Selling Intangibles: How to Sell What the Customer Can't See
<p>In these uncertain and cash-strapped times, how do you convince customers that buying green is smart and profitable? We asked four companies for their tips on selling the real value of green products and services.</p>
Improving environmental performance often takes place behind the scenes – for instance, energy efficiency measures are not always evident on the finished product. But these intangible benefits represent significant environmental upgrades -- sometimes more than reduced packaging or other claims touted in labels or in ads.
So how do companies sell such abstract environmental benefits while keeping an eye on what customers want -- and an eye on the bottom line?
Help Customers Connect the Dots
In trying to overcome the perception that greener things cost more, Dan Daggett has a tough job. But one tried-and-true method involves selling the customer on a "total cost approach," explained Daggett, the corporate sustainability manager for JohnsonDiversey.
As a company that sells cleaning products to businesses and institutions, Daggett said it can be a challenge for the customer to understand there is more value in a $50 gallon of environmentally friendly, concentrated cleaning solution compared to a conventional solution.
|Four Keys to Selling the True Value of Your Products|
|1. Help your customers connect the dots: Emphasize the total cost of ownership.
2. Encourage change by showing success stories: Industry pioneers and mission-driven companies show how reduction of GHGs also leads to reduction in costs.
3. Illustrate that green is a spectrum: Greener purchases make employees happier and help achieve environmental goals.
4. Talk to the right person: the CEOs or CSOs of a company can see the big picture and make the connection with long-term savings and environmental benefits.
"Part of the overall selling proposition is the quantitative savings: energy efficiency, water conservation, reducing energy use, reduced injury rates, which decreases liability concerns," he said. If the cleaning solution is less likely to cause respiratory illness to the janitor who uses it, the company does more than save money in the long run. Fewer illnesses mean increased worker productivity and increased operational efficiency, Daggett explained.
"How do we help customers become more efficient? That is a fairly typical discussion we have with our customers," he said, but noted this type of conversation usually resonates the most among those who are able to "connect the dots" in an organization.
Daggett's total cost approach may be a more effective way to calculate business transactions -- especially in a world where corporate sustainability reports are becoming the norm. By focusing on energy conservation, water waste and health of the workers, JohnsonDiversey gives its customers a tool to improve their reporting and make total costs more tangible.
But the idea of total cost is not new one, Daggett observed. It has long been used in the automotive industry to quantify how much a vehicle costs over its lifetime -- rather than simply the sticker price -- the total cost of owning a car includes the oil, gasoline, and maintenance needed to operate.
Similarly, total cost is factored into IT services: Do the costs above and beyond purchasing hardware make it a smarter investment to switch to cloud computing instead? While the needs vary from company to company and sector to sector, these types of calculations are helping businesses to make informed decisions about business operations. And an informed decision can also mean a more environmentally friendly decision.
JohnsonDiversey shows one way of selling the sometimes intangible values that highlight environmental performance in the long run: By explaining the total costs of purchasing products that normally don't receive that kind of scrutiny. While there are some challenges to this approach, using examples from businesses that have already taken the plunge can make it an easier sell.
Encourage Change by Showing Success Stories
Stonyfield Farm is not your typical for profit company. It began in 1983 as an organic farming school, but now does far more than sell hormone and antibiotic-free yogurt and dairy products.
As its loyal customers probably already know, the company collects its #5 plastic containers to be recycled into toothbrushes, razors, kitchenware and much more. Stonyfield donates 10 percent of its profits to environmental organizations. And all of the company's operations are carbon neutral through a combination of methane capture, energy efficiency and investment in offsets.
These examples show how, as a mission-driven company, Stonyfield sets the bar pretty high for reducing carbon emissions. But its work also highlights an opportunity available to any company: A good example is the work the organic yogurt firm did with Ryder System to improve transportation-related emissions.
"When we approached them about their supply chain, they said 'we want to reduce our emissions' and there was no mention of costs," said Mark Swenson, vice president of business development in supply chain solutions with Ryder.
Since 2006, Stonyfield has achieved a double-digit reduction in greenhouse gas (GHG) emissions as well as a reduction in costs, Ryder reports.
"The two are not mutually exclusive, but truly correlated," Swenson said. "And looking at that model, Stonyfield is a pioneer." By partnering with the Environmental Protection Agency's SmartWay program, Ryder was able to track and improve transportation-related emissions for Stonyfield by improving delivery routes, consolidating orders and using web-based reporting to track shipments, among other practices.
Swenson said he uses the yogurt maker as a case study to persuade businesses that may not be convinced it is possible to reduce costs and GHG emissions at the same time. Onboard computers in Ryder's trucks can identify drivers whose skills should be emulated.
"It is easy to understand how fuel consumption is impacted positively," depending on how a driver shifts gears or how hard a driver brakes, Swenson said. These effects can ripple up the supply chain when efficient drivers are acknowledged and allowed to mentor their peers.
While these details may seem small, they are part of an added value that Ryder sells as part of its RydeGreen service. And these tiny details can save thousands per year in fuel costs; the RydeGreen hybrid trucks improve fuel efficiency by 30 to 40 percent in the city.
Making fleets more efficient signals a shift in public awareness, Swenson said. "Ten years ago it was all about decreasing costs. There was always a positive impact to the environment, but the translation wasn't done because the demand wasn't there."
"Although the initial capital investment is more, the total lifetime ownership costs takes the right data and gives it to the right folks to support these measures," Swenson said.
Optimizing fleets is just one aspect of selling a value-added product. Sometimes environmental improvements come in the form of tangible goods, such as office supplies, but provide an overall benefit to a company's sustainability goals.
Illustrate that Green is a Spectrum
"There is a green cost continuum. [Many customers'] base assumption is if its green it will cost more. That is a very flawed assumption," said Yalmaz Siddiqui, director of environmental strategy at Office Depot. Part of his job is to show how a company can derive intangible benefits from tangible goods.
Some products may cost more up front, of course; examples include compact fluorescent light bulbs or dishes rather than disposable plates for the kitchen, which last longer and save costs in the long run. Other commonly used items, such as remanufactured ink and toner cartridges can provide up to a 10 percent cost reduction and provide the same quality as cartridges made with virgin plastics, Siddiqui said.
While these may seem like insignificant decisions in the face of the world's larger environmental problems, an accumulation of these small steps do help a company shrink its overall environmental footprint, and are genuine signs of progress.
Siddiqui's team provides hard data that can nudge a company to make the switch. For example, those remanufactured ink cartridges not only save 10 percent in costs, they also divert 2.5 pounds of waste from a landfill -- for each cartridge.
In addition to the economic and environmental benefits, Siddiqui emphasized there is another important value present with these decisions.
"Certain things will cost more money, but you will derive value from them from the customer engagement. You're messaging that you are buying greener or that is part of your environmental policy."
Those at Office Depot and Ryder know that aligning your company with trusted names in energy conservation or efficiency, or embracing a greener procurement policy does more than just reduce overhead costs. They form a body of work that shows your company takes the environment seriously, which has a positive effect on a company's brand, according to Ryder's Mark Swenson.
For example, Stonyfield won a manufacturer of the year award for the sustainability of their supply chain. "It doesn't get any more intangible than that." Swenson said. "It has a positive impact on the environment, creates more revenue and more customer loyalty."
Using Energy Star calculators, Siddiqui said Office Depot has shown clients the savings from switching incandescent bulbs to CFLs. Despite upfront initial costs, Siddiqui said companies understand the longer-term benefits. "[T]he payback period is 6 months and return on investment is substantial," he said. "It is worthwhile paying the extra."
Talk to the Right Person
Companies face enormous challenges when it comes to selling value-added products and services: budget cuts, departments narrowly focused on one element of the business and an absolute focus the bottom line. But an increased trend of sustainability reporting pushes companies to be aware of people and the planet, in addition to profits.
It can be difficult to sell "soft" or intangible values such as increased brand loyalty or employee satisfaction, that are an important part of a total cost approach, said JohnsonDiversey's Dan Daggett.
"We tend to shy away from giving them numbers [such as a 10 percent increase in brand loyalty] but do include the qualitative statement; it is the right thing to do save energy, to reduce GHG emissions, it is part of your overall brand to develop a better image."
Fortunately, sustainability managers, and CEOs are often able to connect the dots and are much more receptive to the concept, he added. Reaching out to those employees -- who may be in the c-suite or may just be devoted to their company's environmental footprint -- can make all the difference in selling the intangible benefits of your products.
JohnsonDiversey's total cost approach, which focuses on energy conservation, water waste and worker health, gives companies the information needed to make purchasing decisions that create a path to sustainability, Daggett said.
Similarly, Siddiqui said people make buying decisions first and foremost based on economics. But by engaging sustainability officers in discussions with purchasing departments, it is easier to articulate that buying value added products, like recycled paper, represents the broader values of a company.
And just because you can't assign a number to a value-add doesn't mean it isn't worthwhile.
"It is a very intangible one, but a big benefit to our clients; a lot of consumer products and retail products like Stonyfield want their brand to be associated with environmental friendliness," said Ryder's Swenson.
Perhaps the biggest value a comprehensive sustainability platform can have for a company is not just in cutting costs and impacts, but in making the workplace a desirable place.
"We have a positive impact on our environment, with our customers and internally it helps us retain the best employees," Swenson said.
In terms of the most traditional definition of sustainability -- keeping your company going for the long term -- that's money in the bank.
RydeGreen Hybrid photo provided courtesy of Ryder System Inc.; yogurt lid provided courtesy Flickr user AdamVandenberg