Consumers Link Higher Price To Greater Eco-Friendliness: IIM-I study

Indore (Madhya Pradesh): A study by the Indian Institute of Management Indore has revealed that consumers often believe green products are more eco-friendly if they are priced higher, due to the assumption that sustainable production is more costly.

The study co-authored by Prof Sanjeev Tripathi uncovered a critical psychological link between pricing and consumer perceptions of eco-friendliness in green products.

Published in the prestigious Journal of Business Research, the study introduces the concept of “price-green inference,” shedding light on how consumers interpret a product's sustainability based not on facts, but on how much it costs.

The research revealed that many consumers hold a deep-rooted belief that environmentally friendly products are more expensive to produce — due to factors such as sustainable materials, ethical labour or clean manufacturing processes. As a result, they often assume that higher-priced green products are more genuinely eco-friendly. Conversely, lower-priced products — even when certified green — tend to be viewed with skepticism.

“Consumers interpret price as a signal of environmental effort,” said Prof. Tripathi. “This lay belief can significantly bias how green products are evaluated in the marketplace.”

The study, based on six rigorous experiments across various product types and participant profiles, found that perceived production cost is the primary factor linking price to perceived sustainability.

When prices align with the assumption that green production is costly, consumer trust and belief in the product’s eco-credentials increase. However, when green products are priced lower than expected, the perceived authenticity of their sustainability claims often declines — unless trust in the brand is already strong.

Notably, the research also offers a solution: transparent communication. When brands clearly explain why their eco-friendly products are affordably priced — citing factors such as automation, local sourcing, or reduced packaging — consumers are more likely to accept the product as genuinely green. This insight offers practical guidance for firms looking to balance sustainability with affordability.

The findings have far-reaching implications for both marketers and policymakers. For brand managers, the research emphasises that pricing is not just a commercial tool but a powerful psychological cue. Marketers are advised to use clear messaging, third-party certifications, and trust-building strategies to reinforce the green credibility of both premium and budget-friendly products.

For regulators and public policy advocates, the study highlights the need for greater consumer education about the true costs of green production. Dispelling pricing myths can reduce the risk of greenwashing and support informed, sustainable purchasing decisions.

With this research, IIM Indore positions itself at the forefront of behavioural science in sustainability marketing, offering timely and actionable insights for navigating the complex intersection of consumer psychology, pricing strategy, and environmental responsibility.