Signaling sustainability: How consumer's willingness to pay premium price for green products shapes green brand equity through ESG perceptions

Abstract

This study investigates how consumers’ willingness to pay (WTP) premium price for green products (GPs) influences green brand equity (GBE) through perceived ESG (PESG), applying signaling theory in the context of Vietnam. Survey data from 276 Vietnamese consumers aware of or experienced with GPs were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that WTP positively affects all three PESG dimensions, with perceived environmental responsibility exerting the strongest influence, followed by governance and social factors. All PESG dimensions positively contribute to GBE. This study extends ESG and green branding literature by validating the PESG construct in a consumer context, and demonstrating the signaling value of WTP for GPs. The findings highlight the need for brands to prioritize transparent environmental and governance initiatives to strengthen green brand equity. Research purpose The primary purpose of this study is to create and empirically test a research model that examines the relationships among WTP a premium price for GPs, PESG, and GBE. Specifically, the purpose of this study is to: 1. Assess the influence of customers’ willing to pay a premium price for GPs on customers’ PESG. 2. Investigate the influence of customers’ PESG on green brand equity. Therefore, this study offers insights and strategies to enhance GBE by understanding and motivating consumers’ WTP more for GPs. Research motivation Previous studies on ESG have mainly focused on investors and firms’ internal operations, while consumer perceptions remain underexplored. Although Oh et al (2024) of the PESG framework offers a foundational theoretical basis, its application to GPs is still limited. Prior research, such as Berger (2019) and Francisco et al (2024) addressed social and CSR aspects but did not fully examine the relationship between WTP, ESG, and GBE. In Vietnam, studies have primarily focused on purchase intention rather than brand equity. Therefore, this study aims to extend the understanding of how Vietnamese consumers respond to ESG initiatives, providing insights for sustainable brand development strategies. Research design, approach, and method The study employs a quantitative approach to examine the relationship between consumers’ WTP a premium for GPs and GBE, with PESG commitment as a mediating factor. The collected data were analyzed using SmartPLS 4.1.0.3. The respondents are Ho Chi Minh City consumers who have awareness of or experience with GP consumption. Of the 350 surveys distributed, 276 valid responses were obtained and used for analysis. PLS-SEM was used to assess the measurement model. Main findings The results indicated that WTP more for GPs had a positive impact on all three dimensions of PESG. The strongest effect was observed for PCS. In addition, all three dimensions of PESG were confirmed to be positive drivers of GBE, with PCE showing the most prominent influence. More importantly, the results also showed that PESG played an additional mediating role in the relationship between WTP and GBE. Practical/managerial implications: This research provides substantial practical guidance for green product brands, demonstrating that consumers’ WTP a premium significantly drives GBE, largely mediated by their perception of a brand's ESG efforts. Businesses should therefore strategically focus resources on improving and clearly communicating specific ESG initiatives to build trust, attract new customers, prioritizing sustainable consumption, and boost brand loyalty.