How to Market Sustainable Products

How to Market Sustainable Products

When companies market the sustainability features of their offerings, they often overlook a fundamental truth: Social and environmental benefits have less impact on customers’ decisions than basic product attributes do. With any purchase, consumers are first trying to get a specific job done. Only after they find something that will help them do that job—and only if sustainability is important to them—will they look for a product that in addition confers a social or environmental advantage. No one decides to buy a chocolate bar to, say, improve the working conditions of farmers on the Ivory Coast. People buy chocolate, first and foremost, because they want to indulge in a small pleasure. No one decides to buy an electric car to prevent climate change. People buy cars because they need transportation; reducing their carbon footprint is an ancillary benefit.

Missing this critical point, many marketers overestimate consumers’ appetite for sustainable products. Because of that, in recent years companies have flooded the market with sustainable offerings that consumers are slow to buy, particularly given the price premium such products typically command. Though products that incorporate environmental or social messaging now account for 48% of new consumer packaged goods, their share of the overall U.S. consumer goods market remains relatively low. In 2021 it was only 17%, up from 14% in 2015, according to a report from New York University’s Center for Sustainable Business. The misalignment between what companies offer and what consumers want is evident not just in B2C sectors but in B2B ones as well.

Drawing on an extensive three-year research initiative at IMD business school that encompassed surveys, interviews, and interactive sessions with more 500 executives in B2B and B2C sectors from various countries, we’ve created a guide for sustainability marketing that builds on a more nuanced understanding of how consumers weigh the relative value of traditional and social and environmental benefits. With clarity on how consumers make this calculation, executives can devise product and service strategies that will maximize their chances of success.

Balancing Benefits

Marketers often imagine that sustainability features simply layer additional value on top of an offering’s traditional benefits. But in reality they can interact with a product’s primary attributes in three ways:

• independence, having no impact on traditional benefits
• dissonance, diminishing traditional benefits
• resonance, enhancing traditional benefits

Let’s consider three “sustainable” laundry detergents that compete with a conventional, middle-of-the-pack product that doesn’t promise any environmental or social benefits.

The first is a detergent with natural ingredients that are better for the planet. It’s priced slightly higher because the formulation is more expensive to make. But this detergent’s natural ingredients don’t reduce its traditional benefits— its cleaning ability, stain-removing power, and gentleness. This is a case of independence. The customer gets the same performance the traditional detergent offers (reasons to buy) with the added environmental benefit (reasons to care) but pays a little bit more.

Almost all brand-related social-cause initiatives are a form of independence marketing. J&B whiskey has garnered millions of social media views for an advertisement that promotes diversity and inclusion through a story about a family accepting a transgender member. Similarly, IBM’s support of Girls Who Code, a nonprofit organization dedicated to helping young women enter computer science fields, doesn’t directly affect the performance of its consumer and business offerings. In both cases the brands’ social-cause commitments enhance buyers’ reasons to care and may influence customer loyalty and sales, but they don’t affect product performance.

It’s worth noting that when selling offerings with independent sustainability benefits, firms in different industries may be competing for the same dollars. Many customers have a subconscious “sustainability budget” and may be willing to spend only a limited amount of money on sustainable products. So any firm that can provide customers with greater sustainability benefits has a potential competitive advantage.

In the second detergent, natural ingredients diminish the product’s performance. As a result it suffers from dissonance. Consumers perceive that it is ecofriendly but that it delivers less and costs more than a traditional product. The reasons to care increase, but reasons to buy decrease.

Interestingly, research shows that merely signaling that a product is green can create negative perceptions about it, a phenomenon called “sustainability liability.” For instance, environmentally friendly drain openers may be perceived by consumers to be less effective even though they aren’t necessarily so, and shoes made with green materials are sometimes wrongly assumed to be less durable. (This perception of liability may change over time, however, as consumers become more accustomed to sustainable products.)

With the third detergent, the product’s natural ingredients have unique properties that enhance its cleaning power and gentleness. This is a case of resonance. Consumers’ reasons to buy and reasons to care both increase. Makers of resonant products find synergies between sustainability and performance. Revier Cattle Company in Minnesota, for instance, has a program called Total Livestock Care, which focuses on excellent feed (all-natural and with no preservatives, hormones, or additives) and excellent facilities (to reduce stress on cattle). According to blind taste tests done with chefs, restaurateurs, and butchers, these practices have improved the taste of Revier’s meat while enabling the company to achieve a sustainability scorecard that’s enviable in its industry.

Marketing to Sustainability Segments

The manner in which social and environmental features interact with traditional attributes significantly affects a product’s appeal to different consumer groups. However, we find that many companies unwittingly adopt a one-size-fits-all approach to sustainability marketing, which risks alienating certain customers. Brands need to segment their customers by attitudes toward sustainability and tailor their messages accordingly.

A simple and practical way to do that is to divide consumers into three categories. Greens (or if your marketing department prefers to use personas, “true believers”) place a high value on sustainability, actively seek it in their purchasing, and may sacrifice performance or economy to get it. Blues (or perhaps “agnostics”) place a moderate value on sustainability and, if they don’t need to sacrifice much (or ideally at all) on price and performance, tend to prefer sustainable offerings over alternatives. Grays (“disbelievers”) don’t care about sustainability and may even view it with skepticism. Each kind of consumer requires a different approach.

A customer—whether an individual or a company—may shift consumption profiles from product to product. Someone may be a green consumer in one category (for example, exclusively purchasing clean energy), blue in another (preferring recycled packaging if there’s no cost difference), and gray in another, avoiding sustainable cleaning products or construction materials on the assumption that they underperform. Understanding these dynamics is important.

It’s also imperative to recognize that making a buying decision is a multifaceted psychological process, one that is not always steered solely by the tangible attributes of products or services. For instance, it may be affected by the phenomenon of moral licensing, wherein consumers, having made a significant ecofriendly decision like investing $50,000 in an electric vehicle, become less likely to spend an additional $5 on an ecological product, because they feel they’ve earned a pass. Similarly, the desire for social signaling could drive more-conspicuous sustainable choices like solar roof panels over less visible ones—say, an ecofriendly paper product. It’s crucial for marketers and businesses to be aware of such behavioral tendencies. (For more on how biases influence green consumption, see “The Elusive Green Consumer,” HBR, July–August 2019.)

In addition, the three types of products all have different playbooks. Let’s now look at each one in action.

The Independence Playbook

A B2B client of ours, Georg Fischer (GF), uses renewable materials in all the polyvinyl chloride (PVC) metric pressure pipes, fittings, and valves it produces. The sustainable PVC resin is made using tall oil, a waste product from paper production, reducing manufacturing-related CO2 emissions by up to 90%, with no impact on product quality and durability.

How should GF communicate about its PVC manufacturing with customers? With gray customers there’s no upside in emphasizing sustainability attributes, and so they shouldn’t be a focus—particularly since grays may wonder if there’s a hidden sustainability price premium or performance cost. However, GF’s sustainable manufacturing is a selling point for green and blue customers. With them, GF should underscore that using ecofriendly PVC resin doesn’t affect the performance of its pipes, fittings, and valves. For these customers, GF offers science-based, third-party audits of each product’s environmental performance over its complete life cycle.

With blue customers it’s important to understand their sustainability priorities and gauge your relative contribution to them. Another of our clients, a company that provides energy-efficient milking equipment to the dairy industry, was puzzled by a blue customer that showed little interest in its environmental message. It turned out that the customer was working with its animal-feed and supplements supplier to meet its emissions-reduction goals because cows, not farm equipment, were the main source of its greenhouse gas emissions. Our client’s efficient equipment would be of little help in meeting the customer’s sustainability goals. The company belatedly realized that, for this customer, it was leading with the wrong message and should have focused instead on the cost savings its equipment promised.

Ted and Chelsea Cavanaugh

Independence strategies typically offer temporary differentiation advantages. Because customers may choose to get their sustainable benefits from a completely different kind of product, it’s difficult to charge a premium for them over the long term. Blue consumers, in particular, will look for the lowest-priced sustainability benefits. If you do charge a premium, be conservative and don’t chase excessive margin—and continually reassess your customers’ sustainability needs and your competitive situation.

The Dissonance Playbook

Just because dissonant products require customers to accept reduced performance in exchange for sustainability, that doesn’t mean their brands will inevitably fail. Firms can profitably sell such products to green consumers and in some instances even to blue ones.

One strategy to broaden the customer base is to attract a subset of blue customers who can be persuaded to accept a performance sacrifice because they stand to gain personally from new benefits tied to a firm’s sustainability actions. Take Oatly. When its plant-based milk was launched in Europe in 1994 as a lactose-free alternative, its sales stagnated owing to the sticky habits of milk consumers and perceptions of inferior taste. However, in 2014, it shifted its image to a lifestyle brand for the “post-milk generation,” using the slogan “It’s like milk but made for humans.” While tacitly acknowledging that the product might differ in taste and nutrition, Oatly emphasized its sustainable and trendy attributes, making it more appealing to a wider audience. That strategic rebranding paved the way for its successful entry into the U.S. market and in 2022 pushed its global sales to $722 million.

While Oatly made its dissonant product cool to consumers, other companies have had success marketing more-tangible benefits. Toyota’s hybrid Prius is an iconic example. Launched in 1997, the Prius was expensive, and some considered it underpowered compared with cars with conventional engines. But the greenest buyers were willing to accept those trade-offs for the environmental benefits it promised, as well as the social signaling that the car’s unique silhouette conveyed. In addition, Toyota shrewdly used nonmarket strategies to broaden Prius’s appeal in California. It successfully lobbied the state legislature to allow hybrids in high-occupancy-vehicle lanes even with a single occupant. Hybrid owners were also allowed to park for free at some public meters in Los Angeles and other California cities. Those strategies pulled in blue customers. Over time, Toyota improved the Prius and reduced the trade-offs on traditional benefits. In 2022, it sold 2.6 million hybrid vehicles globally across all its brands. To put that number in perspective, Ford sold 4.2 million vehicles of all types in North America that year.

Firms with established brands should be thoughtful in how they position dissonant product extensions. Our advice here is simple: Do an honest assessment of the trade-offs; large trade-offs will be acceptable only to greens, and in that situation marketers should be laser focused on highlighting the new product’s sustainability credentials to that segment only. If a firm can leverage new benefits tied to sustainability, as Oatly and Prius did, it can appeal to blue customers as well. Pricing strategy here is straightforward: Because with dissonant products you must focus mostly on green consumers, who have a large appetite for sustainable benefits, you have some leverage to extract a premium. But how big that premium is depends on how much consumers value those benefits.

Firms should also continually scan the market for potential converts—customers who may have previously resisted a dissonant offering but are now willing to accept some sacrifice to achieve their sustainability goals. Maersk, the integrated container logistics firm, is a convert. The firm made a commitment to transport at least 25% of ocean cargo using green fuels, which can cost as much as 54% more than conventional fuels, by 2030. Maersk made that move to achieve its own sustainability goals as well as to support large customers that were frustrated with the lack of options for reducing emissions from transportation.

The Resonance Playbook

Unlike offerings with independence or dissonance, products with resonant sustainability features have much more latitude to target a broad customer base. For the most part, the brand message is all upside: “We give you better performance, and you get sustainability too.” Both greens and blues respond well to messages that showcase performance as well as sustainability. While it may seem that you should be able to charge the highest prices for resonant products, keep in mind that they could put off gray customers. With them you must justify premium prices by either highlighting higher traditional benefits or bundling sustainable benefits with traditional benefits.

GEA, a B2B manufacturing client of ours, designs equipment for various industries with a focus on sustainability and cost-efficiency. Its AddCool solution for milk-powder production slashes carbon emissions by 50% to 80% and operating costs by 20% to 30% while preserving product quality. Yet as Nadine Sterley, GEA’s chief sustainability officer, notes, adopting these solutions isn’t a no-brainer for everyone. Some brands readily integrate them, while others are more cautious.

European customers, mainly greens and some blues, have often paid premium prices for GEA’s equipment. However, sustainability is less valued by certain U.S. and Asian clients who tend to be grays. Leading with a sustainability-centric message could turn off those customers, who might think they’re shouldering sustainability costs. So GEA fine-tuned its messaging and pricing in those markets, underscoring economic advantages (such as reduced energy and water use) rather than sustainability.

Firms should revisit their overall brand promise if a new sustainability benefit can be tied to an easily recognized traditional one. Reckitt launched a product-line extension of Finish, a leading dishwashing detergent, that was so effective it eliminated the need to rinse dishes before loading. That saves up to 75 liters of water with every wash, a huge sustainability gain, but it also played into Finish’s traditional brand promise of delivering exceptional cleaning. Finish thus modified its messaging to give customers “sparkling clean dishes the first time, every time, without the need for pre-rinsing—saving dozens of litres of water per load.” Eliminating pre-rinsing is a new traditional benefit that flowed from the pursuit of a sustainability benefit—saving water. It resonates with greens, blues, and even most grays. In its first year touting the new brand promise in Turkey, an initial test market, Finish saw its market share among tier-one brands rise by 27%. Reckitt has since rolled out the product with a similar message in more than half a dozen countries.

One thing to keep in mind is that the three playbooks don’t offer the same potential for long-term success. Resonant products undoubtedly hold the greatest promise. They can appeal to all customer segments, positioning firms to use sustainability as a powerful strategic tool. A dissonant approach might work in certain geographies or sectors, but it will remain a niche strategy until greens come to dominate the consumer landscape. Independent products, though offering broader appeal to both greens and blues, could end up vying for consumers’ sustainability dollars across different categories.

While we have made marketing the focus of this article, at the core of successful sustainable offerings lies innovation; there’s no substitute for it. Thus the real battle for sustainable products won’t be waged through advertising or public relations stunts; it will happen in research-and-development labs. There leading firms will craft groundbreaking solutions that not only deliver unparalleled performance but also champion environmental protection and societal well-being.