Product Life Cycle
This blog explains the Product Life Cycle that looks at the environmental and social aspects and impacts of a product or a service across all stages of production and consumption, from design to disposal.
For each part of the LCA, the company looks at the inputs, what is needed to make the product, for example, energy, materials, labor, and outputs, what comes out of the system, e.g., products, waste, emissions.
Life cycle thinking can be applied at several different levels; to the whole product, just one part of the system, or a particular decision for a material.
Companies then choose to either make changes across the whole lifecycle, or just those with the biggest impact, or a combination that represents incremental improvements.
For example, when P&G conducted a lifecycle assessment of its laundry detergents it found that 85% of greenhouse gas emissions were coming from customers heating the water to do the laundry.
In response to this new information, it developed cold-water detergents that both saved customers money on energy bills and reduced their emissions. It was the first company to launch cold-water detergent in both the USA and Europe.
According to the UNEP/SETAC Lifecycle Initiative, a lifecycle approach promotes:
Awareness that our selections are not isolated but are part of a larger system. For example, the decision to purchase office paper. It takes 24 trees to create 50 000 sheets of paper and 2.3 cubic meters of landfill space to dispose of it.
Thus, the choice to procure recycled paper and paper products from sustainably managed forests and to reuse and recycle paper after use impacts multiple points in the system.
Making choices for the longer term and considering all environmental and social issues associated with those. Thinking about the whole lifecycle of a product helps avoid making short-term decisions that can have a lasting negative influence, such as over-fishing or releasing pollutants into the air.
Improving entire systems, not single parts of systems. Lifecycle thinking was initially designed to prevent decisions, for example, that fix one environmental problem but cause another unexpected or costly problem to arise.
This approach helps prevent shifting problems from one lifecycle stage to another, from one region of the world to another, and from one environmental or social issue to another.
Informed selections but not necessarily ‘right’ or ‘wrong’ ones. Lifecycle thinking helps put the decisions that are made about products and processes into context to look at the unintentional impacts of our actions, such as damaging nature or supporting unfair labor conditions.
If we fully understood the impact of these actions, we might choose to act differently, in the best interests of people and planet.44
For businesses, this approach also helps to understand products, processes, and services better and the impacts these can have on the environment, on society, and on the company at every step.
Companies can make better decisions and find opportunities to improve products and processes and ultimately, their bottom line.
For companies such as Johnson and Johnson, tracking the life-cycle costs avoided as a result of sustainability projects has helped them to build a strong business case for environmental goals and programs.
Tips on conducting a lifecycle assessment
Understand what your goal is before starting. This includes why you are looking at your product’s lifecycle, and what kind of information you need to know in order to make the necessary decisions.
Determine how much information you need. There are so many different elements of a product that you can gather information on that it can very quickly become overwhelming. Understand that the lifecycle will not give you all the answers. It should be used as one component of a decision-making process.
The lifecycle assessment checklist
The following checklist provides a range of topics and issues to address in analyzing the lifecycle of a product:
Design. The lifecycle begins at the design table, where designers of products or services decide on what the product or service will be produced, the need it fulfills, and the resources needed to produce it.
Follow the principles of eco-design to create simpler designs with fewer components that are easy to separate for repair and recycling, and are modular to permit easy repair, recycling, upgrades, or service; and create efficient production processes that aim for zero impact.
Uphold labor standards and human rights throughout the lifecycle. Design products that minimize the use of chemicals, incorporate recycled and recyclable materials, use more durable materials and reduce waste and energy use during production and use.
Sourcing material. Once the materials have been selected, they need to be sourced (e.g., wood, minerals, water, etc.).
Use materials with less environmental impact, for example, timber from sustainable forests.
Work with suppliers that use sustainable processes to extract raw materials.
Source locally available materials and resources.
Apply green chemistry to production processes, and minimize and phase out purchase, use, handling, and disposal of materials and substances that are hazardous or toxic.
Work with suppliers to increase supply chain efficiency.
Use byproducts or wastes from one process in another product or process.
Production and manufacturing. Raw materials are transformed into the product through a series of processes.
Use eco-efficiency and clean production concepts in production processes.
Reduce material variety and weight. Aim for sustainable technologies.
Meet all applicable environmental regulations, safety and performance standards, and labor and human rights standards.
Sell byproducts to others as primary inputs.
Packaging and transportation. Once created, a product is then packaged and transported to distribution centers and to the customer.
Use minimal, robust, reusable, returnable, recyclable packaging. Look at innovative solutions such as labeling the product instead of packaging.
Design products that are easier to transport and store.
Use reusable or recyclable shipping containers, pallets, skids, or packaging.
Use fleet management tools, techniques, and technologies to optimize distribution and shipping efficiency.
Use. How the product or service is actually used has quite an impact on the overall lifecycle of a product.
Use fewer resources and cause less pollution and waste during use. Optimize functionality and service life by communicating multi-functional, modular features, part load operations, upgradeability, energy efficiency, simplicity, increased durability, reliability, reusability, easy maintenance.
Educate users about how to best use and dispose of products.
Look at other inputs needed for use (such as for cleaning or maintenance).
Increase the service intensity and/or leasing options for your products. Encourage customer sharing, swapping.
Disposal and end of life. Finally, the end of the lifecycle is how the product is disposed of after use.
Reduce the environmental impact of disposal by allowing easy reuse, recycling, ease of disassembly, the ability to remanufacture.
Find innovative uses for waste.
Label reusable and recyclable content.
Educate consumers about how to dispose of products.
Provide product refurbishment, remanufacturing, refilling, or other services.
Offer an exchange or take-back program for old or used products. Swedish jean company Nudie Jeans provides consumers with free repair kits to fix jeans. Kits include denim patches, needle, thread, thimble, and even a booklet and online video to help with the repair.
Eco-design, also known as ‘design for the environment,’ concerns designing or redesigning a product or service to take into account the environmental (and social) impacts throughout its lifecycle. Best practices in eco-design involve:
Re-thinking the product and its functions from raw materials on up in order to make it more efficient, thereby reducing the use of energy and other natural resources.
Reducing energy and material consumption throughout a product’s lifecycle.
Re-placing harmful substances with more environmentally friendly alternatives.
Selecting materials that can be Re-cycled, and building the prod-uct so that it disassembles easily to allow recycling.
Designing the product so parts can be Re-used.
Improving the product durability and ease of Re-pair so that the product does not need to be replaced as often.
Products that follow some or all of the above-mentioned eco-design concepts often state that they are a ‘design for’ product (e.g., design for water conservation, design for disassembly, etc.).
Eco-design principles can be applied to a single product or service, or a production process. Computer company HP, for example, has been working to design products that are easier to recycle by integrating clear design guidelines and checklists to assess and improve the recyclability of its products.
They do this by using a modular design to allow components to be removed, upgraded, or replaced, eliminating glues and adhesives by using snap-in features, reducing the number and types of materials used, using single plastic polymers, and using molded-in colors and finishes instead of paint, coating, or plating.
Some things to keep in mind:
Understand your existing products. When redesigning an existing product, a good way to understand eco-design and how it can relate to your project involves physically taking apart the product, looking at the different components, and identifying excessive use of materials as well as opportunities to make improvements in packaging, product use, production, materials, and disposal.
Understand what people really want or need. The key to successful design is to observe what people do and understand how people feel and think and to use these observations as inspiration for designing or redesigning a product.
Often there is a disconnect between what people say and what they actually do, which is why the insights cannot simply come out of market surveys or focus groups: people often don’t say what they think or do what they say.
Create designs that engage the customer. The key is to create products and services that inspire engagement and encourage positive behavior. Many people buy the Toyota Prius not for the return on investment, but for the experience.
One of the features drivers like is the constant information displayed about the fuel economy drivers are getting and how they can get more. Drivers can then take this information and compare it with other users through an online forum on the Toyota website.
Why is it important?
Opportunities. Although surveys differ (estimates range widely from 5% to 75%), a potentially large percentage of consumers are ready and looking to purchase products on sustainability grounds but currently don’t because these products are either not accessible or unavailable. It is a growing market that is not yet being effectively reached.
Bad news can spread quickly. Whether the news has substance or not, the rise of social networks and influencers means that you are not the only one developing your marketing message. Not having a consistent, well-thought-out message will be picked up and can have a lasting negative effect on your brand.
Good news can also spread quickly. If you take sustainability seriously, and it shows through in your products and marketing campaigns, others will do the marketing for you by spreading the news as best practice.
In some markets, such as organics and fair trade products, governments and NGOs run awareness campaigns that indirectly promote products with these labels.
Return on ignoring. By being transparent in their communications with stakeholders, companies can build trust and loyalty with their customers. Leading companies in this area are building their reputations on years of work rather than a campaign they can stand behind for a month.
Internally and externally. Marketers have a crucial job in providing consistent messages about sustainability and the company not only to external customers but also, perhaps more importantly, to employees and internal teams.
The impact is in the use. Considering that the majority of the impact of a product (80%) is actually in the way that it is used and disposed of, marketers can play a key role in educating the consumer on how to best use and dispose of the product in order to reduce the full lifecycle effects of the company’s products.
Selling products. A company can put a lot of effort and investment into creating a new, more sustainable product but if the marketing department doesn’t do its job, the product will not sell – sending a strong message to the company that sustainability isn’t worth it.
Throughout this blog, we have talked about how companies are looking at environmental and social issues across their supply chains.
How they make their supply chain more sustainable is often communicated to the consumer through eco-labels. But eco-labels are merely a starting point for some companies and consumers.
In the past, consumers got information about the positive and negative aspects of product lifecycles from consumer websites, but increasingly the producers themselves are providing that information via the ‘backstory’ as it is called.
Icebreaker, an outdoor clothing company based in New Zealand, has tagged its garments made from merino wool with a code that customers can enter on the website to check out the product’s history – known as a ‘Baacode.’
In Japan, grocery shoppers can use cell phones to scan RFID tags on food items to find out more details about their origins.
Distinguish leadership. Claims should not imply a product is exceptional if all other products share the same general characteristics.
Be based on sound scientific and engineering principles with a strong focus on lifecycle considerations to assure customers that all aspects of the product’s development have been taken into account.
Be credible. Often eco-labels are managed by well-respected and recognized third-party organizations and used by well-respected companies, which increases the product’s credibility.
Be measurable and comparable. Claims should be made only if they can be verified. Methods used can include international standards, recognized standards, or methods developed by industry, provided that they have been subjected to peer review.
Be based on open and accountable processes that can be monitored and questioned. They should operate in a business-like and cost-effective manner.
Several challenges exist in this area. The range of existing and new eco-labels is making it confusing for customers to understand what it all means, especially when private company labels are added to the mix.
Some labels have strict requirements to adhere to while others require very little effort to get certified. However, more work is being done in this area to make it easier for consumers and companies to understand these labels.
Social marketing refers to programs and campaigns that aim to raise public awareness in order to introduce more sustainable behaviors relating to the environment (e.g., energy or water conservation and waste reduction) or society (e.g., health, voting).
Social marketing does not look to sell a product or service, but rather to encourage or modify behavior by applying traditional marketing principles and techniques to influence a particular audience’s behaviors for individuals’ and society’s benefit.
The goals of social marketing can include:
accepting a new behavior (e.g., composting food waste);
rejecting a potentially undesirable behavior (e.g., starting smoking);
modifying a current behavior (e.g., increasing physical activity from 3 to 5 days of the week);
abandoning an old undesirable behavior (e.g., talking on a cell phone while driving).
Social marketing campaigns can be focused either on one-time actions (e.g., install a low-flow showerhead) or on promoting repeated behavior (e.g., take 5-minute showers).
One example is the Rock the Vote campaign in the USA, which aimed to engage the political power of young people through the use of music, popular culture, and new technology to incite young people to register and vote in elections.
Governments and not for profits regularly run these sorts of campaigns, but increasingly industry is doing so as well, as a way to gain support for their sustainability efforts.
As NGO Utopies puts it, ‘these campaigns often seek to encourage consumers to behave responsibly and are usually the work of companies which, having incorporated social responsibility into the products or services they supply, require a matching commitment from their customers for their actions to be really effective.’
Among the best-known, private-sector social marketing campaigns were the Body Shop’s Against Animal Testing campaign in the mid-1990s, which led to a UK-wide ban on animal testing of cosmetic products and ingredients in 1998 and raised awareness with consumers about their products which were not tested on animals.
The ‘look behind the label’ campaign at Marks and Spencer in the UK was an educational campaign aimed at teaching its customer base to appreciate the changes that the company was about to make to their products relating to fair trade, sustainability, non-GM, and animal welfare.
It then followed with Plan A, outlining all the steps that the retail company was going to take to be more sustainable in those areas.
In France, food retailer Leclerc conducted a campaign about the impact of plastic bags in 2003 that was followed by the adoption of an amendment banning non-biodegradable plastic bags in stores.
Social marketing applies traditional marketing techniques to sell a particular behavior rather than a product or service. These include:
1. What is the issue that you are communicating about and why is it important? What is the behavior you want to change and why? Take a look at successful campaigns that have taken place around the world as a starting point. Understand why people don’t want to change and help them get over those hurdles.
2. Who are you communicating with and why? This is the group of people that the campaign will be focused on. Focus on target markets that are ready and willing to act rather than one that is resistant to change.
3. What are your messages? The message should include clear instructions on how to act. Make sure it is simple and doable. Sometimes this message will be accompanied by a physical product that helps with the change.
For example, encouraging people to use less water could be accompanied by a list of where to buy low-flow showerheads.
4. What are they giving up/gaining? The audience should be given information about the costs (both monetary and non-monetary) of the current and any alternative behavior (e.g., smoking includes the cost of a box of cigarettes but also the cost to your health and the health of others around you).
You can also add incentives to help guide the behavior, for example having special lanes on the highways for cars with two or more people.
5. How will your message reach the audience? This includes how you promote the message as well as the physical location where the audience will perform the desired behavior or where the message is made available to the public.
6. How will you know if the campaign has been a success?
Social marketing campaigns will also often include working on laws or regulations that influence the desired behavior.
Monitoring the campaign allows you to learn how the message changed your target audience, whether it had an impact, and revise it as needed. Use prompts such as stickers and commitment to motivate people to continue to change. Let people know how the campaign went.
Cause-related marketing differs from social marketing in that it focuses on raising awareness and concern for a social issue (e.g., global warming), but it typically stops short of trying to change the behavior itself.
Companies explore cause-related marketing as a way of differentiating themselves, or of enhancing their reputation, and also to increase sales and contribute to a cause that is important to their stakeholders.
Cause-related marketing usually involves a partnership between a for-profit company and a not-for-profit organization promoting the product to raise money for the not for profit. Cause-related marketing can take several different forms:
Sales based. Donation programs, where a company donates a percentage of its sales to a particular charity over a certain period of time.
Support for customer-aligned charities. Provide funds to charities that support causes that are important to your stakeholders.
Support causes aligned with business purpose. Endorse a cause that is a natural extension of the company’s own business.
The phrase ‘cause-related marketing’ was first used by American Express in 1983 to describe its campaign to raise money for the restoration of the Statue of Liberty. American Express made a donation to the Statue of Liberty every time someone used its charge card in the area.
As a result, at the time not only did they raise US$1.7 million for the project but the number of new cardholders grew by 45% and card usage increased by 28%.
The success of a cause-related marketing campaign depends on finding the balance between doing something that benefits your company and what your customers perceive as being good for the community. Some tips:
Pick a not-for-profit or issue that means something to your target market. Over 1000 businesses worldwide make up One Percent for the Planet, where members contribute 1% of sales to environmental groups around the world.
Mountain Equipment Co-op joined in 2007 and has since contributed over US$17 million toward conservation, including launching – with Canadian Parks and Wilderness Society – The Big Wild, an ambitious project to protect at least half of Canada’s public land and water wild forever.
Give your customers a way to showcase their good deed. The RED campaign was created to raise awareness and money to help women and children affected by HIV/AIDS in Africa.
Companies involved sell a range of red-colored products such as Motorola red phones, American Express red card, Apple’s red iPod, Gap’s red t-shirts, and red Converse shoes. A percentage of each RED product sold is given to AIDS programs through the Global Fund.
Combine efforts for bigger change. The Glue Network provides a platform for companies and their customers to come together to raise money to make a bigger change. A range of brands from around the world empower their customers to invest their charity dollars in particular projects that the customers believe are most important.
Give people something to talk about and get engaged in. Innocent drinks organize a ‘super gran woolly hats’ promotion every year in the UK to raise money for Age Concern (over 25 000 older people die of cold-related illnesses every winter in the UK).
The public is taught, through the website and knitting sessions at grocery stores, to knit miniature hats. Innocent puts the hats on top of their bottles around Christmas time and 25 pence for every bottle sold with a hat on it is given to Age Concern. Through this campaign over £1 million has been raised since 2008.
Give what you do best. Quite a few companies are exploring the ‘one for one model,’ where for every product sold the same product goes to a person in need. For every pair of TOMS shoes purchased, a pair of new shoes is given to a child in need.
Ark Collective sells backpacks and then donates one to a poor schoolchild in the USA. Warby Parker not only donates a pair of glasses for every one sold but also provides training to low-income entrepreneurs in developing countries to start their own businesses selling glasses.
Be consistent. Made for Good is a consortium of like-minded apparel brands that support a range of charities and issues including curing diseases, educating our youth, assisting the poor, and protecting the environment. A percentage of all product sales is used to raise money for these charities.
The key concepts
Marketers are present throughout the lifecycle of a product and have many opportunities to embed sustainability in their work in the following ways:
Identify who your customer is
Identify what your customer wants
Determine how much to charge
Determine how best to sell those products/services
Determine the best way to present and protect those products
Communicate your sustainability commitments and characteristics
Increase awareness about the issues that are important to your company
Help raise money for causes that are important to your stakeholders
How to promote your sustainability commitments don'ts
Increasingly, customer concern for the environment and society is translating into a demand for more sustainable product options and choices. The extent of this increased demand, however, is a contentious issue.
Numerous studies propose numbers of consumers being prepared to buy ‘green’ that range from 5% to 75%.
Private research firms and the producing companies themselves are working to segment the green consumers to better understand who their customer is and what they want. This has resulted in an ever-growing variety of groupings, for example:
Those who will buy sustainable products no matter what.
Those who will buy green but expect high standards and quality.
Those who are not sure what to think but do want to buy green if it is easy and straightforward.
Those who are completely confused as to what to buy and therefore end up not buying green.
Those who stay away from green products and are uninterested in this area altogether.
The majority of consumers are in the middle group. They are ready to purchase green but influenced by a variety of different sustainability factors to different degrees.
It has proved difficult to isolate the so-called ‘green consumer’ for several reasons:
Some studies tend to overstate green behavior by focusing on what people say they do, but not on what they actually do.
Other studies understate the potential by focusing on only one element of green products (e.g., whether a consumer would buy products that are organic but not looking at products designed to increase efficiency).
The potential market can be overlooked by looking only at the demand for existing products but not the potential demand for products that do not yet exist in this area.
Decisions are based on a range of factors often combined together. Consumers will choose a hybrid car for both environmental and cost-saving reasons or may choose organic food because it tastes better and is healthier, not just because it is better for the environment.
As mainstream products become more sustainable, consumers will be buying green whether or not they consciously realize it. Consumers are not always familiar with or may not truly understand the meaning of the terms used in the surveys – such as ‘green,’ ‘sustainability,’ etc.
They do not necessarily know what exactly a green product is or how to recognize a green company.
By attempting to relate a consumer’s environmental concerns to what they purchase, we may be looking in the wrong place. Many of the significant contributions the consumer can make toward environmental quality actually come from product use, maintenance, and disposal.
Therefore, when considering why people would purchase sustainable products, it is more important to understand the compromises and tradeoffs consumers are being asked to make.
Getting to this stage will then allow companies to focus on providing the products that people actually want and need, thereby making it simple for consumers to do their part. Some of the hurdles to be overcome are:
Many consumers still see ‘green’ products as being inferior. Consumers are looking for green products that work as effectively, or better than, non-green options. Often, they will not buy green products on the basis of environmental benefits alone, and instead are looking for added selling points.
Consumers don’t want to pay much extra or sacrifice quality for greener products. They will only pay a premium if they feel that premium is justified, based on the guarantee of certain environmental or social factors, or added value to the consumer.
Consumers are looking for products that aren’t just making an impact far away, but that impact them directly as well. They will be more likely to respond to product attributes that will personally benefit them, such as ‘safe,’ non-toxic, cost-effective rather than just biodegradable or fair trade.
Consumers will tolerate only minimal inconvenience in using green products and don ’t want to have to go out of their way to buy them. Products need to be easy to use and available at mainstream distributors.
Many consumers may be interested in buying more sustainable products but currently lack the right information at the right time to make those decisions. They don’t necessarily expect companies to have perfect green credentials but will look for a commitment to improving and evidence backed by facts, for example through recognized eco-labels.
If a product is of high quality, readily available, and at a reasonable price it has the potential to capture market share. In an interview with Harvard Business Review, Steve Bishop from Ideo said ‘don’t bother with the green consumer.’
He said that companies spend time trying to connect with those people who really understand the issue, the green niche so to speak, but in the process, risk alienating their base who have different values and who are interested in solving their own personal needs before saving the planet.
The solution? Rather than focusing on the features of a product, focus on consumer needs in order to cater to all consumers.
Those involved in marketing sustainable products should be interested in the following categories of consumers:
The ever-growing conflicted consumer. This group, which is estimated at being anywhere between 25% and over 50% of consumers in some markets, believes that the companies they currently buy from are unethical and are building resentment toward the brands.
Examples include certain fast-food restaurants for the perceived damage their food causes to children. This is a group of apparently loyal customers that are ready to leave as soon as a more ethical alternative product or service becomes available.
Another important consumer group for green products is women. Women spend about 85 cents of every dollar spent and make more than half of family and business-to-business spending decisions.
Consumers are taking sustainability labels seriously and are asking companies to react to these issues.
Product evangelists are your free sales force, they are the ones that do not just believe in your product, but believe in it so much that they will tell others about it. Finding the right tools to engage with this group will increase sales, loyalty, and generate consumer insight.
With increased levels of awareness about sustainability issues, young people are not just getting involved, but are increasingly influencing their parents’ decisions in this area.
A sustainable product is one that provides environmental, social, and economic benefits over its full lifecycle. Some could argue that there is no such thing as a truly sustainable product.
All products need energy, water, and materials to be designed, produced, and used. But much work is being done to reduce the impacts of products across the lifecycle.
Companies have two fundamental choices when it comes to creating sustainable products. First, they can take an existing product and make it greener. This involves many of the concepts introduced in eco-design, including using more sustainable materials, production processes, disposal, etc.
Second, they can identify customers’ needs and wants and develop entirely new products that are able to better address these in a more sustainable way.
Consumers are looking for a variety of different kinds of sustainable product options (or combinations of), including:
Products that present a solution. This could be a product that is a better alternative to what is currently available. The focus is on identifying a need and providing a product that satisfies that need.
Products that are safer.
Several sustainability products, for example, those that use fewer chemicals and have more natural ingredients such as organic, aim at providing healthier, safer options for consumers (e.g., green cleaning products such as 7th Generation and Ecover).
Products that save money. Many green products on the market right now, especially new technologies (both very simple or complex), allow consumers to not only reduce their energy or water use for example but also to save them money (e.g., solar panels which enable a consumer to both generate their own power and sell excess power into the grid).
Products that make them feel good. Certain products may or may not have any intrinsic sustainability characteristics but the companies producing them or the products themselves support causes that the consumer perceives to be important. Supporting those products makes the consumer feel as if they have done their part in making the world a better place.
Products that make them look good. Some consumers are looking for products that look like they are green in order to communicate to others their green credentials (e.g., hybrid cars or green luxury goods).
Products that make it easy to switch. Consumers are looking for products that make their life simpler, not more complicated, and they are looking for products that make it easy to switch.
Consumers are also looking for products, brands, or retailers that are doing the work for them, such as products that all uphold certain standards so that they do not have to think about every single purchasing decision.
Products that are of high quality. Consumers are looking for products that are high quality (e.g., Mountain Equipment Co-op in Canada guarantees its products, which can be returned at any time for exchange, refund, repair, or credit).
Products that aren’ t doing harm. Consumers are increasingly interested in supporting products that are not doing harm to society and the environment, in particular as the levels of awareness increase in the impacts of many of these products and processes.
Marketers have a role to not only question the underlying assumptions behind product development but also, in some cases, to question the product altogether.
Some producers may assume that consumers need to physically own a product in order to be satisfied with their purchase. But generally, it is the use of the product itself rather than the purchase that generates satisfaction.
With this in mind, marketers should rethink not only the way that products are designed but how the entire product experience is designed. Can the product be rented, borrowed, reused, or repaired?
Will it need to be disposed of? Traditional discussions around the purchase itself need to make way for more discussions about what happens after the purchase.
A post on the blog of TerraCycle’s founder explains some of the dilemmas that companies face with a price. The company has a line of eco-friendly cleaners that are just as good as synthetics and, in some cases, better.
They are packaged in used soda bottles and retail at US$2.99, cheaper than other eco-brands, but 70 cents more expensive than other household cleaners.
‘So here’s the question,’ asks Tom Szaky: ‘Our sell through at our retailers is very strong, so we could keep our price at $2.99, and be the best price in the eco-field but still be a premium to the national brand. Or we could cut our margin and either match or even beat the prices of the conventional brands.
It would hurt margin, but it should increase market share. It would be a bold but tempting move since we may be able to gain market share beyond the “eco-cleaner” category. What do you think we should do?’
Pricing products is a tricky business, whether they are green or not. Getting the price right is crucial; price it too high and you may miss the mainstream market but price it too low and consumers may see it as a lesser quality product.
Price consistently comes up as a barrier to moving sustainability to become more mainstream, but it is not alone.
It is only one part of the decision-making process for customers, along with quality for example. ‘How much more would you be willing to pay for greener products?’ contains a powerful message which promotes the image of the environment as an additional cost burden on business and consumers.
It would perhaps be more appropriate to ask consumers, ‘Do you want to continue buying products that are inexpensive because they damage the environment?’
While the pricing of the product from the company’s side often rests on their actual costs, what a consumer is willing to pay for a more sustainable product is more related to the perceived value it brings to both the customer and to the environment and society as a whole. Determining how much a consumer is willing to pay for a sustainability product comes down to these points:
The perceived value (financial). This has to do with the total value that the customer is getting from the product or service itself, and how much value they are getting from this product as opposed to another one. This includes:
Indirect costs. Is the product worth enough to the consumer that they are willing to go out of their way to buy it? Is it higher quality, or does it result in increased consumer satisfaction? Is the product easy to find, easy to use?
The perceived value (ethical). This does not have to do with the product itself, but rather with the claims that the product makes. How much does the consumer value the environmental and social guarantees the product is making?
This also depends on how much knowledge the consumer has about different issues, and therefore whether they are able to understand the positive changes that the company has made to society or to the environment. It also has to do with how far they believe the impacts being claimed are true. This includes:
Direct impact. Supporting a product that was made using sustainable materials, sustainable processes, fair trade, recyclable materials, etc.
For example, a consumer choosing to buy paper that is recycled and FSC certified knows that they are protecting forests and supporting the responsible management of the world’s forests.
Indirect impact. For example, some companies will link parts of their profit to social and environmental causes relevant to or of interest to their business. This is either through the price you pay, or as a percentage of profits.
Customers then feel that they are doing something good by buying the product, especially if they care for the cause, and that if they are being asked to pay a premium it is going to the right place.
Another challenge in this space is companies who overcharge for green products knowing that a particular group of consumers will be willing to pay for them. A study by Accenture found that 60% of respondents admitted to charging a premium of 5% to 25% compared with non-sustainable goods.
The price premium on sustainability items was often seen by the customer as a sort of sustainability tax, and taxes are typically meant to penalize and discourage a behavior.
Surveys show that consumers overwhelmingly want to buy healthier, greener products but do not want to pay more for them. Therefore, competitive pricing is sustainability’s path to mass-market adoption. WalMart has realized this and is working to provide more sustainable options at competitive prices.
The place in the marketing mix generally refers to where and when consumers will acquire a particular product or service. This includes several elements such as where the product is made and how the products are transported. Here we will focus on where the product is being sold; the retailer.
In this context, the retailer includes any organization that sells and delivers a product to the consumer, and it can include supermarkets, stores, restaurants, and department stores.
Retailers have often been perceived as not only playing a passive role in sustainability but in some cases being part of the problem. According to UNEP, the world’s 200 largest retailers account for 30% of worldwide demand. Therefore, actions by retailers have a significant effect in this area, and in many cases, retailers are actually leading the changes.
WalMart, for example, states that with roughly 10 000 suppliers, 200 million customers each week at 10 000 retail units in 27 countries and more than 2.2 million associates, they ‘have the ability to reach and influence people on a level unattainable by any other company.’
Their strategy includes goals and targets in their supply chain, in the products they sell, their employees, and the communities they operate in and source from. Wal-Mart aims to be supplied by 100% renewable energy, to create zero waste, and to sell products that sustain our resources and the environment.
Retailers have a number of areas to review in building and improving sustainability:
Retailers should ensure that their own operations are sustainable and that they are controlling and managing their environmental and social impacts in energy and water conservation, waste management, and recycling in stores and distribution centers.
Over 130 Kohl department stores in the USA now have 40% of their power provided by solar panels on the roof. Because of the high upfront costs of the panels, SunEdison, a solar energy services company, paid for the panels and is selling the electricity to Kohl.
Site selection. Retailers are looking not just at how they build their new buildings but also where. Tesco, a supermarket chain in the UK, has looked to build new stores on brownfields, mean-ing redeveloping lands in urban areas for new uses rather than expanding outward to rural or agricultural areas.
Where products come from. The sourcing of consumer products includes working with suppliers to favor the development of products that are more sustainable.
For example, Starbucks started integrating conservation principles into its best-buying practice, and by working with Conservation International implemented CAFE standards which set ambitious goals to ensure high-quality coffee is grown and processed in a manner that is both socially and environmentally responsible.
Eliminating unsustainable products. Some retailers are eliminating products they consider to be unsustainable from their stores and, where possible, offering more sustainable alternatives.
After a 6-month consultation with its over 100 000 members, The Co-op, a food retailer in the UK, revised its product portfolio in support of more sustainable options, including banning the sale of eggs from caged hens in favor of free-range and organic eggs.
Educating the customer. Retailers are providing more sustainable options for their customers to choose from. They are also educating their staff about these options, and pricing and promoting them appropriately.
Where the product is placed. Retailers are making more sustainable products easier to find and easier to buy. Green products in some countries are confined to the health food aisle or store, which can limit the number and kinds of customers these products potentially attract.
Office Depot publishes a special catalog with its green offerings (over 2200 items), and in-store these offerings are placed alongside less green alternatives which have significantly increased sales.
How the product is sold. Retailers are also exploring new ways to get products to consumers in the first place. Allegrini, an Italian producer of biodegradable detergents, developed Casa Quick.
Casa Quick takes its detergents in mobile vans from house to house and allows families to refill their bottles, paying only for the quantity taken. Consumers receive a kit of plastic flasks which are easy to carry from house to van.
Presentation of products in-store. Several international companies – such as Unilever, IKEA, McDonald’s, and PepsiCo – are working together through the global initiative Refrigerants Naturally! to combat climate change by replacing harmful gases with natural refrigerants in point-of-sale cooling machines.
Retailing differently. The REI (an outdoor company) store in Boulder, Colorado, is not just a LEED-certified green building but also a community center. The floor plan is designed around a central resource area with meeting rooms, information kiosks, and a children’s play area.
Retailers can also provide a spot for consumers to bring back products for reuse and recycling. Many electronic stores already have facilities to collect used batteries and super-markets will collect used plastic bags. Electronic store Best Buy offers several recycling programs to the public, whether they bought the products at the store or not.
They can bring them in for free recycling, they can trade in used electronics for gift cards, they can bring them in for repairs via their ‘Geek Squad’ program, or they can sign up for the Buy Back program when they buy a new product, allowing the customer to bring the product back in-store for a partial refund at the end of the product’s life.
Packaging is the first part of the consumer’s tangible experience with your product. If a product or a company promotes itself as green and then uses excessive or unsustainable packaging, it is not sending a consistent message to the customer.
Packaging should not only be seen as something that protects the product, but also as an opportunity to connect with the customer and transmit information about the product, what it is made of, how best to use it, and how to dispose of it when a consumer is finished using it. There are two components to sustainable packaging:
1. The packaging. Companies are making the packaging itself more sustainable. This includes looking at:
Materials used. According to the Sustainable Packaging Coalition, sustainable packaging is packaging that:
is beneficial, safe, and healthy for individuals and communities throughout its lifecycle;
meets market criteria for performance and cost;
is sourced, manufactured, transported, and recycled using renewable energy;
maximizes the use of renewable or recycled source materials;
is manufactured using clean production technologies and best practices;
is made from materials healthy in all probable end-of-life scenarios;
is physically designed to optimize materials and energy;
and is effectively recovered and utilized in biological and/ or industrial closed-loop cycles.
Reducing the amount of packaging. The European Packaging Directive, for example, sets strict requirements to prevent the use of excessive packaging. In response to this, Danone spent three years re-engineering their yogurt packaging to significantly reduce the packaging used, saving the company US$2.5 million a year in the process.
Getting rid of all packaging is not the answer either. Under-packaging can be as much of an issue as over-packaging in terms of wasted energy and resources from ruined goods. Packaging needs to be considered in the context of the design and manufacturing of the product.
Packaging across the lifecycle of the product. Producers must think about how much is being used and what kinds of materials are being used as part of the packaging, whether it is primary (the packaging customers see), secondary (the packaging used to ship to retailers), or tertiary (the packaging used to ship the products from the manufacturers).
Keeping it simple. Amazon’s Frustration-Free Packaging initiative is designed to free customers from difficult packaging.
Instead of being packaged in hard-to-open and hard-to-recycle plastic and cardboard packaging, Amazon works with leading manufacturers such as Microsoft and Mattel to package products in a simple, recyclable cardboard box.
The design of the packaging. O2 redesigned their packaging to encourage customers who didn’t need a charger to opt out of receiving a new one when they upgraded their phone.
This had multiple knock-on effects, allowing phones to be posted through letterboxes (reducing courier deliveries), and offering a simple way to recycle their current phone.
Rethinking the packaging. There are large numbers of innovations in the area of sustainable packaging – from stores such as Unpackaged in London, which only sells products in bulk and encourages customers to bring their own packaging, to toys whose packaging can be transformed into a second toy.
Eliminating packaging. In 1985 Swiss retailer Migros began selling toothpaste tubes without the unnecessary boxes they usually come in and went on to remove excess packaging from everything from yogurt to drinks.
2. The messages on the package. Companies should also take the opportunity to communicate with the consumer through the packaging in the following ways:
Sustainability information. Several companies take the space on the packaging as an opportunity to communicate their commitments and actions in this area, including goals and information on the causes that are important to the company as well as how the consumer can get more involved.
Materials used (or not used). Timberland’s EcoMetrics label is a sort of nutritional label for shoes that lets customers know exactly what went into making the shoes. It lists the product’s energy use, global warming contribution, and materials efficiency.
How to use. Labels are also the ideal location to give users simple and easy-to-understand information about how best to use the product in order to minimize the negative impacts, and also maximize the positive impacts.
How to dispose of. Labels are being used to provide information for consumers on what to do with the product, or packaging, once they are finished with it. This can involve:
Providing details on how the product itself can be returned, repaired, or reused. Kiehl's, a skin and hair product company, has a loyalty card which is stamped every time a customer returns an empty Kiehls container.
Once you get a certain number of stamps, you can get free products. Other companies provide financial incentives, for example, a deposit that is refunded if you return the used packaging or a discount on your next purchase.
Providing details on how to dispose and recycle. Marks and Spencer in the UK provide clear information on its packaging telling the consumer which parts of the packaging are recyclable and which are not.
As the market for socially and environmentally preferable products continues to grow, so does the need for customers to sift through the increasing number of environmental and social claims used in the marketing of these products and services and to understand what they mean.
Eco-labels, found on a wide variety of products, tell consumers about certain environmental or social standards the product complies with. Labels exist for a wide range of product and service qualities, including, but not limited to, energy and another resource efficiency, sector-specific labels, organic and other food-related labels, social labels such as fair trade, recycling, product content, and design.
The variety and types of eco-labels continue to grow, and many eco-labels are introduced throughout this blog in the relevant areas. According to the ISO standard on eco-labels, there are three major categories of eco-labels.
Type 1: Third-party claims are awards given by a third party requiring a product to meet certain independently set criteria. These show leadership characteristics rather than just presenting information, and are often accompanied by public awareness campaigns to educate consumers about what the label means. Examples include:
Regional and national eco-labeling schemes such as the EU Flower, Germany ’s Blue Angel – considered the first and oldest environmental label, Nordic Swan, Japan’s Eco Mark, India’s Indocert, and New Zealand’s Environmental Choice.
Sector- or issue-specific labels which have a narrower focus than national programs, such as the Rainforest Alliance certification which promotes and guarantees improvements in agriculture and forestry, the Fair Trade label which guarantees producers were paid fair prices, or industry-specific labels such as the chemical industry’s Responsible Care Initiative.
Type 2: Green claims are the manufacturers’ or retailers’ own declarations. Since these are not given by a third party, it is more difficult for consumers to compare them with other brands or to fully understand what the claim means. Examples include:
Statements such as ‘100% recycled,’ ‘natural,’ ‘carbon neutral,’ and ‘environmentally friendly.’ Where not regulated by law or no evidence is shown, these statements are often not reliable and are found on products that are not always what they claim to be.
Company private labels. Private label initiatives have a wide range of truthfulness and usefulness. An example of a well-regarded private label is the Philips’ Green Logo, which is used on electronic products that meet certain environmental criteria across the whole lifecycle.
Products with the logo have been certified by external auditors that they are 10% more efficient than other products on the market within a given product category.
Type 3: Environmental declarations quantify information about a product based on lifecycle impacts and should allow products to be compared easily because they consist of quantified information about aspects such as energy output.
Unlike other labels they do not judge products, leaving that task to consumers. Rather, they provide something similar to a nutrition label found on food products but instead, this label outlines environmental impacts throughout the lifecycle.
Compared with type 1 and type 2, much less work has been done in this area but some examples include labeling products with their carbon footprints and Timberland’s ‘nutritional label’ featured on its products that give buyers information about the environmental footprint of that product.
Good eco-labeling initiatives involve the participation of government, industry, and commercial associations, retailers and companies, consumers, as well as other interested parties such as academics, media, and the international community.
A product must comply with all the required criteria to be awarded a label and must be retested regularly. According to the Global Eco-Labelling Programme, an effective labeling program should:
Be voluntary. It should be the decision of the business to participate in the program.