June, 2011

Research Perspective and Comments & Analysis

How Do Consumers Respond to Advertising Programs for Fruits and Vegetables?

by Brad Rickard, Assistant Professor, Charles H. Dyson School of Applied Economics & Management, Cornell University
 

Fruit and vegetable consumption rates in the United States are significantly lower than what is recommended by nutritionists and health experts. Of the six groups traditionally included in the food recommendation pyramids, fruits and vegetables are significantly under-consumed (Figure 1). Figure 2 shows that fruits and vegetables receive very low levels of advertising funding relative to the other food groups. Therefore, we examine the role of advertising as a way to influence the consumption of fruits and vegetables.

Fruit And Vegetable Marketing

With few exceptions, promotional efforts for fruits and vegetables have been very small, commodity-specific and generic, given the limited number of brands for fresh produce. There have been recent discussions in the United States about implementing a mandatory “broad-based” promotion program for all fruits and vegetables, and this issue was fiercely debated in 2009. In the United States, broad-based campaigns for fruits and vegetables, such as the “Fruit & Veggies: More Matters” campaign, have been supported by voluntary donations and have had much less media exposure than their counterparts in other countries. 

Advocates suggest that commodity-specific programs compete for consumption share and that a large broad-based program may increase demand for the entire fruit and vegetable category.  Opponents argue that broad-based messages simply emphasize a well-known fact — that eating fruits and vegetables is good for you — and do not believe they will influence consumer choice. Among those questioning the efficacy of broad-based campaigns, there are also concerns about the distributive implications across fruits and vegetables; a broad-based effort might only provide benefits for particular fruit and/or vegetables, rather than increase demand for all fruits and vegetables.

Experimental Design

To shed some new light on this issue, we designed an experiment that showed samples of promotional efforts for fruits and vegetables to research participants. We recruited 271 adult subjects and asked them to participate in several computerized auctions and to submit bids that reflect their maximum willingness to pay for one pound of selected fruit and vegetable products. Subjects were placed into one of six treatments, and the treatments varied according to the advertisement shown to the participants. Each treatment was comprised of three 90-second video clips of the popular animated television series, The Simpsons, interspersed with up to two minutes of advertisements for fruits and vegetables.  Advertisements for fruits and vegetables were either commodity-specific, broad-based, or a mixed approach that included commodity-specific and broad-based efforts.

Effects of Broad-Based And Commodity-Specific Advertising

Table 1 shows the average price subjects were willing to pay for the eight fruits and vegetables (apples, oranges, grapes, bananas, tomatoes, potatoes, carrots and bell peppers) under each treatment. Here we see that the average bid was $0.74 per pound in the control group (no advertisements), and did not exceed this level in the treatments showing commodity-specific advertisements. However, in the three treatments that include broad-based advertising, we see a significant increase in price that consumers were willing to pay. 

Our results show that the average willingness to pay across the eight fruits and vegetables was 41 percent higher among subjects in the broad-based group compared to the control group. Our treatment that combines potato advertising and a broad-based campaign provides evidence that a mixed advertising strategy may also lead to a significant increase in the average willingness to pay for fruits and vegetables.  However, the increase in demand associated with this mixed strategy is very similar to the shift in demand associated with adoption of a broad-based program. 

Industry Implications

Our study provides support for the advocates of a broad-based promotional campaign who argue that such advertising would raise overall demand for fruits and vegetables.  In fact, we find that the fruit and vegetable industry may be better off without any commodity-specific advertising. For these reasons, a cooperative strategy whereby producers of fruits and vegetables pool their advertising funds and promote their products generically is apt to be more profitable than a series of competing commodity-specific messages.

 

Intriguing Start For Future Studies

The design of this study is truly ingenious and the industry really owes a debt to Professor Rickard, his associates and Cornell for attempting to inject some rigor into a debate that often has depended more on superstition than science.

As is typical with ground-breaking research, the study raises many questions that only time and more research will be able to answer. For example, one question deals with the long term impact of advertising on purchase and consumption patterns. It is plausible to believe that effective advertising might boost the short-term value perception on a given item or range of items. So in a burst of enthusiasm after seeing an ad, research subjects may well bid higher to get fresh fruits and vegetables.

Typically, though, the question to be addressed in running such a campaign is a financial one. Even if such a campaign were to be run by government as a promoter of public health, there would be an examination to ascertain the costs and benefits of such an effort. This would involve many elements, but a crucial one would be the ability of the advertisements to foster behavioral change over long periods.    

Another intriguing issue for future exploration would be the degree to which this result would change in the competitive media environment that we live in. Today, an ad promoting fresh produce on television is highly likely to be preceded by an ad for beer and followed by an ad for ice cream. Possibly this study actually examines a “media monopoly” effect, and if those ads had been for beef, chicken or baked goods, those categories might have found a similar effect.

Another question is to further explore the issue of value perception vs. purchase propensity. One might be willing to pay more for a given item without necessarily wanting to buy more of that item.    

Indeed, one wonders if we could adapt this type of research to determine optimal pricing at retail, meaning the price level that would produce the highest dollar value for the crop at retail.

Of course, as is always true in research, the answer you get depends on the question you ask. Even if we were to accept this study as definitive proof that a generic promotion program would increase produce consumption, that doesn’t make it a slam dunk that the industry would or should be willing to pay to conduct such a program.

Increasing consumption may be a worthwhile public health goal, but for individual produce producers the issue with an investment in generic promotion is the same as with any other investment — what is the return on the investment?

On the one hand, you have great division between growers of different crops. Some tree crops take many years to grow and so, presumably, if there was a sudden increase in demand, these producers would enjoy a windfall of profits at least until production could be increased many years later. On the other hand, many row crops can be increased in production almost immediately, so there would be less likelihood of a price increase from generic marketing.

Given this, the ability to benefit from an increase in consumption varies by type of company. A large marketer might benefit from an increase in consumption by growing its business, representing more acreage, etc. Some producers or family businesses, though, grow a fixed amount of acreage or stop the growth of their businesses based on the capacity of family members to handle business. If this family grows 500 acres of zucchini, and consumption of this item increases 20 percent and production increases 20 percent, it is not obvious that this family farmer will benefit in any way from increased consumption of his crop — yet he will be paying for the generic promotion program. This means, of course, that he will be poorer, even if the program succeeds in its goal of increasing consumption of his items.

In fact, there is no guarantee that a successful program will be successful for every crop. Indeed, it would be interesting to see this research expanded to ascertain how the value perception of individual items is changed by a generic promotion. Does it matter, for example, if a particular item is pictured in the ad?

Another issue is how to spread costs throughout the marketing chain. If the expectation here was that the effort will lift produce prices at the farm, it would make sense to say that growers should pay for the effort — they are the ones who would benefit. This issue was raised, however, in the context of an effort to increase consumption. As such, the expectation was that produce production would increase and prices would not go up. So the win for any individual produce company had to be the ability to sell more volume. Yet if this is the case, it is not clear why producers should pay the bill.

Wouldn’t a wholesaler benefit from the doubling of its business as much as a producer? What about retailers or restaurants that would get to sell more produce?

One assumes that these retailers and restaurants would object. After all, would increased consumption of produce actually increase their sales or would it simply switch business from another department? Perhaps a future research study from Professor Rickard, his associates and Cornell will give us the answer.