In the age of sustainability, one thing is clear: consumers are gravitating towards brands and products that either directly benefit their community or those that have a compelling local story. And further research indicates that local businesses or products may benefit from tailoring their messaging to a more local focus.
Currently, companies find it difficult to set and increase prices in the digital marketplace due to pricing transparency. However, a recent study by the Indiana University Kelley School of Business has revealed that consumers often associate higher prices with quality when buying local. The study authors suggest that marketers or local businesses can use this understanding of local vs. global identity to shape consumers’ price perceptions and behaviors.
"Consumers tend to use price to judge a product's quality when their local identity is most important to them," said Ashok Lalwani, PhD, associate professor of marketing at Kelley.
He further explained that when marketing higher-priced or branded items, businesses can encourage consumers to think locally or employ local cultural symbols in advertising.
This information is not necessarily new. A 2017 Global Future Consumer Study found that 55% of consumers in the United States reported very little or no confidence in big brands, up from only 36% in 2012.2
Through their field studies, experiments, and secondary data, investigators found that when consumers choose to identify more with others around them, they perceive greater differences among brands. These consumers often use price to gauge quality, according to the authors.
"For products to be marketed to the places where people tend to have a more local identity (such as rural areas), local flavors and ingredients can be used in the products. As these consumers are more likely to make price-quality associations, marketers may not need to allocate much ad budget to convince consumers about price-quality associations," Lalwani and his co-authors wrote.
The study authors suggest that the same practices may not apply to more metropolitan areas, where consumers often do not have an established connection between price and quality.
Dr. Lalwani is the process of reviewing the results of a large-scale national survey of the United States that measures which states tend to have more of a local identity than a global one, for a follow-up study.
- Buying Local? Higher prices means higher quality in consumers’ minds [press release]. Bloomington, Ind. Indiana University website. Published July 23, 2019. https://news.iu.edu/stories/2019/07/iub/releases/23-buying-local-higher-price-higher-quality.html. Accessed July 24, 2019.
- New A.T. Kearney Global Future Consumer Study reveals shift from Affluence to Influence economy [press release]. New York, NY. PR Newswire website. Published June 28, 2017. https://www.prnewswire.com/news-releases/new-at-kearney-global-future-consumer-study-reveals-shift-from-affluence-to-influence-economy-300480994.html. Accessed July 24, 2019.