Label equity and the effectiveness of values‐based labels: an experiment with two French Protected Geographic Indication labels

The objective of this research is to explore the decision‐making process of consumers when faced with food products that have values‐based labels. An experimental methodology was used to test the impact of a label of origin guaranteed by the European Union, the Protected Geographic Indications (PGI) label. The reactions of French consumers to photographs of two food products were investigated with four different presentations: without a specific label, with a simple regional label, with both a regional label and the PGI label, and finally, with the previous two labels along with an explanation of the nature of the PGI label. It was found that the impact on overall quality and purchase intention emerged only when the relatively unrecognized PGI label was explained to consumers, thus highlighting the importance of building awareness of a values‐based label. When it was explained, however, the values‐based label was shown to operate as an effective market signal that generated both descriptive and inferential beliefs in relation to the products bearing the label. These beliefs in turn explained consumers’ perception of overall quality and influenced purchasing intention. By investigating the dimensions of label equity and by explaining the mechanism whereby values‐based labels are perceived by consumers, this research offers firms a methodology for improving the commercial viability of values‐based labelling schemes. Policymakers can also benefit from these insights to develop clearer understanding of how labels are actually interpreted by consumers. Finally, consumers – individually and collectively – will be better served by labelling schemes that incorporate an understanding of their perspective.