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Module 13: Sustainable Marketing Mix

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Sustainable Marketing Mix

Price

Pricing

Price is the monetary (or bartered) amount a consumer pays for a product or service based on the product or service’s value or worth.

For sustainable products, pricing has often been an issue limiting a product’s or service’s mass acceptance and market growth.




Sustainable Pricing Considerations

In the past, environmental and social costs were considered external to the production costs and had not, by general rule, been included in consideration of setting prices.

However, as stakeholders and legislation increase demands on the companies to provide more sustainable solutions, companies have been driven to consider these costs within pricing policies.

Sustainable companies reexamine costing methods and begin to consider the real and actual social, economic, and environmental costs associated with products and services.






Green Pricing Gap

Green products tend to be more expensive because the ingredients may cost more than their conventional counterparts. For example, organic food grown with natural fertilizers may be more expensive than those foods not utilizing natural fertilizers. Manufacturing and transportation costs can also be higher.

For example, if the transport costs use a higher cost but lower polluting renewable energy fuel source, this will contribute to a higher price point. This creates a price gap between conventional products and those that are sustainable, which is often referred to as the “green pricing gap.”





Higher Price Needs Additional Value

The higher price can be a barrier to wide market acceptance for many green products, as some consumers may want to purchase products that are better for the environment but either do not want or are financially unable to pay a higher price.

For the large majority of consumers, if they do not receive additional value from a sustainable product, for example, in the form of reduced energy costs or longer product lives, they will not pay a premium for the sustainable product.

If a product is competitive in terms of price, as well as product, place, and promotion, with traditional products and services, sustainability can give that product a competitive edge particularly among consumers with some interest in sustainability such as the middle green.






Minimizing the Price Barrier

Marketers need to minimize the price barrier either by reducing the price point to be closer to its conventional counterparts or through marketing efforts to raise the perceived value to command a premium.







Effective Targeting

Some green product marketers use effective targeting to minimize the green price gap by targeting either people who are better off financially (those who can better afford to take environmental factors into their consumption decisions) or particular market or consumer groups, such as super greens and green regional markets (e.g., Portland, Oregon, USA), with concentrations of potential customers who derive value in conspicuous conservation and demonstrating their environmentalism. [1]





Purchasing Power

Consider the American family of four who spends an average $115.60 per week on groceries. [3] If the green products cost 10 percent to 25 percent more, their $115.60 per week yields significantly less purchasing power.

This is even more pronounced in a weak economy. Yet many sustainable business practices, such as using materials with longer life, can save consumers money in the long term. Pricing is key in the marketing mix and marketers of sustainable products and services need to ensure the price and value equation is right for maximum success.





What Really Motivates Consumers

Marketers take notice. One way to create a so-called win-win for consumers of sustainable products is to capitalize on what can help really motivate consumers to use green products-cost savings from using green products.

Some consumers recognize this benefit as some green products save them money in the long run, such as driving a hybrid car saves at the gas pump; energy efficient light bulbs, refrigerators, washers, and dryers save on energy costs; water conservation shower heads save on the water bill; and using refillable water bottles is much cheaper than buying plastic water bottles at the store.

Combining a concrete benefit like saving money with a sustainable benefit strengthens the brand messaging and may help to minimize the green pricing gap.






Bibliography

[1] Lindsay Kauffman, “Green as a Status Symbol: Why Increased Prices May Increase Sales,” Triplepundit.com, http://www.triplepundit.com/2011/05/green-status-increase-prices-increase-sales.

[2] “2011 Cone/Echo Global CR Report,” Cone Communications, http://www.coneinc.com/2011globalcrreport.

[3] Food Marketing Institute, U.S. Grocery Shopper Trends (Food Marketing Institute, 2010), 107; “Key Facts,” Food Marketing Institute, http://www.fmi.org.




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