Choosing the Right Green-Marketing Strategy

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.

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.1 (This also explains why car manufacturers are now pinning their hopes on gas- and electric-powered hybrids.)

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.2 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.3

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.4 Likewise, some consumers have been willing to pay an up-front premium for energy-efficient, water-conserving washer and dryer units (although the price premium has diminished recently). 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?6 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 nongreen 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

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 U.S. 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.

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:

• True Blue Greens (9%): True Blues have strong environmental values and take it upon themselves to try to effect positive change. They are over four times more likely to avoid products made by companies that are not environmentally conscious.
• 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.
• 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.
• 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.
• Basic Browns (33%): Basic Browns are caught up with day-to-day concerns and do not care about environmental and social issues.

These figures indicate that somewhere between 15% and 46% of the overall consumer market could be receptive to a green appeal, depending on the product category and other factors. And there are social, cultural and economic trends that could cause the size of this target market to grow. One trend worth noting is the aging of the baby boomers — their concern about living longer, healthier lives is leading them to place a high priority on environmental quality.7

The Competitive Landscape

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 “outgreen” key competitors?

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.8

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.9 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.10

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.

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

Managers must ask themselves two sets of questions regarding a green-marketing strategy. (See “The Green Marketing Strategy Matrix.”) 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?

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? (Note that answers to both sets of questions will help a company determine how much it should stress greenness as a differentiating attribute in its marketing, not how much it should invest in environmentally friendly business practices. How a company responds to that issue should be guided by a host of other considerations.) Depending on how these questions are answered, companies should consider one of these strategies:

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.

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 modifications. Although Coca-Cola is concerned about the environment, in most cases it has chosen not to market its efforts.11 One reason for this might be the company’s wide target market and brand breadth. If Coca-Cola directly tied its environmental efforts to the overall brand, it would run the risk that all its products would be pigeonholed as green. Also, by publicizing its green marketing efforts, Coca-Cola might actually do itself more harm than good. Added scrutiny could lead to the unveiling of other issues that had previously been unknown to the public. For Lean Greens, narrowly tying environmental issues to one brand is the safer approach, as Coca-Cola has done with its Odwalla brand.

Defensive Green.

Defensive Greens usually use green marketing as a precautionary measure, a response to a crisis or a response to a competitor’s actions. They seek to enhance brand image and mitigate damage, recognizing that the green market segments are important and profitable constituencies that they cannot afford to alienate. Their environmental initiatives may be sincere and sustained, but their efforts to promote and publicize those initiatives are sporadic and temporary, since they do not typically have the ability to differentiate themselves from competitors on greenness. Aggressive promotion of greenness would be wasteful and would create expectations that could not be met.

Defensives will pursue actions such as sponsoring smaller environmentally friendly events and programs. And they will certainly defend their environmental records with public relations and advertising efforts if they are attacked by activists, regulators or competitors. But unless they discover that they can obtain a sustainable competitive advantage on the basis of greenness, they will not launch an overt, significant green campaign.

The huge clothing retailer Gap Inc. has often been cited as a socially responsible company that is concerned about the welfare of the workers and customers at its Gap, Banana Republic and Old Navy stores. On the environmental front, the company has long promoted energy conservation and waste reduction, and its corporate headquarters has been described as a prime example of sustainable building. The company mentions these activities on its Web site, but it does not publicize them externally much beyond that.

In the late 1990s, the Gap became the target of considerable activist criticism because of the involvement of its former CEO, Robert Fisher (son of the founder of the company), and his relatives with the Mendocino Redwood Co. Llc. That company had purchased 350 square miles of Northern California timberlands, planning to preserve most of it but also to do some sustainable forestry in smaller portions of it. Their sustainability plans were not adequate in the eyes of certain activist groups (see www.gapsucks.org) and numerous demonstrations, critical press releases from environmental groups and boycott efforts followed.12

This activism had the potential to be a major blow to Gap, since large portions of its target markets have environmental concerns. The company was able to weather this attack with a measured, quieter response. It repeatedly answered press and activist inquiries with an explanation that Mendocino Redwood was a totally separate company from Gap and that it should be contacted directly (addresses and numbers were provided) for an explanation of its environmental policies and practices. This same information was also given to retail customers in a pamphlet that was available at all Gap stores. Gap employees were also provided information about the logging practices of Mendocino Redwood and invited to open a dialogue with the Fisher family about what was happening. The uproar over all this was short-lived and by 2000 a planned rally against Gap at the company’s San Francisco headquarters attracted only seven protesters.13

Shaded Green.

Shaded Greens invest in long-term, systemwide, environmentally friendly processes that require a substantial financial and nonfinancial commitment. These companies see green “as an opportunity to develop innovative needs-satisfying products and technologies that result in a competitive advantage.”14 They have the capability to truly differentiate themselves on greenness, but they choose not to do so because they can make more money by stressing other attributes. Shaded Greens primarily promote the direct, tangible benefits provided to the customer and sell their products through mainstream channels. Environmental benefits are promoted as a secondary factor.

The Toyota Prius is advertised today as “an environmentally advanced, fuel-efficient hybrid.” However, when the Prius was first launched in the U.S. market in 2000, Toyota Motor Corp. did not play up its environmental attributes. The emphasis was instead on fuel efficiency — consumers would spend less on gas and spend less time at the pump.15 The fact that the Prius reduced air pollution was merely icing on the cake. This type of promotion works particularly well for products that have the ability to help the consumer save on recurring expenses; energy-efficient appliances are another example.

Extreme Green.

Holistic philosophies and values shape Extreme Green companies. Environmental issues are fully integrated into the business and product life-cycle process of these firms. Usually greenness has been a major driving force behind the company since day one. Practices involve life-cycle pricing approaches, total-quality environmental management and manufacturing for the environment. Extreme Greens often serve niche markets and sell their products or services through boutique stores or specialty channels.

Examples of Extreme Greens include The Body Shop, Patagonia and Honest Tea of Bethesda, Maryland. Honest Tea is one of the fastest-growing organic tea companies in the natural foods industry. Social responsibility is embedded in its identity and purpose, from manufacturing to marketing, as illustrated by its biodegradable tea bags, organic ingredients and community partnerships. The value of the Honest Tea brand is based on authenticity, integrity and purity.16 But relatively speaking, Honest Tea and other Extreme Greens are few and far between. (For another way of thinking about these four strategies, see “Using the Primary Marketing-Mix Tools in Green Strategy.”)

Implementation Considerations

To understand where a brand or company really stands on the two dimensions of green market size and the ability to differentiate on the basis of greenness requires careful research. As a good starting point for trying to understand the size of the green market segment, managers should gather data from customer records or surveys to determine whether a significant portion of a brand’s current customers fall within the True Blue Green, Greenback Green or Sprout segments. If the brand is not currently appealing very much to those segments, the company would probably not be able to capitalize on becoming greener.

On the other hand, if any of the green segments are prominent within the current customer base, estimates need to be made, again relying on customer records or surveys, of how much the company stands to lose if perceptions of its greenness are diminished by a crisis. Estimates also need to be made of what the company stands to gain if it is perceived by these segments as improving in greenness. If a change in perceived greenness in either a negative or positive direction would not affect the purchasing habits in these segments very much, the size of the market cannot be considered large.

However, if it is discovered that consumers in these segments are very responsive to changes in greenness or that some of the segments might grow when cultivated properly, the market size probably would be high and defensive green or extreme green strategies would be appropriate. Choosing between a defensive or extreme strategy in this situation should be guided by what is learned in additional research on competitors and company capabilities. It should also be guided by consumer research on the nongreen segments — companies want to be sure they won’t suffer costly abandonment of a brand if it is perceived as “too green” by customer segments that are indifferent or even hostile to green product attributes.

In addition to studying consumer responsiveness, it is also crucial to gain an understanding of how competitors are perceived by consumers on greenness as compared with the company’s brand. At the same time, gathering information about the reality of how competitors are performing on greenness is also necessary. A critical eye must also be focused on the company’s own green processes and its upper management commitment to greenness. It must be determined whether consumers perceive the greenness of the company and its competitors accurately or whether misperceptions are creating differentiation in the markets. If a marketer feels that it is possible to truly differentiate a brand in a way that will be honest, credible and long-lasting, a shaded green or extreme green strategy will be viable. But if competitors are really better and are capable of maintaining this edge — or if the cost of becoming greener than competitors does not seem worth the effort, given the prospects for additional revenue — then a lean green or defensive green strategy will make more sense.

In addition to doing careful research to guide strategy selection, managers should also cultivate the corporate culture. The organization and its people must support a truly green marketing strategy in order for it to succeed. Managers should encourage the increased participation of all employees in order to generate ideas and increase enthusiasm. They should also keep in mind that most customers and employees get satisfaction from being part of an organization that is committed to operating in a socially responsible manner.

It’s also important to educate consumers. According to the 2002 Roper survey, labels and displays can play an important role in making an environmental statement about a brand. More than half of all Americans say they have purchased a product because the advertising or label indicated that it was environmentally safe or biodegradable. Explaining how or why a product is environmentally sound can also make a big difference. Product packaging or in-store displays can be a major source of information about environmental action. Point-of-sale demonstrations and knowledgeable salespeople can help to educate consumers. Giving out free samples might be a good way to ease customers’ initial reluctance to try a new product.

Another key element of green marketing strategy is credibility. Having a good reputation to begin with can go a long way in helping to ease customer skepticism. Companies with socially responsible corporate values will appear more credible to target audiences, but it is critical that they also back up environmental claims. Customers are still worried about the “green-washing” (that is, false or misleading environmental claims) that was prevalent in the 1980s and early 1990s. Now new standards and certifications allow customers to identify green products easily. In 1992, the U.S. Federal Trade Commission developed general principles and specific guidelines on the use of environmental claims.17 By following those guidelines, marketers can avoid overstating environmental claims. The use of ecolabels such as “Blue Angel” in Germany and “Energy Star” in the United States can help assure customers that the products they are purchasing are in fact green.

Finally, because consumers buy products and services primarily to fulfill individual needs and wants, companies should continue to highlight the direct benefits of their products. They should continue to tout the traditional product attributes of price, quality, convenience and availability and make only a secondary appeal to consumers on the basis of environmental attributes.

Fulfilling the Promise

Consumers, shareholders and society at large all stand to benefit when a company integrates environmental friendliness into its marketing strategy. If properly implemented, green marketing can help to increase the emotional connection between consumers and brands. Being branded a green company can generate a more positive public image, which can, in turn, enhance sales and increase stock prices.18 A green image may also lead consumers to have increased affinity for a company or a specific product, causing brand loyalty to grow.

While there are obvious benefits to integrating environmental friendliness into consumer marketing, there are also some significant risks. There is a lot at stake for companies that choose to implement green marketing strategies, including the magnitude and risk of capital investments, the rigors of regulatory compliance and the potential for consumer backlash. An ability to anticipate and react to the next environmental issue could mean the difference between maintaining a green reputation or losing status as a green company — and potentially much more.

As understanding grows about the impact of human activity on the Earth’s ecosystems, consumer concern about the environment and its links to health and safety will intensify. At the same time, humankind’s passion for consumption will persist. The challenge for companies will be to devise business practices and products that are friendly to the environment while also meeting the needs of consumers.