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Why Trade-offs Are Key for Green Marketing

how-to-green-marketingDo people buy green products? Yes, of course. The real question for green marketers is whether they buy enough. In other words, are green sales in line with pro-green attitudes? Not really, as huge majorities of consumers show at least some green tendencies while purchases lag far behind. Why is that? Economics tells us that consumers buy based on value (trading off cost and benefits). Since eco-friendly products are seen as being more expensive, higher prices can lower the value of a green product enough to make a conventional alternative more attractive.

While the cost trade-off is clear, it is not the only one. The benefit side has at least two major components. One is the environmental benefit, which may or may not seem tangible enough to make a difference. For instance, a dozen eggs at Acme goes for less than a dollar, while some cage-free varieties can run north of $4 at Whole Foods. So, an environmentally conscious consumer has to make a trade-off at the time of purchase – is the product worth the additional cost? For items like food, the benefits may seem small enough, and far enough out, that many may decide the value proposition does not work for them. In other product categories (say, green laundry detergent), the benefits may seem both long term and impersonal, making the trade-off even harder.

The second major component is the effectiveness of the product in performing its basic function. If consumers perceive green products as inherently inferior (in terms of conventional attributes like performance), they are less likely to buy them. So a green laundry detergent (that uses less harsh chemicals) could be seen as more expensive and less effective in cleaning clothes, further dropping its overall value. (A complicating issue is that the lack of effectiveness itself could be a perceptual rather than real problem). Unless the company is able to offset these disadvantages, the product is unlikely to succeed.

A direct way to increase demand is to offer higher performance on a compensatory attribute. In the case of LED TVs, for example, newer technology consumes less power and provides better picture quality. (Paradoxically, this can sometimes lead to the Rebound Effect, whereby greener technologies encourage higher use, thus clawing back some of the benefits). But in reality, most products are not in a position where green attributes offer performance boosts.

And of course, as it is with every other market, there are segments in this market as well. Consumers who are highly committed (dark green) are willing to buy, as the value they place on the longer term environmental benefits is high enough. And, often they are affluent enough to afford the price. But a product looking for mainstream success cannot succeed only with dark green consumers (who rarely account for more than 20% of the market). Other shades of green will also need to buy. Short of government subsidies and mandates, green marketers have to find ways to balance out the components of the value proposition for the bulk of the market.

So, what should a green marketer do?

While there are several rungs in the success ladder, the first and most crucial one is a good understanding of all the trade-offs inherent in the product. The best way to understand consumer perceptions is not to ask consumers directly, but to use a trade-off based approach that simulates real buying situations. Specifically, an analytical technique called conjoint analysis is perfectly suited for this purpose. [For an introduction click here.] By presenting a sequence of real trade-off situations, this approach gets consumers to make choices that reveal what they really value.

Further, it can also provide precise estimates of the monetary value associated with a green attribute – something that is very hard to do with direct questioning. Dark green consumers may place a higher value on a green attribute while others may place a lower, or even negative, value. With a comprehensive understanding of how the segments differentially perceive the product, various marketing options (including expanded product lines) can be pursued.

With a full understanding of the attributes and the trade-offs involved, it will become easier to price and promote the product appropriately, giving the green marketer higher odds of success against conventional alternatives.

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