Will the Consumer Pay a Premium for Green?

Will the Consumer Pay a Premium for Green?

Ask most marketers the answer to this question: "Will consumers pay a penny more for a green product?" They will most likely respond with an unequivocal "No!" (They may have had experience with an otherwise well-intended new green product that flopped when consumers failed to pay the requisite premium.)

But for those of us moving ahead in a business, it's important to ask more probing questions: "Does the green product offer meaningful benefits to the consumer beyond appeals to altruism?" Keep in mind that most consumers do not understand a lot about environmental issues, much less the preferable solutions. Moreover, they are skeptical of industry's environmental claims and suspect retailers of price gouging.

Does the green product have a familiar brand name, and does it come from a trusted manufacturer? Remember that consumers minimize risk at the check-out counter by purchasing brands they know. Smallness can be a plus for many products. (There really is a Ben, there really is a Jerry and there really is a Tom from Maine.) But to grow one's business beyond the green niche, it takes a lot of marketing clout to break through the clutter and establish one's brand against the "big boys."

Imagery and Credibility

Is the product wrapped to the hilt in green imagery -- you know, daisies, babies, and appeals to saving the planet? Then expect consumers to suspect the product's ability to perform, an unfortunate legacy from early green products such as all-natural laundry powders that didn't clean clothes and water-saving shower heads that sputtered. Such products of the '70s languished in health food stores, gathering dust.

And just how much of a premium are we talking about? A slight premium might be acceptable to some, but keep in mind that despite a booming stock market, most American households barely squeak by on $30,000 a year.

The marketplace proves my point. When the marketing fundamentals are in place, consumers will gladly pay a premium for green. Take greener products with a perceived health benefit like organically grown foods growing at 25 percent a year. Or products promising affordable indulgence such as those beautifully merchandised by Terra Verde, an emporium in New York City's Soho district that sells luxuriously soft organic cotton sheets, and towels, aromatic candles, and natural body oils. Or Rayovac's Renewal brand reusable alkaline batteries which promise heavy battery users to save $150 on a $100 CD player. And how about Maytag's new Neptune Washer-created in response to energy legislation, its ingeniously designed horizontal access tub cleans clothes better, cleans more clothes per wash, and saves an estimated $100 per year on water and energy bills, and even looks good in the washroom. Even at a hefty 50 percent premium, retailers can't keep enough in stock.

Unbury the Treasure

Ten years in this business tells me a simple truth: Ninety-nine out of 100 green product developments yield buried treasure: a new "thing" that performs better, saves money, or is safer to use. Daisies are nice, but these are the direct, tangible consumer benefits that should be placed front and center in advertising and marketing. These are the reasons why consumers shop for products in the first place, not to save the planet.

When price or performance match, consumers will pick the products and brands that will help them feel as if they're doing their bit. But rarely are things so equal. Smart marketers with well-crafted green products find that the inherent efficiencies, safety and other benefits that stem from environmental quality pay off in superior performing products with distinct appeal to a discernible segment of the market. So, focus on the primary benefits consumers seek from products in the first place and support those benefits with simple, honest expressions of environmentalism, and reap the premiums you deserve. Case closed.

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Jacquelyn Ottman is president of J. Ottman Consulting, Inc., a NYC-based marketing consulting firm that advises companies on how to develop and market environmentally sound products. Her book, Green Marketing: Opportunity for Innovation, is available from the GreenBiz Bookstore. This column is © J. Ottman Consulting, Inc., and is reprinted from In Business magazine, a GreenBiz News Affiliate.
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