Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 Determinants of Green Perceived Value and Their Influence on Brand Loyalty: Perceptions of Chinese Consumers Jialing Lin, Antonio Lobo and Civilai Leckie The objectives of this study are to investigate the determinants that influence customer green perceived value (GPV) and also to test the relationship between GPV and brand loyalty in China. Based on the deontological and teleological framework, this study suggests that informational justice, utilitarian environmental and warm glow of giving benefits enhance green perceived value. In turn, the consumers’ perception of green value has a positive impact on brand loyalty. This study employs structural equation modelling (SEM) to empirically test the hypotheses. The results demonstrate that customers’ green brand perceptions are positively related to green perceived value. Additionally, the results reveal that green perceived value directly leads to brand loyalty and it fully mediates the relationships between informational justice, utilitarian environmental and warm glow of giving benefits and brand loyalty. Hence, if companies intend to increase customer green brand loyalty, they need to facilitate the creation of green perceived value amongst the consumers. In particular, both deontological and teleological approaches need to be considered when creating customer green perceived value. Keywords: green perceived value, deontological perspective, teleological perspective, informational justice, environmental functionality, warm glow of giving, brand loyalty Track: Business Ethics / Marketing 1. Introduction This study aims to investigate the antecedents to green perceived value and the influence of green perceived on brand loyalty in the context of green marketing in China. The Chinese government has recently initiated several new strategies and policies. For example, it joined the non-legally binding Copenhagen Accord aimed at protecting the environment and it aims to decrease its carbon intensity by 40-50% by 2020 compared with 2005 levels (Marinova et al. 2013). More importantly, the Chinese government has identified green economy as a sustainable development plan to stimulate economic growth and prevent its environment from further damage (Pan et al., 2011). Chinese authorities officially announced the strategy for balancing economic development and environment protection in its 12th Five-year Development Plan (Chen et al. 2013). Furthermore, under the prevailing political regime, numerous enterprises in China are taking advantages of this opportunity to transform their business by implementing various green marketing strategies. More recently, a top 100 green brand report has been released (Chinese Brand Research Centre of Peking University 2012), which reveals that China has a huge potential market for green products. Although consumers‘ green purchase behaviour has been widely explored in recent literature, there are still unresolved issues relating to companies‘ failure to capture consumers‘ green needs in China, where customers‘ green ______________________________________________________ School of Business, Swinburne University of Technology, Melbourne Correspondent author‘s email: alobo@swin.edu.au Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 scepticism is dramatically growing. Against this back drop, there is a research opportunity to explore Chinese consumers‘ green value perceptions and loyalty toward green brands. The findings of this study can help reduce the gap between consumers‘ environmental attitude and green purchase behaviour and assist global enterprises in better understanding consumers and the green marketing potential in China. The overarching research questions of this study are: (a) What are the factors which stimulate the delivery of GPV associated with green brands in China? Namely, what are the antecedents to green perceived value based consumers‘ deontological and teleological perspectives? (b) What is the impact of GPV on Chinese consumers‘ loyalty to green brands? 2. Literature Review Green marketing has received increased attention since 1960s and its growing popularity has particularly been evident since 1990s when the public started having higher environmental awareness regarding environmental problems, such as global warming (Fisk1973; Kinnear et al. 1974; Mostafa 2007). From the marketing perspective, the issue on green consumption behaviour is of great value in recent research as a growing number of consumers are becoming more environmentally aware. For instance, recent data shows that less than one-half of the consumers had never bought a green product (Manget et al.2009) and the value of the market related to healthy and sustainable lifestyle products (e.g. energy-efficient products, ecotourism and solar panels ) was equivalent to $209 billion (Kotler 2011, pp.134). However, an investigation of factors influencing consumer purchase behaviour towards green brands remains under-researched despite green brands being widely regarded as one of the effective ways to achieve market differentiation (Hartmann et al. 2005; Papista & Krystallis 2013; Raska & Shaw 2012). Moreover, most prior studies in relation to consumer green purchase behaviour have widely employed the theory of Reasoned Action (TRA) and theory of Planning Behaviour (TPB) as frameworks. In particular, the findings of those prior studies have shown that consumers‘ environmental attitudes fail to translate into environmental behaviour (e.g. Bamberg 2003; Carrington et al. 2010; Kilbourne& Beckmann 1998; Nordlund & Garvill 2002). In an attempt to gain a better understanding of the attitudes-behaviour relationship, Paista and Krystallis (2013) adopted the customer value (CV) concept to understand the customer-green brand relationship development and associated consumer behaviour. Such inclusion of customer value in the context of green brand consumption is consistent with Pickett et al.‘s argument (1995) that in order to make environmentally sustainable products commercially successful, green brand attributes and value need to be well communicated to consumers and the public at large. Chen (2013) suggests that it would be imperative to separate GPV from CV. Therefore, this study extends the CV concept which simply captures the customers‘ overall value perception toward green brand to reduce the attitude-behaviour gap. In particular, this study focuses on green perceived value (GPV). The concept of GPV was first proposed by Chen and Chang (2012a) to express consumers‘ environmental desires, sustainable expectations and green needs when evaluating a product or service. Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 Past studies which propose antecedents to green perceived value (e.g. Hur et al. 2013; Koller et al. 2011) mainly investigated consumers‘ consideration of costs and benefits (i.e. teleological perspective) when evaluating and purchasing green products and services. There is scant research relating to the factor (s) influencing consumers‘ green value perceptions from their willingness to do good for society (Deontological perspective). Brunk (2012) has suggested that both teleological and deontological approaches need to be considered when investigating consumers‘ perceptions toward an ethical brand. Hence, this study also investigates factors influencing consumer green value perception from these two perspectives, which is consistent with the recent research trend on consumers‘ ethical behaviour (Fatma & Rahman 2015). Although consumers‘ green purchase behaviour has been widely explored in recent literature, there are still unresolved issues relating to companies‘ failure to capture consumers‘ green needs in China, where customers‘ green scepticism is dramatically growing. In order to reduce customers‘ sceptical attitude towards green brands, the role of GPV in consumer-green brand relationship development needs to be explored, especially its influence on green brand loyalty. Such an exploration helps to fulfil companies‘ goals in terms of reaching profitability and corporate social responsibility by implementing green branding strategy (Mourad & Ahmed 2012). Recently, numerous enterprises in China are taking advantage of opportunities which the Chinese government has provided in supporting green economy development. They are transforming their business by implementing various green marketing strategies (Chen et al. 2013, Pan et al., 2011). As a result, China has a huge potential market for green products. 2.1 Conceptual model and Hypotheses Based on the extended ethical theory by Hunt and Vitell (1986), this study proposes a conceptual model that examines the factors which contribute to GPV and the mediating role of GPV in the relationship between consumers‘ ethical consideration and brand loyalty in the context of green brands in China. First, the study assesses the influence of factors derived from consumers‘ deontological perspective (informational justice) and teleological perspective (utilitarian environmental benefit and warm glow of giving benefit) on green perceived value. Second, green perceived value is proposed to increase brand loyalty. Moreover, the indirect effects of informational justice, utilitarian environmental benefit and warm glow of giving on brand loyalty via green perceived value are investigated. The conceptual model is depicted in Figure1. The following section presents the important constructs and associated hypotheses. Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 Figure1: Proposed Conceptual Framework 2.2 Green Perceived Value (GPV) Although the TRA and TPB have been widely applied in green consumption behaviour studies, a significant problem emerges. This problem is widely regarded as the ‗attitude-behaviour gap‘ or ‗halo effect‘ (e.g., Boulstridge & Carrigan, 2000; Gupta & Ogden 2006;Mainieriet al. 1997; Wheale & Hinton 2007; Young et al. 2010; Zinkhan1995). These studies provide evidence that environmental concern or attitudinal variables fail to converge into actual behaviour (Bamber 2003; Hines et al. 1987; Scott & Willis 1994; Schultz et al. 1995; Taner 1999). Thus, Papista and Krystallis (2013) developed a holistic conceptual model adopting customer perceived value (CV) concept as an alternative approach of the TPB model to investigate customer‘s green brand adoption behaviour and consumer-green brand relationship development. However, Papista and Krystallis (2013) did not empirically test their model and the way they operationalise the CV concept in their study is too broad. In addition, various values listed in their model were derived from cost-benefits trade-off. Thus, this study proposes the use of GPV as an extension of the CV concept as Chen (2013) suggests that separating GPV from CV is important and it is necessary for companies to invest resources to raise their customers‘ GPV if they intend to increase their customers‘ green brand loyalty. GPV is a novel construct developed as an extension to the CV concept and is used in the specific context of green marketing (Chen 2013). Following an initial concept developed by Patterson and Spreng (1997), GPV can be defined as ―a consumer‘s overall appraisal of the net benefit of a product or service between what is received and what is given based on the consumer‘s environmental desires, sustainable expectations, and green needs‖ (Chen and Chang 2012a, p. 505). Both consumers‘ moral obligation consideration and cost-benefit consideration are required since rule-based norms and altruism motivations are identified as stimulants of green brand purchase. These two considerations are well explained by Hunt and Vitell‘s (1986) ethical decision model, which postulates that ethical judgments are determined by two types of moral philosophies, namely deontological and teleological evaluations when one encounters issues with ethical content. In turn, the ethical judgments affect an individual‘s behaviour through his/her moral intention. Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 2.3 Informational justice and green perceived value (Deontological perspective) Justice is one of the deontological perspectives which is based on fairness and equality. This concept connects moral thought and moral development (Kohlberg, 1969) and provides an ethical standard in distinguishing between right and wrong. Informational justice has only recently been applied to the services marketing context (Lee and Park, 2010), which refers to the perceived adequacy and truthfulness of information explaining the causes for unsatisfactory outcomes (Colquitt, 2001; Mattila & Cranage, 2005). Nowadays, bad corporate behaviour, like greenwash in green market, has created consumers‘ negative attitudes towards a company‘s environmental engagements (Peattie et al. 2009). Consumers feel very confused about green products (Pomering & Johnson 2009). In addition, previous studies suggest that customers‘ perception of unfair treatment regarding green communication is negatively associated with their green quality evaluation (Chen et al. 2014, Nance & White 2009). In this respect, justice communication regarding green products with consumers is required to increase consumers‘ trust towards green brand. As a result of the foregoing discussion, the following hypothesis has been developed: Hypothesis1: informational justice is positively associated with green perceived value 2.4 Utilitarian environmental benefit and green perceived value (Teleological perspective) Environmental benefits are essential attributes of green brand, which outweigh the attributes of conventional alternatives. Consumers look for additional functional benefits when they consume products with environmentally sound attributes (Bech-Larsen 1996; Sriram & Forman 1993). These functional benefits reflect customers‘ perceived utility acquired from a brand‘s capacity to fulfil functional, utilitarian or physical environmental performance (Sheth et al. 1991). In particular prior research suggests that there is a positive relationship between product performance and customer perceived value (Baker et al. 2002; Bolton &Drew 1991; Cronin et al. 2000; Dodds et al. 1991; Grewal et al. 1998; Sirohi et al. 1998). Compared with customer overall perceived value, GPV focuses more on customers‘ environmental expectations and green needs. Thus, it is expected that utilitarian environmental benefits will relate positively to GPV. Hence the following hypothesis has been developed: Hypothesis 2: utilitarian environmental benefit is positively associated with green perceived value 2.5 Warm glow of giving and green perceived value (Teleological perspective) Warm glow of giving reflects a feeling of moral satisfaction when involving the common good, which is a form of altruism (Andreoni 1989, 1990).Warm glow of giving as one kind of psychological benefit has received increasing interests in the specific context of green brands (e.g. Hartmann &ApaolazaIbáñez 2012; Papista&Krystallis 2013; Pickett-Baker & Ozaki 2008). In particular, Papista and Krystallis (2013) propose that altruistic value is positively associated with CV. Consumers tend to feel good when they Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 purchase green brands with environmentally friendly attributes (Pickett-Baker & Ozaki 2008) and altruism motivates consumers to use green products or services (Hartmann and Apaolaza-Ibáñez 2006). This moral satisfaction results when they make a decision to purchase green brands. Hence, the above findings drive us to propose that warm glow of giving benefit arising from green brands will positively influence GPV. Accordingly, the following hypothesis has been proposed: Hypothesis 3: Warm glow of giving is positively associated with green perceived value 2.6 Outcome of green perceived value Recently, the role of GPV in relationship marketing has received growing attention and its influence on green loyalty is of great interest (Chen & Chang 2012; Chen 2013; Hur et al. 2013; Koller et al. 2011; Ng et al. 2014). Based on Oliver (1999), Chen (2013) first proposed the concept of customer green loyalty. It is defined as ‗the level of repurchase intentions prompted by a strong environmental attitude and sustainable commitment towards an object, such as a product, a service, a company, a brand or a group. Previous studies have shown that customer perceived value is positively associated with their post-purchase behaviours and it is an important factor influencing customers‘ purchase intention and loyalty (Brady and Robertson, 1999; Cronin et al., 1997; Tam, 2004). Hur et al. (2013) found that there is an indirect relationship between green perceived value and customer loyalty via satisfaction while Chen (2013) suggests that customers‘ green value perception is positively related to customers‘ green loyalty. Hence the following is hypothesised: Hypothesis 4: Green perceived value is positively associated with brand loyalty 3. Methodology 3.1 Measures In order to facilitate respondents‘ understanding, the survey instrument originally in English was subsequently translated into Chinese and later translated back into Chinese. In addition, to ensure instrument clarity, question wording and validity, six academics who were experts in green marketing and relationship management were invited to discuss and comment on the survey instrument. Two rounds of pre-tests were conducted by using two focus groups, each of which included eight university students who resided in the Guangzhou (South) and Chongqing (West) cities of China, and who were familiar with green brands. Subsequently, some minor changes regarding the wording and formatting were made based on the feedback received from these pre-tests. This study has adopted previously validated scales to capture consumer perceptions towards informational justice, warm glow of giving, environmental functionality, green perceived value and brand loyalty of the green brand they chose. Informational justice is taken from the study by Colquitt (2001). To capture consumers‘ informational justice perception regarding the company‘s process of green practices, all items were adapted to reflect green communication. As to consumers‘ perceived benefits derived from green brand consumption, three items measuring warm glow of giving benefit were adapted from Aquino and Reed‘s (2002), Hartmann and Apaolaza-Ibáñez Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 (2012) and Nunes and Schokkaert (2003). The three items measuring utilitarian environmental benefit were adapted from Johnson and Frank (2006), Salmela and Varho (2006) and Truffer et al.(2001). Four statements measuring green perceived value were adapted from Chen and Chang (2012a, b) and brand loyalty (four items) was measured by the scale adapted from Chen (2013) and Huang et al. (2014). A Likert scale anchored at 1 = strongly disagree and 7 = strongly agree was used to rate respondents‘ perceptions for each item. 3.2 Data collection To empirically test the hypothesised model, this study employed an online survey using consumer panels in China. Data were collected in four geographically dispersed cities (i.e. Beijing, Guangzhou, Chengdu, Hangzhou) of China. The four selected cities have both high economic development and high ecological footprint hence it would be ideal to target consumers‘ green brand adoption in these cities (Xia & Ye 2014; Eves & Cheng 2007). All respondents were above 18 years of age and they were required to select a specific green brand that they used before. Then respondents were asked to complete the survey keeping in mind the selected green brand as the focal object and remembering the image with green claims of the selected green brand. Finally, 826 valid surveys were obtained from two stages over a one month period. A total of 1013 participants had logged onto the web link. 3.3 Data Analysis Prior to the analysis, all variable data were screened regarding normality, outliers and missing values to avoid the violation of analysis methods. The two-step approach developed by Anderson and Gerbing (1988) was employed to analyse the data and the statistical software program Mplus 7.0 was used to conduct the analysis. First, confirmatory factor analysis (CFA) was conducted to assess the measurement properties of the scales. The reliability and validity of the measurement models was assessed. Then, structural equation modelling (SEM) with a maximum likelihood method was employed to test the proposed hypotheses. 4. Findings and discussions 4.1 Measurement model Confirmatory factor analysis (CFA) was utilised to test the reliability and validity of the reflective measurements. Table 1 reveals that the goodness-offit indices of the measurement are satisfactory [Chi-square =216.95, df. =125, CFI = .98, TLI =.98, RMSEA = .038]. The convergent validity was achieved since all factor loadings are significant. Standard factor loadings of all measurement items well exceeded the recommended .5 cut-off (Rencher, 2002). The composite reliability also exceeded the recommended cut-off values of .70 (ranging from .76 to .86) (Nunnally & Bernstein, 1994). The AVE values of all constructs exceeded the threshold of .50 (Fornell & Larcker, 1981). As to discriminant validity, all squared correlations coefficients were below AVEs, showing sufficient discriminant validity (Fornell & Larcker, 1981). In addition, the highest degree of correlation between two latent variables presented in Table 2 was .693, which was below the cut-off value of .90 Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 (Tabachinick and Fidel, 2011). Hence, neither redundancy nor violation of multi-collinearity was found. Table 1 Instrument Items and Reliability Indices Constructs Items SFL A IF This brand is open in its green communication with me 0.742 0.811 This brand explains the green 0.730 procedures thoroughly and timely through its packaging and promotion materials This brand‘s explanations regarding to 0.779 the green procedures are reasonable This brand seems to tailor its green 0.699 communications to individuals‘ special needs WG With this brand, I can feel good 0.787 0.837 because I help to protect the environment With this brand, I have the feeling of 0.723 contributing to the well-being of humanity and nature With this brand, I can feel better 0.659 because I don‘t harm the environment UEB This brand respects the environment 0.771 0.764 This brand helps to prevent global 0.644 warming Products of this brand do not pollute the 0.740 environment GPV This brand‘s environmental functions 0.780 0.830 provide very good value for me I purchase this brand because it is 0.799 environmental friendly I purchase this brand because it has 0.759 more environmental benefits than other brands I purchase this brand because it has 0.763 more environmental concern than other brands BL I prefer to purchasing this brand to 0.819 0.851 other brands I intend to continue buying this brand 0.752 Overall, this brand will be my first 0.738 choice I will recommend this brand to other 0.747 people CR AVE 0.827 0.545 0.768 0.525 0.763 0.519 0.858 0.601 0.849 0.585 Notes: SFL=Standard factor loading, a=Cronbach‘s alpha, CR=Construct reliability, AVE=Average variance extracted, IF=Informational Justice, WG=Warm Glow of Giving, UEB=Utilitarian Environmental Benefit, GPV=Green Perceived Value, BL=Brand Loyalty. Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 Table 2 Correlations between the constructs IF WG UEB GPV IF 1 WG .541** 1 UEB .634** .664** 1 GPV .693** .613** .654** 1 BL .561** .569** .595** .639** BL 1 Notes: IF=Informational Justice; WG=Warm Glow of Giving; UEB=Utilitarian Environmental Benefit, GPV=Green Perceived Value, BL=Brand Loyalty. ** All correlations are significant at the .01 level (2-tailed). 4.2 Structural Model The structural model presented in Figure 1 was tested using maximum likelihood algorithm. The results displayed in Table 3 indicate that the model fits the empirical data well [Chi-square =224.30, df. = 128; CFI= 0.98, TFI=0.98, RMSEA=0.029] and all of the hypothesised relationships were statistically significant (full model is shown in figure 2). This study demonstrates that customers‘ green brand perceptions based on their deontological and teleological perspectives are positively related to green perceived value. The three antecedents, namely informational justice, utilitarian environmental and warm glow of giving benefits, positively promote the consumers‘ green value perception. Thus, the results confirm that both deontological and teleological approaches need to be considered when investigating green consumption behaviour. By comparing the impacts of the three antecedents on GPV, we found that informational justice performs better than warm glow of giving and utilitarian environmental benefits in enhancing green perceived value. In addition, the results also indicate that green perceived value directly leads to brand loyalty. Additional tests were conducted to evaluate the mediating role of CGV in the relationships between the three antecedents and brand loyalty. The results suggest that GPV is a full mediator. Hypotheses H1 H2 H3 H4 **p < .01 Table 3 The results of the structural model Structural relationship Std. coefficient GPV IFJ .426** GPV UEB .318** GPV WG .225** BL GPV .782** Results Supported Supported Supported Supported 5. Conclusion and Implications With consumers‘ increasing awareness of environmental problems, green marketing has become a popular strategy for companies to build up their positive social image and gain competitive advantage. As proposed, factors regarding to consumer brand perceptions based on deontological and teleological perspectives are positively associated with green perceived value. First, informational justice is positively related to green perceived value. Thus, Proceedings of 32nd International Business Research Conference 23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4 it is important that companies who try to promote green benefits should communicate information truthfully to reduce consumers‘ greenwash perception. This finding is consistent with current research trend of green marketing that green marketing has been integrated into a broader framework of corporate social responsibility (Wymer & Polonsky 2015). Thus, if companies want to increase consumer green perceived value, the improvement of informational justice is essential. For example, companies can promote communication activities regarding green procedures to improve consumers‘ positive green brand perceptions. Second, both warm glow of giving and utilitarian environmental benefits are also positively related to green perceived value. These results are inconsistent with the studies conducted by Hartmann et al. (2005) and Hartmann and Apaolaza-Ibáñez (2012). They suggested that both emotional and functional benefits have positive influence on green purchase attitudes and warm glow of giving benefit performs well in green purchase intention compared to utilitarian benefit. The results of this study show that utilitarian environmental benefit performs well in increasing green perceived value compared to warm glow of giving benefit in current Chinese consumers‘ choice. These findings suggest that Chinese consumers still see functional benefits when selecting a green brand. Therefore, both functional and psychological benefits need to be considered when aiming at creating green value. In addition, the findings of this study suggest that green perceived value directly leads to green brand loyalty. Thus, companies should develop green value from consumers‘ perspective to promote loyalty among Chinese consumers. Finally, the findings also suggest that green perceived value fully mediates the relationships between the three antecedents and brand loyalty. Hence, green perceived value is an important latent variable for companies to develop and monitor so that consumers‘ attitude-behaviour gap in green consumption can be reduced. This study investigated the influential factors of green perceived value as explained in the findings. Further research can investigate the moderating role of greenwash since the relationships between the three antecedents on GPV may vary depending on the greenwash experience. In addition, this study revealed a direct relationship between green perceived value and brand loyalty while several recent studies suggest that their relationship should be mediated by other relational variables, such as green trust, green satisfaction and relationship quality (Martínez 2015; Papista&Krystallis 2013). Hence, future research can focus on customer-green brand relationship building. 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