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Green signal and Its Impact on Price Premium and Product Evaluation
- Signaling Theory
1. Background
(1)Study purpose
This study evaluates the extent to which the value of IT product can be enhanced by
Green image and, more specifically, how environmental message appeals and source
credibility play a role in value formation. Drawing theories from Information systems,
marketing and psychology, this study expect to demonstrate that Green signal can add the
value to the quality of products, and show how this benefit accrues to customers from the
adoption of Green IT. The value of the Green Signal is exhibited in premium prices
customers are willing to pay for the Green IT.
(2)Study background
Recent years have seen increased attention being given to the issue of adopting Green IT
in the organizations because of legislation, customer pressure and social responsibility.
Many studies have found that Green IT has gathered great importance as a competitiveforce and a tool for competitive advantage and sustainable development. Therefore, what
the role of Green IT plays in organizations and how to use Green IT to improve
competition become a central place in the fields of management and Information Systems
nowadays. Despite the importance of the Green IT in the organizations, most of studies
focus only on organizational aspect. Little is known, however, about customers aspect
and how organizations can provide benefits by adopting Green IT to customers.
Customers are vital part of organization. Without considering customers perspective may
result in lacking of compressive view of the impact of Green IT on organizations.
Therefore, this study emphasizes on customers perspective about how they receive
Green IT signals and how they evaluate product quality of Green IT.
(3) Research Questions:
1. What kind of signals that consumers appreciate and look for when going through the
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purchasing process?
So this could perhaps be a two-phased study
a qualitative one perhaps a protocol analysis
a quantitative experiment).
2. Does producing signal compromise your ability to deliver the product/service that is
consistent with signal?
3. It might be interesting to compare the impact of eco-branding of products/services
and eco-compliance of organizational processes. Which is a better signal? Does one
override the effects of the other?
4. What impact does cost of the signal have on the consumer?
2. Theoretical Background
Prior studies have found that Green IT can bring several benefits for companies,
including generating cost saving, promoting innovation, premium pricing, enhancing the
brand image and differentiating from competitors(Orsato 2006). If companies have
adopted suitable strategies, these benefits may create competitive advantage. For better
understand these strategies, this study based on Orsatos Generic Competitive
Environmental Strategies focuses on two strategies to develop our research model.(1)Generic competitive environmental strategies
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Strategy 2: Beyond Compliance Leadership
Two key points of beyond compliance leadership are listed bellow:
1. Acknowledgement from public and customer for their efforts
2. Indirect influence on the image of a firm and eventually affect the shopping behaviorof consumers
3. improved the image consumers and shareholders have about their operations.
Strategy 3: Eco-Branding
Firms that intend to generate competitive advantage from strategies based on eco-
branding need to observe three basic pre-requisites:
1. consumers must be willing to pay for the costs of ecological differentiation;
Consumers need to perceive a clear benefit for their purchase
2. reliable information about product's environmental performance must be available to
the consumer;
Eco-Lable, such as Energy Star, ISO 14000 and KRAV
3. the differentiation should be difficult to be imitated by competitors.
Strategy 2 tells us the importance of acknowledgement of Green image from customers.
This implies that whether the Green image signals can correctly and clearly disseminate
to customers and, in turn, let customers recognize the companies effort on Green IT.Therefore, the first variable this study will explore is Environmental Signals (Message
appeals). The second variable is Perceived Quality, which represents the reorganization
of companies effort on Green IT from customers.
Strategy 3 provides the insights of how customers will react - willing to pay more and
product evaluation. Thus, this study will adopt these two variables as well. Furthermore,
the reliable information is another key to create strategy 3. Eco-Lable may be a good
indicator of credible source. Hence, Source Credibility will be another variable in our
model.
In sum, five variables are included in our research model : Environmental Signals
(Message appeals), Perceived Quality, willing to pay more, product evaluation and
Source Credibility.
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(2) Signaling theory
Signaling theory is the fundamental concept behind our research model. Signaling is theidea that one party (termed the agent) conveys some meaningful information about itself
to another party (the principal). For example, in Michael Spence's job-market signaling
model, (potential) employees send a signal about their ability level to the employer by
acquiring certain education credentials. The informational value of the credential comes
from the fact that the employer assumes it is positively correlated with having greater
ability. Based on Signaling theory, this study tries to answer few questions below:
How much time, energy, or money should the sender (agent) spend on sending the
signal?
How can the receiver (the principal, who is usually the buyer in the transaction)
trust the signal to be an honest declaration of information?
Assuming there is a signaling equilibrium under which the sender signals honestly
and the receiver trusts that information, under what circumstances will that
equilibrium break down?
(3)Literature
Environmental Signals (Message appeals): (Chang 2004; Goodwin and Etgar
1980)
Perceived Quality:(Dodds, Monroe, and Grewal 1991; Dsouza, Taghian, and
Khosla 2007; Grewal et al. 1998)
Willing to pay more:(Chan 2001; Dsouza et al. 2007; Homburg, Koschate, and
Hoyer 2005; Laroche, Bergeron, and Barbaro-Forleo 2001; Walter, Gupta, and
Su 2006)
Product evaluation:(Dsouza et al. 2007; Monroe and Chapman 1987) Source Credibility: (D'Souza et al. 2007)
Environmental Consciousness: (Junaedi 2007) (Chan 2001)
Signaling Theory: (Boulding and Kirmani 1993; Hoxmeier 2000; Levy and
Lazarovich-Porat 1995)
Competitive environmental strategies: (Orsato 2006)
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3. Structure and Experimental Design
(1) Research Structure
Independent variables: Message signals and Source Credibility
Moderator: Environmental Consciousness
Dependent Variables: Product Evaluation, Perceive Quality and Willingness to
pay more
(2)Experimental Design
2 X 3
Environmental Signals (Message Appeals)
Environmental Appeal( External Environment)
Benefits/Cost Appeal(User-Side)
Environmental Appeal +Benefits/Cost Appeal
SourceCredibility
Certification:Yes
Certification:No
Message Signals
Source Credibility
Product Evaluation
Perceived Quality
Willingness to pay more
Environmental Consciousness
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(3) Measurement
Willing to pay more
1. (Homburg et al. 2005)
We measured WTP with an open-ended question. Participants were asked the price that
they would be willing to pay for the restaurant visit. This type of measure has been
widely used in other studies in this area (e.g., Cameron and James 1987; Krishna 1991).
Table 2 provides the means of the WTP measures for the eight scenarios.(Homburg et al.
2005)
2. (Dsouza et al. 2007)
I prefer to purchase an environmentally safe product even if it is somewhat more
expensive.
I prefer to purchase an environmentally safe product even if it is somewhat lower in
quality.
3.(Laroche et al. 2001)
Environment Consciousness
1. (Chan 2001)
It frightens me to think that much of the food I eat is contaminated with
pesticides.
It genuinely infuriates me to think that the government doesn't do more to help
control pollution of the environment.
I become incensed when I think about the harm being done to plant and animal life
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by pollution.
When I think of the ways industries are causing pollution, I get frustrated and angry.
The whole pollution issue has never upset me too much since I feel it's some what
overrated.
2. (Mostafa 2006)
I know that I buy products and packages that are environmentally safe.
I know more about recycling than the average person.
I know how to select products and packages that reduce the amount of waste
ending up in landfills.
I understand the environmental phrases and symbols on product package.
I am very knowledgeable about environmental issues
Perceived Quality
(Dodds et al. 1991)
1. The likelihood that the product would be reliable is: (very high to very low)
2. The workmanship of product would be: (very high lo very low).
3.. This product should be of: (very good quality to very low quality)
4. The likelihood that this product is dependable is: (very high to very low)
5. This product would seem to be durable (strongly agree to strongly disagree)
Perceived Value(Dodds et al. 1991)
1. This product is a: (very good value for the money to very poor value for the
money)
2. At the price shown the product is: (very economical lo very un-economical)
3. The product is considered to be a good buy {strongly agree to strongly disagree)
4. The price shown for the product is: (very acceptable to very unacceptable)
5. This product appears to be a bargain (strongly agree to strongly disagree)
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4. Research Scenario
Apple iMac as an example ( I will think about a fiction product in our research but now,
in order to image the whole scenario easier, I use iMac as an example)
Please image that you are going to buy a new desktop. There are three desktops that you
like very much. So, you have to compare these three desktops now and make sure which
one is what you need. Assume that these three desktops all have similar features and
functions, please how much do you think for these three desktop may have?
Price:
Now, one of them has following appeal(s) in its official website:
Scenario 1: Environmental appeal and no Certification
Eliminating Toxic Substances
Its what iMac doesnt have that makes it more environmentally friendly. Its free
of many harmful toxins, including mercury, arsenic, BFRs, and PVC.
Scenarios 2: Environmental appeal and Certification
Eliminating Toxic Substances
Its what iMac doesnt have that makes it
more environmentally friendly. Its free of
many harmful toxins, including mercury,
arsenic, BFRs, and PVC.
iMac is designed to be energy
efficient right out of the box. It has
even earned the EPAs ENERGY STAR
qualification for its low power
consumption.
Scenarios 3: User appeal and no Certification
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Using our new iMac, you can save 15% of payment of electric bill by reducing the
amount of power wasted.
Scenarios 4: User appeal and Certification
Using our new iMac, you can save 15% of
payment of electric bill by reducing the
amount of power wasted.
iMac isdesigned to be energy efficient rightout of the box. It has even earnedthe EPAs ENERGY STAR qualificationfor its low power consumption.
Scenarios 5: Environmental and User appeal, but no Certification
Using our new iMac, you can save 15% of
payment of electric bill by reducing the
amount of power wasted.
Eliminating ToxicSubstances
Its what iMac doesnt have that
makes it more environmentally
friendly. Its free of many harmful
toxins, including mercury, arsenic,
BFRs, and PVC.
15%
Energy Save
15%Energy Save
15%Energy Save
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Appendix
(Laroche et al. 2001)
Appendix 2
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Ecolabes
The Mobius Loop indicates that a product can be recycled. Each arrow
represents an aspect of a successful recycling programme: collection, remanufacturing
into a new product, and finally purchase by the consumer. Please note that it does not
necessarily mean that the object has been recycled.
Common labels include yellow EnergyGuide tags found in North America as part of
theEnergy Starprogram, European Union energy labels, and theEnergy Saving
Recommended logo[8]administrated by the Energy Saving Trust in the United Kingdom.
http://en.wikipedia.org/wiki/Energy_Starhttp://en.wikipedia.org/wiki/Energy_Starhttp://en.wikipedia.org/wiki/Energy_Starhttp://en.wikipedia.org/wiki/European_Union_energy_labelhttp://en.wikipedia.org/wiki/Energy_Saving_Recommendedhttp://en.wikipedia.org/wiki/Energy_Saving_Recommendedhttp://en.wikipedia.org/wiki/Energy_Saving_Recommendedhttp://en.wikipedia.org/wiki/Ecolabel#cite_note-7http://en.wikipedia.org/wiki/Ecolabel#cite_note-7http://en.wikipedia.org/wiki/Energy_Saving_Trusthttp://en.wikipedia.org/wiki/Energy_Starhttp://en.wikipedia.org/wiki/European_Union_energy_labelhttp://en.wikipedia.org/wiki/Energy_Saving_Recommendedhttp://en.wikipedia.org/wiki/Energy_Saving_Recommendedhttp://en.wikipedia.org/wiki/Ecolabel#cite_note-7http://en.wikipedia.org/wiki/Energy_Saving_Trust8/8/2019 Green IT - Topic Thinking 0922
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