Decision Tree Analysis for the Consumers' Willingness to Pay for Eco-Friendly Products

The goal of this study is to find major characteristics of consumers who are willing to pay a premium price for green products. The study is to provide useful implications for company to establish marketing strategies facilitating a positive attitude towards green consumption. Green marketing has focused on environmentally friendly behavior as a consumption trend to create a new consumer market and find a consumer market as a target. This study tried to identify consumer groups which prefer purchasing eco-friendly products and services as green consumers. The study also makes efforts to identify and use such green consumers as a target groups. A survey was conducted on targeting office workers with age of 20 or older living in Seoul and Gyeonggi Province to examine consumers' willingness to pay more for green products. The study shows a frequency analysis and an analysis of validity and reliability of the item of measuring a willingness to pay more for green products to examine demographic characteristics and willingness to pay of the samples. Finally, a decision tree analysis, a data mining technique, is used to identify characteristics of consumers who are willing to pay more for green products, producing an efficient marketing strategy. The result of the analysis on consumers' willingness to pay more for green products shows that an income level and marital status are important variables, while the presence or absence of a child interacts are not. Firstly, married respondents who have a high level of income and with one or more children are found to have a willingness to pay green products, but those married respondents who have a high level of income but with no child are found to have no willingness to pay green products. Secondly, married and elderly respondents with a high level of income have a willingness to pay green products, while unmarried, elderly respondents with a high level of income are found to have no such willingness to pay green products. Thirdly, it is found that those with one or more children have a willingness to pay green products regardless of an income level, while those with no child have no such willingness regardless of an income level. As a result of this study, it is found consumers with specific demographic characteristics (married, elderly respondents with a high level of income) are more likely to get involved in green consumption than other consumer groups in the market. It is also found that those consumers with such demographic characteristics are willing to pay more for purchasing green products. The study shows that there exists a specific consumer groups which prefer green consumption. Companies need to identify characteristics of those consumers who purchase green products and identify specific customer groups for a green marketing strategy to revitalize a consumption market, where reliable green products can be produced.