When marketers work on an eco-friendly brand, one of the key issues is pricing.
To what extent is premium pricing for eco-friendly brands a deal-killer? I recently asked AnalyticsIQ CEO Dave Kelly to illuminate the issue. His firm’s research reveals that 75% of us say we prefer eco-friendly brands, but only 40% of us will pay more for them.
Paul Talbot: What’s the number one concept marketers of eco-friendly brands should keep in mind when working on their strategy?
Dave Kelly: Marketers of eco-friendly brands face a unique challenge in that most consumers say they are ‘environmentally-conscious.’ However, many of these consumers overestimate their personal level of environmental engagement. Their stated desire to support green practices is not reflected in their lifestyle and purchases.
The fact that many consumers say or look like they would support your eco-friendly brand, while only certain individuals are actually willing to follow through, makes having the right data to target the right audiences absolutely critical.
Without a deep understanding of your ideal audience and their motivations coupled with precise targeting based on reliable data and insights, eco-friendly brands risk wasting marketing spend as they attempt to sift through the sea of consumers unwilling or unable to purchase potentially more expensive, eco-friendly products.
Talbot: How should marketers best understand their target and accurately define the characteristics of the sustainable living spender?
Kelly: We found that the intersection of two unique factors are extremely predictive of an individual’s level of green consumerism. Those factors are an individual’s belief in man-made climate change in conjunction with an individual’s level of cognitive flexibility, which refers to the ability to recognize and process two opposing ideas at once.
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The sustainable living spenders have both a high level of belief in climate change and possess a high degree of cognitive flexibility. This specific intersection of personal characteristics results in the most ethically-minded, green-motivated consumers we call the sustainable living spenders.
Specifically, the sustainable living spender’s green consumerism is reflected in the fact that they are more likely to avoid a product if the company that sells it is socially irresponsible.
They buy products with reusable or recyclable packaging.
They have paid more for eco-friendly products even when there is a more affordable option.
They have switched products for environmental reasons.
They do not buy products that are harmful for the environment.
What is interesting is that these true climate champions are not the tree hugging hippies you may envision. The sustainable living spenders are a highly affluent audience with an annual income that is 37% higher than average.
They also spend 23% more on discretionary items per year than the average individual. So, not only are the sustainable living spenders motivated to make ethically minded purchases thanks to their belief in climate change and high cognitive flexibility, they have the means to put their money where their mouth is.
Talbot: Does the disconnect between a preference for green products and the resistance to spend more suggest consumers haven’t arrived at the point where they attach significant importance to eco-friendly products?
Kelly: That is absolutely a fair statement. Based on our research, we’ve found that the ‘resistance’ is due directly to a lack of belief in climate change or simply a lack of financial means to make eco-friendly purchases when an internal belief in climate change is present.
Although the combination of belief in climate change and high cognitive flexibility is the magic recipe for the sustainable living spenders, lower levels of cognitive flexibility do not indicate a lack of eco-friendly purchases for all consumers when the belief in climate change is present.
As you might expect, without a high belief in and concern for climate change, you are unlikely to be motivated to make green purchases. f an individual holds no belief in climate change, they will not make eco-friendly purchases regardless of their means or cognitive flexibility.
Talbot: Are there product categories or a price threshold where pricing resistance diminishes?
Kelly: Not for the sustainable living spenders. These folks are ethically-minded consumers to the core. It is part of who they are and that is reflected in their shopping habits regardless of product category or price.