458 –468
464

and switching range for different types of products. More
specifically, perceived functional risk appears to have a
statistically significant impact on consumer purchase
decisions. This finding is a critical step to understanding the
marketing of products manufactured with recycled and/or
reused materials. The next steps are: to consider the effects of
branding, the associated effects of change in perception of a
firm’s corporate identity, and specific psycho-social variables
that affect consumer perceptions and decision making and
variables that are critical to understanding functional risk.
Through the consideration of these important theoretical
questions, we can also gain insights that are impor tant to
practice. The study offers practitioners a technique for
determining at what price would a version of their product
that incorporates recycled and/or reused materials – an
important practical contribution since it allows for an
economic assessment of greener products. As further
insights are obtained into psycho-social characteristics
associated to WTP, marketing professionals will be able to
make better decisions about positioning greener versions of
their products. As further insights are obtained about the
evaluation of functional risk, it will become more feasible to
use information about WTP for one or more product to make
decisions about WTP for one or more other products. As an
understanding of perceived functional risk of products
containing recycled or reused materials increases, it will
become more apparent what sorts of consumer information
and awareness programs might alter consumer perceptions
and assist consumers in making more informed decisions.
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Appendix. One segment of the survey used for
elicitation of prices of remanufactured product
If you are going to purchase a replacement alternator for a car
for $100 and you are given the alternative of buying a
refurbished alternator, please state
1 The highest price that you would definitely pay for the
refurbished alternator __.
2 The price that you would probably buy the refurbished
alternator, but there is a small chance you may not (i.e.,
19 times out of 20 you would buy the refurbished
alternator) __.
3 The price that you would buy the refurbished alternator
about half the time and the standard product half the
time__.
4 The price that you would probably not buy the
refurbished alternator, but there is a small chance you
would still purchase it (i.e., one time out of 20 you would
buy the refurbished alternator) __.
5 The lowest price that you would definitely not pay for the
refurbished alternator __.
About the authors
Leila Hamzaoui Essoussi is an Assistant Professor at the
Telfer School of Management, University of Ottawa, Canada.
Her research interests include brand management, country of
origin effects, and current issues related to consumer
behaviour focusing on organic and recycled products
consumption. Leila Hamzaoui Essoussi is the corresponding
author and can be contacted at: hamzaoui@telfer.uottawa.ca
Jonathan D. Linton is a Professor at the Telfer School of
Management, University of Ottawa, Canada. His research
interests are in questions in which traditional assumptions of
operations management are violated when considering
emerging technologies and environmental management. He
is the Editor-in-Chief of Technovation and is on the editorial
Board of IEEE Transactions on Engineering Management and
Technological Forecasting and Social Change.
Executive summary and implications for
managers and executives
This summary has been provided to allow managers and executives
a rapid appreciation of the content of the article. Those with a
particular interest in the topic covered may then read the article in
toto to take advantage of the more comprehensive description of the
research undertaken and its results to get the full benefit of the
material present.
Consumers are increasingly concerned about the
environment; these concerns are displayed in consumers’
stated preferences and in some cases a willingness to pay
premium prices.
Products: how much are consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Journal of Consumer Marketing
Volume 27 · Number 5 · 2010 · 458 –468
467

Why recycled products?
Previous studies indicate the importance attributed to
environmental protection by citizens. Consumption of
recycled products is a means to leave the environment as it
is. Although environmentally-friendly products remain a
niche market, firms are developing products and processes
that are both economically and environmentally attractive.
Simultaneously legislation and regulations requiring the reuse
of material and end of product life take-back have been put in
place. Moreover, advances in operations and manufacturing
management enable the reuse of material content for existing
products. Finally, firms engaged in the sale of products with
reused part have higher than average profits. Therefore,
marketing greener products based on reused content is
increasingly relevant.
Research into green consumerism has identified
correlations between environmental purchase behavior and
education, income and gender. The segment of consumers
willing to pay a premium for environmentally friendlier
products is sufficient to be worth pursuing.
Specific types of environmentally-consciousness behavior
include the purchase of recycled products. Consumers’
quality evaluation of recycled products is moderated by the
product category. Surveys show that many consumers are in
general willing to pay a premium price for green products.
Not much is known about consumers willingness-to-pay for
recycled products, and its variability.
Essoussi and Linton investigate the price premium that
consumers are willing to pay for products with reused or
recycled content. The impact of the product category on
consumers’ willingness to pay premium prices is addressed, as
well as consumer switching behavior from recycled to new/
conventional products due to relative price differences.
The study of 49 respondents indicates the maximum price
they would pay for a recycled/refurbished product xpercent of
the time given a set price for a conventional product, for seven
product categories.
Findings show differences in perception of relative value of
products with recycled content compared to new/
conventional products. This agrees with earlier research in
distinct, but related areas. Other specific aspects of the
findings are presented as key factors to be considered.
Key factors to consider
Perceived functional risk
Product evaluation depends on the product category and is
reflected in consumers’ WTP for different products. This
highlights that overall environmental consciousness does not
lead to WTP premium price regardless of product category.
Perceived risk, and more specifically functional risk associated
with a product with recycled content seems to influence WTP.
For products like recycled paper and single use cameras, with
low perceived functional risk, consumers are willing to pay
large price premiums. But other products such as recycled
tires are different, as the possibility of bad performance
leading to the risk of physical harm to the purchaser appears
to depress a WTP premium prices.
Familiarity with recycled content and product category
Whereas recycled paper has been available for a long time,
and lacks a high functional risk, this is not the case for other
product categories. A lack of familiarity with the use of
recycled material in some products, associated to a lack of
knowledge or concern over product functionality and
performance makes consumers less willing to pay premium
prices for products like refurbished cell phone and auto parts
or refilled toner cartridge and refurbished printer.
Consumers switch from a recycled product to a new/
conventional product within a smaller range of price if the
product is associated to a higher functional risk. Again, this
indicates that consumers make clear decision what the price
discount must be to accept a higher functional risk, even
though they are concerned about the environment.
Conclusion and recommendations
Companies must consider the perceived functional risk
associated with any type of recycled product, since this
appears to influence WTP for the product category. A high
level of perceived risk, however, can be compensated by using
several risk reduction strategies such as using well-known
brand names or warranty. Companies offering products with
high functional risks could use a strong brand name to
counterbalance the recycled content of the product. This is all
the more applicable if there is a significant difference between
the actual and the perceived risk. Companies need to assess
the impact of linking their brand name with recycled products
in terms of overall quality perceptions and its contribution to
the corporate identity.
The authors suggest that this study offers practitioners a
technique for determining at what price a version of a product
that includes recycled material becomes attractive to
consumers. Further insights are needed regarding
consumers’ perceptions of functional risk in order to better
apply risk reduction strategies Furthermore, information
about personal and contextual variables to advance knowledge
about environmental behavior and its impact on consumers
WTP for recycled products is needed to determine what type
of product/brand information and awareness programs can be
used to assist consumers in making more informed decisions
when considering recycled products. This in turn allows
companies to better address consumers’ dual benefits,
functional performance and environmental safety.
(A pre
´of the article “New or recycled products: how much are
consumers willing to pay?”. Supplied by Marketing Consultants for
Emerald.)
Products: how much are consumers willing to pay?
Leila Hamzaoui Essoussi and Jonathan D. Linton
Journal of Consumer Marketing
Volume 27 · Number 5 · 2010 · 458 –468
468
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