INFORM
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MARKETINTELLIGENCE
Do you really want to charge people extra for being green?
by Peter Winters
ompanies developing low-carbon brands should be wary of charging a premium to customers for “being green” – as people may feel ripped off. This is how Peter Tertzakian, the environmentally minded economist, felt when offered a hire car upgrade to a Prius for an extra $15 a day. As he described in a blog article, unless he was going to drive a large distance to defray the extra rental costs, “going green” would cost extra. There was a dissonance between his desire to use the energy-efficient “green” car, and his wish to have the best value for money. Indeed, evidence from the marketing litera- ture suggests that the most powerful marketing propositions align both emotional and rational appeals and that building brand equity requires positive brand experience over time. So, instead of trying to get people to “pay extra to buy green”, companies can often make the case that their low-carbon brand is green and saves money. Getting people to invest in improving the energy-efficiency of their home is usually a matter of overcoming people’s reti- cence to pay upfront capital costs in order that they can generate savings over time. In line with behavioural economics, different versions of the value proposition can be tested among tar- get consumers to discover which is actually most effective in getting people to buy. In the UK, the well-established “A to G” scale is a brand device that successfully inte- grates emotional desires and rational rewards. It provides information that helps to determine how environmentally friendly a product is, and delivers benefits to the individual customer allowing them to save energy running costs, and enhancing resale value on major products (cars/houses). According to the first wave of our Environmental Choices™ survey, in late 2008, 72% of English people recognised the
“A to G” scale, and 47% of English people indicated that this scale had an impact on their behaviour. This impact was higher amongst those most concerned about climate change (Climate Citizens: 59%) compared to those least concerned (Sceptics & Uninvolved: 32%). A recent UK marketing device is the carbon- labelling system, designed to show that the manufacturer is measuring, and committed to reducing, the carbon footprint of a product. It is an achievement to provide this information, enabling people to make low-carbon consumer choices. But how much do such choices benefit the individual? Could more be done to encour- age adoption – with prize draws, social recog- nition and/or some form of “Green Credits” (a scheme suggested by Zerofootprint)? While the “A to G” scale has become largely mandatory, carbon labelling is not – and I wonder if con- sumers and businesses expect that carbon- labelled products should command a price pre- mium for the extra work involved? By late 2008, the Environmental Choices™ survey showed that just 9% of English people recog- nised the “Carbon Labelling” logo, and only 2% indicated that it had affected their behav-
16 May 2010 ❘ Sustainab le Business
iour (mostly Climate Citizens) – we should recognise that carbon labelling is still quite new. We are not arguing that it is inappropriate for companies to get people to pay extra for their low-carbon offering. Canadian clean-electricity provider Bullfrog Power is currently undertak- ing an advertising campaign enticing people to “Pay More For Energy”. Yet this is likely to be part of a niche strategy within a crowded mar- ket; I suspect that they would be delighted to achieve 5% market share. They also clearly communicate why they charge extra. For their customers, they provide the individual benefit of becoming part of a Facebook Bullfrog Power community. By late 2008, our Environmental Choices™ study shows that Bullfrog Power is best known in Ontario, where (based on 398 respondents) 18% were aware of the company and 2% used them. Here are three integrated marketing chal- lenges for any low-carbon value proposition. First, how well does it evoke emotional desires – especially amongst those concerned about cli- mate change? This could be to do with how it helps the customer do “good for the environ- ment”, and/or its visceral, aesthetic appeal. Second, how can the proposition be designed so that it “makes sense” to a consumer to buy? It is about satisfying the customer, and likely to be, in part, to do with financial justification – although a creative use of other rewards might work. Depending on the type of product and buying situation, this can be about rational argument, or it could be about framing the cus- tomer decision in a more sub-conscious way. Thirdly, once the customer has bought the low-carbon product, what could be done to enhance their satisfaction in this purchase? This is about a rational reflection of “making a good decision”, leading to emotional attachment to the brand, and is the basis of building brand equity, and word-of-mouth recommendation.
Peter Winters is president of Haddock Research & Branding
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peter.winters@haddock-research.com
Haddock Research is a market research agency dedicated to providing vital information to those creating a low-carbon world. SB readers can claim a 15% discount on Environmental
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