Greenwire, 13 October 2008 - While a new study says shoppers are increasingly factoring the environmental friendliness of products into buying decisions, "green" products face a tough road to broader acceptability as the United States slides toward recession.

The price premium demanded for many green products remains the biggest obstacle to their mass-market appeal. But a deeper look into consumer habits and mindsets provides clues for companies looking to survive the economic downturn.

Most Americans, especially young adults, now identify green products as "desirable," according to an online consumer survey by the Yale School of Management and McKinsey & Co. Green goods are also generally seen as being of higher quality than other products, and most U.S. consumers expect them to be more expensive.

Companies are also still facing difficulty gaining recognition for brands associated with the green products they market. When asked what comes to mind when they hear "green products," 42 percent of respondents named categories of products, like hybrid vehicles or fluorescent light bulbs, rather than a specific product or company brand.

That finding echoes results of other studies that suggest most consumers do not recognize company efforts to go green to the extent that marketers would prefer. An earlier study by Lippincott and the Climate Group, for instance, showed that most consumers are blind to corporate climate change initiatives.

In the Yale and McKinsey study, 24 percent of respondents could name a company brand or product that came to mind when thinking of green products. Fully 27 percent of respondents could not name a company brand, product name or even a category of goods when asked to identify green products.

But a deeper analysis of those 24 percent of respondents who did name a company product provides clues to where green product markets should focus sales efforts.

While many may assume that the Toyota Prius would be the most commonly identified green product in the United States, most respondents named the Clorox Green Works lineup of concentrated laundry detergents and household cleaning agents. The reason, the study's authors say, has to do with what people look for in green products in their value chain analysis -- primarily at the level of consumer use and disposal, rather than the volume of raw materials that go into production.

"Consumer use and disposal is where people want to see improvement," said Tamara Charm, a consumer insights expert at McKinsey & Co., at the launch of the survey results Friday.

But the vast majority of consumers -- fully 80 percent -- still believe automobiles have the biggest impact on the environment. The Toyota Prius came in as the second most frequently mentioned green brand.

And rather than fretting about the impact of the raw material extraction and manufacturing that must go into producing cars, consumers still look to the way cars are used and disposed of in their appreciation of green attributes. Most respondents said they would like to see better fuel economy in cars, and to know that the vehicles won't generate a lot of landfill waste when they are ultimately disposed of.

'Put the consumer in a different mindset'

Nearly all consumer product categories face a tough road as economic conditions worsen. Government statistics show that consumer spending is down sharply, and the retail sector is shedding jobs faster than other industries.

The declining economy will likely encourage companies to adjust their strategies to focus on cost savings inherent in their green products, whether through energy or water savings or improved gasoline mileage. But officials responsible for the Yale-McKinsey consumer survey say their findings suggest companies could do better by focusing their marketing on creating an emotional connection between shoppers and eco-friendly brands.

Through a serious of carefully tailored questions and brain exercises, thousands of survey participants were encouraged to enter either an abstract or rational mindset before answering why certain green products may appeal to them. The abstract thought question blocks attempted to measure the extent to which instinctive, split-second decisionmaking processes could translate into shopping patterns, even though a person's rational state of mind may dominate the ultimate decision.

In one example, Charm described how participants were asked about their thoughts on pollution and asthma, promoting an emotional state of mind, before being asked why they may choose to purchase a hybrid vehicle. In other cases, consumers were encouraged to think of high gas prices and family budgets before being asked the same question.

The results, they say, were surprising. Those put into an "abstract" mindset were more likely to say that they would choose a hybrid car primarily because of pollution concerns. Products that emphasized an emotional appeal generated a higher response rate than those that simply offered long-term cost savings to customers.

"You really have to put the consumer in a different mindset," said Ravi Dhar, professor of management at Yale.

How Toyota promoted Prius

That could explain the initial success of the Toyota Prius, which emerged strongly on the scene in relatively better economic times but also when gasoline cost 99 cents a gallon in many places in the United States.

In a presentation, Marjorie Schussel, manager of corporate marketing at Toyota Motor North America, described how her firm capitalized on the growing appeal of green products, especially among young and environmentally conscious consumers, to expand the car's market share at a time when sports utility vehicles were still very popular. While emphasizing the cost savings the first-generation Prius' average 48-miles-per-gallon fuel economy would provide, Toyota's marketing efforts tended to focus more on the reduction in greenhouse gas pollution the car offered.

The success of the Prius also allowed Toyota to reshape its entire image around a green theme, culminating in the "Why not" campaign, in which Toyota promises a future of selling zero-emission cars that produce no net waste in production or disposal. While the company is suffering with the rest of the auto industry as car sales plummet, sales of hybrids and other fuel-efficient cars are still relatively robust.

The lesson Toyota got from all this, said Schussel, is that shoppers are increasingly looking for responsible companies to offer products that allow the consumer to also have a lighter impact on the environment. That emotional connection could explain why the more expensive Prius was so successful even at a time in high gasoline prices were not an issue. Toyota is scheduled to begin manufacturing the third-generation Prius at a plant now under construction in Mississippi in 2010.

"It's clear that CSR [corporate social responsibility] now has really moved," said Schussel. "Customers demand that companies do right by society."

Recession's 'profound impact'

But the evolving economic landscape threatens to completely change the rules of the game.

Lisa Klauser, vice president of customer solutions at Unilever, warned executives at the survey release that studies conducted by her firm show that a recession will have a "profound impact" on shopping patterns.

While green products may have an advantage over others thanks to their emotional appeal, they will likely still have to win consumers over on pricing considerations as the drumbeat of glum economic reports encourages shoppers to retrench even further.

Judy Hu, executive director of advertising and brand at General Electric Co., said that the key to a successful sale could lie in marketing products in ways that address the whole range of shopping considerations. Those products that offer consumers ways to lessen their harm to the environment, feel good about their shopping choices and save money, whether at the immediate point of purchase or over the long term, could survive and even thrive in the wake of the financial crisis that is eroding the shopping power of Americans.

"For most of our consumer products, there's definitely an emotional call," said Hu in an interview. But issues like rising energy prices and raw material inflation are not likely to go away anytime soon, so cost considerations are still very much in play, she said.

Hu, originator of GE's "ecomagination" campaign, also emphasized product diversity and global reach as important factors determining how well companies can weather the financial crisis.

Selling almost anything in an economic recession will prove very tough. But the trend toward higher energy costs, burgeoning consumption in the developing world and greater social awareness of environmental degradation means companies would be wise not to abandon efforts to green their operations. Studies by Goldman Sachs, the Carbon Trust and the Carbon Disclosure Project all suggest that companies that emphasize green stewardship are better managed overall and face better business prospects in the future.

GE, said Hu, is taking those lessons to heart and may even emerge from the downturn stronger because of it.

"I think the business climate is terrible. Anybody in America has to be upset about it," Hu said. "But GE is positioned well to weather the storm."

World Business Council for Sustainable Development Website (www.wbcsd.org)
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