Green May Be Ho-Hum for the Holidays, But It’s Here to Stay

So far, this holiday season has seen a rather muted push on green by retailers, both in terms of the products they sell and the messages they communicate to consumers.  Marshal Cohen, Chief Industry Analyst at NPD Group, recently suggested that such lack of enthusiasm by retailers reflects waning interest in green.  Cohen stated: “It’s basically a card that a lot of people played while it was hot and trendy…and it got overplayed.”  

Indeed, early signs suggest that retailers left their Birkenstocks home for the holidays.  While most retailers are taking steps to green their operations and supply chains, few have taken steps to green the shopping experience.  Reuters recently reported that retailers such as Target, Wal-Mart and J.C. Penney recognized green as a trend but does not have plans to promote green merchandise this holiday season  (Barneys is apparently a notable exception).  A spokesman for J.C Penney added: “It’s something that is growing in importance with the customer…[but it’s in] its early days.”  

But, could it be the case that after so much hype early in the year, the green trend has faded just as it was getting off the ground? 

Marketing Green believes just the opposite: as a trend, green is just getting started.  Quite simply, the apparent lack of enthusiasm shown by retailers this holiday season reflects the fact that we are still early on the adoption curve.  Here’s why: 

Green products popular today are not necessary gift ready.  Green products that have been adopted by the mass market – including compact florescent light bulbs and hybrid cars – may not make the best stocking stuffers.  Moreover, unlike organic foods, clothes made from organic cotton have not been adopted by the mass market yet.  As such, it is not surprising that we do not see a sudden surge in demand for these items this season. 

Consumers may not equate green with spreading holiday cheer.  When it comes to giving a gift that is overtly green, consumers may worry that they may be perceived by friends and family as the Grinch.   While social norms are changing, being green today is still in many regards a personal virtue rather than societal expectation.  As such, gift-givers may fear that giving a green gift may be perceived by recipients as politicizing the holidays.   

Retailers fear being accused of greenwashing.  Today, few standards are in place to determine how green is green.  Without them, retailers are left to their own devices to determine what is eco-friendly – and, as a result, are left exposed to criticism by outsiders who may think otherwise.  As such, many retailers today are focused more on greening their internal initiatives than greening specific products. 

While interest in green may wax and wane, marketers must remember that we are still in an early adoption cycle for green.  Regardless of how successful this season is for green, as a trend, green is here to stay.  In fact, there are five global influencers that will ensure that as a trend it grows, spreads and matures.  

Changing physical environment.  While the melting of the ice caps may still be an abstract concept for most, consumers are beginning to experience erratic weather patterns that are likely – though not certainly – being caused and/or exacerbated by global warming.   Indeed, Oxfam recently reported that weather-related natural disasters have increased four-fold over the past two decades while geologic-related ones (eg, earthquakes, volcanoes, etc) have remained steady.   Such visible signs will likely increase and intensify with time, providing a constant reminder that something in our world is not in balance.   

Increasingly concerned consumers:  In the US today, consumers have a high awareness of climate change as an environmental concern, but arguably relatively low awareness of the severity of its impact – especially on the poor who are least responsible for its cause but most vulnerable to its adverse affects.  As Hans Verolme, Director of Global Climate Change Programmes for World Wildlife Fund stated, “There’s no escaping the facts: global warming will bring hunger, floods and water shortages.”

Marketers should be prepared that such a realization may cause a sea change in how American consumers view the brands that they purchase.   Americans may be voracious consumers, but they do not like to do so at other people’s expense.  As a consumer issue, therefore, climate change mitigation may be similar to enforcing fair labor laws or worker safety practices  – it is just what you do or risk a backlash from consumers. 

Leadership by business: Some may find it surprising that many global corporations are strong proponents of action on climate change.  Indeed, 150 leading companies – including US multinationals Coca-Cola, GE, Nike, Johnson & Johnson and Sun Microsystems – have already signed a communique on climate change and presented at the UN conference this month in Bali that calls for legally binding targets for carbon emissions. 

So why would global companies lead the charge?  Corporations know that mandates on carbon emissions are inevitable.  The sooner government acts to set acceptable carbon emission levels, the faster business can respond and plan for the future – by modifying capital investment decisions or commercializing new products, for example.  

Moreover, once global emission caps are put into place, standards will be developed within each product category that determine how green is green.  Without standards today, companies decide for themselves to what level they should green their products.  In this situation, the burden is on the consumer to decide how competitive products stack up while leaving well-intentioned companies vulnerable to greenwashing accusations by critics that disagree with their claims. 

Where standards have emerged though, green products have taken off.  One great example is the creation of the Leadership in Energy and Environmental Design (LEED) certification that set standards for green buildings.  The result: 20% growth in green buildings in 2005, followed by 30% growth in 2006.    

Watchdog role of Non-Governmental Organizations (NGOs):  In many ways, NGOs serve as watchdogs for industry on environmental issues.  Today, such organizations enjoy increasing clout, fueled by increased membership and financial backing over the past few years.  More than ever, NGOs are flexing their muscle by challenging corporate activities that they deem as destructive to the environment or deceptive to consumers.   

Interestingly, even companies that are viewed as leaders on green do not get a pass by NGOs when activities are deemed inconsistent with their competitive positioning on green.  For example, despite (or as a result of) earmarking a combined $70 billion toward green investments and loans, both Bank of America and Citigroup were recently the target of a grassroots campaign by Rainforest Action Network to the fact that these banks also fund coal-fired plants, a primary contributor to global warming.    

Today, consumers can also serve as watchdogs as well by rating corporate green activities through sites such as Greenwashing Index, Do the Right Thing and Climate Counts.    

Involvement by governments: Today, there is growing global support for action on global warming.  Signs of this momentum are perhaps nowhere more prevalent than in the US and Australia – two countries that have long been holdouts for global action.  Over the past couple of weeks, there has been a sea change in Australia, as Kevin Rudd, the newly-elected Prime Minister, signed the Kyoto accord as one of his first acts of government.  Moreover, the US Senate Committee on Environment and Public Works voted last week for an ambitious 70% reduction in carbon emissions by 2050.   

So, marketers should take note.  Early signs are that green may not bring holiday cheer to retailers. Nonetheless, green marketers should remain steadfast.  Though consumer focus on green may fluctuate, green as a trend is here to stay.  Five key influencers will not only ensure that is the case but accelerate its growth over time.   

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 Choices, EcoWise, 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.

Consumer-Generated Content: An Underleveraged Opportunity for Green Retailers

Online retailers find that consumer-generated content such as product reviews and ratings have a significant influence on consumer purchasing behavior.  According to Jupiter Research, over three-quarters of online shoppers leverage consumer-generated content, while nearly half of all online shoppers find such content “useful” when making purchase decisions.  Moreover, those who do find it “useful” also spend more at, return items less frequently to, and demonstrate more loyal toward online retailers that provide the content.  (“Retail Marketing: Driving Sales through Consumer-Created Content,” August, 2006).

Yet today, few online retailers are leveraging consumer-generated content such as reviews and ratings to sell green products.  Those that do tend to be more mainstream online retailers like Amazon that have integrated green into their product lines.  Green sites such as Gaiam and Green Guide Home hold promise, but have too little consumer-generated content on the site today to impact consumer behavior on a broad scale.

There may be two reasons for the limited adoption of consumer-generated content in the green retailer space today:

 

First, green is a nascent category where there are few standards and little hands-on experience with the products by consumers.  Expert opinions may be equally (if not more) beneficial to consumer purchase decisions than the opinion of the general population, especially if those experts can bring clarity and perspective to a category where little exists.  Sites, therefore, tend to focus on expert tips, reviews or ratings (eg, The Daily Green, Yahoo Auto Green Center), or complement expert recommendations with consumer reviews, albeit limited today (eg, Alter Systems, Gaiam, Green Guide Home).

Second, many green sites today are not direct retailers, and hence are disadvantaged when it comes to soliciting consumer-generated reviews and ratings.  Indeed, most green product sites serve more as product information aggregators and filters than traditional online retailers.   

Because products are ultimately purchases on another site or at an offline retailer, such sites have fewer opportunities to solicit product reviews directly from consumers.  Such sites include: product aggregators (eg, Great Green Goods, Green Shopping, Green Guide Home) and lifestyle sites (The Green Guide, Sprig, The Daily Green).

Nonetheless, the dearth of consumer-generated content – specifically consumer reviews and rankings – is an underleveraged opportunity for green online retailers, product aggregators and lifestyle sites.  As the number of “expert consumers” who can comment on the products grows, so too should options for consumer-generated content.  Smart marketers will explore ways to solicit this content from consumers and leverage it to cultivate more loyal, higher spending customers over time.

How Many Green Marketers Does It Take to Change a Light Bulb?

Answer: We may never find out as long as the sales model remains flawed.

 

Fluorescent light bulbs have proven difficult to market.  First, consumers have not demonstrated a strong willingness to pay a price premium for the bulbs. (While the price has fallen in recent years, the cost of a fluorescent bulb is still more than 3x the cost of comparable incandescent bulbs.)  Second, despite the fact that each fluorescent bulb can save between $30 and $100+ over its lifetime, consumers resist paying today for promised savings in the future.

Yet, such high potential savings for consumers may open up a game-changing opportunity for green marketers and investors: Instead of having consumers pay for the bulbs upfront, have consumers pay later through installment payments that are tied to energy savings.  To make this a reality, consumers must be willing share a portion of the cost savings to cover the cost of financing the bulbs until repayment, as well as associated transaction fees, bad debt and program administrative costs.

Despite the higher costs and risks associated with such a program, this business model is feasible for several reasons.  First, the payback period to recoup the cost of the bulbs is short, ranging from 4-12 months.  Not only does this minimize the financial risk of such a program but it also reduces any pric epremium required – over and above the cost of the bulbs – to cover added expenses and hedge against risk.

 

Survey of Home Depot single and multi-pack fluorescent bulbs based on current retail prices and the average (undiscounted) savings over their projected lifespan 

 

 

Second, consumers have a significant financial incentive to sign up for such a program: a typical household could realize more than $1,000 in savings over a 7-9 year product lifespan by simply changing 20 incandescent bulbs to fluorescents.  As such, even with an added premium to enable an installment plan, consumers will generate significant savings from this program over time.

While many companies and industries could take advantage of this opportunity, those with existing recurring billing relationships – including utilities and mortgage companies and even cable and telephone providers – are perhaps best situated to do so.  An installment plan could be tacked on to existing monthly bills and only offered to creditworthy customers to reduce risk.  Retailers could leverage credit cards as a payment vehicle, but would likely have to charge higher premiums to consumers in order to cover higher transaction fees and possible allowances for card churn.

Of course, marketers will have to address inevitable concerns given that consumers are currently not accustomed to deferring payment or monitoring recurring billing on small ticket items.  Moreover, consumers may simply forget that they signed up for such a program leading to a poor consumer experience, or perhaps be skeptical about how much energy they are actually saving given the difficulty of tracking such savings when bills fluctuate month to month.  As such, marketers may consider product and customer satisfaction guarantees to help overcome reservations.

Green marketers – think outside the current way of doing business!  Seize this opportunity and create a win-win-win for business, consumers and the environment.

Green Consumer Behavior – Part III: Changing Behavior without Changing Attitudes

Marketers have historically faced an uphill battle when it comes to marketing eco-friendly goods.  Simply put, it is difficult to influence consumer purchase behavior without first impacting attitudes and values.  These values, however, take a concerted effort over a long period of time to change. 

As a result, corporate marketers tend to stay clear of awareness and education communications, preferring to target consumers lower in the purchase funnel who are already predisposed to green messaging.  The reason for this is self-evident: when it comes to green, acquisition campaigns have higher and more immediate financial returns than awareness campaigns. 

Yet, for marketers, the opportunity exists to influence environmentally friendly behavior without necessarily shifting attitudes.  This effect has been subject of academic investigation including a study conducted by Professors John Thøgersen and Folke Ölander of the Aarhus School of Business (Denmark) examining the relationship between “value priorities” and “environmentally-friendly consumer behavior.”   

As part of this study, Thøgersen and Ölander examined the impact of recycling on the values and behaviors of Danish consumers over the course of one year. (“Human Values and the Emergence of a Sustainable Consumption Pattern: A Panel Study,” Journal of Economic Psychology, 2002).  The results of such investigation reveal several key findings that green marketers should consider:

First, the study reconfirmed that values drive behavior (while the converse relationship was not found to be statistically significant).  While not surprising, this result confirms that marketers face an uphill battle if they are to influence environmentally friendly behavior without first addressing values. 

Second, the study found that values are very stable and are difficult to impact in the “short and medium term.”  Finally, behavior change, the authors concluded, is hindered not only by values but by “behavioural inertia, created by forces [such as established habits] that are independent of – or at least not related in a simple way to – values”.    

Yet significantly for marketers, the study also suggests that for those that already hold environmentally friendly values, environmentally friendly behavior can evolve over time if consumers are provided the opportunity to engage in this behavior.  Thøgersen and Ölander concluded that “when new opportunities for environmentally-friendly behaviour are offered, consumers holding ‘environmentally-friendly values’ adjust their behaviour to be more consistent with their values.”  This finding implies that consumers who hold green values will demonstrate greener behavior if presented with relevant products or services.   

For marketers, the findings of this study help to uncover several opportunities to consider: 

Cultivate “greener than average” behavior: Half the products sold in the market are simply greener than the other half.  As such, marketers of “greener than average” products should make this a source of differentiation to attract consumers receptive to green messaging or cross-sell/up-sell existing customers to even “greener” products. 

For example, Honda is currently running a campaign to build awareness about how fuel efficient its cars fleet is.  With an average fuel economy of 30.1 MPG, Honda claims to sell “greener” products (inclusive of both hybrid and conventional engines) that are more than 20% more fuel efficient than the US average over the past 10 years. 

While such positioning can build awareness for its automobiles’ fuel economy, Honda can also leverage this campaign to build loyalty and even drive resale with its existing consumer base.  To do so, Honda must reinforce and cultivate “greener” behavior through congratulatory messaging at the time of purchase (ie, through “You made the right choice for you and the environment” messaging), as well as through results-based messaging throughout the customer lifecycle (ie, through “By driving a Honda, you have prevented 1000 lbs of CO₂ from being released into our environment this year over an average vehicle.  Collectively, we are making a difference” messaging).  When it comes to resell, Honda should then try to up-sell a customer to an even greener vehicle or model. 

Target nascent green value holders:  Marketers should seize opportunities to speak with broader audiences who may not hold strong green values, but may be developing a greater affinity for environmental causes. These individuals may be more receptive to the green message when it is contextually relevant.   

The upcoming Live Earth concert may be one such opportunity.  Planned for 07/07/07, Live Earth will reach an estimated 2 billion people globally.  Sponsorship of this concert provides marketers with the opportunity to build brand awareness, educate consumers and even drive acquisition. 

Take advantage of government regulation that mandates behavior change:  As more governments grapple with how to reduce carbon emissions, governments will take action in order to accelerate change in consumer behavior.  One intriguing example is fluorescent light bulbs, often cited as low hanging fruit in the effort to slow global warming. 

For example, the adoption of fluorescent light bulbs by consumers has been slow for a variety of reasons: unconventional shape (though companies have started to change this), harsh ‘industrial’ light emitted, and high initial price (though bulbs last longer and save significant money on electricity bills over time).  

Despite these hurdles, several retailers have taken on the challenge.  For example, Home Depot sold 60MM fluorescent light bulbs last year while Wal-Mart intends to sell 100MM this year.  However, without significant change in consumer attitudes (combined perhaps with aggressive marketing tactics or financial incentives), these goals may fall short. 

Recently, however, legislatures have stepped up to fill the green behavior void – with legislation passed (EU, Australia) or up for consideration (California and Canada) to effectively phase out incandescent bulbs (by making efficiency standards higher than what can be currently achieved by current technology).  In effect, regulation would force consumers to switch en masse to more efficient light bulbs – and do so without first influencing consumer attitudes. 

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.   

Sustainable by Design

An Interview with Ian Yolles, VP of Marketing, Nau

What if you could build a company from the ground up, where every decision was based on the principles of sustainability? Nau is an emerging outdoor apparel company that is trying to do just that. In fact, even its corporate bylaws state that fiduciary responsibility to shareholders must be balanced by the needs of the environment.

In doing so, it is going to market with a three point differentiation strategy:

• Sell high-performance, high-design apparel made solely using sustainable sources and practices
• Transform the traditional retail concept into a physical “Webfront“. In this setting, consumers can browse and try on the apparel in a gallery-like setting, but are provided with an incentive to order through kiosks and have merchandise shipped to them – much like an e-commerce experience. This allows the store to have a smaller footprint, carry fewer inventories, and reduce operating costs and the overall impact on the environment.
• Engage consumers in the brand through active dialogue (e.g., blog) and philanthropic giving (5% of sales donated to one of a list of charities)

Sustainability is often viewed as a competitive handicap. Few companies have been successful in building their brand while adhering to such principles. Nau’s plans to revolutionize the product, the retail space and consumer experience simultaneously are ambitious and will test the size and loyalty of the emerging eco-friendly consumer segment. This is a brand to watch as we move forward toward a more sustainable world.

I recently spoke with Ian Yolles, Nau’s VP of Marketing. Here’s what he had to say:

MG: What are your key brand attributes?

IY: Performance, sustainability and beauty.

MG: Will your brand resonate with eco-conscious and not so eco-conscious consumers?

IY: Absolutely. I do not believe we will be successful solely on the basis of sustainability; the product has to do a lot more. If you look at our product, for anyone who leads an active life…if you look at it visually, you will see performance cues and design cues…and have a differentiated point of view to make it successful on those two attributes alone.

MG: Is a business that sells sustainable products itself sustainable?

IY: We get asked that a lot. “Isn’t this a passing fade or trend”? Our point of view: Interest in sustainability reflects a much deeper and much longer shift and does not reflect a passing trend. Evidence to suggest this? Look at GE. Last year they announced ‘ecoimagination’. One effect is that it impacts [GE’s] marketing. It also reflects a shift in thinking at GE. This was not driven by purely an idealistic view but rather because it’s good for business.

MG: How will you revolutionize the retail environment?

IY: [Nau’s point of view] comes from a broader perspective about consumer shopping behavior. In 2006, we see that the Internet has influenced how people are learning, getting information. It also has influenced shopping behavior: People often start online by doing research; particularly in the case of an apparel product, they want to try it on and then go home and find it online for the lowest possible cost. In e-commerce and traditional channels, no one has connect the dots to reflect changing behavior of consumers. We are connecting the dots for them.

MG: How does it work?

IY: “Webfronts” integrate the website shopping experience with the storefront shopping one. If you want to buy it [at the store], you can do it. There will be sales reps there and POS terminals there. But, we will incentivise you to make a different choice: Purchase at an [in-store] interactive display. Shipping is at no extra cost, and we will offer you a 10% discount.

The outdoor and broader sports industry is structured as a wholesale model. With “webfronts”, we are taking out the middle man. Webfront efficiencies [such as smaller store footprints, centralized inventory, fewer inventories] and flexibilities change what you can do with the business model. [For example], we will engage every one of our customers directly and experientially in the giving process with a direct donation [via 5% of sales to the philanthropy] of their choice. The current benchmark is Patagonia at 1% of sales. 5% is well beyond what corporate America is doing.

MG: How else will you interact with your consumers?

IY: Through participation, dialogue and engagement. The brand has to have one identify and clear point of view. But the world is changing, and the idea is to have a brand that invites dialogue, engagement. We launched through ‘The Thought Kitchen’ (blog). It is the location where people engage in ideas. We aspire to be very authentic, transparent in how we communicate with them.

MG: Will competitors follow your lead?

IY: It will be very hard for competitors to adapt. We are a direct business; other companies are tethered to a wholesale model. Any change will cause conflict between the channels. Transition for them would be very difficult. It also takes a different mindset to operate a direct business versus a wholesale model.

Wal-Mart Turns Over a Green Leaf and Generates Buzz

Eco blogs are buzzing this week over Fortune Magazine’s lead article (“The Green Machine,” August 14, 2006) The world’s largest retailer has learned that green is good for business. Much of the chatter questions Wal-Mart’s true intentions; after all, this is a company that has been a magnet for bad PR for paying low hourly wages, offering poor employee healthcare benefits, discriminating employees based on gender, and for putting mom and pop retailers out of business when it comes to town.

But, business is business and Wal-Mart is learning that consumer needs and attitudes are evolving. Latent markets exist for eco-friendly products – if the price is right. One example: Sam’s Club sold nearly 200,000 organic cotton tops ($14) and bottoms ($10) within ten weeks. To create these new markets, Wal-Mart is leveraging its overwhelming purchasing power to keep costs low and to motivate suppliers to bring innovative, eco-friendly products to them. The result: Wal-Mart has the potential to reshape the landscape when it comes to eco-certified products and eco-friendly packaging.

Wal-Mart has a long way to go to demonstrate to the skeptics that this positive PR is genuinely deserved. Nonetheless, with curious bed fellows such as Greenpeace, Wal-Mart has come a long way.

Back to School at Wal-Mart

Wal-Mart is sending its employees back to school – all 1.3MM of them – to teach them “how to better take care of themselves and the environment”. While this program is still in the planning stages, it seeks to focus on “practical advice” such as replacing light bulbs with energy efficient ones or improving nutritional balance in the lives of its employees.

It is easily to dismiss such a program as simply self-serving. After all, a healthier workforce means fewer sick days and reduced health care insurance costs. Moreover, being viewed as a proponent of the environment will improve public perception for this 800-pound retailing gorilla.

Yet, there is a greater lesson to be learned by all green marketers: the best salespeople for a product are those that are also its best customers. This is the “hair club for men” version of green marketing (Remember: “I am not just the president…I am also a client”). By sending employees back to school, Wal-Mart hopes to turn its employees into passionate advocates for everything from its eco-friendly products (Wal-Mart carries energy efficient bulbs) to its organic produce. This is a lesson that every corporate executive should memorize.