A study conducted in 2011 by Harvard, MIT and the London School of Economics found the fair-trade certified label has a large positive impact on sales. A substantial segment of consumers are willing to pay up to 8% more for a product bearing the fair-trade label, the study found. This explains why many companies display the fair-trade designation on their packaging and in their marketing materials to attract customers.
But many experts remain skeptical that the designation makes that much of a difference to customers. “There is a segment of upper-middle-class customers who care. They don’t even need to be wealthy — they can be poor graduate students, but because of their sensibilities, their awareness, what they read and who their peers are, they are willing to pay five cents more for a cup of fair-trade coffee. But that is not where the money is made, and companies know that,” says Chakravorti. “Most customers will not pay more [for a socially responsible product].”
Wharton’s Reed agrees. “There is a huge difference between what people will write down on a survey because it looks good, and what they will do when it comes to reaching into their own pocketbook and paying for something,” he says. “It is easy to say they would want to buy something that’s not been made with exploitative labor, but they don’t necessarily want to pay more for the stuff. People vote with their dollars.”