Turning consumers into prosumers for ethical shopping Highlights from Nudgeapalooza

27 June 2018

A challenge to selling ethically produced products is getting consumers to follow through on their good intentions. Georgetown’s Neeru Paharia, who spoke with Tanya Ott at Deloitte’s 2017 Nudgeapalooza conference, discusses how to better guide consumer behavior.

People don't like sweatshop labor. If you ask consumers, they say, hey, we don't want this in our supply chain.

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TANYA OTT: But a lot of consumers end up buying those sorts of products anyway. Can you nudge consumers to choose ethically produced products? That’s what we’re talking about today on the Press Room.

I’m Tanya Ott, and today’s show is the latest in our special series recorded at Georgetown University—where Deloitte’s Centers for Government Insights and Integrated Research held a one-day conference to explore how behavioral science and data science can help governments, universities, and businesses address some of their most challenging problems.  

REBECCA HAMILTON: Good morning, everyone. Welcome to Georgetown University and McDonough School of Business. I’m Rebecca Hamilton, professor of marketing here at the business school.  

TANYA OTT: They brought together thought leaders, researchers, and academics like Neeru Paharia. She’s an assistant professor at Georgetown specializing in consumer behavior and decision-making. Prior to joining Georgetown’s faculty, she served as the research director of a center for ethics at Harvard University. And she’s particularly interested in how—using digital tools and behavioral nudges—you can get people more interested in buying fair-trade products. It all hinges on an idea called “pro-sumerism.”

NEERU PAHARIA: The idea behind pro-sumerism is that there's this sort of duality. We tend to occupy a role that's more consistent with being consumers: We go to the store. We buy things. Things are already there, they’re sorted out, they’ve been decided for us. We don’t really take on the role of the producer. The company takes on the role of the producer.

TANYA OTT: But imagine a world where you can customize your products. You can design them yourself. You can break down the wall between consumer and producer. You can be both. 

NEERU PAHARIA: Customizing. We can custom-design our own T-shirts, aprons, hats, all these kinds of things. We can print books on demand. Some book stores, rather than having this insane inventory of low-volume books, will print books on demand for you. So these kind of rare and maybe long-tail titles, now you can just print them on demand.

TANYA OTT: Neeru is particularly interested in the intersection of pro-sumerism and fair trade.

NEERU PAHARIA: This is probably familiar to most of you. The idea behind fair-trade production is that we're going to have [a] labeling and certification process where consumers can understand that their products were made under favorable working conditions, that the producers got good wages, that environmental standards were actually met. This is in response to what we often see in the news, that there are all these issues in the supply chain.  

A lot of these iconic brands have issues in their supply chains. And there are often these really dramatic headlines that consumers find to be disturbing. People don't like sweatshop labor. If you ask consumers, they say, hey, we don't want this in our supply chain.

TANYA OTT: One survey by a cloud supply chain platform found that 45 percent of consumers said they’d pay more for responsibly produced clothing and footwear.1

NEERU PAHARIA: Why, then, aren't [there] more kinds of fair-trade or ethically sourced products available to consumers?

TANYA OTT: It comes down to human behavior.

NEERU PAHARIA: We're consumers, we tend to be passive, we go to the store, we buy what's available to us. We're not really taking an active role in production. This is pretty common. This is what we typically see when you go to the store.

TANYA OTT: So basically, we tend to take the path of least resistance. Nielsen, the global information, data, and measurement company, did a survey where it tried to separate people who were passively eco-friendly and those who were passionately eco-friendly. They found that 40 percent of respondents in North America were interested in buying from socially responsible brands. But when they asked survey respondents if they actually checked the labels on products to make sure the companies are committed to positive social and environmental impact, less than a third said they did.2

NEERU PAHARIA: So then, that leads us to this disconnect.

TANYA OTT: Neeru started collecting data. She looked at several different scenarios where people were told they could buy something either made before they ordered it—or made to their specific order. They were told that both companies had some unfavorable labor practices involved. And what she found was kind of surprising. Even though people told researchers they don’t like certain labor practices and such, people were more likely to purchase the already-made products than the made-to-order.

NEERU PAHARIA: We don’t feel responsible because stuff has already been made. We don’t actually have responsibility for its production.

TANYA OTT: But, she says, combine made-to-order and ethically produced and you might actually encourage people to buy fair-trade products.

NEERU PAHARIA: [I doubt] a company's going to tell you, we have unfavorable things going on in our supply chain. How do we actually get people to have more interest and at least be more willing to pay for something like a fair-trade product?

So here, rather than talk about favorable labor conditions, participants just considered two kinds of shirts. One was a regular production shirt, not saying anything negative about it at all. The other was a fair-trade shirt, and the fair-trade shirt costs $6 more. They're different designs, but other than that they're pretty similar in terms of sizes and whether they're available for men or women.

So in the first condition, we asked them to choose, which one of these shirts would you rather buy from inventory? These were already made, they're pre-produced, and you're just picking one from a store. This is essentially what people are used to doing.

Or, we told participants, this is a crowdfunding situation. You get to choose which one you want and if you commit to buying it, we're crowdfunding this. If we reach our goal, then you'll end up with the one you chose, and if not, you won't be charged and we won't produce the shirt. So what happens in terms of choice?

TANYA OTT: That’s when a shift occurred.

NEERU PAHARIA: When we're talking about inventory, we find that the majority of people, around 60 percent, are choosing the standard production. The regular option—they're not choosing the fair-trade shirt. But when we're talking about crowdfunding, now we get a reversal. Now we're talking about 60 percent of people are more willing to buy the fair-trade option.

So we can think about how crowdfunding can actually increase interest in fair-trade options. Now they're not thinking about negative labor conditions. They're thinking about buying a fair-trade shirt. They actually feel happier, they feel more responsible, they feel more gratification. And they feel happier for having some impact and contributing to something that aligns with their values.

TANYA OTT: With that one tweak …

NEERU PAHARIA: You can actually see that people are more interested in fair-trade options. Thank you so much. [APPLAUSE]

TANYA OTT: That was Georgetown University assistant business professor Neeru Paharia, speaking at Deloitte’s Nudgeapalooza last November. We’ll have more conversations from the event in upcoming episodes of the podcast. And you can check out our previous podcast from the event, on whether good behavior can be habit forming, at deloitte.com/insights.

I’m Tanya Ott for the Press Room. Thanks for listening!

This podcast is provided by Deloitte and is intended to provide general information only. This podcast is not intended to constitute advice or services of any kind. For additional information about Deloitte, go to Deloitte.com/about.