Reading1.docx Choosing the Right Green Marketing Strategy 1 Green marketing has not lived up to the hopes and dreams of many managers and activists. Although public opinion polls consistently show that consumers would prefer to choose a green product over one that is less friendly to the environment when all other things are equal, those “other things” are rarely equal in the minds of consumers. 2 For example, when consumers are forced to make trade-offs between product attributes or helping the environment, the environment almost never wins. Most consumers simply will not sacrifice their needs or desires just to be green, as the case of the Ford Think, a two-seater electric car, demonstrates. Ford Motor Co. initially expected this car to be a big hit, but late in 2002 the company announced it was scrapping the vehicle. The Think, which required six hours of recharging after being driven for only 50 miles, would have required drastic changes in driving behavior by its owners. The lesson is that regardless of their environmental benefits, electric-powered cars will remain a niche product at best until manufacturers can radically improve battery life and cost. 3 Hopes for green products have also been hurt by the perception that such products are of lower quality or don’t really deliver on their environmental promises. In a 2002 Roper survey, 41% of consumers said they did not buy green products because they worried about the diminished quality of eco-friendly versions. And both Procter & Gamble Co. and Wal-Mart Stores Inc. have been criticized for selling a brand of paper towels labeled as green in which the inner tube was made of recycled paper but the towels themselves were made of chlorine-bleached unrecycled paper and came packaged in plastic. 4 And yet the news isn’t all bad—far from it. For example, a growing number of people are willing to pay a premium for organic foods because, whether it is actually true or not, they believe organic food to be healthier, tastier and safer. Likewise, some consumers have been willing to pay an up-front premium for energy efficient, water-conserving washer and dryer units. Such consumers realize that they will actually save money on energy and water bills over the long term. Organic foods and energy-efficient appliances thus appeal to consumers’ self-interest while at the same time promoting environmental benefits—a dual message that electric cars cannot deliver. 5 How, then, should companies handle the dilemmas associated with green marketing? They must always keep in mind that consumers are unlikely to compromise on traditional product attributes, such as convenience, availability, price, quality and performance. In other words, green products must match up on those attributes against no green products in order to earn consideration from the vast majority of consumers. It’s even more important to realize, however, that there is no single green marketing strategy that is right for every company. The strategies that should work best under different market and competitive conditions range from the relatively passive and silent “lean green” approach to the more aggressive and visible “extreme green” approach—with “defensive green” and “shaded green” in between. Managers who understand these strategies and the underlying reasoning behind them will be better prepared to help their companies benefit from an environmentally friendly approach to marketing. Green Consumer Segments 6 While buying green may not appeal to everyone, there are substantial numbers of consumers who are potentially receptive to a green appeal. According to the Roper survey mentioned above, 58% of US consumers try to save electricity at home, 46% recycle newspapers, 45% return bottles or cans and 23% buy products made from, or packaged in, recycled materials. So it is clear that some consumers already demonstrate sporadic green sentiments in their habits and purchasing behavior. Understanding the target consumer will help marketers to know whether “greenness” is an appropriate selling attribute and how it should be incorporated into the marketing mix. 7 To respond to consumers’ varying degrees of environmental concern, marketers can segment the market into different shades of green. The Roper survey divides consumers into the following groups: 8 True Blue Greens (9%): True Blues have strong environ-mental values and take it upon themselves to try to effect positive change. They’re over four times more likely to avoid products made by companies that are not environmentally conscious. 9 Greenback Greens (6%): Greenbacks differ from True Blues in that they do not take the time to be politically active. But they are more willing than the average consumer to purchase environmentally friendly products. 10 Sprouts (31%): Sprouts believe in environmental causes in theory but not in practice. Sprouts will rarely buy a green product if it means spending more, but they are capable of going either way and can be persuaded to buy green if appealed to appropriately. 11 Grousers (19%): Grousers tend to be uneducated about environmental issues and cynical about their ability to effect change. They believe that green products cost too much and do not perform as well as the competition. 12 Basic Browns (33%): Basic Browns are caught up with day-to-day concerns and do not care about environmental and social issues. The Competitive Landscape 13 Companies contemplating a green strategy must consider how competitors are pursuing these potential target segments. Are key competitors already playing in the green consumer space? Is it necessary to match their approach? Is there an opportunity to “out green” key competitors? 14 Clearly, many companies have become committed to being socially responsible. Today on practically every company Web site one can find corporate social responsibility reports with titles such as “Corporate Citizenship,” “Environmental Health and Safety” or “Sustainability Report.” As public scrutiny of corporations has increased throughout the past decade, companies in nearly every industry have begun to integrate environmental concerns into their product and service development. Businesses realize that they must be prepared to provide their customers with information on the environmental impact of their products and manufacturing processes. 15 Some companies have devised more effective production processes that reduce waste or the need for raw materials (or both). Others have learned to design products that are better for the environment. For example, Anheuser-Busch Inc. developed an aluminum can that is 33% lighter than previous cans. The reduced use of aluminum, combined with an overall recycling plan, saves the company $200 million a year. And McDonald’s Corp. saved 3,200 tons of paper and cardboard in 1999 by eliminating clamshell sandwich containers and replacing them with single-layer flexible sandwich wraps. This move was prompted by increased consumer concern relating to polystyrene production and ozone depletion. 16 There is little doubt that companies will continue to take steps toward becoming better corporate citizens. The fact that a company implements green procedures internally, however, does not mean that it should stress such changes externally. If being green does not drive increased sales and market share or enhance corporate reputation, then boasting about green activity may be foolhardy. If Anheuser-Busch had publicized its recycling initiatives, for example, the green message would not likely have resonated with Budweiser’s target market. In fact, a public campaign might even have alienated some Budweiser drinkers. On the other hand, McDonald’s did publicize its recycling efforts, a sensible tactic given that consumer outcry led McDonald’s to implement the change in the first place. 17 Such complexities make it difficult for managers to choose and implement a profitable green strategy. A review of several possible strategies should make the choices and trade-offs clearer. Choosing a Strategy 18 Managers must ask themselves two sets of questions regarding a green-marketing strategy. First, how substantial is the green consumer segment for the company? Can the company increase revenues by improving on perceived greenness? Would the business suffer a financial blow if consumers judged the company to be inadequately green? Or are there plenty of consumers who are indifferent to the issue that the company can serve profitably? 19 Second main question: Can the brand or company be differentiated on the green dimension? Does the company have the resources, an understanding of what it means to be green in its industry and the internal commitment at the highest management levels to be green? Can competitors be beaten on this dimension, or are some so entrenched in the green space that competing with them on environmental issues would be very expensive and frustrating? Depending on how these questions are answered, companies should consider one of these strategies: 20 Lean Green. Lean Greens try to be good corporate citizens, but they are not focused on publicizing or marketing their green initiatives. Instead, they are interested in reducing costs and improving efficiencies through pro-environmental activities, thereby creating a lower-cost competitive advantage, not a green one. They are usually seeking long-term preemptive solutions and want to comply with regulations, but they do not see substantial money to be made from the green market segments. Lean Greens are often hesitant to promote their green activities or green product attributes for fear of being held to a higher standard—and not always being able to live up to it or differentiate themselves from competitors. 21 Despite some public setbacks, the Coca-Cola Co. can be characterized as a Lean Green company. Most consumers do not know that the company has invested heavily in various recycling activities and package modif