Beyond classical van Westendorp: Assessing price sensitivity for variants of algae-based meat substitutes

Highlights

• Van Westendorp is an inexpensive and easy method to study price sensitivity.

• We assess its applicability in pricing of novel foods and in early product design.

• Between-subject experiment investigates optimal price points for product variants.

• Share of micro-algae, while a cost driver, is less influential on price sensitivity.

• Implications for product design and retailing of alga-based food are discussed.

Abstract

Food product innovations are characterized by high flop rates. In an early development stage, manifold product formulations seem feasible. To determine the most promising product option, market research can help, but is frequently considered too costly and complex. We assess the applicability of the van Westendorp approach, an inexpensive and simple method, for guiding early product design and pricing decisions for novel foods. Findings from a between-subject experiment for meat substitutes consisting of different shares of micro-algae indicate that micro-algae, while a cost driver, has little effect on price preferences. Implications for novel food product design, market research, and retailing are discussed.

Introduction

Sustainability is an important component for many consumers’ diets (Larson et al., 2019; van Loo et al., 2017). Closely connected to a sustainable diet is a reduction in meat consumption. This is also the focus of an increasing number of consumers (Sanchez-Sabate and Sabaté, 2019). More and more meat free alternatives are launched, as manufacturers are lured into the market by promising profit margins. A variety of meat substitutes, such as soy or egg, offer protein alternatives to meat. There is already a broad scope of research on consumer acceptance as well as on drivers for and barriers to meat substitutes and reducing meat consumption (e.g. Hartmann and Siegrist, 2017; Sanchez-Sabate and Sabaté, 2019; Weinrich, 2019). Research shows that consumers often underestimate the ecological impact of meat consumption. However, consumers are often willing to consume meat substitutes. The challenge is the behavioral change of meat consumption for a majority of consumers (ibid.). Weekly food shopping is also strongly habitually influenced. Furthermore, consumers are often very familiar with meat prices and are therefore price-sensitive for meat substitutes (Apostolides and McLeay, 2016). Price can be an impediment to not buying sustainable products such as meat substitutes (Wei et al., 2018). The retail price of meat substitutes is therefore a crucial issue for their retail success.

In this paper, the focus is particularly on meat substitutes based on micro-algae. Micro-algae are unicellular organisms that not only offer a high-quality protein content but also have antioxidant, antihypertensive, immunomodulating or anticarcinogenic effects (Caporgno and Mathys, 2018). So far, there has been little research on micro-algae in the food market and even less on willingness to pay (Weinrich and Elshiewy, 2019). In retail as well as for food manufacturers, the aim is to minimize the flop rate of novel food products. In addition to target group analysis as well as sensory studies with consumers, the focus of producers and retailers is on the final pricing of the product innovation.

There are plenty of willingness to pay (WTP) measures (Endalew et al., 2018), but WTP methods are often complex (Lichters et al., 2019). Both food developers and management are faced with the question, how to price a novel product. For practitioners, an appropriate method should be easy to carry out, not too time consuming and inexpensive – especially at an early stage of product development with its variety of product candidates. The main questions at this stage of product development are concerned with variations in consumers' overall acceptance and purchase intention for potential product concepts. Furthermore, knowing whether selected (novel) ingredients have a particularly strong effect on consumers’ price preferences is equally valuable, especially if the share of these ingredients drives production costs and subsequent pricing decisions. There is therefore a need for a quick and easy measurement of price preferences at the design phase of a novel food product.

This paper's contribution is twofold. First, adding to the literature on meat substitutes, we show how consumers' price preferences for substitute products are affected by the choice of plant- (pea) or an alternative animal-sourced protein base (egg, milk) and the proportions of micro-algae present in the actual product. We assess how sensitive price preferences are to product modifications. Second, we use van Westendorp's Price Sensitivity Meter (PSM) approach (van Westendorp, 1976), as a simple, inexpensive method to estimate price preferences for product innovations (Reinecke et al., 2009; Kim et al., 2012). To the best of our knowledge, this paper is the first to test the practicability of the PSM approach for assessing price preferences for product variations for novel foods in a between-subject experiment. The paper therefore offers important results for (food) producers, marketers and retailers as well as for other researchers interested in meat substitutes and WTP methods.

The remainder of the paper is structured as follows: in the next chapter, we describe the content of the questionnaire plus data collection and applied methods. In Chapter 3, the results are shown. Thereafter, the results are discussed in the light of the background described in the introduction then recommendations for further research are deduced. The paper closes with conclusions.