In part one of this series on marketing green products (see below), I gave some insights on consumers and their perceptions regarding green products. Now I will share some recommendations for going to market with organic and fair trade products, which are the result of my research into marketing fair trade chocolate for Sustainability and Environmental Marketing courses as part of my MBA at the Sauder School of Business (UBC). The research included secondary research and a survey to MBA students.
1. Positioning
As mentioned in my previous post, there are two promising markets for fair trade and organic products: ethical buyers –who highly value the green quality of products– and those who buy it for selfish qualities which can be related to health, quality or taste, depending on the product. In my research into fair trade chocolate, for example, I realized that though “ethical buyers” in my survey highly valued the environment and sustainable practices, fair trade and organic qualities rated 5 and 6 in a list of 8 qualities that they valued most when shopping for chocolate. Considering that chocolate is a low-risk purchase and involves little time and thought when purchasing, it is likely that even these buyers would prefer a known brand, a preferred variety of chocolate, or better yet, the quality and taste of the chocolate. So even with ethical buyers, green qualities are not enough. The brand must also build the perceptions of high quality, health/indulgence depending on the product (which green buyers also rated highly) and other functional qualities (like different flavors, in the case of chocolate). For indulgers, a promising positioning strategy would be to use the “single source” quality that fair trade products can offer, because they are usually sourced by specific cooperatives and bought directly by the manufacturing company, as opposed to commodity cocoa, which is bought from distributors from all over the world at the cheapest prices possible.
2. Price and Distribution
As I mentioned in my previous entry, though ethical buyers and indulgers are willing to pay a higher price for the green qualities/experience of the products, a promising strategy is to create a line of products that is affordable and accessible to the general population. Divine Chocolate, a successful non-for-profit based in the U.K., has achieved successful growth thanks to a strategy where it places its chocolate products in popular retail chains and sells at affordable prices*. Placing organic and fair trade products in supermarkets and other accessible retail locations (instead of high-end and specialized boutiques only) also helps sales**. Of course, if the strategy is to compete in the fast-growing high end chocolate segment, fair trade is also very promising. In that case, as mentioned above, single-source qualities and percentage of cocoa are important qualities when demanding a premium.
4. Promotion
From my research I came up with many recommendations for promoting and communicating the value of fair trade and organic chocolate. Advertising should be focused on educating people on the benefits of fair trade, which even the ethical buyers I surveyed were not very aware of. This means not only expressing the social benefits of cocoa bought at above-commodity prices from poor farmers in developing countries, but also the environmental and health benefits that it can bring because of the reduced use of chemicals and growing the plants in a forest, rather than in a dedicated cocoa plantation. PR and events are also key. Divine Chocolate Company, for example, has created buzz by using comedians and celebrities to talk about the cause on TV. It even managed to get then Prime Minister Tony Blair to visit the farms where the cocoa was grown in Ghana**. Another promising opportunity, especially for indulgers, are chocolate tastings and wine pairings, which have become more popular in the recent years.
In conclusion, organic and fair trade products –like many green offerings– are not as easy a sell as we wish they could be. The big lesson from this is that green qualities are not enough. Though they are increasingly important to consumers, and a key in any corporate social responsibility program, green products must also have functional qualities that benefit consumers directly. It is important to price them competitively, and assure that distribution and promotion contribute to making them more accessible and creating value in the buyer’s minds.
*Doherty, B., & Tranchell, S. (2005, July). New thinking in international trade? A case study of The Day Chocolate Company. Sustainable Development, 13(3), 166-176.
**Regmi, A. (2001) Changing Structure of Global Food Consumption and Trade. Market and Trade Economics Division, Economic Research Service, U.S. Department of Agriculture, Agriculture and Trade Report. Retrieved from the USDA Website on March 10, 2009.
Sunday, July 12, 2009
Sunday, June 28, 2009
Succeeding in the green market I: Consumer Insights
These days it seems that everyone wants to get into the green market. Whether it’s environmentally friendly or ethical products, there is a lot of optimism about the high growth in these categories. But products with “green” labels can be challenging to promote effectively, as I learned during research into marketing fair trade chocolate for Sustainability and Environmental Marketing courses as part of my MBA at the Sauder School of Business (UBC).
During my secondary research and a survey, I learned about the expectations that people have about green products and their willingness to put their money where their mouths are. I also learned about marketing practices that have helped organic and fair trade brands succeed in this difficult market.
Here is my first of two postings: Insights into the market for ethical and green products.
1. Though environmental and altruistic benefits are termed as very important by many green consumers, “selfish benefits” are more effective in achieving adoption. As opposed to organic brands, which consumers perceive to have personal benefits like better taste and health benefits, fair trade products claim mainly altruistic benefits: you pay a premium price for a product that has been bought at fair prices from poor communities in developing countries. Organics have become big not just with the environmentally conscious, but also with people who want healthier, less processed foods. It’s become a “catchy” label, and people are more likely to associate it to “health” or “environmental qualities” than what it actually means: products made with no added chemicals like pesticides and fertilizers (Try this: ask a person in a supermarket with organic produce in her cart what "organic" means... even the MBAs in my survey had a hard time defining it). Fair trade is even harder to understand and the premium price is not always valued by consumers, who make most of their purchasing decisions based on direct benefits to themselves rather than to other people who’s country they may not even be able to point to on a map.
2. There is willingness to pay for ethical products, but competitive pricing is key to market-wide adoption. Though people are used to seeing organic and fair trade products being priced at a premium, research shows that even people who place a high value on ethical qualities of a product are willing to pay a lower premium than what is set by the manufacturers*. Pricing at competitive prices has turned out to be a successful strategy for market and revenue growth for Divine Chocolate Company in the U.K.**
3. Ethical consumers are a key target, but “health buyers” and “indulgers” can also be key. Research shows that consumers who highly value the ethical qualities of a product will pay more for them, especially if their expectation for that product and brand are especially high. However, they will also “punish” unethical companies by demanding a steeper price reduction for their products***. If premium pricing is the strategy, then key demographics are those that value the health or taste/quality of the fair trade product. In the case of fair trade chocolate, women and Generation X consumers –who are accustomed to paying a premium for luxury experiences– are good targets.
In my next entry, I will give discuss some tactics that have led to success in the marketing of fair trade and organic products.
*Didier, T., & Lucie, S. (2008, September). Measuring consumer's willingness to pay for organic and Fair Trade products. International Journal of Consumer Studies, 32(5), 479-490. Retrieved March 12, 2009 from Wiley Interscience Journals webpage
**Divine and Dubble go mainstream :But fair-trade chocolate keeps its integrity. (2008). Strategic Direction, 24(10), 13-15. Retrieved March 12, 2009, from ABI/INFORM Global database.
***Remi Trudel, June Cotte. (2009). Does It Pay to Be Good? MIT Sloan Management Review, 50(2), 61-68. Retrieved March 12, 2009, from ABI/INFORM Global database.
During my secondary research and a survey, I learned about the expectations that people have about green products and their willingness to put their money where their mouths are. I also learned about marketing practices that have helped organic and fair trade brands succeed in this difficult market.
Here is my first of two postings: Insights into the market for ethical and green products.
1. Though environmental and altruistic benefits are termed as very important by many green consumers, “selfish benefits” are more effective in achieving adoption. As opposed to organic brands, which consumers perceive to have personal benefits like better taste and health benefits, fair trade products claim mainly altruistic benefits: you pay a premium price for a product that has been bought at fair prices from poor communities in developing countries. Organics have become big not just with the environmentally conscious, but also with people who want healthier, less processed foods. It’s become a “catchy” label, and people are more likely to associate it to “health” or “environmental qualities” than what it actually means: products made with no added chemicals like pesticides and fertilizers (Try this: ask a person in a supermarket with organic produce in her cart what "organic" means... even the MBAs in my survey had a hard time defining it). Fair trade is even harder to understand and the premium price is not always valued by consumers, who make most of their purchasing decisions based on direct benefits to themselves rather than to other people who’s country they may not even be able to point to on a map.
2. There is willingness to pay for ethical products, but competitive pricing is key to market-wide adoption. Though people are used to seeing organic and fair trade products being priced at a premium, research shows that even people who place a high value on ethical qualities of a product are willing to pay a lower premium than what is set by the manufacturers*. Pricing at competitive prices has turned out to be a successful strategy for market and revenue growth for Divine Chocolate Company in the U.K.**
3. Ethical consumers are a key target, but “health buyers” and “indulgers” can also be key. Research shows that consumers who highly value the ethical qualities of a product will pay more for them, especially if their expectation for that product and brand are especially high. However, they will also “punish” unethical companies by demanding a steeper price reduction for their products***. If premium pricing is the strategy, then key demographics are those that value the health or taste/quality of the fair trade product. In the case of fair trade chocolate, women and Generation X consumers –who are accustomed to paying a premium for luxury experiences– are good targets.
In my next entry, I will give discuss some tactics that have led to success in the marketing of fair trade and organic products.
*Didier, T., & Lucie, S. (2008, September). Measuring consumer's willingness to pay for organic and Fair Trade products. International Journal of Consumer Studies, 32(5), 479-490. Retrieved March 12, 2009 from Wiley Interscience Journals webpage
**Divine and Dubble go mainstream :But fair-trade chocolate keeps its integrity. (2008). Strategic Direction, 24(10), 13-15. Retrieved March 12, 2009, from ABI/INFORM Global database.
***Remi Trudel, June Cotte. (2009). Does It Pay to Be Good? MIT Sloan Management Review, 50(2), 61-68. Retrieved March 12, 2009, from ABI/INFORM Global database.
Thursday, April 30, 2009
MBAs: Adding value in a time of recession
I'd like to share this blog with you that I originally posted on the Toronto-based Financial Post's Executive Blog: http://network.nationalpost.com/np/blogs/executive/archive/2009/04/30/mbas-adding-value-in-a-time-of-recession.aspx
Tell me what you think!
*******************
This is not a good year for MBAs. On one hand, more people are applying for an MBA than ever, as a way to get out of a bad job market and improve their skills at the same time. On the other, new MBA grads and interns are concerned about being able to demand higher salaries and even to find a job, when so many businesses are struggling to weather the recession.
But I also believe that this is a time of great opportunity for those of us who can be creative, and use those tools we learned in Business School to really impact the bottom line. A lot of businesses are finding that business as always is not effective anymore and may be more open than in times of success to listen to new points of view.
I used my LinkedIn network to ask people from different businesses about what they valued in an MBA. Here are the qualities they said they valued the most:
1. Being able to work independently: with all the current layoffs, this is no time to make managers babysit new employees.
2. Quantitative analysis: Turning projects into measurable results that can be compared and decided on.
3. New ideas: creativity for solutions, bringing in the latest business solutions that are being discussed in the classrooms.
4. Proven business skills: previous experience can be key in making a decision.
5. Ability to work under pressure and in uncertain situations: “We can begin with what the “M” in MBA stands for: Master. The MBA connotes a mastery of business beyond experience alone. I think the foremost thing it means is that the person is prepared to deal with ambiguity and so is comfortable with a lack of certain and definable answers”, says Ron Cenfetelli, Professor of IT Management at the Sauder School of Business (University of British Columbia).
I even had a recommendation about what companies don’t need from MBA’s: a “know-it-all” attitude and substituting quantitative skills for observation and communication.
What do you think?
Tell me what you think!
*******************
This is not a good year for MBAs. On one hand, more people are applying for an MBA than ever, as a way to get out of a bad job market and improve their skills at the same time. On the other, new MBA grads and interns are concerned about being able to demand higher salaries and even to find a job, when so many businesses are struggling to weather the recession.
But I also believe that this is a time of great opportunity for those of us who can be creative, and use those tools we learned in Business School to really impact the bottom line. A lot of businesses are finding that business as always is not effective anymore and may be more open than in times of success to listen to new points of view.
I used my LinkedIn network to ask people from different businesses about what they valued in an MBA. Here are the qualities they said they valued the most:
1. Being able to work independently: with all the current layoffs, this is no time to make managers babysit new employees.
2. Quantitative analysis: Turning projects into measurable results that can be compared and decided on.
3. New ideas: creativity for solutions, bringing in the latest business solutions that are being discussed in the classrooms.
4. Proven business skills: previous experience can be key in making a decision.
5. Ability to work under pressure and in uncertain situations: “We can begin with what the “M” in MBA stands for: Master. The MBA connotes a mastery of business beyond experience alone. I think the foremost thing it means is that the person is prepared to deal with ambiguity and so is comfortable with a lack of certain and definable answers”, says Ron Cenfetelli, Professor of IT Management at the Sauder School of Business (University of British Columbia).
I even had a recommendation about what companies don’t need from MBA’s: a “know-it-all” attitude and substituting quantitative skills for observation and communication.
What do you think?
Friday, March 20, 2009
Marketing software: The challenge of selling an “invisible product”
Marketing software: The challenge of selling an “invisible product”
I'd like to share this blog with you that I originally posted on the Toronto-based Financial Post's Executive Blog: http://network.nationalpost.com/np/blogs/executive/archive/2009/02/17/marketing-software-the-challenge-of-selling-an-invisible-product.aspx
Tell me what you think!
*****************
Have you ever tried selling something people can’t see, or feel or taste? It seems that marketers have made an art of selling the “invisible” qualities of visible products: a perfume commercial, for example, barely mentions the actual scent of the product or its liquid form. Instead, it promises to turn you into an elegant, irresistible man or woman. The same goes for packaged foods that offer vitamins, minerals and antioxidants that you can’t really see… you have to take their word for it. But in both cases, you have a very real product to see and touch. Even services can be perceived clearly by the senses: think customer service at a bank or five-star hotel, for example.
But what happens when it’s the other way around: when the product is invisible and all you have is the experience of using the product? This is the case of most software products, which have a world of advantages, but to the naked eye appear as pages of indecipherable code.
You may think: “But I do see the product! I’m looking at my computer screen right now!” Well, the truth is that you are only seeing the very surface of the product, or the interface. It is the part of the program that lets you interact with it: buttons, scroll bars, pretty icons… they are your experience of the program, but the real value of the product is the programming behind it.
Because of this, it is hard to market many software solutions, especially when they don’t have the Microsoft logo on them. Small companies selling software have to begin by trying to explain to ordinary consumers or non-IT business clients why their solution is really valuable. In some cases, the interface can be similar to a rival product, so the client thinks it is practically the same, and only decides on price. It can be difficult to explain why there is a price premium, especially if the better qualities aren’t easily perceived by the user.
Because of this, creating a polished and user-friendly interface is so important. Trying to explain the technical benefit to the users is often a lost cause. What you can do is show them how it will work for them and making sure that they can easily experience it.
Another challenge about marketing high-tech products is deciding whether to innovate around the client’s needs, or to just let the inventor’s creative flow decide what to create and risk having a marvelous product that does not immediately fit with a particular user.
Last month I attended a speaker event hosted by the British Columbia Technology Industry Association, which included three BC companies that have achieved big success in the past years: MDA, MailChannels and BuildDirect. Their products have been successful because they are real solutions to real problems. But they also raised an interesting topic: sometimes you just have to make something that doesn’t make clear sense at first and then create the need for it. This is the case of some of the most successful inventions of history. For example, no one imagined that electricity could be useful. Candles worked well enough to light homes, and fireplaces brought warmth to the homes. It didn’t follow a “trend” of inventions, like the mp3 player has followed the portable cassette and CD players. Looking back, it seems like we couldn’t live without it. From our kitchen appliances, phones and TV sets, we depend on electricity for almost everything we do. But who could tell someone in the late 1800s that they needed a TV set or a computer? All they could see was a small light bulb that didn’t light much better than their lamps and fires. But it could be turned on with the flip of a button and there was no need to keep buying oil.
The advantage of this creative approach is that this allows the inventor to be openly creative and not restrained by certain needs. If marketing research is not done properly, it can also be misleading and generate as many losses as not having done any research at all. But in many cases, not tailoring products to users can be a huge mistake. This is the cause of many of the thousands of product failures that occur each year. If you are curious to know about them, just Google “product flops”. You’ll be surprised on how many major brand names are behind product flops, many of which are the result of bad marketing research (New Coke is the typical text-book example).
What is the best approach? It depends on the individual product and if the new invention could eventually satisfy a real need, even if it was not catered to one initially. “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole”. This quote by Theodore Levitt is a classic in marketing education. So even if your innovation is completely new and different, if it can open the quarter-inch hole, even if it isn’t a drill, it might still be successful.
*******
What do you think? I would like to hear your opinion on the topic, especially if you are in the software and high-tech industry.
I'd like to share this blog with you that I originally posted on the Toronto-based Financial Post's Executive Blog: http://network.nationalpost.com/np/blogs/executive/archive/2009/02/17/marketing-software-the-challenge-of-selling-an-invisible-product.aspx
Tell me what you think!
*****************
Have you ever tried selling something people can’t see, or feel or taste? It seems that marketers have made an art of selling the “invisible” qualities of visible products: a perfume commercial, for example, barely mentions the actual scent of the product or its liquid form. Instead, it promises to turn you into an elegant, irresistible man or woman. The same goes for packaged foods that offer vitamins, minerals and antioxidants that you can’t really see… you have to take their word for it. But in both cases, you have a very real product to see and touch. Even services can be perceived clearly by the senses: think customer service at a bank or five-star hotel, for example.
But what happens when it’s the other way around: when the product is invisible and all you have is the experience of using the product? This is the case of most software products, which have a world of advantages, but to the naked eye appear as pages of indecipherable code.
You may think: “But I do see the product! I’m looking at my computer screen right now!” Well, the truth is that you are only seeing the very surface of the product, or the interface. It is the part of the program that lets you interact with it: buttons, scroll bars, pretty icons… they are your experience of the program, but the real value of the product is the programming behind it.
Because of this, it is hard to market many software solutions, especially when they don’t have the Microsoft logo on them. Small companies selling software have to begin by trying to explain to ordinary consumers or non-IT business clients why their solution is really valuable. In some cases, the interface can be similar to a rival product, so the client thinks it is practically the same, and only decides on price. It can be difficult to explain why there is a price premium, especially if the better qualities aren’t easily perceived by the user.
Because of this, creating a polished and user-friendly interface is so important. Trying to explain the technical benefit to the users is often a lost cause. What you can do is show them how it will work for them and making sure that they can easily experience it.
Another challenge about marketing high-tech products is deciding whether to innovate around the client’s needs, or to just let the inventor’s creative flow decide what to create and risk having a marvelous product that does not immediately fit with a particular user.
Last month I attended a speaker event hosted by the British Columbia Technology Industry Association, which included three BC companies that have achieved big success in the past years: MDA, MailChannels and BuildDirect. Their products have been successful because they are real solutions to real problems. But they also raised an interesting topic: sometimes you just have to make something that doesn’t make clear sense at first and then create the need for it. This is the case of some of the most successful inventions of history. For example, no one imagined that electricity could be useful. Candles worked well enough to light homes, and fireplaces brought warmth to the homes. It didn’t follow a “trend” of inventions, like the mp3 player has followed the portable cassette and CD players. Looking back, it seems like we couldn’t live without it. From our kitchen appliances, phones and TV sets, we depend on electricity for almost everything we do. But who could tell someone in the late 1800s that they needed a TV set or a computer? All they could see was a small light bulb that didn’t light much better than their lamps and fires. But it could be turned on with the flip of a button and there was no need to keep buying oil.
The advantage of this creative approach is that this allows the inventor to be openly creative and not restrained by certain needs. If marketing research is not done properly, it can also be misleading and generate as many losses as not having done any research at all. But in many cases, not tailoring products to users can be a huge mistake. This is the cause of many of the thousands of product failures that occur each year. If you are curious to know about them, just Google “product flops”. You’ll be surprised on how many major brand names are behind product flops, many of which are the result of bad marketing research (New Coke is the typical text-book example).
What is the best approach? It depends on the individual product and if the new invention could eventually satisfy a real need, even if it was not catered to one initially. “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole”. This quote by Theodore Levitt is a classic in marketing education. So even if your innovation is completely new and different, if it can open the quarter-inch hole, even if it isn’t a drill, it might still be successful.
*******
What do you think? I would like to hear your opinion on the topic, especially if you are in the software and high-tech industry.
Welcome to my blog
For those of you who know me, you know that I am passionate about learning about new ideas and trends in the world, and even more so about being able to discuss and debate them with others.
In this blog, I want to start discussions about different areas of business, including marketing, sustainability and how business can help develop poor communities.
I especially welcome those who want to make comments about these subjects or publish links.
Enjoy!
In this blog, I want to start discussions about different areas of business, including marketing, sustainability and how business can help develop poor communities.
I especially welcome those who want to make comments about these subjects or publish links.
Enjoy!
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