In most discussionsabout sustainable brands and product or service offerings, someone inevitably asks;
“Will customers pay a premium for green products?”
With the downturn in the economy, this question has been arising earlier in the conversation and is framed more as a statement:
“Customers won’t pay a premium for green products, especially now, will they?”
Perhaps this is the wrong question to ask, and framing the issue this way leads to lost opportunities — for the environment, for customers, and for the business.
Focusing on whether or not customers will pay a premium for green products brings with it a number of constraining assumptions:
- Green products do not have any tangible benefits for customers other than making them feel good about helping the planet
- That green products are more expensive to produce than non-green products. But for businesses that understand customer insight and innovation, these assumptions are simply not valid.
While customers probably won’t pay extra for the intangible benefit of helping the planet, they will pay for the value of direct benefits they receive. The trick is to align direct customer benefits (for your target segments) with environmental benefits. Offering products at competitive prices that work well while helping the environment gives you a chance to add value for your customers and to increase your market share.
Not all consumers and customers will pay a premium and not in all product categories. You need to do your customer insight homework to identify the opportunities. Understand which aspects of “green” matter to which customer segments and how these attributes compare to other features, functions, and price. Some consumers will place a high value on the safety signaling of packaged food brands that have demonstrated environmental sensitivity even if they won’t pay for a lower lifecycle carbon footprint.
The second assumption, about green products being more expensive to produce, is also a trap. Certainly, green products will often be more expensive to produce if they are made through the same processes that are used to make their less environmentally friendly counterparts. However, this doesn’t take into account the impact of innovation.
Embedding a sustainability mindset up front into product design and process engineering will yield green products that can be priced profitably at parity or below the price of comparable non-green products.
Going green in business should be like any other business decision;
- Its good to stand for something, you will differentiate yourself.
- Be sure you’re not a me too.
- Green credentials can be a by-product of your efficiency, sustainability and innovation efforts….. to increase sales and profitability.
These are compeling reasons to green your business and with customer insight and innovation, we don’t have to put customers in the position of trading off direct customer value and environmental value.
Adapted from HBR article
