Green Product Paradox: When Too Much Good Is Bad for the Environment

October 4, 2010

A common mantra in green marketing is that if you want the masses to buy your product, focus your messaging on more traditional attributes such as price, quality or service.  A product’s “greenness” is likely secondary for many mainstream consumers. For green marketers then, the holy grail may be to offer a product that is competitive on dimensions both traditional and eco-friendly.  This would result in the greatest number of products sold and greatest impact on the environment.

But, things are not always that simple.  Consider the scenario when an innovative green product spurs new demand across an entire product category, rather than just replaces the existing generation of products in market. Is the individual product still green if the aggregate impact of the category is greater than what it replaced? 

Take, for example, household lighting.  Most of us are aware that switching from incandescent to fluorescent light bulbs can result in a dramatic reduction in energy use.  But, overall adoption has been relatively modest in comparison to the potential market, likely due to the premium price commanded for the bulbs. 

Today, an even newer generation of lighting technology is on the commercial horizon.  Solid state lighting, described as a “souped up” version of the light emitting diodes (LEDs) that are commonly used today to illuminate electronic displays on alarm clocks and audio equipment, promises to provide lighting at a fraction of the energy used by today’s bulbs.  (“Not Such a Bright Idea”, The Economist, August 26, 2010)  Mass adoption of such technology could have significant implications for the environment given that 6.5% of the world’s energy is used for illumination.

In many ways, we should celebrate such technology fixes given their benefits to the environment.  For marketers, solid state lighting clearly has the potential to be one of those “holy grail products”. Yet, green products such as solid state lighting also present a paradox in that their adoption in mass might actually be detrimental to the environment. How could this be the case?  Well, according to J Y Tsao and colleagues at the Sandia National Laboratory, cheaper lighting that sips energy will likely increase overall demand and uses for light, and with it, overall energy consumption.  (J Y Tsao, et. al., “Solid-State Lighting: An Energy-Economics Perspective”, Journal of Physics D: Applied Physics, August 19, 2010)

The rationale? Today, Tsao et. al., contends that consumers underconsume indoor light – with current fixtures providing 1/10th of the illumination as ambient outdoor light on cloudy days and 1/60th of ambient outdoor light on sunny ones.  Tsao rationalizes that there is plenty of room to consume more – including in new ways that have yet to be thought of.

As evidence, Tsao et. al., models historical lighting use and adoption rates for new technologies – from gas lanterns to fluorescent bulbs – and extrapolates forward demand based on the amount of light produced (measured in lumens) and cost per lumen.

Historic trends clearly indicate that consumer demand greatly increased when cost dropped and other attributes – such as faster turn on/off and greater cleanliness – expanded lighting uses.  Extrapolating into the future, Tsao et. al., predicts that with solid state lighting, demand has the potential to increase10x by 2030 and with it, perhaps a 2x increase in energy use.  How paradoxical. 

It is important to note that the green product paradox is not isolated to LED lighting.  Increased demand for electric cars, for example, could result in a similar dilemma if the added electricity load needed to power the vehicles is generated using higher polluting coal.

As such, the green product paradox presents quite the challenge for a marketer.  For individual companies, such products can be both profitable and (at least appear) socially responsible.   It is only by looking at the forest from the trees – and perhaps a little into the future – does it become apparent that, in aggregate, such products may, paradoxically, have a negative impact.

A sustainable brand might try itself to mitigate any impact that its products may have.  But, this will only have broad impact if it ultimately compels competitors to follow suit.  Given this, marketers should recognize that a solution to the paradox may not lie within an individual company’s grasp.  Alternatively, it may take an industry consortium to make the necessary product changes or evolve consumer expectations.  Or, it may take collaboration across industries to have lasting impact.  In both examples cited above, a shift to lower-polluting sources for energy generation would mitigate an increase in demand for both products.

Overall, the green product paradox presents a difficult challenge for green marketers.  Doing good for the planet may not always be as a simple as motivating purchase of greener goods.  In some cases, it just might be too much of a good thing.


Driving Adoption of Renewable Energy: Part II – An Energy Marketer’s Perspective

September 1, 2008

Interview with Adam Capage, Director, Utility Partnerships, 3Degrees

 

With the #1 renewable energy program in the US, the City of Palo Alto Utilities (CPAU) must be doing something right.  In fact, despite a formidable price hurdle, CPAU has managed to sign up over 20% of Palo Alto residents for clean energy, and is not finished yet.

 

Notably, when CPAU decided to aggressively market renewable energy to its customers, it decided to reach beyond traditional utility circles to engage the right marketing partner.  For that, CPAU turned to 3Degrees to educate consumers and convert them to clean energy.

 

Recently, I had the opportunity to talk with Adam Capage, Director of Utility Partnerships at 3Degrees.  We spoke of the challenges that marketers face when trying to shift consumers to renewable energy, the approach that 3Degrees takes and reasons why it has been so successful.  Here are his words:

 

MG: How do you partner with utilities?

 

AC: Essentially, we partner with utilities by leveraging their brand and their customer connections [and combine it] with our knowledge of how to talk to people about why they’d want to support renewable energy. 

 

The Palo Alto partnership was [our] first utility partnership [formed] in 2003.  When we partnered with Palo Alto, they had already had a green program operating for three years and it had not yet reached 1% participation. 

 

In many ways Palo Alto had the ideal demographics for marketing this product.  And so it’s very tempting to just think “Well hey, its Palo Alto, of course they’re at 20%”.  But, the product did exist for three years [before involvement by 3Degrees] without hitting 1%.  So, it’s a combination.  Yes, demographics are key.  But, you do have to talk to [consumers] repeatedly and get the messages out there and that’s what we’ve been focusing on. 

 

Since 2003, the participation rate has basically sloped upward the whole time.  Today, we’re actually over 20% now and we haven’t seen any slowing.  We keep kind of wondering if and when it will slow, but it hasn’t. 

 

Traditional thought was that there was low hanging fruit [to acquire] and then it would get harder to acquire people over time.  Instead, it seems that you can create new low hanging fruit.  As you talk to people, you make [renewable] an accessible, appealing product to new groups.  Another possibility is just that Palo Alto has such a huge percentage of their population with [the] perfect demographics [for purchasing renewable energy] that you can get an incredibly high penetration rate.

 

MG: Do you tailor your message to particular subgroups within the city?

 

AC:  No.  The real challenge is that renewable energy requires people to pay a premium and they have absolutely nothing [tangible] to show for it.  People for a long time tried to compare this to organic food or bottled water or other premium product.  And, you just can’t do that because with bottled water people think they’re getting [a personal benefit like] cleaner water.  With organic food they might be stopping themselves from having pesticides.  [Unlike with renewable energy], it’s not just about the public good.

 

[Marketing clean energy] is like a request for people to make a private contribution to a public good.  And that’s just damn hard. 

 

I think that the best parallel is public radio and TV knowing that people understand that the programs are very likely to continue whether or not they pay up, but they do it anyway.  With renewable energy we need to put a line item on the bill that says you pay more.  It’s very hard to make people get connected to what they’ve done.  So we try but you know we can’t be in the home everyday like public radio or TV. 

 

We focus on a message that you can make a difference and there are specific environmental benefits to purchasing renewable energy.  We link [environmental benefits] to specific energy usage and [provide] examples of benefits that are local.  And then we repeatedly try to get that message out there.

 

MG: Do you focus your message on awareness or consideration for purchase?

 

AC: When we start each [partnership], it is like going back to 2003 in Palo Alto; you start from ground zero.  It’s a cluttered market and it’s hard to break through so awareness is definitely our first battle.  

 

With Palo Alto I think that awareness has come a very long way.  I don’t think they’ve done research recently, but I bet it’s pretty high  so now we’ve got messages that simply say “just do it”.

 

MG:  What is average price premium for renewable energy?

 

AC:  It varies quite a bit around the country based on the premium for clean energy, current electricity rates and the amount of energy that is consumed.

 

In California the average household uses something like 500 or 600 kilowatt hours a month, where as we have a partner, Amerin, that is based in St. Louis.  Its Missouri customers use on average 1,000 kilowatt hours a month.

 

The premium for Palo Alto [residents] that convert [to renewable energy] is going to be between $5 and $7 per month I think.  For our partnership in Amerin, it’s closer to $15 per month on average. 

 

MG:  Aren’t renewable energy prices independent of oil price shifts?

 

AC:  The programs aren’t designed that way.  A few [utility tariffs] in the country are actually designed where the renewable energy price is essentially substituted on people’s bills for their traditional fuel.  Those programs have seen great success.   Everyone understands why they’ve seen [success] as they have a whole new message to talk about: price stability because [the price of] renewables never change.

 

Most programs are designed where the renewable energy premium is on top of what they already pay.  So the thinking [by consumers] is renewable energy is more expensive.  You aren’t actually getting the electricity from [specific] wind turbines anyway.  What your dollars are doing is allowing the utility make more investments in putting renewable energy into the overall mix.

 

Hence the public good part: your electricity comes on just like everybody else’s except you pay more.

 

MG: Are you actually paying for 100% equivalent renewable energy?

 

AC:  Yes.  Not every program in the country is designed the same. But, our five partnerships are all 100% usage.

 

MG: What are the key customer insights for purchase of renewable energy?

 

AC:  A few people talk about new technology and want to support it.  A few people talk about fuel prices going through the roof and we are beholden to the Middle East, so they want to support another source. But the majority just says “I want to make a difference”.  It seems like one small step, one small opportunity for [consumers] to do that.

 

MG:  Can the success of Palo Alto be replicated across the country or is this an anomaly?

 

AC:  20% might be an anomaly but I know that, in general, these [renewable energy] programs are underperforming.  We have five like I said.  One of them just started and so it only has a couple tenths of a percent participation.  But all together our five average 7.8% participation.  The industry average is 1.8%.  You can do this better.

 

MG:  What’s the secret?

 

AC:  I think that the partnership model is a really good one.  The utility has the customer’s eyes and contacts and, in most cases, the customer’s trust.  That is certainly true in Palo Alto.

 

3Degrees brings the messaging and dedication to execution.  The single best thing we’ve found is that you collect information about what channels and messages are working well and you just execute again and again and again and again. 

 

That’s not what utilities do; they are not marketing organizations.  We do the marketing behind their brand and no one ever knows our name.  We want it that way.

 

MG:  Do you think that the social narrative has changed given Al Gore’s movie a few years ago and just the growing reality and awareness of global warming?  Has that context enabled you to move the needle further?

 

AC:  It definitely helps.  We were out in front of movie theaters when Al Gore’s movie was released.  We set up tables outside to intercept people came out of the movie.

 

MG:  When you target utility customers, what kind of marketing campaign do you implement?

 

AC:  The campaign is continuous.  Email, bill insert, direct mail, events.  We’re spending money and testing different channels all the time except TV.

 

Yard signs are also used to bring to peoples’ attention that their neighbors have done this.  We get requests [for signs] saying I want to show people that I did this.

 

MG: Were there other ways that you tapped viral marketing or activated influencers?

 

AC:  We did holiday card campaign where we sent all Palo Alto participants a card that they could send to their friends saying “I participated in Palo Alto Green and you can too”.

 

We offer wind tours where we let participants come and then, hopefully, tell other people about going to a wind farm and seeing what their money is supporting. 


%d bloggers like this: