Green Brand Leadership: a Fish Story

The customer is always right – so goes the mantra of every sales rep from time immemorial. But, as we know, what customers want may not be best for the planet. For some brands, this presents a dilemma: how do you satisfy consumer needs while remaining eco-responsible?

The dilemma can be quite daunting for a brand, especially if the eco-impact is caused by lifestyle choices consumers are long accustomed to. This challenge is only compounded when consumers are not yet aware that their very actions are having a detrimental effect – as no brand wants to be the bearer of bad news. Or, perhaps more challenging still, brands may find that the very behaviors and rituals that help define a brand itself turn out to perpetuate the very actions that are having a negative impact.

Whose responsibility is it to promote more sustainable consumer behaviors?

Many brands would say, it is the role of governments to regulate – and if they don’t, a corporate entity is not accountable for their failure to act. Others would say that it should be left to the discerning buyer. Should a brand itself take the lead? Some may argue yes. It is a demonstration of brand leadership, they say.

But, being out ahead of one’s customers may serve brands well only when their customers expect them to do so. Staking out a leadership position appeals to customers that want to know that they are doing good through the choices that they make.

Others may argue no. Brands sell products, not morality they might say. Worse, eco-responsible messaging may be antithetical to the experience a brand is trying to create. It is hard to enjoy pleasures guilt-free if one is constantly reminded of the impact that one is having on the planet.

But, regardless of where one nets out on this issue, one thing is clear: today, brands are increasingly left with little choice but to act – or react – whether or not their actions directly influence customer purchase decisions. Advocacy groups as well as individuals are leveraging the power of the media (and social media) to broadcast and amplify their voices to sway popular opinion.

Whether viewed as an opportunity to demonstrate leadership or take a defensive stance, it is likely that more and more brands will have to make such choices.

One example of such tension between brands and eco-decisions recently appeared in the New York Times Magazine article by Paul Greenberg, “Tuna’s End: The Fate of the Bluefin, the Oceans and Us.” (June 27, 2010), As Greenberg writes, Nobu, the internationally acclaimed sushi restaurant chain, faces a decision today over the selection of seafood that it serves.

The Atlantic Bluefin Tuna – a prized fish for sushi and sashimi – is now endangered. Continued commercial fishing may push it to extinction. Further, the timing of the BP oil spill in the Gulf likely exacerbated the situation by polluting one of two known breeding grounds in the Atlantic for these fish right as mating season was to begin.

Today, Greenpeace is pressuring Nobu – in large measure because it is a category leader – to no longer serve Bluefin to its patrons. Nobu has resisted. Nobu co-owner Richie Notar noted, “The Japanese have relied on tuna and other bounties of the sea as part of their culture and history for centuries. We are absolutely appreciative of your goals and efforts within your cause, but it goes far beyond just saying that we can just taken what all of a sudden has been declared an “endangered” species off the menu. It has to do with custom, heritage and behavior.”

Arguably, Nobu’s brand identity emanates from a careful balance of adherence to the tradition and ritual of sushi – its creation, its presentation, its consumption – and hip appeal: swanky ambiance, innovative food creations and celebrity ownership. Out of balance, the brand does not deliver on the experience consumers have come to expect.

With this balance in mind, Nobu has tried to stake out a middle ground by updating its menu with the following message: “Bluefin tuna is an environmentally threatened species. Please ask your server for an alternative”

Such a simple message informs patrons of the issue and then let’s each consumer make their own choice. Additionally, such phrasing invites a dialogue between the patron and server regarding food substitutes, though it is unclear as to how many patrons would be inclined to do so.

What Nobu has missed, however, is an opportunity to leverage this situation to evolve its brand appeal – keeping the balance between tradition and hip appeal while elevating each to the next level.

Nobu could find an alternative to Bluefin tuna and not jeopardize the brand, but arguably reinforce consumer perception of Nobu as hip and trendy. Greenberg asserts that what Nobu needs is a new substitute for tuna. As part of his research, he went searching for a Bluefin substitute and may have found one in a fish known as kahala. Arguably, Nobu is missing an opportunity to be one of the first to introduce kahala across its menus, reinforcing its trendy image.

Ironically, by introducing such a substitute, Nobu would not be breaking with tradition, but rather, returning to it, as Bluefin was not widely popular in sushi until just 30 years ago. It was nowhere to be found in sushi before 170 years ago.

Thus, shifting away from Bluefin and offering consumers a tasty substitute could actually enhance Nobu’s reputation for seeding new trends while maintaining close adherence to the tradition of sushi.

In this case, what is good for the brand may actually be good for the planet.

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Eco-labels Impact Consumer Behavior

Eco-labels influence consumer behavior in two ways.  First, they introduce green as a considered attribute at the point of sale.  Second, they enable consumers to comparison shop based on green.  Over the past few years, there have been many new eco-labels launched by governments, manufacturers and retailers.  Many of these labels are listed on Consumer Reports’ Greener Choices site.

Interestingly, the Natural Marketing Institute’s 2007 LOHAS Consumer Trends Database report determined that not all eco-labels have the same impact.  In fact, consumers indicate that they are more likely to make eco-friendly purchase decisions if the eco-labels are also widely recognized and trusted brands in of themselves.  Familiar labels for programs like the EPA’s Energy Star have a more significant influence on consumer behavior than others. 

While such a finding reinforces the value of eco-labels, it does challenge the notion that CPG companies and retailers should necessarily launch proprietary labels to differentiate themselves on green.

Like all brands, eco-labels take significant time and resources to build.  Moreover, given the sensitivities regarding greenwashing, for-profit entities may have to overcome a higher hurdle than government or a non-profit organization given the appearance of conflict if proprietary labels adorn their own products.

 

As such, Marketing Green recommends that product companies and retailers focus on disclosing product information about environmental impact to differentiate themselves in the market rather than trying to define new green labels.  Disclosures provide consumers with information that can inform purchase decisions rather than certify a product’s greenness.  This is what HP has done with its launch of Eco Highlights labels on its products.   

Marketing Green also recommends that retailers simultaneously push for industry-wide labels.  While some retailers may consider proprietary labels as a competitive differentiator, it is likely that broadly recognized labels will accelerate consumer adoption while reduce the cost to support them. 

 

Moreover, retailers should differentiate themselves by sourcing more green products.  Arguably, this is one of Wal-Mart’s strategic priorities today.  Greater variety combined with recognized eco-labels will likely drive more sales as well as consumer loyalty.  In the end, this approach is likely to have more impact for both business and the environment.

Greening Consumption

An Interview with Michel Gelobter, Founder and EVP of Cooler

Long-time environmental activist Paul Hawkins once described “green consumerism” as an oxymoron.  Indeed, “green consumption” makes Wikipedia’s “List of Genuine Oxymora”.   The reason: consumption by its very nature has an impact on the environment – to some degree or another – and therefore, is hard to call truly green.

 

Yet, short of reducing consumption, many consumers, manufacturers and retailers are focusing on greener consumption – a term which implies shifting to products and services that have a lower environmental impact, though in many cases, not specifying by how much.

 

Today, there are positive signs that demand for greener products is increasing sharply.  In fact, the Natural Marketing Institute reports that the $200+ billion Lifestyles of Health and Sustainability (LOHAS) market is expected to double by 2010 and quadruple by 2015.  

There are many online retailers and content sites that offer green products directly or simply help consumers navigate the market.  They include three primary categories:

Green online retailers: Many online retailers have emerged that are dedicated to serving the green market including Buy Green, Earth Friendly Goods, Eco ChoicesEcoWise, Gaiam, Green Feet, Green Home, Green Shop (UK), Green Shopper, Green Shopping (UK), Green Store, Indigenous, Natural Collection (UK), Nigel’s Eco Store (UK), Rogue Natural Living, Shop Green (PriceGrabber), The Green Office and VivaTerra among others.

General online retailers. Several general merchandisers and portals have embedded a green section into their existing offering, including Amazon and MSN among others.

Green directories: Finally, other online sites have positioned themselves as green directories, product search engines and shopping guides.  Sites include EcoBusinessLink, EcoMall, EcoSeek, Evolvist, Evolve Shopping, Green Deals Daily, Great Green Goods (blog), Green People, Green Providers Directory (UK), Green Shopping Guide (UK), Guide Me Green (UK), Haute*Nature (blog) National Green Pages, Pristine Planet, and TheFindGreen among others.  Perhaps the most comprehensive guide to online eco-friendly shopping is published by thepurplebook

Yet, despite this growth rate, LOHAS spending is still a drop in the budget when it comes to US consumer buying power – estimated at more that $10 trillion in 2007.  As such, the greater challenge is to shift spending on mainstream products to greener ones and do so in a way that also provides the incentive for mainstream manufacturers to reduce the carbon footprint of their products over time.

There are many ways to motivate the purchase of greener products across the purchase funnel.  Here are a few examples:

Make existing products greener.  Product companies have the opportunity to green their products – including sourcing, use and disposal.  Greening a product in the first place, of course, is the best way to reduce its environmental footprint.  Companies are motivated to do so for a variety of reasons including increased consumer demand, pressure from partners across the supply chain and risk to the brand simply by being complacent.

One of the best examples is Wal-Mart.  For example, it has identified $10 billion in potential savings simply by decreasing product packaging.  It has also required its suppliers to reduce the environmental impact of the products that it sells (eg, more concentrated laundry detergent formulas reduce the use of energy for transportation) while expanding the market for others (eg, by selling fluorescent bulbs at lower cost under its own private label). 

Due perhaps, in part, to Wal-Mart’s pressure and lead, Procter & Gamble has responded with a commitment to sell $20 billion worth of greener products over the next five years.  It has also joined the Supply Chain Leadership Coalition, an industry organization that pressures suppliers to publish information on carbon emissions, to help it reduce the impact of its suppliers as well.

 

Motivate greener choices.  Product companies and retailers can influence behavior by interjecting green as a considered attribute in the purchase decision.  There are several ways to do so including the use of eco-labels, ratings, promotional benefits or green rewards tied to a loyalty program.  Eco-labels and ratings impact consumer purchase decisions by providing relevant environmental information at the point of sale – and indirectly motivate greener product design and manufacturing decisions by making green a differentiating attribute. 

 

Today, eco-labels are actively being used or under consideration by manufacturers, (eg, HP, Dell), retailer (eg, Wal-Mart, Home Depot) and government regulators.   Moreover, several organizations have taken the lead in developing or aggregating green rating systems including Green Seal, Consumer Report’s Green Choices, the US EPA’s Energy Star and independent Better World Shopper.  Moreover, sites like Alonovo allow users to filter products based on their own green values.

 

Promotional benefits and rewards can also influence consumer purchase behavior.  Marketing Green explores both of these levers in two previous blog entries. (“Green Labels as Drivers of Consumption and Loyalty Programs”, March 19, 2007; “Testing Green Promotional Benefits to Drive Acquisition”, September 16, 2007).

 

Offset environment impact.  Today, more and more companies and consumers are turning to carbon offsets (and renewable energy credits or RECs) to mitigate the environmental impact of products manufactured or purchased.  While the offset mechanism may vary – from purchasing allowances on a carbon exchange to investing in renewable energy projects – the effect is similar: offsets reduce the carbon impact of consumption by effectively removing the equivalent amount from the environment elsewhere. 

 

While carbon offsets are not without controversy, they can be a powerful way to mitigate the impact of consumption.  There are several ways that carbon offsets are purchased today:

 

First, carbon offsets can be voluntary.  Retailers can provide options to do so – as most airline sites do today, for example – or consumers can purchase them directly from many brokers including Atmosfair (Germany) Better World Club, Carbon Fund, Carbon Leaf (UK), Carbon Zero (Canada), Climate Care, Climate Counter, Climate Friendly, ClimatMundi, CO2 Balance, My Climate, Native Energy, Offset Carbon Company (UK), Offsetters (Canada), Solar Electric Light Fund, Sustainable Travel International, Target Neutral (UK), Terrapass, The Carbon Neutral Company, TreeBanking, and Uniglobe Travel among others. 

Typically, retailers play no more than a passive role in facilitating carbon offset purchases by providing the mechanism to do so on their site.  In many cases, it is no more than an additional option available during the check-out process.  The case of Virgin Atlantic is different, however; in response to low voluntary purchases, Virgin is now actively selling carbon offsets to customers while in-flight.  Sunvil Holidays (UK) goes one step further by putting the burden on the consumer to opt-out of – rather than opt-in to – purchasing a carbon offset by embedding it directly into the cost of its vacation packages. 

Second, carbon offsets can be structured into the transaction itself – treated as a promotional expense, embedded in the purchase price or covered as part of the transaction fee.  Companies as diverse as insurance giant Allstate, UK’s Silver Jet and Fiji Water are making their products carbon natural (or even carbon negative) as a way to differentiate their offering.  In this case the product company is absorbing the cost directly or raising its price to cover the added expense. (Interestingly, Allstate is offering to offset the carbon emissions from the automobiles that it insures).

 

Alternatively, credit card transaction fees can be used to offset carbon emissions as well.  Recently, issuers including Barclays, GE, MetaBank, Triodos Bank and Wells Fargo have launched green cards while Bank of America and upstart Brighter Planet have announced their intentions to do so.  These cards divert a portion of their fees to mitigate the impact of the products purchased through a donation to a non-profit organization or direct purchase of carbon offsets. 

 

Such card programs have advantages and disadvantages.  Given their reach, credit cards can green a significant amount of consumer spending simply by providing the incentive to consumers to make their purchases on a card with green benefits.  Yet, to do so, cardholders must trade in personal benefits earned from traditional reward programs (eg, airline miles) for ones that provide more societal benefits.

 

Alternatively, a promising, new retail model has emerged that divert a portion of revenues earned through affiliate marketing programs to pay to offset the carbon from products purchased.  In doing so, sites such as Cooler and Earth Moment enable consumers to purchase products from traditional retailers while offsetting the carbon impact of these purchase in the process.  Such a model is compelling to consumers as, from their perspective, the cost of the carbon offset is absorbed by the retailer and they can green their purchases while using their existing credit cards. 

 

While numerous companies are involved in carbon offsetting, Cooler has clearly been one of the most innovative players in the space.  Distributing 8 million products from 400 retailers, Cooler provides consumers with the largest selection of products that can be purchased with an embedded carbon offset.

 

Recently, I had the opportunity of sitting down with Michel Gelobter, Founder and Executive Vice-President at Cooler.  We discussed the recent launch of his company, its B2B and B2C offerings and the challenges that we all face in greening consumption.  Here are his words:

Marketing Green:  By offsetting the carbon impact of products purchased, Climate Cooler has the potential to change the game in the online retail space.  What was the impetus for starting the company? 

Cooler:  We wanted to find ways to create the momentum in the consumer space for taking action on climate change.  That exploration led to what has now become Cooler.  Cooler is distinguished by being the first site where you can purchase practically anything you can buy on the Internet – except for maybe a plane ticket – in a way that eliminates the global warming impact through the point of sale.   

Our mission as a company is to connect every purchase with a solution for global warming.  We do that with three offerings.  The first is that we use the country’s only product and service carbon calculator that was developed jointly by Carnegie Mellon and Berkeley.   

MG: Does it calculate the entire impact of the product, that is, how it is manufactured, used and disposed of? 

C: It is just to the point of sale: how it is manufactured and transported.  But, the innovative piece is that it adds the retail component which ranges usually from 20-30% of a product’s carbon footprint. 

MG: How about shipping? 

C: Yeah, it includes that too.  But [the environmental impact] tends to be much lower which can be a surprise to our customer base. 

The second piece of this offering is our basket of carbon offsets or pollution prevention and renewable investments that have been unanimously approved by the world’s best environmental organizations.  And finally, we set out to create a basis on which consumers could take action in a way that was trusted and transparent.  And that is what Cooler is about.   

We also give people a way to track their impact and start thinking about carbon budgeting.  We already have the My Impact page which tells [consumers] what they are emitting.  After all, 40% of the average American’s carbon footprint is in consumption of goods and services.  

MG: So do you view part of the value that you bring is educating consumers on their true environmental impact? 

C: In the consumer space, absolutely.   

The bigger piece of the business is really the B2B offering.  Companies started coming to us and saying: “How can I put your works into my gears so when people come to my website – or bricks and mortar store – they can get a carbon neutral product.”

Our B2B offering is called Cooler Compete which is basically a way for companies to know, offset and reduce the global warming impact of the products that they sell.  And the difference is that those companies are going to make a choice about who pays for [the offset].  We think that most of our business customers are going to absorb the costs of carbon neutrality. 

MG: What services are you providing in the B2B space? 

C: First, we are providing the [carbon emission] calculation.  Our calculator is really revolutionary.  We are using a method that is, on average, more accurate [than existing calculators].  It is based on an approach called economic input/output analysis, whereby we calculate the footprint of a product directly through the economy.  Instead of looking at a shoe and saying “where did that leather come from?”, we say “how much of the leather industry did this company use?”.   

Peer-reviewed studies show that this method is, on average, more [inclusive] from an environmental perspective because it includes more of the carbon footprint than [other] analysis. 

The second service is really a reduction service, that is, a list of the top contributors to your carbon impact.  That is usually enough to motivate companies to bench mark against those numbers and reduce their impact.  

Finally, companies buy offsets with us.  We don’t actually make any profit from our offsets – we pass the costs directly through.  But our basket of offsets is very high quality.  

MG: You are ambitious in trying to serve two different audiences with very distinct offerings. 

C: Yes, but the website in some sense can be seen as a technology showcase.  The web site gives [companies] the sense like “Oh, this is what it could look like.”  So that is why the website is really critical.   

MG: In your B2C work, who is the typical customer that you are targeting? 

C: We are partnering with environmental organizations so our early go-to-market strategy is [targeting] the members of our partner organizations.  Now we are trying to move from the environmental group members to more of the LOHAS crowd.  Over time, we will target a broader and broader swath of the American public as more people become conscious of this issue. 

MG: How important is viral to your marketing strategy?

C: Viral would be great.  Right now, we are honing our technology platform to make that more potent.  For example, when you tell a friend, we are able to report back to you how much your friends offset.  We can also have people compete to see who is more carbon neutral.   

MG: How does the B2C business model work?  Is it an affiliate model? 

C: It is.  On average, if we refer someone [to an online retailer that subsequently makes a purchase], we get 6% [of the total sale].  The cost of the [carbon] offset ranges from 0.7 to 1.5% and we keep the rest for the business. 

MG: Are there plans to offset carbon emissions from the use and disposal of the products that you sell? CC: We do not have any plans to address that now. MG: How receptive are consumers today to carbon offsets? 

C:  I think we are easily 10 to 20 years out from having a stable, trustworthy, well-defined commodity market for offsets.  One of the reasons we partnered with the environmental groups is to give consumers assurances that at any moment in time, the best decisions are being made.  

MG: Do you think offsets take on more meaning when the US market moves from a voluntary to a mandated cap and trade system? 

C: No. I think personally that people need to take action now.  Our offsets are additional so they are already above and beyond everything done today.  We follow three criteria that are summarized as follows: real, additional and positive. 

“Real” means that we are taking carbon out of the atmosphere when you buy something.  We are not just meeting the next increment of energy demand with cleaner energy.  We’re actually capturing or reducing an emission somewhere else in the world, hopefully in the United States.   

“Additional” means that this would not have happened where it not for your purchase.   And “positive” means doing more for the world than just helping the climate.  It means helping to create jobs or generate more environmental protection or biodiversity. 

It is going to be a long time before governments are actually cutting emissions by 80%; by 2050, unfortunately.  Until that time and maybe well beyond it, we want to be the place where consumers can know that by acting their doing their part above and beyond what government is doing.  

MG: It is conceivable that your success could provide incentive for others to enter the market and that one day, offsets will simply be a threshold to compete? 

C: Of course, we would love it as a company and a social event if this became a must have.  And we are going to do our best to make sure that happens.  That is one of the reasons why we started the company. 

MG: Will this actually help solve global warming? 

C: I absolutely think it’s a huge part of the solution.  We can not be paralyzed by the fact that shopping and consumption is part of the problem.  We have to go in and fix it.  People have been trading goods for money for a long time and the system’s broken.  And climate change is actually a huge archetype for a wide range of ways to reknit the fabric of shopping with the fabric of community and earth care.

Defining Green Brand Leadership

“We will not be measured by our aspirations.  We will be measured by our actions”                   

— Wal-Mart CEO Lee Scott in making sustainability part of his core strategy

Great brands today understand that return on investment (ROI) using hard dollars is not sufficient to assess the overall impact of environmental initiatives.  Today, social norms regarding the environment are changing and consumers are increasingly holding brands accountable for what they do (and don’t do) rather than just what they say.  As a result, more and more companies are making investment decisions that incorporate brand impact and brand risk into their equations. 

Wikipedia defines brand as the “embodiment of all information connected to [a] product and serves to create associations and expectations around it.”  Though intangible, a brand may generate significant value for a company based on its ability to create differentiated experiences for consumers – and enable the company to generate and sustain future cash flows as a result. 

One way to view a brand is that it can enable companies to charge a premium for what may ordinarily be perceived as a commodity product.  Take for example Coca-Cola, the #1 brand based on the 2007 BusinessWeek/Interbrand survey.  According to the Brand Finance 250 annual report, Coca-Cola has the highest brand value – over $43 billion or nearly 40% of its total $110 billion enterprise value – in a highly competitive beverage market.   

While taste is indeed an important differentiator, Coca-Cola is able to charge a premium for its products – and generate significant brand value – primarily due to the strong brand loyalty of its customers. 

Increasingly, leading brand companies are recognizing that environmental issues have the potential to impact brand value – positively or negatively – and are taking action.  Coca-Cola clearly understands this and is aggressively responding with bold initiatives that are intent on shoring up its green credentials. 

For example, consumers today are less willing to accept that a plastic bottle will take 1,000 years to decompose in a landfill.  By proactively redesigning its bottle to reduce material use and pledging to recycle 100% of bottles sold in the US, Coca-Cola is clearly taking action to stay ahead of consumer brand expectations – and by doing so, defending (or perhaps enhancing) its brand value.

Does reduced material use lower production costs for Coca-Cola?  Absolutely.  Does committing to recycling 100% of its bottles help attract new customers?  Not necessarily.  Regardless, recycling bottles impacts its brand value – and ability to continue to sustain future cash flows – by strengthening connections with existing customers and mitigating potential risk to its corporate reputation as a result of negative PR.

Today, many leading brands like Coca-Cola are responding to consumer concerns about the environment by making investments that strengthen or shore up brand value.  Marketing Green believes that there are five actions that define green brand leaders. These five actions need to be considered by companies looking to green their brands: 

Be accountable.  Companies should acknowledge that environmental issues such as climate change are real and that, despite good intentions, they are part of the problem (and can be part of the solution). At this point, businesses are likely to alienate few consumers with such a statement and can begin to attract the growing group of consumers looking for green brand leadership.    

Additionally, businesses should audit their own operations and the lifecycle of their products – including sourcing, use and disposal – to determine their environmental impact and track these metrics over time. Indeed accountability, now considered one of the top pillars of successful marketing communications, cannot be underestimated when it comes to the environmental space.

Consumers are becoming increasingly savvy and increasingly demanding when it comes to the environment.  Companies should not be shy in setting high goals for themselves when it comes to the environment; if there’s any time to admit the future needs to be different than the past, it’s now.  

Be transparent.  More and more, leading brands are providing public disclosures of their environmental and social impact.  Today, in fact, 43 of the top 100 brands – including 12 of the top 15 – make public disclosures based on sustainability guidelines set by the Global Reporting Initiative. 

This reporting framework – first proposed by Boston-based non-profit CERES, endorsed by the United Nations Environmental Programme and supported by a consortium of leading brands including Alcan, BP, Ford, GM, Microsoft, RBC Financial and Shell – has become the de facto standard for environmental and social reporting globally.  Currently, more than 1,250 companies in over 60 countries are making disclosures using this framework. 

Another way that companies are demonstrating transparency is through partnerships with non-governmental organizations (NGOs) such as the National Resource Defense Council and Environmental Defense (ED).  NGOs provide credibility for a company because consumers view them as industry watch dogs. 

Certainly, one of the best partnership examples is the one forged between Wal-Mart and ED to make Wal-Mart’s operations and supply chain more sustainable.  In effect, Wal-Mart – not ranked in the BusinessWeek/Interbrand survey because it operates internationally under different brand names – has turned to a respected NGO to endorse its environmental efforts. 

This partnership hold such promise that ED announced last year that it was adding a staff position in Bentonville, AR in order to coordinate ongoing work with the retail giant.

Be credible.  Today, consumers are skeptical; too many companies have tried to green wash hollow environmental efforts.  As such, companies must work hard to build credibility and earn consumer trust over time.   

One way for a company to do so is to first green its internal operations, followed by its products and services, and then its marketing communications.  This way, companies ensure that they take responsibility for their own actions before encouraging consumers to do so with their products or through their messaging. 

But this is not the only way to gain credibility with consumers.  Companies like Toyota (# 6 ranked brand) started by greening its products (eg, hybrids) first.  The risk for a company, however, is that over time its own product enthusiasts are likely to challenge how the product is made.  In the case of Toyota, hybrid owners are now pressuring it to green its operations and manufacturing facilities and Toyota is taking action, according to Marjorie Schussel, National Manager of Corporate Communications, at the recent Green Conference sponsored by Ad Age. 

In contrast, Dell (#31 ranked brand, in contrast to #3 IBM and Dell archrival #12 ranked HP) started with its marketing communications first, declaring that it was going to be the greenest IT company on earth.  In doing so, it essentially admitted that its operations and products were not green yet but that it had every intention to make them green over time.  To help facilitate this transformation, Dell created a site called IdeaStorm to solicit input from its customers on ways by which it could go green. 

Be an enabler.  Leading brands should recognize that consumer expectations have changed.  It is not enough for a company to green its products; consumers expect the products that they purchase to help reduce the environmental impact in their own lives too. 

Recent research by Umbria, a marketing intelligence company, supports this.  Averill Doering, a consumer research analyst with Umbria, made the following observation: “[Consumers] see the [environmental] problem. They want to do something about it.  And, they want the companies they buy from to help them do it.” 

Such consumer expectations raise the bar and imply that consumers may hold companies responsible for the environmental impact of the products that they buy – across the entire lifecycle.  Consumers may increasingly care not just about product sourcing, but about its use and disposal too.  The emergence of eco-labels may serve to reinforce these consumer expectations as they will provide consumers with the necessary information to make greener choices by comparison shopping.  

Leading brands only need to witness the growth in hybrid sales – 49% during the first seven months of 2007 over the same period in 2006 – to recognize that consumers are actively seeking products that enable them to be greener.  Today, every major automobile company is following suit and is accelerating development and commercialization of greener automobiles. 

Be visionary. Visionaries are willing to make bold decisions that redefine their strategy or reshape industry dynamics.  Today, there are many emerging green visionaries.  Among them is Wal-Mart. 

In June of 2004, a pivotal meeting took place between CEO Lee Scott, Rob Walton, Board member and son of the late founder, and Peter Seligmann, Co-founder and CEO of Conservation International.  Walton and Seligmann were friends and had often discussed the potential impact that Wal-Mart could have as the largest global retailer if it were to change the way it did business.   

The pitch to Scott: Wal-Mart had long been criticized for its labor practices, employee health benefits and environmental record.  Given its buying power as the world’s largest retailer, Wal-Mart was in a unique position to affect change in the retail space and do so in a way that would greatly reduce its impact on the environment while saving money, growing revenue and positively impacting its brand image. 

Over time, Scott has essentially turned this pitch into Wal-Mart’s modus operandi.  Not only did Scott set ambitious goals regarding sustainability – 100% renewable energy, zero waste, products that sustain our resources and environment – but he has made it a central component of his strategy and brand positioning.   

Wal-Mart first demonstrated the demand for more sustainable products when it began selling organic cotton yoga outfits through Sam’s Club: 190K sold in less than 10 weeks. This year, Wal-Mart challenged itself to sell 100MM compact fluorescent light bulbs (CFLs) and has already surpassed that goal.  To do so, it combined its marketing muscle to heavily advertise the CFLs in its stores, and purchasing clout to be able to drive down the cost substantially over just one year ago. 

Moreover, Wal-Mart is intent on making its suppliers more sustainable.  Earlier this year, Wal-Mart launched Sustainability 360º, a program intended to enlist its employees, suppliers, customers and local communities to help reduce environmental impact.  This month Scott hosted a Sustainability Summit to connect Wal-Mart suppliers with vendors that could help them become more sustainable.  

Finally, Wal-Mart has expanded its brand positioning to include not just its long time low cost promise, but also “affordable, sustainable products that help [customers] live better every day.”  “Save Money. Live Better” is now the Wal-Mart tag line.    

Increasingly, companies recognize that environmental issues can impact brand value.  In response, leading brands are increasingly incorporating brand metrics into their evaluation criteria for green investments; they are also taking action to green their operations, products and marketing communications.   

Smart brand marketers should think twice about simply focusing on near-term green revenue and cost savings opportunities; the path for sustaining growth needs to also start with greening the brand.

Visualizing Green

Images are powerful marketing tools. For marketers, they provide powerful stimuli that can augment messaging and influence consumer behavior and beliefs.  Here are a few suggestions for marketers using visual images in the green space: 

Chose the right image.  Images can affect change by amplify existing or associating new attributes with a brand or marketing messages.  In the green category specifically, imagery has the potential to evoke strong emotional responses from individuals with a vested interest in or passion for the category. 

Today, consumers have preconceived notions about what colors and images are aligned with green.  Research prepared through a partnership between the Yankelovich Group and Getty Images (“Going Green”, Yankelovich Group webinar, June 27, 2007) yielded powerful insights regarding green imagery: consumers believe that the color “forest” green and images of actual forests, (followed by images of water including oceans, rivers and streams), are the most representative of the environment (based on a palate of green color and image stimuli that consumers were exposed to during research). As such, marketers should carefully consider color palate and image selection in order to align with existing consumer perceptions associated with the environment.  (Getty hosts a gallery of powerful green images on its site). 

Track how visual language is evolving.  How consumers interpret and understand “visual language” is continually evolving.  Understanding this evolution can provide marketers with valuable insights to drive successful campaigns.  Here is one example: As part of its research with Yankelovich, Getty identified “key concepts that will influence the future of visual language” in green.  The key concepts include the following:

  1. The Future 
  2. Goodness
  3. Simplicity
  4. Legacy
  5. Inheritance
  6. Purity
  7. Care
  8. Trust
  9. Sustainability
  10. Fresh & Clean

For marketers, such concepts provide relevant ways to connect consumers with green and should be considered when crafting a marketing campaign.

Moreover, green marketers should take note of emerging patterns across these concepts.  For example, four concepts – “the future”, “legacy”, “inheritance” and “sustainability” relate to what we leave for our children.   Additionally, words like “goodness”, “purity” and “fresh and clean” may perhaps evoke a sense of natural goodness.  (“Going Green,” June 27, 2007).

Pick images that allude to ideas beyond the stated message.  Unlike the written word, images “elude empirical verification”.  This enables marketers to leverage the suggestive potential of an image without being held accountable to the degree that you would be if making written or verbal “product claims or political promises”. (Schroeder, Jonathan, “Introduction to the Special Issue on Aesthetics, Images and Vision”, Marketing Theory, 2006; 6; 5)

Let visual imagery influence new product development and design.  Today, marketers typically choose images as part of the overall strategic branding or marketing campaign tactics.  However, given the strong association by consumers of certain images with green, marketers (and product managers) may want to turn this approach on its head.  Instead, companies should consider perhaps developing products that more closely “fit the image” of green already held by consumers, rather than the other way around.  To do so, product designers and green marketers should leverage this imagery to inspire new designs and shape marketing initiatives. (Schroeder, 2006).

Launching Sprig into a Rising Tide of Green Consumerism

An interview with Mark Whitaker, Editor-in-Chief of New Ventures, Washingtonpost.Newsweek Interactive 

Consumer spending on green products is growing: the 2007 Cone Consumer Environmental Survey cites that nearly half (47%) of all Americans purchased eco-friendly products in the past year.  Such green products included:

  • Products with recycled content (62% of consumers who purchased green)
  • Energy-efficient home improvements (56%)
  • Cleaning supplies (48%)
  • Organic or other third-party certified foods/beverages (24%)
  • Energy-efficient cars (13%)
  • Green apparel (10%)

Given the choice, American consumers say that they prefer to purchase more eco-friendly products.  Yet, there are stipulations: when while most people say they will buy green, they typically do so only when product “price, accessibility and attributes” are similar to green alternatives.  (“The Rising Power of Green Spending,” Kenan Institute Asia, December, 2006) It is not surprising then that online business models are emerging to capitalize on this growing interest in greener consumerism including:

Shopping sites: Amazon recently added a “Sustainable Living” section, joining existing sites including VivaTerra and Organic Fair Trade that sell greener products directly to consumers. 

Shopping advice sites: Online publishers – including Washingtonpost.Newsweek Interactive which launched Sprig last week and National Geographic which recently acquired The Green Guide – are joining existing green shopping advice sites such as Great Green Goods and Ideal Bite to inform consumers on green products and lifestyles.

 

Sprig – short for “Stylish People are Into Green” – is a compelling online shopping advice and lifestyle site offering original content and news on stylish products that happen to be green.  The site’s goal is to become the Daily Candy of green – and then some. With a robust web site that aggregates green products – 1,500 at launch and counting across the food, fashion, beauty, home and lifestyle categories – and provides exclusive editorial content, Sprig promises an engaging shopping platform for the growing audience who values green style. 

Last week, I had the opportunity to speak with Mark Whitaker, Editor-in-Chief of New Ventures at WashingtonPost.Newsweek Interactive.  We talked about the decision to launch Sprig, its growing target audience and the emerging interest in green consumerism. 

MG: What is the impetus for Sprig and what will it offer consumers?

MW: Sprig is the convergence of two things.  First, a willing appetite at the [Washington Post Company] board level to do more investing online.  Last year we generated $100MM in revenue [online] with 250 employees devoted to the channel.  That is where we expect the growth. 

Second, we were approached by an editorial business team that had been involved with Organic Style at Rodale.  [The magazine] had folded for a variety of reasons.  They came to use and said: “We think that the idea of having a publication that identifies great products that are also environmentally friendly would be a great service.  And this is the moment.” 

And if anything, it is better done online.  One, the online [channel] is more environmentally-friendly.  Two, people who are forward thinking about the environment are also more likely to be online.  And three, it offers instant delivery. 

MG: Who is your target and what are you offering? 

MW: We plan to target women as the primary consumers and decision makers about these products.   

The original concept was focused on the newsletter. You know the Daily Candy? 

 

MG: Yes. 

MW: The Daily Candy has shown that model of short daily newsletters – devoted everyday to different products that makes you feel like you are getting the latest information – works.  The newsletter is a very viral thing both in terms of the technology and with its target: women as an audience are evangelists and tell each other.  They have shown that has worked.  Let’s take that kind of model and apply it to this space. 

But, then we decided to be far more ambitious and launch a website and have it more than an archive of our newsletters.  [The website] will have video 2-3 new clips a week, ranging from consumerist profiles of companies to “how-tos” with interviews with green experts.  Green celebrities that we interview will fill out an online questionnaire that we upload with pictures that they send to us.  We will also allow them to go into our database to identify products that they like, to create sort of a celebrity wish list. 

For consumers, we will also have a template that users can use to create your own page.  They can fill out the questionnaire, upload pictures, fill out the questionnaire, pick products from the database and [create] a profile page that looks like our expert pages. 

What I think is really the killer app in this is the interactive, searchable database of green products.  We are hoping to have as many as 1,500 products at launch and then keep adding to it.  For each product, we will have a blurb about why we think it is a good product and what is an environmentally friendly product, along with the name of the product, company, price information and a link to the [product] site. 

MG: How do you leverage the data? 

MW: That is a very interesting question.  What we know we are good at is selling display advertising against quality content.  But, obviously, we have the potential to experiment with other things like more targeted advertising.   

The other thing that is interesting about this space is that more and more products are coming onto the market.  The two principle editors say that when they go out to the shows, the increase in good products has grown exponentially even compared to a year or two ago. 

MG: Do you feel that you are bringing style to the green market or green style to the mass market?

MW: I think it’s more the latter.  Until recently, there were many people that thought green style was an oxymoron.  We do not think that is true anymore; we think it is one of our core convictions behind the site.   

Some elements within the traditional green community won’t [embrace the site] because so much of it is about shopping and consumerism.  By definition, Sprig will not be for them.   

But, we think the real opportunity is with people who are becoming aware of [green] but don’t quite know what to do.  If they are in a position where the do not have to sacrifice anything – style, quality – they will be interested.   

This is not a site that will overtly push a lifestyle on you; it is going to give you options.  One of our mantras is that the world may be better off if 95 percent of the people became 5% more green than 5% of the people becoming 95% more green.   

MG: You are providing consumers with a place to find green products.  But you also may be spurring supply because you are providing a low cost channel for suppliers to test and distribute green products.  Is that not the case? 

MW: That’s right.  To say upfront that we have that effect would be presumptuous.  Some people would say that we are being “light green”.  That may be true, but the fact of the matter is that by being light green we will encourage more mainstream producers to actually start producing new products. 

One thing you will notice is that in terms of the aesthetics: [Sprig] is not about shouting green at you.  If you go to most of the existing green sites and publications, the color green almost become a cliché. 

We wanted something that felt distinctly like a brand.  We wanted a design and color palate that evoked what we were talking about without being heavy-handed and literal.  We also wanted to project out ten years and said: “What if green is universal then?’’ And calling yourself “green” does not really give you something extra.  So we are hoping people will embrace [the brand] not just because it is green but because it is cool and they like our tastes and aesthetics. 

MG: Why is this the right time to launch Sprig? 

MW: I think that we are at the front edge of the wave.  You can see the wave building, but it has not crested yet, and we are jumping on at the right moment. 

MG: You say that women are your primary target.  Tell me about their demographic makeup?  

MW: [Our target] is based on both demographics and psychographics.  It is women with a fairly wide age band.  But, elements within each age group will connect with us for slightly different reasons.  It is for younger women who want to be hip and stylistic.  They are also a generation that cares about the environment.  If there tends to be an activist movement on campus, that tends to be it.  So they are attracted to it.   

There are also enlightened baby boomers who are getting more into this.  The Laurie David [co-founder of Stop Global Warming and a producer of An Inconvenient Truth] type.  Or, in between people who have been turned on to it because they are mothers and are concerned about what is good for their kids.

MG: Are these women purchasing green products today or are you going to open up a whole new world for them? 

MW: I think it will vary.  Some people will be very knowledgeable, but given the depth of our [product] database, we will introduce them to a lot of products they didn’t know about. 

But then I think there will be some people who have literally never really thought about this.  We want [the brand] to be accessible to those who do not think of themselves as green. It is almost like it is the kind of site that they would want to shop or check out anyway.  And all of this stuff is good for the environment.  That’s cool.

Green Labels as Driver of Consumption and Loyalty Programs

It was not too surprising that Wal-Mart announced last week that it intends to provide its customers with carbon ratings for the electronics products it sells. This announcement comes at the heels of (and perhaps in response to) the announcement by UK-based Tesco – the world’s fifth largest retailer – that it would provide eco-ratings on every product within its stores.  Green labels, intended to provide consumers with transparency about a product’s carbon footprint, will effectively introduce sustainability as a considered attribute in every consumer purchase decision.

There are several strategic motivations for a company like Tesco to be a first mover on green labels.  First, there are societal benefits: manufacturers will likely feel pressure to reduce their product’s carbon footprint or risk losing market share to those who do.  Second, such a move creates positive buzz for the company and bolsters its brand image and green credentials.   

Finally, by making such information available in the store aisle or online catalog, Tesco allows consumers to make purchase decisions based on a product’s environmental impact – similar to the way that nutritional labels inform food purchases today.  By capturing and analyzing this purchase data, Tesco can generate in-depth consumer insights about what role sustainability plays in purchase decisions across segments, product categories and geographies.  

While such insights can be used to drive incremental sales, the biggest win for Tesco may be to enhance its existing Clubcard (and nascent Green Clubcard) program by vastly expanding the categories in which consumers can earn program points by purchasing greener products.  In turn, Tesco will position itself to capture an increased share of spend and expand Tesco’s appeal to include all consumers with an affinity for green. 

For marketers, in particular retailers, Tesco’s green loyalty program provides best practices that should be considered when launching similar programs (thanks to Nunes and Drèze for their recently published article in Harvard Business Review, “Your Loyalty Program is Betraying You”, which provides a broad roadmap):

Create the right balance between spending and reward: Tesco’s program rewards consumers with redeemable vouchers on a quarterly basis based on tiered levels of spending.  For consumers, such a program provides incentives to consolidate spend at a single retailer in order to maximize rewards over time. (This is in contrast to rewards granted at the time of purchase as in the case of in-store coupons). The proliferation of green labels will only expand the program’s appeal by attracting consumers who would prefer to purchase greener (though not necessarily ‘green’) products and by rewarding consumers for doing so. 

Build a “sense of momentum”: It has been demonstrated that consumers are often filled with a sense of inertia if rewards seem too far away to be achievable.  Moreover, consumers are known to accelerate their purchases as they get closer to obtaining a reward.  As such, retailers often try to provide ways overcome inertia for those new to the program, as well as to accelerate spending by those who are close to earning rewards.   

Tesco’s current promotion offering double Clubcard points on the purchase of green products may be designed to do just that.  Green spending will increase not only because double points are being offered, but also because by making it a temporary promotion, Tesco has created a sense of urgency to acquire points before time runs out.  

Provide rewards that increase stickiness: With Tesco, consumers earn points that can be redeemed for Tesco merchandise online, in-store or for 4x their value on special Clubcard partner deals (eg, amusement parks, restaurants, hotels).  This flexibility enables consumers to leverage these points to splurge on items that they perhaps would not ordinarily purchase, creating more stickiness than with programs that offer more narrowly defined benefits.  It is reasonable to assume that Tesco will add green rewards to this portfolio in the near-term. 

Drive incremental sales:  Retailers should provide incentives to entice consumers to purchase products that they would not have thought about ordinarily, but would consider purchasing given the right offer.  For example, by leveraging its rich transaction data on green products, Tesco will be able to identify complementary green products that can drive incremental sales.   

Additionally, Tesco can develop “customer lookalike models” to identify consumers that look like the store’s best green consumers, but have different levels of current spending on green products.  By doing so, Tesco can target these consumers with relevant green product messaging and drive incremental sales.   

Marketers should take note.  Green labels will empower consumers with information to help them make more informed green purchase decisions.  Similarly, smart retailers should look for ways to reward this behavior in order to capture increased wallet share and cultivate greater loyalty from their customers.   

Offsetting Carbon in a Voluntary Market

An Interview with Adam Stein, VP of Marketing at TerraPass

 

Founded in 2003, the Chicago Climate Exchange (CCX) is the world’s first voluntary exchange for registering and trading emission allowances for gases that cause climate change.  What does that mean?  Exchange members as diverse as Ford, DuPont, IBM, Waste Management, Safeway, Tufts University and the City of Chicago have made a voluntary but legally binding commitment to reduce carbon emissions, and then trade on the exchange to meet those commitments.  If members reduce emissions below target levels, excess permits – or rights to emit carbon – can be sold on the exchange.  If they exceed target levels, they must purchase permits to do so.

 

CCX was modeled after an earlier market-based success story – established by Title IV of the 1990 Clean Air Act – that facilitated the reduction of sulfur dioxide (SO2) using transferable emission allowances.  A cap and trading system was established whereby a target level was set, and utilities bought and sold allowances to emit SO2 under the cap. 

By any definition, the market-based approach for reducing SO2 was an overwhelming success.  As Dr. Richard Sandor, Founder, Chairman and CEO of CCX, states, a cap and trade system enabled “faster-than-required pollution cuts at far lower cost than predicted”.  Indeed results were impressive: an Environmental Defense Fund report estimates that actual emissions were 30% below target levels, while Carlson et. al., estimates that a trading system saved $700-800 million annually over similar command and control systems.

Yet, given that carbon reduction is primarily done on a voluntary basis in the US (at least until this past September when California passed legislation to reduce greenhouse gases), it more challenging to gain buy-in.  Nonetheless, CCX has enjoyed remarkable success, with nearly 9 billion metric tons of carbon traded to date.

TerraPass effectively serves as an intermediary on this exchange, enabling individuals and non-member companies to offset the carbon emissions they are responsible for by buying and holding (rather than using) allowances to emit carbon. 

 

Lately, it has enjoyed remarkable growth in its business.  Corporation such as Patagonia buy permits through TerraPass to offset emissions from their operations.  For such corporations, carbon offsetting can have strategic importance.  Not only can reduced carbon emissions result in significant cost savings (say from reduced energy use) but it can generate positive PR.  It also recognizes the inevitable: that the US will one day join the rest of the global community and require reductions in climate change gas emissions.  An exchange enables corporations to legally document the reductions they make today, with the expectation that such reductions will likely be taken into consideration when carbon level baselines are set in the future.

 

In addition, individual consumers are increasingly holding themselves accountable for their activities by buying carbon offsets for their carbon-emitting activities including driving and flying.  According to TerraPass’s website calculator, for example, if you drive a 2006 Honda Civic 12k miles per year, you are responsible for emitting 6,710 lbs of carbon a year that can be offset for $39.95.  Yet, if you drive the Civic Hybrid instead, you would be responsible for emitting 4,695 lbs of carbon – or over 2,000 fewer lbs of carbon than with the conventional Civic.  This carbon could be offset for just $29.95.

 

For consumers, the rationale for carbon offsetting is less intuitive, as the benefits from an individual’s efforts are neither immediate nor enjoyed exclusively.  For some, there is a “moral imperative” to lessen the impact of climate change, as Al Gore suggests in An Inconvenient Truth.  For others, US inaction has caused deep frustration and a sense of not being in control.  Carbon offsets have provided a way to retake control.  Yet, regardless of the underlying reason, individuals are increasingly taking action, and turning to companies like TerraPass to do so.

 

I recently had the opportunity to speak with Adam Stein, VP of Marketing for TerraPass about evolving consumer attitudes, its recent deal with Expedia and its efforts to sell carbon offsets in the voluntary US market.  Here is what he had to say:

MG: What is the level of awareness for carbon offsetting as a response to global warming, and specifically, for the TerraPass brand?  

AS: The overall awareness of carbon offsets in the US is low, especially in comparison to Europe.  They are obviously operating under a carbon constrained economy and have a better sense as to what carbon marketing means.  In the US it is still a foreign concept.  If this is any gauge, I still draw a lot of blank stares at cocktail parties when I tell people what I do for a living.

 

Yet, having said that, I will tell you that more and more people are hearing about TerraPass.  In particular the Expedia deal has given us a lot more name recognition. It is one of the first and the best example of the voluntary carbon market breaking into the mainstream audiences.

MG: What does that deal [with Expedia] do for you? What about for Expedia? 

AS: So for us, the deal has been incredible.  When we signed this deal, we thought it would be a credibility booster, rather than a driver of sales.  I never expected people to dig through the list of options to find an item that few people had ever heard of and add it onto their purchase.  They did and have done it in large numbers and it has been pretty remarkable.  Not only that, but this was a different audience we were talking to, a more mainstream audience.   

 

What does [the deal] do for Expedia?  There are a lot of benefits for them.  Certainly, there is a public relations benefit.  Beyond that, this has been a big morale booster [for Expedia], as well as a very useful tool in recruiting.  It’s just something that they are generally excited about – all they way up to the CEO.

MG: Has this driven customer loyalty for Expedia whereby consumers are coming back to purchase a plane ticket with an offset?

Anecdotally, we definitely think that is true, though it has not been measured directly yet.  But, based on focused groups that we have done and emails we have received about repeat purchases, I believe that it has.  It can not be taken for granted that carbon offsetting projects will be received positively. I am not sure if you saw any of the fallout when Whole Foods launched a wind power card.  [Whole Foods sold wind credits from Renewable Choice or REC via a stored value card that was not well received or understood by the blogosphere]. 

MG: How do you differentiate between what happened with your deal with Expedia and REC’s experience at Whole Foods?

AS: First of all, we have staunchly defended Whole Foods and REC in our blog.  So we have carried a lot of water for one of our competitors.  But, it is such a small industry and we are all in it together. Honestly, one thing to bear in mind is that the controversy happened in the blogosphere – which does not necessarily reflect the real world.

 

One thing that TerraPass did differently was to link the offset directly to consumer behavior – which is something that people seem to be more comfortable doing – rather than buying them as a stand alone item. 

MG: So what is the key learning from your success with Expedia?  

As the number one thing that it has demonstrated is the demand. When these options are presented in a way so that consumers know what they are getting, there is demonstrated demand. 

MG: The Expedia deal embeds carbon offset as a consideration when conducting a transaction for plane tickets online.  What about other online purchases, say for consumer electronics?

My guess is that choices in the consumer electronics world are not yet driven by these environmental considerations and it might be a head scratcher to most.

MG: How has the consumer target evolved?  You would assume early adoptors would be more green-focused while those that purchased from Expedia are more of a mass audience.  Has the audience changed?  

It is commonly assumed that the early adoptors have been ‘deep greens’ as we call them.  Somewhat surprisingly, this has not necessarily been the case actually.  A lot of our early adoptors were techies interestingly enough.  And that make some sense.  They tended to be young, professional, male, relatively high earners and interested in technological solutions to problems.   It did not trouble them that there was a financial mechanism being applied to an environmental problem. 

 

Moreover, it was certainly affordable.  They were certainly aware of and concerned about environmental issues but weren’t necessarily willing to make huge lifestyle commitments.  For thirty six bucks a year, they were interested in supporting wind energy or supporting efficiency.

 

With that said, we do see large support from deep greens.  Interestingly, they are a harder customer to sell to because they have a lot of questions.  But once turned on to the concept, they are very devoted.

 

I think what were are now seeing is more of that ‘soccer mom’ segment: Socially aware, almost constrained to a certain degree in lifestyle choices by all of the trappings of a typical American existence and are excited to have this option for that problem.

MG: Is there a different message that resonates with ‘soccer moms’ or is it simply a matter of making them aware of this option?

AS:  We basically have one message [across segments]: this notion that we all contribute to global warming but there is something that you can do now and that something is affordable and real.  And that is something that resonates with a lot of people.

 

MG: Is the market creating a tailwind?

 

I think absolutely there is a tailwind. I think that there is a growing awareness in America that global warming is real and is a very serious problem.  And beyond that, our country is not leading the world but lagging the world and that creates sort of tension and frustration in a large number of people that feel helpless because it is very difficult to move the needle when you know that we create 25% of GHG emissions and so far seemed very uninterested in joining the conversion that the rest of the world is having.  And that has made the market ripe for voluntary carbon offset.

MG: Does interest differ across geographic regions?

AS: Less that you would think.  You are probably assuming that we sell solely in San Francisco and Seattle. We do overweight on the coasts and in urban areas, but again, less that you think.

MG: What tactics do you use to drive traffic to your site?   

AS: We do some small ad buys online, but we primarily rely on guerilla marketing.  We are a boot strapped company.

MG: Tell me about your guerilla marketing efforts? 

AS: It is mostly word of mouth.  We have a blog and a newsletter which actually has quite a large readership.  Obviously, PR has been enormously helpful for us.  The press interest has been phenomenal as everybody is interested in what is going in the world of carbon. 

MG: How do you engage prospects on your site? 

AS: The carbon calculators are definitely a key engagement mechanism.  We are all about that tangible link and the calculator makes it very real for people.  They type in their information and it spits back their exact carbon footprint.  It also lends credibility to the site when [the visitor is] able to see the number there.  Every product launched since has had a more elaborate calculator attached to it.  

MG: Where do you go from here?

AS: This market is extremely fluid because it is wrapped up in so many legislative and cultural issues.  I have no ideal what TerraPass will look like when it grows up. Everyone in the industry feels like the endgame is about making meaningful progress in America on global warming.  This is not a sales goal but more of a high-minded goal.  Hopefully, we will get there.

Bottled Water Backlash

The $10B* bottled US water industry has enjoyed aggressive growth over the past decade. With over a 9% CAGR since 2000, the industry does not show many signs of slowing down (International Bottled Water Association). Today, one in two Americans drink bottled water while one in six drink it exclusively (Corporate Accountability International).

Marketers have fueled this growth by creating the perception in consumers minds that bottled water is better than tap water in three ways: it is healthier (i.e., based on purity, perceived health benefits), better tasting and more convenient.

While it may be convenient to pick up a cold bottle of water at the local convenience store (and perhaps a healthier alternative to soda), it is a misperception – fueled by marketers – that bottled water is healthier or necessarily tastes better than tap.

Bottled water is not necessarily healthier that tap: While different agencies govern tap water (Environmental Protection Agency) and bottled water (Food and Drug Administration), for the most part, similar standards have been adopted by both.

Consumers can not distinguish bottled and tap water by taste: Corporate Accountability International staged a “Tap Water Challenge”, a blind taste test in 8 US cities where consumers were asked to differentiate by taste between bottled (spring – Nestle’s Poland Spring and “purified” tap water – PepsiCo’s Aquifina or Coca-Cola’s Desani) and regular tap water. Overwhelmingly, participants could not distinguish one from another.

As such, the current brand positioning for bottle water is at odds with greens who view bottled water as detrimental to the environment (e.g., higher use of fuels to bottle and transport water) and, potentially, municipal supplies (e.g., may divert consumer interest and investment away from public water systems, unsustainable pumping of local aquifers). Brands may face negative impact if recent anti-bottled water campaigns such CAI’s “Think Outside the Bottle” resonate with even a small segment of consumers.

Marketers might want a preemptive strike:

Make product more eco-friendly and clearly label it so: Shift to eco-friendly packaging, tap local supplies to reduce transportation costs, ensure that the water comes from a sustainable source.

Donate % of profits to charity. Starbucks has it right. If you are selling a commodity to consumers at a premium price, why not ask them to help ensure that others have access to safe (public) drinking water as well? Through its Ethos brand, Starbucks plans to donate $10 million over the next five years for clean-water sources in poor countries (or about $0.05 per bottle).

*2005 forecast for producer revenue only, Beverage Marketing Corporation

Eco-friendly Packaging Premium

CPGs design packaging to serve many functions; one critical role is to enhance consumer perception of product value. Typically, CPGs do this by using a bigger box or more expensive or flashier material than necessary. Yet, CPGs and retailers alike are under pressure to reduce this waste.

A new generation of biodegradable packaging by companies such as EarthShell and NatureWorks (a Cargill company) is emerging as a cost efficient alternative. While this is great news for the environment, it may be somewhat surprising to marketers that the benefits from biodegradable packaging may not stop there. Studies suggest that consumers may be willing to pay a premium for products that use these materials. Research conducted by Grapentine on behalf of NatureWorks found that “50% of those surveyed would pay 20 cents more for products” in NatureWorks’ biodegradable polylactide packages [made from corn starch] versus more traditional petroleum-based plastic containers. (“Marketers See ‘Green’ in Nature-Friendly Packages”, BrandWeek, April 3, 2006)

Moreover, eco-friendly labeling may serve as an essential point of differentiation for products, especially for those where biodegradable packaging becomes a tangible expression of a product’s brand promise. Biota Spring Water – sold in biodegradable containers – is one example (see video of bottle decomposition).

Lower cost, higher prices, differentiated brands…retailers ranging from Whole Foods to Wal-Mart are taking note…so should marketers.