Market observations confirm that repeated negative experiences with
the quality of purchased goods affect consumer purchase decisions or
the volume purchased. The distinction between the purchase decision
and the consumption frequency or volume consumed has been modeled
using a double-hurdle model. The premise of the model’s theoretical
framework is that consumers consciously choose to participate in the
market by making a purchase and, subsequently, make a separate deci-
sion about how much of a good to purchase. These two separate deci-
sions are assumed to be determined by different sets of factors, some of
which are the good’s quality attributes. For example, Park and Florkow-
ski (1999) showed that positive experiences with shelled pecans influ-
enced the consumption frequency, while negative experiences lowered
the probability of making the purchase decision. Furthermore, they found
that consumers may be divided into two uneven-size groups, of those
who regularly purchase the product and those who do not or do so only
occasionally.
Variable reaction of consumers regarding their experience with prod-
uct quality suggests the need to maintain the integrity of fresh produce
or risk sales. A high-priced item requiring a substantial consumer in-
volvement in the purchase decision may be promptly ignored by buyers
if it does not meet quality expectations. Adverse selection behavior
aimed at risk reduction can encourage purchases and consumption of
standard quality fruit and vegetables sold at low prices. Furthermore, the
promotional message aimed at one group of consumers may be unsuit-
able for other groups. To attract new buyers, rather than only maintain-
ing the current population segment, the produce industry may reconsider
the marketing strategy in the context of expected revenue changes.
Strategies addressing market risk may vary with the size of a farm
operation. Demand for special or exotic produce can be met by small
growers exploiting cross-cultural eating differences, which create mar-
ket niches. Specialized produce often sells at higher prices and offers
higher margins than sales of the most frequently eaten fruits or vegeta-
bles. By choosing the production of novelty produce in response to con-
sumer demand, farmers may reduce market risk and isolate their niche
from direct competition. But a sustained effort to ensure high and con-
sistent quality produce is necessary to fend off the entry of competitors
or to maintain a segment of buyers.
Price received by farmers for fresh produce represents only a portion
of the marketing bill. Growing pressure to generate income in a market
saturated with competing products leads to the use of produce quality
Quality as a Risk Management Tool 243