green@work : Magazine : Back Issues : Mar/Apr 2003 : Lessons from the Green Graveyard

Innovation

Lessons from the Green Graveyard
Balancing green marketing, customer needs key to longevity.

by Jacquelyn A. Ottman

Remember General Motor’s EV-1 electric car? Philips’ Earthlight compact fluorescent light bulbs? Whirlpool’s CFC-free refrigerator? Exciting-sounding eco-innovations, they unfortunately met with new product doom. What they share is a failure to address one of the key rules to green marketing success: balance environmental issues with primary customer needs or be forever relegated to the green graveyard.

Happily, in many cases, for each product in the graveyard, there are examples of others in the same industry that learned the lessons and achieved success. We at J. Ottman Consulting routinely study such cases, looking to mine nuggets of insight for clients. What did the losers fail to do? What did the winners do differently? How can you incorporate their learning into your own business?

The “Rules” of Green Marketing
The first rule of green marketing is the first rule of marketing: focus on customer benefits (i.e., the primary reason why consumers buy certain products in the first place). Do this right and you’ll motivate consumers to switch brands or even pay a premium for your greener alternative. Next, keep in mind that for green marketing to work, it is important that customers:

* are aware of and concerned about the environmental issues your product addresses;
* feel that by using your product they will make a difference (“empowerment”);
* believe your claims (something that’s a bit challenging to big business these days);
* feel your product will work as well as non-green alternatives (this reflects lingering misperceptions from the days when natural laundry detergents left clothes dingy and fluorescent lightbulbs sputtered); and
* can afford any premiums. (Some can’t afford premiums for any kind of product, green or not.) Of course, the more you offer, the more consumers may be willing to pay.

Case #1: Provide Personal Benefits to the Consumer
Give credit to Whirlpool for being the first manufacturer to introduce a CFC-free, energy efficient refrigerator, and you won’t be alone. For its accomplishment, they won the “Golden Carrot,” a $30 million award package of consumer rebates put up by the Department of Energy and several electric utilities. Despite the accolade, the product launch was a flop. That’s because Whirlpool misjudged consumer willingness to pay the 10 percent premium in the balance of the country not covered by the rebates for environmental benefits they did not appreciate.

In contrast, when developing their water and energy efficient “Neptune” washing machine in response to regulatory demands, Maytag was sure to pack in benefits that could support the premium-priced front-loading technology. These included nifty styling, an estimated $100 per year cost savings on energy and water, superior cleaning power, and a 15-inch tilt in the door that made it easy to load. Despite a 100 percent premium, the value proposition has yielded robust sales and a #1 rating in Consumer Reports.

Taking a more eco-innovative approach with the potential to offer consumers something really new, Electrolux is testing a washing machine service in Gothenburg, Sweden. Consumers pay by the load, and Internet connections help determine how much laundry powder to use and when to run the machines so as to take advantage of off-peak utility rates. Although the business model still needs to be worked out, the company reports that consumers are starting to do laundry more efficiently—a step in the right direction when you consider the potential to reduce environmental impacts simply by influencing user behavior.

Case #2: Shedding Light on Life Cycle Benefits
Philips Lighting’s first shot at marketing a stand-alone compact fluorescent light (CFL) bulb was as clumsy as the funny-looking bulb that didn’t easily fit most lamps. To boot, the “EarthLight” name confused consumers (I personally thought it was some type of plant light), and at $15 each versus 75¢ for incandescents, EarthLight couldn’t climb out of a green niche.

The brilliantly re-launched “Marathon” CFL solved several problems: the “super long life” positioning and incandescent-looking shape appealed to the convenience-oriented mainstream, while the promise of saving $26 in energy costs over its lifetime lured thrifty consumers. With the U.S. EPA’s Energy Star® label to add credibility, as well as new sensitivity to rising utility costs and electricity shortages, sales in 2001 were up 12 percent in a flat market.

Case #3: Roads to the Future
With their limited driving range and the need for constant recharging, electric cars such as GM’s EV-1 and Ford’s Think Mobility lines suggest that pure electric vehicles don’t stand a chance in mainstream markets.

Toyota took a different road. Its Prius sedan, introduced in 2001, met combined customer needs for extended driving and fuel efficiency by marrying an internal combustion engine with an electric one. And Toyota is able to offer the benefit of a quieter ride and faster acceleration that appeal to non-green customers as well. Toyota claims the Prius is already profitable and sales are on track to achieve 300,000 units worldwide by 2005. Honda’s Insight and the Hybrid Civic promise similar results. Within the next few decades, fuel cells such as the Hy-wire recently announced by GM will likely follow hybrids’ lead in efficient engine re-design. (Now if only all of these vehicles came with Engelhard’s “Premair” Ozone Catalyst that restores air quality as you drive! It comes standard on Volvo 90-series vehicles and all new BMWs.)

As enticing as these modifications to current technologies appear, the longer term solutions really lie in meeting additional customer needs—for such things as reduced congestion, traffic tie-ups, parking nightmares and, of course, more open space. These will only be met by making changes to the larger transportation system. Car-sharing services meet many of these needs. Such new time-sharing systems for cars that are cropping up in U.S. cities allow members to choose from a variety of cars and vans according to their needs for a given occasion; some services even offer electric vehicles for shorter hauls.

Meanwhile, neighborhood electric vehicles (NEVs) like Daimler-Chrysler’s GEM car fit a Darwinian-type niche in the marketplace for limited range driving needs such as those in planned communities and on college campuses. They also make perfect feeder cars, connecting commuters with other modes of transit.

Winning at Green Marketing
In sum, when played “by the rules,” environmental improvements can enhance marketability, improve performance and represent a potent source of innovation. To prevent your greener products from winding up in the green graveyard, focus on the primary benefits that your environmentally inspired technologies can support.

From an organizational standpoint, integrate environmental considerations into all aspects of new product development and marketing. This requires the support of cross-functional teams with marketers, not engineers, at the helm. The holistic nature of green also suggests that new stakeholders be enlisted besides suppliers and retailers. These can include educators, members of the community, regulators and NGOs.

Finally, consider green as an ideal goal achieved though continuous improvement. Ask: in what ways can customers reduce environmental impacts during use? What is the next radical evolution of our product? In what ways might we offer a service rather than, or in addition to, a product? In what ways might we restore the eco-systems that sustain us?