Monday, June 20, 2016

Perspective - Sustainable Marketing || Saurabh Pandey || XLRI Jamshedpur || February 2016 edition

Sustainable Marketing 

-Saurabh Pandey
XLRI, Jamshedpur


What is Sustainable Marketing?


We are very well aware of the term sustainability. We also know what the definition of
marketing is. But what exactly is Sustainable Marketing? What exactly does this term signify?
The truth is, Sustainable Marketing has not been precisely defined. However, both academicians
and practitioners have provided us with various interpretations. Thus it becomes imperative to first of all define what Sustainable Marketing is as we understand it before we move any further. Sustainable Marketing can be defined as an all-inclusive approach that not only satisfies the needs and demands of customers, as done in traditional marketing, but also puts an equal emphasis on environmental and social issues, thus generating profit in a sustainable way. Recently, there has been a profound increase in the value that consumers place on eco-friendly products and hence there is a rise in the commitment of the companies to deliver environment friendly products and services.
Sustainable Marketing seeks to capitalize on this increased customer preferences and company’s commitment towards eco-friendly products. This cannot be done through age old marketing mix and strategies alone. There is a need for new strategies and concepts which align with the goal of sustainability.


This article will majorly focus on following three areas:-
a) How to revise strategies of marketing to incorporate an ecologically balanced approach
b) Modification of 4Ps for alignment of the organisation with the objectives of sustainability
c) Benefits that an organisation will receive by adopting a sustainable approach




Sustainable Marketing Strategy

Traditionally marketing has been driven by economic objectives like profit and market share. The situation may not be the same in near future. Companies will have to change their behaviour, forced by climate change or shortage of raw materials. This change of behaviour can also be triggered
due to shift of consumer preferences to the environment friendly products or due to adoption of sustainable practices by a competitor. In any case sustainable marketing will have to be a part of strategies of the companies in order to succeed in the market. 
One of the most important decision would be to decide whom to target and how. Segmentation of the customers and positioning of the product needs to be remodelled from the angle of sustainability in
order to adapt to the changing circumstances.

Segmentation
Currently segmentation is done on the basis of demographics, psychographic or behavioural characteristics of the customers. These parameters will however not truly reflect an individual’s environmental attitude or his consumption habit of ecological products. Sustainable marketing requires a thorough understanding of consumer’s current behaviour and his willingness to act sustainably. This will help a marketer understand the level of involvement a consumer has when it comes to ecological products, their reasons for using an environment friendly product or their reasons for opposing it. Insights provided by this understanding will help marketers choose their target group effectively and meet their demands in a suitable way. Numerous attempts have been made to segment customers on the basis of their environment friendly practises.
Segmentation done by British government’s department for Environmental, Food and Rural affairs is a good example. They divided the population into seven segments on the basis of their engagement in sustainable practices. These seven segments are as follows: 

  • Positive greens
  • Waste Watchers 
  • Concerned Consumers
  • Sideline Supporters
  • Cautious Participants
  • Stalled Starters
  • Honestly Disengaged (Reeves, 2007). 
First three comprise of customers who care about the environment and have adopted sustainability
wholeheartedly. Next three are those in which sustainable behaviour is low to non-existent and last one have no interest in environment whatsoever.
This sort of segmentation gives a clear picture as to which segment needs to be targeted and how a product needs to be positioned in the mind of the consumers.

Positioning
Positioning is defined as how the product is perceived by the customers and what position does it take compared to the competitor’s product. With increase in the use of sustainable practices right from the production process to distribution, it is important for the company to convey this message to the end users. The final consumers should be well aware of the initiatives taken by the company in order to be more environment friendly. This requires modification of the way the positioning of the
product is being done.
A very good example of this would be Coca-Cola which proudly declares itself as ‘water neutral’. This positioning helps Coca-Cola gain a positive attitude from consumers who perceive Coca-Cola as an environment friendly company.


Sustainable Marketing Mix

We are aware of the 4Ps of marketing: Product, Price, Place and Promotion. However, effective utilization of 4Ps in order to achieve the objective of sustainability is not well known. Most of the sustainable initiative taken by the company are focused on the operational issues and any marketing effort undertaken is focused on a single ‘P’ Promotion. 
However, 4Ps present an opportunity to the organisation, if wisely used, to work effectively to
achieve the sustainability agenda. Let’s look at each ‘P’ of the marketing mix and understand how we can effectively use them.

Product
Product is a tangible good (soap, automobile etc.) or an intangible service (hotel, airline etc.) which is marketed to consumers to meet their specific demand. It can also be defined as anything that can be offered to satisfy a need or want.
When talking from the perspective of product there are various stages where the concept of sustainability can be applied. Starting point is procurement of raw materials in an environment friendly manner. Going further, use of renewable energy resources in the production process
and increasing the energy efficiency of the entire production process. Generation and disposal of waste is another area which can be improved upon by using sustainable practices. Conducting a Life Cycle Assessment of the product and following a cradle to cradle approach can help the company reduce its carbon footprint. 
For example, most mobile companies now take the responsibility for disposal/ recycle of e-waste and battery, following cradle to cradle approach. However all of this comes at a price, which forms a major factor in the consumer purchase decision.

Price
Sustainable products have always been perceived to be more costly than their conventional counterparts. This has severely impeded their growth and acceptance on a large


scale. However, this is not a true representation. Environmental cost, social cost, cost of biodiversity loss are seldom included in the production cost of any product. Instead they are treated as externalities, which are costs that are shifted to the society and hence providing customers with a skewed picture of the actual cost they bear for any product.
Marketers need to reduce this pricing barrier either by increasing the perceived value of the product or through reducing the price gap through innovation. Products such as organic food brands, Starbucks, LED bulbs have done a commendable job of increasing the perceived value in the
mind of customers and charging a premium for their products.
Another approach could to be target people who are financially better off or people who are environmentally conscious. This would help companies to get a market for products which have a premium pricing due to their environment friendly nature.

Place
Place can be a physical store or a virtual store where products are sold and it also includes how the product is distributed. The issue of sustainability can be looked from various perspectives here. Right from building of energy efficient stores, green buildings that handle waste disposal efficiently to effective usage of fuel in transportation and using green vehicles for distribution purpose can all be effective measures to reduce the carbon footprint. With the increasing focus on sustainability some of the brick and mortar stores are moving toward more environment friendly practices. Stores like Walmart are building more energy efficient stores, using environment friendly fuel in the trucks and green packaging material. There are examples of retail stores using solar panels for their daily energy needs. Some of the retail stores have even adopted a policy of buying goods only from companies which adopt environment friendly practices.
These practices not only increase customer base of the retailers by appealing to environment friendly consumers but it also helps them earn a premium by generating value for which customers are willing to pay. Moreover it reduces cost for retailers in the long run and hence increases profitability.

Promotion
The biggest task of the marketers is to convey the environment friendly practices adopted by the organisation to the end consumers. Consumers must be made aware of the sustainable practices undertaken by the organisation. The objectives of promotion can be listed out as follows:-
Raising awareness regarding the use of sustainable products

  • Conveying the sustainable practices implemented by the company and use it as a differentiating factor
  • Informing consumers regarding the sustainable use of the product or how can consumers be eco-friendly by using the product
  • Persuading consumer to use the product
  • Awarding consumers for using an eco-friendly product

To achieve these objectives a mix of direct promotion, social and print marketing, personal selling
and advertisements are to be used. These methods of marketing can be used in different ways to promote a particular product. What is more important though is to convey the value a product will deliver if bought by the customer. True, customers do care about environment and sustainability, but
the value they receive from the product remains most important. It is the task of marketers to make customers realize the value of the product without any harm to the environment.
This can be done by conveying benefit through efficiency, cost saving, environment protection, safety, health benefits, symbolism, status and convenience. For example home appliances like LED/CFL bulbs or CFC free refrigerators promise cost saving along with environment protection. Hybrid cars promise fuel efficiency whereas organic food promises health and safety along with their eco friendly nature.
The potential of effectively using marketing strategies for sustainability is huge. However, one major question that remains for all the companies is ‘What’s in it for me?’ The following section tries to answer this particular question.


Benefits of Sustainable Marketing

Most of the aforementioned text focuses on the benefits received by the end consumer due to the sustainable practices followed by the companies. Let us now list down the benefits an organization derives from eco-friendly practices.
  • Competitive advantage: Organization adopting sustainable practices early will have the first mover’s advantage. Early adoption of eco-friendly practices will not only help company move towards a greener ecosystem but will also help gain a leadership position in the market. It will help the organisation gain the market share and reputation as a green company.
  • Cost Saving: Profit is the main objective of any commercial organization. Companies continuously strive to increase their profit by reducing costs associated with production, distribution, promotion etc. Adoption of sustainable practises helps company to save costs in the long run. ITC’s classmate is a good example. By refusing to import pulp and developing in-house technology to develop sustainable ecosystem helped ITC to reduce production cost and gain leadership position in the market.
  • Reduced Risk: With changing climate conditions there is a big question mark on availability of raw materials and fulfilments of energy requirements in the future. Mitigation of these risks can only be done by moving to cleaner forms of energy and adopting sustainable practices in order to increase efficiency. Moreover, due to impending changes in the environment, government across countries will impose strict environmental measures in order to control the changes. Waiting for these restrictions to be applied and then conforming to them makes no sense. Proactive approach helps companies to avoid problems of compliances in the future.
  • Increased market share: Involvement of eco-friendly practices help the companies to appeal to environment conscious people. It will help the company increase its customer base. Also gain in reputation due to use of sustainable practices will attract more customers. All of this will results in increased revenue and hence increased profits.

Conclusion

Sustainable marketing is undoubtedly an important concept which when integrated with the daily operations of a firm has the potential to yield huge benefits. Effective implementation of sustainable practices coupled with effective use of sustainable marketing strategy and marketing mix can prove to be a boon for a company in today’s scenario of global warming and climate change.

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