Wednesday, April 8, 2009

Marketing “Green”

What “Green” means… What is a “Green” process, and how should businesses adapt their marketing strategies for “Green”

While recently attending a global consumer and shopping conference, we were shown a video in which consumers were asked to express what “green” meant to them. The interviewees in the video generally struggled to articulate the concept. One interview really called my attention, during which the respondent candidly discussed his skepticism of “green” and belief that the word had been overused by marketers and is most likely misleading. He questioned what “green” really is, and then pointed out that a product has been labeled “green” but came from a non-green manufacturing process, is pointless. The video got me to ponder what does “green” really mean? What should qualify as a “green” process? …and how should companies respond to “green” to more intelligently market their products?

What does green mean?
Green is used in many contexts, but the most accepted consumer concept is creating a product that is benign to both people and the environment. There have been a laundry list of green claims used by marketers recently. Their need to compartmentalize the green benefits is due to the fact that the product is most likely only partially green. Below is a characterization of the common claims that many companies put on their products.

  • Biodegradable – According to the FTC, Biodegradable products use "materials, that break down and decompose into elements found in nature when they are exposed to air, moisture, and bacteria or other organisms. "Photodegradable" materials, usually plastics, disintegrate into smaller pieces when exposed to enough sunlight. Degradable does not mean it is safe for people or the environment, just that it will decompose.

  • Made with a renewable ingredients – A renewable resource is replenished by natural processes at a rate comparable or faster than its rate of consumption by humans. The main intent here is sustainability. Products can claim to be renewable by replacing a non-renewable energy resource such as oil feed stock with a bio-feed stock like corn or soy bean oil.

  • Energy Efficient – using less energy to provide the same level of energy service as before.

  • Non-Toxic / Toxin removed - Non-toxic means that the product is not made with hazardous substances and won’t pose any significant risk to people or the environment. Some products claim to remove a toxin that can be harmful for the environment or people.

  • Recycled or recyclable – The FTC defines "Recycled" products as those made from items recovered or separated from the "waste stream" that are melted down or ground up into raw materials and then used to make new products. They may be products that are used, rebuilt, reconditioned, or remanufactured. Recyclable means that the product can be collected and used again to make recycled products.

What about the “green” process?
The processes used for products can be broken down into the collection, manufacturing, logistics and disposal processes. The complexity of most products value chains leaves many steps where the “green” intent can be compromised.

  • The Design Process – The design process is developing a plan for a product. Integrating an environmentally sound approach to the design process can be more beneficial than retrofitting products.

  • The Collection Process – This is the extraction process of the materials to be used to make the products. A common example of a green product lacking a green collection process is Brazilian sugarcane derived fuel ethanol – which is seen as a sustainable substitute for oil-derived gasoline. The process used for sugarcane harvesting in Brazil is replete with non-green actvities, including the oil fueled burning of entire fields of cane to speed up the harvest. This practice is widely employed by cane harvesters even though it is illegal and very harmful to both the environment and the workers.

  • The Manufacturing Process- Manufacturing is to make or process raw materials into a finished product. The manufacturing process can break down when externalities are created that can cause harm. It is commonly understood that manufacturing can have many pollutants including but not limited to air pollution.

  • The Logistics Process- Logistics is the management of the flow of goods from point of origin to the point of consumption. The green aspect of the logistics process can break down when the distribution of green products is more costly than using locally sourced products. For example, consumers demanding a hypothetical green product from Denmark and to be shipped by plane to California would be extremely wasteful in both carbon footprint and resource waste especially if a less-green alternative is easily obtainable locally.

  • The Disposal Process-Once the lifespan of a product is over then it must be disposed of. The disposing of products can be complex and can be a problem or negate all of the green benefit if not handled properly. For example, although the compact fluorescent light-bulb significantly reduces energy consumption throughout its life, it contains the highly toxic pollutant mercury , which requires special handling for its disposal or else the mercury pollution can weigh against the green benefit of using the low consumption bulb in the first place.

How should a business respond?
Consumers are becoming more attuned to the tricks that marketers use to sell up the “Green” elements of a product’s story while also glossing over the less green aspects. For companies to respond, they must analyze how their customers are deciding whether products warrant a “green” label or not, how much they are willing to pay for green features, and how they should market, educate and help calculate the net green benefit for their customers.
At the highest level, green purchasing decisions can be segmented into three distinct types: Green Luxury Goods, Simple Goods, and Complex Goods. Green buying behavior is mix of status, impulse, goodwill, quality, and role modeling. It requires more complex and dynamic strategies than traditional marketing approaches.

Green Luxury –Emotional Benefit Analysis

  • The Veblen Good – This is when customers are interested in buying an expensive green product and their preference for buying the product increases as a direct function of its price. In this situation, thelLuxury green goods can be priced at a premium. Make sure you understand the motivation of the customers identified in this group to proper market to them and prepare for possible shifts in preferences. Is their desire for the good driven by the snob effect or the bandwagon effect? In other words, is green the new benchmark for luxury and are people buying the product for status and exclusivity or just because everyone else is.
  • Women luxury buyers -Many of the green luxury buyers are affluent women who express a greater concern with green issues than their male counterparts. If affluent women are your main customer, you will need to identify the environmental and social issues that concern them with your products and ensure the appropriate adjustments to the products, the processes and the marketing are being made. Again, understanding the motivation and emotional purchase behavior will help adjust the marketing that assist customers with their buying decision.
The Simple Goods – Amount Willing to Pay vs. Benefit Analysis
If the product is a simple good that someone can easily quantify and processes the green requirements, then you may want to educate customers of the “green” benefits. Customers actively conduct analyses for how much they are willing to pay versus how much benefit they are getting out of the product. To help companies identify where the green benefit sits in this analysis, you need to first identify if it is an expected benefit or an augmented (extra) benefit. If customers view this as an expected benefit, then they are expecting it to be included and are not willing to pay any more for it. If it falls in the augmented/ extra category, then you need to identify if this is something they are looking for or if this green benefit is something they are unaware of. Some products have one negative connotation associated with them and people want it solved. If you solve this problem without adding additional issues, then all you need to do is educate on that solution and the additional benefit is clear and obviously adds value and justifies additional willingness to pay. If the customer is unaware of the green benefit’s need, then they will need time to learn it to continue the analysis. Not all customers are willing to take the time and they may throw it out of the decision analysis and not consider the product. To be clear, core benefits must not be compromised in order to get people to spend more for the additional green benefits.

It is also important to take into consideration all the processes in the chain of the product. Any step in the process that is viewed as green critical and is not, then this can easily becomes a disqualifier to the consumers such that they are willing to throw the entire green benefit out in their analysis. You must make sure that the augmented benefits fit what customers are seeking.

With simple goods most consumers are making the buying decision at the point of purchase. This means that the education and analysis is occurring at that moment and this is the most critical time to educate customers. Product labels, signage and sales associate are critical in educating the customer for these products. If the green claim falls under the case that they are unaware of the benefit, you may want to create a marketing campaign with the purpose that educates and moves the decision from unaware to knowing.

Example: Palmolive Eco+ Dishwasher Detergent
Dishwasher detergent is a simple product that most people are familiar with. Palmolive developed the Eco+ Dishwasher Detergent - the Eco+ means that phosphate, a toxin to rivers and lakes, has been removed. Since most major brands of dishwasher detergents contain phosphate this is not an expected benefit and consumers should be willing to pay a few more scents for it. The core benefit is that consumers are looking for is that the detergent works well by being compatible with the dishwasher and cleans dishes. This benefit must not be compromised due to the phosphate free green benefit and the bottle does mention that it still cleans to a sparkling shine which is good. This must hold true after a trial use. Some consumers may be aware of the phosphate issue but I would think that most are unaware. This type of product could benefit from a campaign that educates more on the topic with signage near the product or clearer labels on the bottle. The bottle does a good job of explaining that the removal of phosphate benefits the lakes and streams, but does not say how and in the back of the bottle, the message is diluted by the statement that phosphate ”MAY be harmful to lakes and streams.” It does not say it is explicitly. The other disturbing fact on this product is that is claims to remove a toxin, but it is still a toxic product. Some states are starting to regulate phosphate in dishwasher detergents, so I am not sure for how long this will be an augmented benefit. In the long-term, they will have to add additional green benefits to the eco+ line of dishwasher detergents in order to remain in the augmented products benefits category in order for consumers to be willing to pay more for the product. Maybe clearing up some of the previous concerns mentioned.

The Complex Goods- Net “Green” Benefit Analysis
For other goods that are more complicated, customers are calculating the net green benefit. They are taking the total amount of green benefits versus the negative externalities and want the total to be better than before. This will require justifying the whole chain and showing improvement in net benefit against previous versions and compared to main competitors. This requires much more education and campaigns that are more complex. People do research on complex products and they will educate themselves. This means they are looking at the websites, consumer reports, asking users and checking claims. They are taking this knowledge with them to the point of sale and asking tough questions of sales people. This means that the campaign must be multifaceted and tailored to include information in places where people are expecting answers. Multiple commercials and print may be applicable and an educated sales force is a must. Education on the proper usage of the product to maximize the green benefit may also be needed due to the complexity of the product.

Examples: Apple MacBook Pro Laptops
Laptop computers are complicated products. Apple has just recently come out with “greenest Macbook Pro” and they are doing a great job with a green complex product. Already with the title, it is obvious that with the word greenest, that they are implying greener than before. A net benefit calculation compared to the previous version of the product. On their web page, they define what that means and it includes a big picture view of many benefits and many of the processes including an explanation at how the design and manufacturing process came together. They have taken toxins out, reduced packaging, made it more energy efficient, and a longer lasting battery. They are at the start of the campaign, but the battery solution is the topic of their first commercial. The commercial does a great job of comparing the battery life span to a typical lifespan and the green benefit that is associated. They continue this logic by including the percent reduction in packaging and other similar calculation. Environmental reports and awards are included as well. All this helps with the net benefit analysis calculation that customer do and since they cover many aspects you are left convinced that the product is truly greener. The only criticism I have to the new campaign, is that in my visit to an L.A. Apple store, the store personnel was not as well trained on this message and they had no signage to help guide them or me as the customer. Hopefully they will fix this soon. Now when comparing the benefits to a Dell laptop, you will find that Dell also has benefits but comes from the manufacturing angle. They do not have a campaign and their materials are written in technical language making it more difficult to interpret. As usual, Apple is making it simpler and I look forward to the next installment of the TV commercial on the greenest Macbook.