labelling in india

7/29/2019 labelling in india

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SECTIONS IN THIS CHAPTER

IntroductionEnergy labelling programmesThe effectiveness of energy labels: a conceptual framework for analysisDiscussion and suggestionsConclusions and recommendations concerning energy labelling programmesReferences

1 Introduction

Introduction of energy standards as well as energy labelling programmes for electrical

appliances play an increasingly important role in national energy efficiency promotion

strategies. In several member countries of ESCAP, including China, Japan, Republic of

Korea, Thailand and United States of America, umbrella energy conservation laws provide

mandates to designated authorities to conduct product testing, establish minimum energy

efficiency standards and launch voluntary or mandatory energy labelling programmes.

In other ESCAP member countries or territories, such as Australia, New Zealand, thePhilippines, and Hong Kong, China, separate regulations have been issued to provide for the

introduction of energy labels. A considerable wealth of recent literature discusses the

technical aspects of energy standards or labelling programmes, but only a few reports deal

with the various parameters which affect the impact and success of such programmes.

Lawmakers in Asia should study the emerging results of empirical work on the impacts of

energy labelling programmes as they consider replication or expansion of such programmes

to include additional appliances.

During the past decade, there has been great concern worldwide in improving energy

conservation and energy efficiency, both in the industrial and residential sectors. This is a

particular concern in Asian developing countries where the demand for home appliances isgrowing rapidly. Compared with industrialized countries, energy efficiency of some home

appliances is still quite low, thus the projected residential electricity demand is expected to

increase continuously.

As part of demand side management and improving energy end-use efficiency, energy

performance standards and energy labelling programmes are major energy policy measures in

many countries. The purposes of energy labelling programmes are multifaceted. At the

national level, the main objectives are energy conservation and reduction of emissions,

including CO2 emissions. For appliance manufacturers and suppliers, labelling programmes

may increase business opportunities. For consumers, labelling programmes are expected to

provide additional product information and result in better product choices and higherconsumer satisfaction.

The primary purpose of an energy labelling programme is to provide information and

improve consumer awareness of energy efficiency. The effectiveness of energy labels can

only be evaluated based on an understanding of consumer behaviour. There is a dearth of

research addressing the impact of energy labels on consumers. Most research has focused on

economical analysis or technical analysis of the potential energy savings or the environmental

impact. This paper is to review the impact of energy labelling programme on consumer

behaviour.

In the following sections, the analysis of energy labelling programmes is to be restricted to

appliance labelling programmes on refrigerators, washing machines and air-conditioners,
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which are all major electricity-consuming appliances. In Asian countries, a refrigerator is

usually the first appliance purchased when income allows. A washing machine comes next.

Air-conditioners are also important to consider because many of the Asian countries

experience long periods of high heat and humidity. In Asian developing countries, clothes

dryers, dishwashers and ranges with ovens do not play a key role in the appliance market.

The climate makes line drying of clothes standard practice and Asian kitchens rarely haveroom for a dishwasher or a range.

2 Energy labelling programmes

Energy labels are designated to provide information on energy efficiency, energy

consumption or performance of the product. Various types of energy label programmes have

been developed reflecting each country's status of economy, technology, industry and

appliance market.

Designs of energy labels differ (see Figure 3.4.1,Figure 3.4.2, Figure 3.4.3& Figure 3.4.4).

The concept of labelling programmes also differ between voluntary and mandatoryprogrammes. Some programmes are associated with Minimum Energy Performance

Standards (MEPS). Comparison labels may compare a particular model to others on the

market. Comparison labels provide information allowing the consumer to compare the energy

efficiency of all products within a given category, while endorsement labels identify and

endorse a limited number of products that meet a designated efficiency standard.

Table 3.4.1presents an overview of energy labelling programmes worldwide concerning

refrigerators, washing machines, and air-conditioners. Eight countries and the European

Union have appliance labelling programmes for at least one of these three household

appliances. Characteristic and comparisons of appliance labelling programmes of each

country are also summarized.

3 The effectiveness of energy labels: a conceptual framework for analysis

Until recently, environmental concerns and issues of energy efficiency have been the interests

of engineering and science study but not of social science. Lack of interdisciplinary

collaboration is one of the major reasons research and empirical data regarding the impact of

energy labelling programmes on consumers are unusually scarce. However, such studies are

essential for the successful replication and expansion of labelling programmes. This section

presents a preliminary conceptual framework which uses consumer research and human

behavioural sciences such as psychology and sociology to evaluate the effectiveness ofenergy labels.

3.1 Product stimulus (energy label) and consumer response (purchasing behaviour)

Purchasing is not just procurement of the product or the exchange of money for the product.

Consumers are involved in their purchasing activity in order to accomplish their personal

goals and achieve satisfaction. The consumer, in purchase decision-making, is influenced by

his or her own psychological makeup and also by the sociological influences of society.

Following a simplified behavioural approach, it is perceivable that consumers exposed to

some stimulus (product) may likely develop a purchase response. It can be assumed that an
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energy label, as one of many product stimuli, could have a positive or negative impact on

consumer response (purchasing behaviour).

From the consumer's initial notice of product stimulus (energy label) to the final response

(purchasing decision), there are many antecedents of each behaviour and a process of

response is involved. A purchase as the outcome of a process of response is complicated andmediated by a host of internal and external influences and constraints. Any human behaviour

as the outcome of a process of response is comprised of physical, cognitive and affective

dimensions. The physical dimension relates to senses and motor skills. The cognitive

dimension is the realm of thinking and memory and the affective dimension includes

emotions, needs and motivations. In the process of response, these three behavioural

dimensions are reflected as awareness, knowledge and preference.

a) Awareness: In this beginning stage of the response process, the consumer becomes aware

of stimulus (i.e., the product's existence and/or the energy label). The consumer is exposed to

the product stimulus for the response to occur. The consumer perceives the physical

existence, figures and characteristics of the product.

b) Knowledge: The consumer knows and understands what the stimulus is offering. Based on

the individual's previous learning experiences, the process of comprehension and

interpretation of product stimulus progresses.

c) Preference: The consumer's favourable attitudes towards the product have developed to the

point of preferring it to other products or possibilities.

3.2 Review of consumer research results on energy labels

The three aforementioned behavioural dimensions of the process of response can be applied

as criteria for evaluating the effectiveness of appliance labels. Consumer reaction to an

appliance label can vary from simple ignorance to a full understanding of the highly

advanced technical information of the label. There is a lack of qualitative and quantitative in-

depth study of how consumers recognize, perceive, comprehend and use label information in

their purchasing decision. In this section, preliminary results of a recent empirical survey

conducted by the author in Seoul, Republic of Korea and some available results from

Australia , Thailand and the United States are reviewed and discussed.

3.2.1 Awareness: Label recognition

Label recognition by individual consumers ranges from simple awareness of the physical

existence of a label on the appliance and notice of its location to complete familiarity with the

label and/or energy efficiency label programme. Recognition of an appliance label by a

consumer is important because it is the essential step if any further meaningful process of

response is ever to ensue. Awareness occurs in a short period of time and usually involves

processing little information. In this stage, the response is simple recognition and notice of

the stimulus may generate just enough interest to carry over to the next steps.

Du Pont's (1997) study of recent appliance buyers in the United States and Thailand shows

that while a majority of Thai consumers were aware of the Thai energy labelling programme,

awareness was comparatively low among consumers in the United States. Results ofWilkenfeld's (1997) study with an Australian sample also show that the energy label has very
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high visibility and recognition in Australia where recognition of the label among randomly

surveyed adults is constantly over 65 per cent.

The author's sample of recent appliance buyers in the Republic of Korea shows that 57.8 per

cent of respondents were aware of the energy efficiency rating system. However, more in-

depth questions revealed that only 33 per cent of appliance buyers knew about the energylabelling programme when they made their purchasing decisions and only 40.9 per cent of the

respondents remembered the correct location of the energy label on their already purchased

product.

3.2.2 Knowledge: Label comprehension

Knowledge is a basic underpinning to most explanations of consumer behaviour. Knowledge

of the product stimulus means acquaintance with and understanding of the product. Simple

notice of the existence of an energy label without any further thought process on the part of

the consumer is not likely to result in any impact on the consumer's response. Understanding

the stimulus and use of information for the individual's purchasing decision will be important.

Though the understanding and label comprehension process is largely based on an individual

consumer's previous learning experiences and ability, the way information is presented and

introduced to consumers is critical. Energy labels should not be just perceived as a "yellow

thing" on the appliance. Consumers should rather comprehend what the energy label says,

understand what the numbers on the label stand for and finally process this information for

their own purpose or purchasing decision.

Du Pont reported that the great majority of Thai consumers understood the basic meaning of

the label and could use it to identify a model's energy efficiency. Forty-five per cent of an

Australian sample used label information to compare appliances. However, contradicting

results regarding consumers' understanding of an appliance label are also evidenced. An in-

store survey (1995) with a United States sample indicated that 90 per cent of buyers noticed

the "Energy Guide" label but found the label format confusing.

Among the sample in the Republic of Korea, 12.6 per cent of respondents correctly

understood, 21.8 per cent partially understood, and 65.5 per cent of respondents did not

understand the energy efficiency rating grade/class which is the main information on the

label. Among those who "tried" to use the information, 33.8 per cent of respondents used it to

compare models, 17.9 and 29 per cent used it to estimate monthly energy consumption and

monthly utility cost, respectively. However, 66.6 per cent of respondents reported the labelwas not useful. The most frequent reasons given for the label's uselessness were: a) not

knowing how to use information on the label (45.7 per cent) and b) unreliable information

(27.1 per cent).

3.2.3 Preference: Priority of energy efficiency

Even if the product stimulus reaches the consumer, the consumer may not respond. Stimulus

reception does not guarantee equal direct response. People buy things not only for the

properties of the product, but also for what they mean. Products vary in the degree to which

social-symbolic meaning is important. Each consumer as an individual has different values

and motivations which are influenced by society. This situation is reflected in each
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purchasing decision. A consumer's preference created by energy labels may be measured by

the priority given to energy efficiency over other factors.

Product price, quality, design and brand name are among the factors which influence

purchasing decisions. A 1995 survey of major appliance dealers in United States of America

reported that the three single most important factors determining consumer's purchasingdecisions were: price (32 per cent); product quality (31 per cent), and product features (20 per

cent). Fifty-two per cent of the same respondents reported that energy efficiency was a very

important factor, and 44 per cent said it was somewhat important when making a sale.

In 1991, 28.4 per cent of respondents in Australia considered the energy efficiency rating to

be the most important factor when purchasing a new appliance. "Operational cost" was the

most important factor for 13.5 per cent of respondents and about 42 per cent of consumers

reported energy efficiency or related factors as being the most important consideration in

their choice of an appliance. Thirty-three per cent of appliance buyers in the author's own

sample reported that label information had influenced their purchasing decision and 70.6 per

cent of respondents reported energy efficiency would be the priority concern in futureappliance purchasing.

When the same respondents were asked about their willingness to pay more for a highly

energy efficient appliance in the future, 67.7 per cent of respondents said they would if the

price increase was 1 to 5 per cent. However, 28.6 per cent of the respondents said that they

were willing to pay 5 to 10 per cent more for models with above average energy efficiency.

The survey with major appliance dealers in the United States also showed that 53 per cent of

dealers reported that consumers are willing to pay more for energy efficiency.

4 Discussion and suggestions

Despite its limitations, the results of this review indicate some critical points which should be

considered in evaluating energy labelling programmes and which are essential for

understanding the consumer response to energy labels. Label recognition results vary

considerably between the different studies. This suggests that consumers in different

countries and different cultures react differently to energy labels. This also allows the

conclusion that the replication of energy labelling programmes internationally may not

always be useful or effective unless the particular socio-economic and cultural circumstances

are carefully considered.

This may partially explain why energy labelling of appliances in the United States has beenless effective than in Thailand. The appliance market in the United States is enormous in size

and the socio-economic, cultural and ethnic spectrum among consumer groups extremely

diverse. In Thailand, there is far less heterogeneity in the appliance market; hence, labelling

programmes, their design and the related public relations and information campaigns have

been much more effective.

Another dimension which may affect label recognition is the size and diversity of the

respective national/local market. In all those situations where there is a wide array of brands,

models, sizes, designs and features, the purchasing decisions of consumers are proportionally

more complex. The recognition and impact of labels may be quite different from developing

country markets which are usually characterized by a more limited choice of products.
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On the issue of label comprehension, the results of the review indicate that most consumers,

regardless of country, showed their intention to use label information. Despite a consumer's

desire to use the information label comprehension can be difficult and frustrating. The

consumer's lack of skill, insufficient label information and the complexity and diversity of the

appliance market may all be factors contributing to these difficulties. Simplifying energy

labels and at the same time providing relevant information to consumers may involve someunavoidable tradeoffs. However, the label which is simple enough to meet the needs of the

general consumer and is also supported by enough complementary information to satisfy

individual consumers' different information needs may work the best.

The various results show that reasons for consumer preference in energy efficiency vary

between economic benefits, environmental concerns, equipment performance and product

quality. Consumer preferences appear to depend on each country's economic and social

system as well as on individual experiences with earlier appliance purchases. In general, a

high percentage of consumers consider energy efficiency a a priority in appliance purchasing.

Despite claims by some appliance manufacturers that "efficiency won't sell", a significantpercentage of respondents said they were willing to pay a higher price for highly energy

efficient appliances. Governments, appliance manufacturers and markets should pay attention

to this emerging trend in purchasing behaviour. Although initial cost is still the primary

determinant in the purchase decision, monetary value is not the only attractive factor. When

consumers feel it is worthwhile, they are willing to pay more. Though energy efficiency may

not always be the sole contributor to a premium price, the results of this review suggest that

energy efficiency and related environmental issues can act as a strong tie-breaker and provide

a source of differentiation and added value in the purchasing decision.

5 Conclusions and recommendations concerning energy labelling programmes

5.1 User-friendly label: simple, easy, reliable information

Energy labels should be designed for the convenience of consumers. Many energy labels

convey too much technical information. In many cases, the information provided may not be

used by consumers. Energy labels should be simple and easy to understand. Only then will

they influence purchasing decisions. However, a simple label should be accompanied with

supplementary in-depth information provided by brochures or user manuals.

Another crucial concern of label information is its reliability no matter how simple it is.

Labels should not mislead or misinform consumers. Label designs and the concepts of alabelling programme can be improved through the active involvement of consumer

organizations or environmental groups.

5.2 Value add-on label

Although energy efficiency may be the primary information on an appliance energy label, it

could be related to other values such as monetary benefits, environmental impact, equipment

quality and performance. If more criteria or values are added-on to the appliance label,

consumers may be more attracted. With information on additional values, appliance labels

would no longer be just about efficiency but would also convey social-symbolic meaning and

"say something more".
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Some of the empirical studies have shown that many consumers still have not realized the

connection between purchasing highly energy efficient appliances and the impact on the

environment. And some do not understand the economic benefit of energy efficient

appliances. While many environmentally concerned consumers are looking for simple and

easy ways to practice environmentally responsible behaviour, they may not see how

environmental problems are directly associated with energy production and use. Consumereducation by means of publicity, media advertisements, and/or collaborative efforts among

government, utilities, manufacturers and consumer organizations may therefore be very

useful in developing and upgrading energy labels and labelling programmes.

5.3 Environmental consumerism

Over the past two decades, environmental concerns worldwide increased dramatically. A

Cable News Network (CNN)/Angus Reid Group world poll of 16 countries in 1992 found

that more than four-fifths of respondents identified with the statement: "I am very worried

about the state of the environment." In any one country there exists a certain group of

consumers who actively seek out products perceived as having relatively minimal impact onthe environment. These groups of consumers ("green" consumers) have developed a keen

interest in product quality and are rejecting companies and products with insincere,

inaccurate or incomplete environmental action programmes.

A majority of consumers claim that environmental concern affects their choice of product,

even if they must pay a higher price. The most significant implication for the market of this

emerging "green consumerism" is that individuals are acting upon their values through the

power of their purchasing decisions. Among "green consumers", products are evaluated not

only on basis of performance or price, but also on the social responsibility of manufacturers.

The emerging "environmental consumerism" may have profound implications both for the

way products are developed and marketed in the future and the way energy efficiency and

energy labelling programmes are promoted.


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