While most people to date have proven themselves unwilling to pay a premium for environmentally responsible brands, I think there are at least three reasons why companies should look seriously at making “green” works a part of their business plans. First, there is certainly a niche market for such products, and though it may currently be small, I believe it will grow substantially over time. Second, it promotes a responsible image, which, as I have said previously, will be a necessary cost of doing business moving forward. And finally, by investing in “going green,” companies can cut costs for themselves in the long run.

Method is an example of a brand that has succeeded in creating a new segment by combining good product performance, strong design, and an ethos of sustainability. Launched in February 2001, the business was estimated to be worth more than $100 million in 2008. Critical to the company’s success is its positioning as being not only good for the environment but also good for personal health. As Eric Ryan suggests in this video, the company is “deep green” on the inside but “light green” on the outside. Thus it has broader appeal than many other environmentally-oriented brands. (Note: The video is well worth watching. It highlights many of the basic drivers of building a strong brand.)

As a strong, highly differentiated brand, Method is able to sustain significant price premiums. For example, the Method Omop was launched at twice the price of its mainstream competition, P&G’s Swiffer, apparently justifying the differential by its great design and biodegradable, corn-based sweeping cloths.

Because Method is a brand that was recently built from the ground up, it is hard to say whether its equity is based in the brand’s product design, its green positioning, or its health positioning. Long-established brands may find it far more difficult to get consumers to pay a premium for their products, particularly when their offerings or their image do not naturally support it.

However, as I said at the outset, there are other good reasons to go green. The BusinessWeek article that I referred to in my previous post “Green: are you willing to pay for that?” reveals some of these positive business ramifications. For example, as a result of new sustainability efforts, Nike expects to reduce the amount of material it wastes by 17 percent over the next decade. (Click here to read “Nike Goes Green Very Quietly.”)

The discount retailing giant Wal-Mart also realized that going green made good business sense, and in the process of doing so put pressure on many of its business partners to follow suit. (Click here for a post I wrote on this topic two years ago.) A recent New York Times article states, “sustainability efforts have saved Wal-Mart hundreds of millions of dollars, according to people familiar with the company’s environmental initiatives.”

Those sustainability efforts have not only saved money directly, but have also lessened negative publicity and improved public opinion, thus freeing up corporate resources that were previously used to defend Wal-Mart’s business practices (click here for story).

In the cases where the green ethos does fit a brand’s positioning, the sentiment of its target consumers, and the ability of those consumers to pay, green brands may command a premium. In most cases, however, consumers simply expect companies to be doing the right things. Expecting more of major corporations than they do of themselves, people want social and environmental responsibility from businesses even if they are not willing to pay for it. And though that seems to put business in an impossible position, many companies have found ways to make sustainability efforts save money. Thus they can rest easier, knowing that future revenue is less at risk from a sudden consumer backlash on learning of malpractice or negligence.

So what brands can you think of that can sustain a price premium for doing the right thing? How else does a brand benefit from going green?

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This entry was posted on Sunday, October 25th, 2009 at 10:01 pm and is filed under Brands, Other. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Print this Page