Why do Belgian consumers buy fair trade products... and why not?

Table of Content:

Introduction:

Problem formulation & Methodology:

Marketing Mix of fair Trade: What does matter?

Place

Product:

Price

Promotion:

Process:

People:

Physical Evidence:

Conclusion:

References:

Journal articles:

Non Scientific Internet Sources:

Interviews:

Outline of the essay:

This essay tries to identify - using a marketing-mix approach of Fair Trade products - the main determinants driving customers to choose fair-trade products rather than their free trade equivalents. It also highlights the major difficulties encountered by companies active in the Fair-trade market while trying to inform consumers and to influence their buying behaviour. On that basis, this paper proposes several solutions in order to ameliorate the Fair Trade marketing offer. Arguments and critics included in this essay are supported by recent scientific researches in the Fair Trade marketing area.

Introduction:

In 1860, Multatoli¹ published Max Havelaar a novel where he told the story of a man who decided to battle the Dutch government in Indonesia whose unfair policies regarding the trade of coffee were impoverishing local farmers. Historically, this novel is usually considered as the starting block of the long run of the fair trade movement for fair trading partnerships. Fair-trade has been on for a while but it is only during the 90’s that a large media coverage of this concept combined with the growth of the fair-trade industry made occidental consumers more aware of this possible alternative to ‘free trade’ products. While free trade protagonists claim that the just price of a product should equal the supply and the demand functions, the free-trade ideology is based on a different opinion. The Fair-Trade Federation (2005) gives a clear definition of the fair-trade philosophy, at least from a European consumer point of view:

“Fair Trade is a movement promoting trading partnerships based on dialogue, transparency and respect, and seeks greater equity in international trade. It contributes to sustainable development by offering better trading condition to, and securing the rights of, marginalized producers and workers - especially in the South.

Fair Trade organizations (backed by consumers) are engaged actively in supporting producers, awareness raising, and campaigning for changes in the rules and practice of conventional international trade (p. 12)”

As it was well commented by Barrat-Brown, Fair Trade aspires to be “in and against”² the market. It “destabilizes neo-liberal knowledge claims regarding the normalcy of commercial conventions” (Raynolds, 2002). By offering an alternative solution to free trade, fair trade tries to solve the failures of capitalism (such as the information asymmetry and the unequal benefit between stakeholders) for trading partnerships between developing and developed countries.

Consumers appear to devote more and more interest in the goods and services they consume. Provenance and background of the products they buy are becoming particularly important to them (Alexander & Nicholls, 2006). This fact explains the trend toward ethical consumption which includes among others the purchase of fair trade products.

Although the great ideology beard up by fair-trade does not seem to convince everyone as, according to Nicholls and Opal (2005)³, the fair trade industry only counts for 0.01 of all word trade. This very small number can be reasonably assumed to result from a lack of interest on the demand side. Marketing their products for a larger audience beyond the segment of “ethically aware consumers” is the difficult challenge that fair trade companies have currently to face (Alexander & Nicholls, 2006). Moreover, new fair trade brands have usually to face higher production costs while they have in the same time to compete with brands which are very much anchored in consumers’ purchasing habits.

Consequently, marketers need to understand thoroughly fair trade consumers’ behaviour in order improve marketing productivity by making the right strategic choices with regards for example to specific marketing mix actions (Keller, 1993). Developing a better understanding of consumers is the first step toward raising their involvement with products. By increasing consumers’ involvement, marketers augment their chances to improve consumers’ loyalty, awareness and positive word-of-mouth communications with regard to the product (Alexander & Nicholls, 2006). Thus, what fair trade marketers really need to start with is to understand why consumers do buy fair trade products... and why some consumers do not. This is the challenge that I will try to overcome in this paper.

Problem formulation & Methodology:

This paper will try to deliver a marketing answer to the question: “Why people buy fair trade products. and why not?” The paper is primarily exploratory and addresses this specific question through an analysis of relevant literature from the marketing field as well as from other disciplinary areas.

The marketing science has some knowledge that may be useful to ameliorate the processes which can conduct a consumer to choose fair traded products rather than others. Therefore, this essay is not written in the only perspective of showing facts about fair-trade consumerism but has also the objectives to criticize those facts, to confront different findings and to try to find solutions to several dysfunctions in the consumer buying process.

To achieve these goals, I have built my reasoning on the analysis of the “7Ps” of the well- known marketing mix. The 7Ps include the 4Ps (Product, Place, Promotion and Price) as they were primarily defined in 1960 by McCarthy⁴ expanded by 3 other Ps (Process, People and Physical Evidence) which are more specific to the service offered to clients. It is clear though that other factors - such as luck or public relations⁵ - have a significant influence on the success or failure of a product.

Historically, several reasons (that I will explain within this paper) have pushed fair trade marketers to change their strategies from a marketing-mix element to another. Alexander & Nicholls (2006) have studied those switches; although they did not really use a marketing approach. I will reclassify their findings to make them fit within my paper framework in order to use them to understand what elements of the marketing mix marketers have been focused on in the past and how relevant those specific strategies were.

For each instrument, I will also try to look at how it is currently implemented and what are its implications on the buying behaviour. In order to answer those questions, I will use several articles written by De Pelsmacker and his colleagues who have study quantitatively and qualitatively many facets of Fair Trade marketing (De Pelsmacker, Driesen & Rayp, 2005; De Pelsmacker et al., 2005; De Pelsmacker et al., 2006; De Pelsmacker & Janssens, 2007). Subsequently, in order to add value to this paper, I will also try to draft some solutions to diminish inefficiencies by creating the appropriate marketing mix.

I have also realized a short semi-construct interview with the CEO of Devas, a medium­sized fair-trade chocolate company active in Belgium. I have done this interview in order to realize some very basic triangulation and to have a better understanding of how companies approach their customers.

This essay is a marketing approach of the fair-trade buying behaviour. Thus, it is clear that some issues will not be discussed. It is obvious that many stakeholders of fair-trade producers have an important role to play. Marketing is a powerful science but not powerful enough to control every actor/stakeholder of an enterprise. For example, the government interest about fair-trade can have indirectly a real impact on the buying behaviour (through campaigns, tax- incentives for fair-trade producers, etc.). Companies’ influence on a government’s decision is quite limited; especially in a niche market such as the fair-trade industry.

For clarity of illustration and comparison, I limit the substantive topic of this paper to the discussion of fair-trade food industry.

Marketing Mix of fair Trade: What does matter?

Place

Usually, marketers’ focus on “Place” refers particularly to the channels of distribution used to reach the customer. In the case of fair trade though, attention is also maintained on the place of production. The country of origin of the product and other supply chain information are important issues that fair trade marketers have paid attention to, especially during the early stages of market growth, in order to reach consumers the more sensitive to ethical issues.

The emergence and growth of the fair-trade movement is a phenomenon which is strongly linked to several megatrends of our time such as scepticism against capitalism, awareness of ecological and social responsibilities, globalization, etc. Consumers’ beliefs and opinion regarding issues raised by those megatrends may have an influence on their buying behaviour. There is no coincidence that the early consumers targeted by the fair trade marketing were what Mintel called “strongly ethical”⁶ consumers or the “global watchdogs”⁷ defined by Cowe and Williams (Alexander & Nicholls, 2006).

Marketing communications need to be more open and supply chains operations need to be more transparent in order to fulfil ethical consumers’ desire for “authentic and reliable information” (Alexander & Nicholls, 2006). Cova (1997) argued that the links a product generates participate to its consumption value⁸. This argument appears even more consistent in the case of fair trade products.

The main reasons pushing Belgian people to buy fair-trade products are - quite obviously - rather found in the ideology surrounding the fair-trade movement rather than in the fungible characteristics of products. Indeed, the three major reasons to buy fair­trade products are (in order of importance): “a fair price to farmers in developed countries”, Source of the figures: De Pelsmacker et al· ([2006])

“safe and honest production processes” and “retention of dignity and autonomy”

(De Pelsmacker et al., 2006).

[...]

¹ Multatoli was the pen name of Eduard Douwes Dekker.

² BARRAT-BROWN, M. 1993. Fair Trade: Reform and Realities in the International Trade System. London: Zed Books.

³ NICHOLLS, Alex & Charlotte OPAL. 2005. Fair Trade: Market-Driven Ethical Consumption. London: SAGE Publications.

⁴ McCARTHY, E.J. 1960. Basic Marketing: A Managerial Approach. Homewood IL: Irwin.

⁵ Some marketers may see PR as an element of promotion within the marketing mix. PR people usually see it though as a different discipline. In this paper, I will favour this last view and will not pay a great attention to this issue.

⁶ MINTEL. 1999. UK Green and Ethical Consumer Survey. London: Mintel.

⁷ COWE, R. & S. WILLIAMS. 2000. Who are the Ethical Consumers? Co-operative Bank/MORI Survey. Manchester: Co-operative Bank/MORI.

⁸ COVA, В. 1997. “Community and consumption: towards a definition of the linking value of product or services”. European Journal of Marketing. 31(3/4): 297-316.