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.