Choosing the RightGreen Marketing Strategy

I reen marketing has not lived up to the hopes and dreams of many man-agers and activists. Although public opinion polls consistently show that con-sumers would prefer to choose a green product over one that is less friendlyto the environment when all other things are equal, those "other things" arerarely equal in the minds of consumers.

For example, when consumers are forced to make trade-offs betweenproduct attributes or helping the environment, the environment almostnever wins. Most consumers simply will not sacrifice their needs or desiresjust to be green, as the case of the Ford Think, a two-seater electric car,demonstrates. Ford Motor Co. initially expected this car to be a big bit, butlate in 2002 the company announced it was scrapping the vehicle. The Think,which required six hours of recharging after being driven for only 50 miles,would have required drastic changes in driving behavior by its owners. Thelesson is that regardless of their environmental benefits, electric-poweredcars will remain a niche product at best until manufacturers can radicallyimprove battery life and cost.' {This also explains why car manufacturers arenow pinning their hopes on gas- and electric-powered hybrids.)

Hopes for green products have also been burt by tbe perception that suchproducts are of lower quality or don't really deliver on their environmentalpromises. In a 2002 Roper survey, 41% of consumers said they did not buygreen products because they worried about the diminished quality of eco-friendly versions. And both Procter & Gamble Co. and Wal-Mart Stores Inc.have been criticized for selling a brand of paper towels labeled as green in whichthe inner tube was made of recycled paper but the towels themselves were madeof chlorine-bleached unrecycled paper and came packaged in plastic.

And yet the news isn't all bad — far from it. For example, a growing num-ber of people are willing to pay a premium for organic foods because, wbetherit is actually true or not, they believe organic food to be healthier, tastier andsafer.'* Likewise, some consumers have been willing to pay an up-front pre-mium for energy-efficient, water-conserving washer and dryer units (althoughthe price premium has diminished recently). Such consumers realize that theywill actually save money on energy and water bills over the long term. Organicfoods and energy-efficient appliances thus appeal to consumers' self-interest

Green marketing has

not fulfilled its initial

promise, but companies

can take a more

effective approach

if they realize that a

one-size-fits-all strategy

does not exist.

Jill Meredith Ginsberg

and Paul N. Bloom

Jill Meredith Ginsberg is the marketing coordinator of PopCap Games in Seattle.Washington: she is a 2004 MBA graduate of the University of North Carolina atChapel Hill's Kenan-Flagler Business School. Paul N. Bloom is a professor of mar-keting at the Kenan-Flagler School- They can be reached at jill@popcap. com andPaul Bloom & unc.edu.

FALL 2004 MIT SLOAN MANAGEMENT REVIEW 79

while at the same time promoting environmental benefits — adual message that electric cars cannot deliver.

How, then, should companies handle the dilemmas associatedwith green marketing?^ They must always keep in mind that con-sumers are unlikely to compromise on traditional product attrib-utes, such as convenience, availability, price, quality andperformance. In other words, green products must match up onthose attributes against nongreen products in order to earn con-sideration from the vast majority of consumers. It's even moreimportant to realize, however, that there is no single green mar-keting strategy that is right for every company. The strategies thatshould work best under different market and competitive condi-tions range from the relatively passive and silent "lean green"approach to the more aggressive and visible "extreme green"approach — with "defensive green" and "shaded green" inbetween. Managers who understand these strategies and theunderlying reasoning behind them will be better prepared to helptheir companies benefit from an environmentally friendlyapproach to marketing.

Green Consumer SegmentsWhile buying green may not appeal to everyone, there are sub-stantial numbers of consumers who are potentially receptive to agreen appeal. According to the Roper survey mentioned above,58% of U.S. consumers try to save electricity at home, 46% recy-cle newspapers, 45% return bottles or cans and 23% buy productsmade from, or packaged in, recy-cled materials. So it is clear thatsome consumers already demon-strate sporadic green sentimentsin their habits and purchasingbehavior. Understanding the tar-get consumer will help marketersto know whether "greenness" isan appropriate selling attributeand how it should be incorpo-rated into the marketing mix.

To respond to consumers'varying degrees of environmen-tal concern, marketers can seg-ment the market into differentshades of green. The Roper sur-vey divides consumers into thefollowing groups:

• True Blue Greens {9%): TrueBlues have strong environ-mental values and take itupon themselves to try toeffect positive change. They

Consumers areunlikely to compro-mise on productattributes snchas convenience,availability, price,quality and per-formance to buygreen products.

are over four times more likely to avoid products made bycompanies that are not environmentally conscious.

• Greenback Greens (6%): Greenbacks differ from True Bluesin that they do not take the time to be politically active. Butthey are more willing than the average consumer to purchaseenvironmentally friendly products.

• Sprouts (31%): Sprouts believe in environmental causes intheory but not in practice. Sprouts will rarely buy a greenproduct if it means spending more, but they are capable ofgoing either way and can be persuaded to buy green ifappealed to appropriately.

• Grousers (19%): Grousers tend to be uneducated about envi-ronmental issues and cynical about their ability to effectchange. They believe that green products cost too much anddo not perform as well as the competition.

• Basic Browns (33%): Basic Browns are caught up with day-to-day concerns and do not care about environmental andsocial issues.

These figures indicate that somewhere between 15% and 46%of tbe overall consumer market could be receptive to a greenappeal, depending on the product category and other factors.And there are social, cultural and economic trends that couldcause the size of this target market to grow. One trend worthnoting is the aging of the baby boomers — their concern aboutliving longer, healthier lives is leading them to place a high pri-ority on environmental quality.''

The Competitive LandscapeCompanies contemplating a green strategy must consider howcompetitors are pursuing these potential target segments. Are keycompetitors already playing in the green consumer space? Is itnecessary to match their approach? Is there an opportunity to"outgreen" key competitors?

Clearly, many companies have become committed to beingsocially responsible. Today on practically every company Website one can find corporate social responsibility reports witbtitles sucb as "Corporate Citizenship," "Environmental Healthand Safety" or "Sustainability Report." As public scrutiny of cor-porations has increased throughout the past decade, companiesin nearly every industry have begun to integrate environmentalconcerns into their product and service development. Busi-nesses realize that they must be prepared to provide their cus-tomers with information on the environmental impact of theirproducts and manufacturing processes.^

Some companies have devised more effective production

80 MIT SLOAN MANAGEMENT REVIEW FALL 2004

The Green Marketing Strategy Matrix

Companies should consider the likely size of the green marketin their industry as well as their ability to differentiate theirproducts on "greenness" from those of competitors beforechoosing one of the strategies in the matrix.

High

SUBSTANTIALITY OFGREEN MARKET

SEGMENTS

Low

DEFENSIVEGREEN

LEANGREEN

XTREMEGREEN

SHADEDGREEN

Low DIFFERENTIABILITYON GREENNESS

High

processes that reduce waste or the need for raw materials (orhoth). Others have learned to design products that are better forthe environment. For example, Anheuser-Busch Inc. developedan aluminum can that is 33% lighter than previous cans. Thereduced use of aluminum, combined with an overall recyclingplan, saves the company $200 million a year. And McDonald'sCorp. saved 3,200 tons of paper and cardboard in 1999 by elim-inating clamshell sandwich containers and replacing them withsingle-layer flexible sandwich wraps. This move was promptedby increased consumer concern relating to polystyrene produc-tion and ozone depletion.'^

There is little doubt that companies will continue to take stepstoward becoming better corporate citizens. The fact that a com-pany implements green procedures internally, however, does notmean that it should stress such changes externally, if being greendoes not drive increased sales and market share or enhance cor-porate reputation, then boasting about green activity may hefoolhardy. If Anheuser-Busch had publicized its recycling initia-tives, for example, the green message would not likely have res-onated with Budweiser's target market. In fact, a public campaignmight even have alienated some Budweiser drinkers. On theother hand, McDonald's did publicize its recycling efforts, a sen-sible tactic given that constmier outcry led McDonald's to imple-ment the change in the first place.

Such complexities make it difficult for managers to chooseand implement a profitable green strategy. A review of severalpossible strategies should make the choices and trade-offs clearer.

Choosing o StrategyManagers must ask themselves two sets of questions regarding agreen-marketing strategy. (See "The Green Marketing Strategy

Matrix.") First, how substantial is the green consumer segmentfor the company? Can the company increase revenues by improv-ing on perceived greenness? Would the business suffer a financialblowif consumers judged the company to be inadequately green?Or are there plenty of consumers who are indifferent to the issuethat the company can serve profitably?

Second main question: Can the brand or company be differen-tiated on the green dimension? Does the company have theresources, an understanding of what it means to be green in itsindustry and the internal commitment at the highest managementlevels to be green? Can competitors be beaten on this dimension,or are some so entrenched in the green space that competing withthem on environmental issues would he very expensive and frus-trating? (Note that answers to both sets of questions will help acompany determine how much it should stress greenness as a dif-ferentiating attribute in its marketing, not how much it shouldinvest in environmentally friendly business practices. How a com-pany responds to that issue should be guided by a host of otherconsiderations.) Depending on how these questions are answered,companies should consider one of these strategies:

Lean Green. Lean Creens try to be good corporate citizens, butthey are not focused on publicizing or marketing their greeninitiatives. Instead, they are interested in reducing costs andimproving efficiencies through pro-environmental activities,thereby creating a lower-cost competitive advantage, not agreen one. They are usually seeking long-term preemptive solu-tions and want to comply with regulations, but they do not seesubstantial money to be made from the green market segments.Lean Greens are often hesitant to promote their green activitiesor green product attributes for fear of being held to a higherstandard — and not always being able to live up to it or differ-entiate themselves from competitors.

Despite some public setbacks, the C oca-Cola Co. can be char-acterized as a Lean Green company. Most consumers do not knowthat the company has invested heavily in various recycling activi-ties and package modifications. Although Coca-Cola is concernedabout the environment, in most cases it has chosen not to marketits efforts." One reason for this might be the company's wide tar-get market and brand breadth. If Coca-Cola directly tied its envi-ronmental efforts to the overall brand, it would run the risk that allits products would be pigeonholed as green. Also, by publicizing itsgreen marketing efforts, Coca-Cola might actually do itself morebarm than good. Added scrutiny could lead to the unveiling ofother issues that had previously been unknown to the public. ForLean Greens, narrowly tying environmental issues to one brand isthe safer approach, as Coca-Cola has done with its Odwaila brand.

Defensive Green. Defensive Greens usually use green marketingas a precautionary measure, a response to a crisis or a response to

FALL 2004 MIT SLOAN MANAGEMENT REVIEW 81

Using the Primary Marketing-Mix Tools in Green Strategy

Differences among the four strategies of green marketing can be seen by considering

how the four elements of the marketing mix — product, price, place and promotion —

are utilized in each strategy. The lean green strategy is one in which greenness tends to

be exhibited mostly in product development, design and manufacturing. The defensive

green strategy mainly involves the promotion aspect of the marketing mix. making par-

ticular use of quieter public relations promotions rather than overt tools like advertis-

ing. The defensive green also quietly pursues greenness in its product development,

design and manufacturing. The shaded green strategy puts some secondary emphasis

on greenness in its more overt promotional efforts and also pursues greenness in prod-

uct development, design and manufacturing as well as in pricing if cost efficiencies can

be achieved with greenness. Finally, the extreme green strategy involves heavy use of all

the marketing mix elements, including the place element, as distribution systems and

retailers are chosen and given incentives on the basis of their greenness.

LEAN

DEFENSIVE

SHADED

Product

X

X

X

Price

X

Place Promotion

X

X

EXTREME

a competitor's actions. They seek to enhance brand image andmitigate damage, recognizing that the green market segments areimportant and profitable constituencies that they cannot affordto alienate. Their environmental initiatives may be sincere andsustained, but their efforts to promote and publicize those initia-tives are sporadic and temporary, since they do not typically havethe abihty to differentiate themselves from competitors on green-ness. Aggressive promotion of greenness would be wasteful andwould create expectations tbat could not he met.

Defensives will pursue actions such as sponsoring smallerenvironmentally friendly events and programs. And they will cer-tainly defend their environmental records with public relationsand advertising efforts if they are attacked by activists, regulatorsor competitors. But unless they discover that they can obtain asustainable competitive advantage on the basis of greenness, theywill not launch an overt, significant green campaign.

The huge clothing retailer Gap Inc. has often been cited as asocially responsible company tbat is concerned about the wel-fare of the workers and customers at its Gap, Banana Republicand Old Navy stores. On the environmental front, the companyhas long promoted energy conservation and waste reduction,and its corporate headquarters has been described as a primeexample of sustainable building. The company mentions theseactivities on its Web site, but it does not publicize them exter-nally much beyond that.

In the late 1990s, the Gap hecame the target of considerable

activist criticism because of the involve-ment of its former CEO, Robert Fisher(son of the founder of the company),and his relatives with the MendocinoRedwood Co. Lie. That company badpurchased 350 square miles of North-ern California timberlands, planning topreserve most of it but also to do somesustainable forestry in smaller portionsof it. Their sustainability plans were notadequate in the eyes of certain activistgroups (see wvvw.gapsucks.org) andnumerous demonstrations, criticalpress releases from environmentalgroups and boycott efforts followed.'

Tbis activism had the potential to bea major blow to Gap, since large por-tions of its target markets have environ-mental concerns. The company wasable to weather this attack with a meas-ured, quieter response. It repeatedly

^ answered press and activist inquiries

with an explanation that MendocinoRedwood was a totally separate com-

pany from Gap and tbat it should be contacted directly (addressesand numbers were provided) for an explanation of its environ-mental policies and practices. This same information was alsogiven to retail customers in a pamphlet that was available at allGap stores. Gap employees were also provided information aboutthe logging practices of Mendocino Redwood and invited to opena dialogue with the Fisher family about what was happening. Theuproar over all this was short-lived and by 2000 a planned rallyagainst Gap at the company's San Francisco headquartersattracted only seven protesters.'^

Shaded Green. Shaded Greens invest in long-term, systemwide,environmentally friendly processes that require a substantialfinancial and nonfinancial commitment. These companies seegreen "as an opportunity to develop innovative needs-satisfyingproducts and technologies that resuh in a competitive advan-tage."''' They have the capability to truly differentiate themselveson greenness, but they choose not to do so because they can makemore money by stressing other attributes. Shaded Greens prima-rily promote the direct, tangible benefits provided to the cus-tomer and sell their products through mainstream channels.Environmental benefits are promoted as a secondary factor.

The Toyota Prius is advertised today as "an environmentallyadvanced, fuel-efficient hybrid." However, when the Prius wasfirst launched in the U.S. market in 2000, Toyota Motor Corp. didnot play up its environmental attributes. The emphasis was

82 MIT SLOAN MANAGEMENT REVIEW FALL 2004

instead on fuel efficiency — consumers would spend less on gasand spend less time at the pump.'^ The fact that the Priusreduced air pollution was merely icing on the cake. This type ofpromotion works particularly well for products that have theability to help the consnnier save on recurring expenses; energy-efficient appliances are another example.

Extreme Green. Holistic philosophies and values shapetixtreme Green companies. Environmental issues are fully inte-grated into the business and product life-cycle process of thesefirms. Usually greenness has been a major driving force behindthe company since day one. Practices involve life-cycle pricingapproaches, total-quality environmental management andmanufacturing for the environment. Extreme Greens oftenserve niche markets and sell their products or services throughboutique stores or specialty channels.

Examples of Extreme Greens include The Body Shop, Patago-nia and Honest Tea of Bethesda, Maryland. Honest Tea is one ofthe fastest-growing organic tea companies in the natural foodsindustry. Social responsibility is embedded in its identity and pur-pose, from manufacturing to marketing, as illustrated by itsbiodegradable tea bags, organic ingredients and community part-nerships. The value of the Honest Tea brand is based on authen-ticity, integrity and purity.'* But relatively speaking, Honest Teaand other Extreme Greens are few and far between. (Eor anotherway of thinking about these four strategies, see "Using the Pri-mary Marketing-Mix Tools in Green Strategy.")

Implementation ConsiderationsTo understand where a brand or company really stands on thetwo dimensions of green market size and the ability to differenti-ate on the basis of greenness requires careful research. As a goodstarting point for trying to understand the size of the green mar-ket segment, managers should gather data from customer recordsor surveys to determine whether a significant portion of abrand's current customers fall within the True Blue Green,Greenback Green or Sprout segments. If the brand is not cur-rently appealing very much to those segments, the companywould probably not be able to capitalize on becoming greener.

On the other hand, if any of the green segments are prominentwithin the current customer base, estimates need to be made,again relying on customer records or surveys, of how much thecompany stands to lose if perceptions of its greenness are dimin-ished by a crisis. Estimates also need to be made of what the com-pany stands to gain if it is perceived by these segments asimproving in greenness. If a change in perceived greenness ineither a negative or positive direction would not affect the pur-chasing habits in these segments very much, the size of the mar-ket cannot be considered large.

However, if it is discovered that consumers in these segments

are very responsive to changes in greenness or that some of thesegments might grow when cultivated properly, the market sizeprobably would be high and defensive green or extreme greenstrategies would be appropriate. Choosing between a defensive orextreme strategy in this situation should be guided by what islearned in additional research on competitors and companycapabilities. It should also be guided by consumer research on thenongreen segments — companies want to be sure they won't suf-fer costly abandonment of a brand if it is perceived as "too green"by customer segments that are indifferent or even hostile to greenproduct attributes.

In addition to studying consumer responsiveness, it is also cru-cial to gain an understanding of how competitors are perceived byconsumers on greenness as compared with the company's brand.At the same time, gathering information about the reality of howcompetitors are performing on greenness is also necessary. A crit-ical eye must also be focused on the company's own greenprocesses and its upper management commitment to greenness. Itmust be determined whether consumers perceive the greenness ofthe company and its competitors accurately or whether misper-ceptions are creating differentiation in the markets. If a marketerfeels that it is possible to truly differentiate a brand in a way thatwill be honest, credible and long-lasting, a shaded green orextreme green strategy will be viable. But if competitors arereally better and are capable of maintaining tbis edge — or if thecost of becoming greener than competitors does not seem worth

the effort, given the prospects foradditional revenue — then a leangreen or defensive green strategywill make more sense.

In addition to doing carefulresearch to guide strategy selec-tion, managers should also culti-vate the corporate culture. Theorganization and its people mustsupport a truly green marketingstrategy in order for it to succeed.Managers should encourage theincreased participation of allemployees in order to generateideas and increase enthusiasm.They should also keep in mindthat most customers and employ-ees get satisfaction from beingpart of an organization that iscommitted to operating in asocially responsible manner.

It's also important to educateconsumers. According to the 2002Roper survey, labels and displays

Companies wantto avoid the costlyabandonment ofa brand perceivedas "too green"by customersindifferent orhostile to greenproduct attributes.

FALL 2004 MIT SLOAN MANAGEMENT REVIEW 83

can play an important role in making an environmental statementabout a brand. More than half of all Americans say they have pur-chased a product because the advertising or label indicated that Itwas environmentally safe or biodegradable. Explaining how orwhy a product is environmentally sound can also make a big dit-ference. Product packaging or in-store displays can be a majorsource of information about environmental action. Point-of-saledemonstrations and knowledgeable salespeople can help to edu-cate consumers. Giving out free samples might be a good way toease customers' initial reluctance to try a new product.

Another key element of green marketing strategy is credibil-ity. Having a good reputation to begin with can go a long wayin helping to ease customer skepticism. Gompanies withsocially responsible corporate values will appear more credibleto target audiences, but it is critical that they also back up envi-ronmental claims. Gustomers are still worried about the "green-washing" (that is, false or misleading environmental claims)that was prevalent in the 1980s and early 1990s. Now new stan-dards and certifications allow customers to identify green prod-ucts easily. In 1992, the U.S. Eederal Trade Gommissiondeveloped general principles and specific guidelines on the useof environmental claims.'' By following those guidelines, mar-keters can avoid overstating environmental claims. The use ofecolabels such as "Blue Angel" in Germany and "Energy Star" inthe United States can help assure customers that the productsthey are purchasing are in fact green.

Einally, because consumers buy products and services prima-rily to fulfill individual needs and wants, companies should con-tinue to highlight the direct benefits of their products. Theyshould continue to tout the traditional product attributes of price,quality, convenience and availability and make only a secondaryappeal to consumers on the basis of environmental attributes.

Fulfilling the PromiseGonsumers, shareholders and society at large all stand to benefitwhen a company integrates environmental friendliness into itsmarketing strategy. If properly implemented, green marketingcan help to increase the emotional connection between con-sumers and brands. Being branded a green company can gener-ate a more positive public image, which can, in turn, enhancesales and increase stock prices.'** A green image may also leadconsumers to have increased affinity for a company or a specificproduct, causing brand loyalty to grow.

While there are obvious benefits to integrating environmentalfriendliness into consumer marketing, there are also some signi-ficant risks. There is a lot at stake for companies that choose toimplement green marketing strategies, including the magnitudeand risk of capital investments, the rigors of regulatory compli-ance and the potential for consumer backlash. An ability to antici-pate and react to the next environmental issue could mean the

difference between maintaining a green reputation or losing sta-tus as a green company — and potentially much more.

As understanding grows about the impact of human activityon the Earth's ecosystems, consumer concern about the envi-ronment and its links to health and safety will intensify. At thesame time, humankind's passion for consumption will persist.The challenge for companies will be to devise business practicesand products that are friendly to the environment while alsomeeting the needs of consumers.

REFERENCES

1. "Ford Pulls Plug on Think Electric Car," Reuters. Aug. 30, 2002.

2. Roper ASW, "Green Gauge Report 2002" (New York: Roper ASW,2002).

3. F. Cairncross, "Costing the Earth: The Challenge tor Governments,the Opportunities tor Business" (Boston: Harvard Business SchoolPress, 1992).

4. Mintel Marketing Intelligence. "Organic and Ethical Foods" (London:Mintel International Group Ltd., 1997).

5. J. Ottman, "Green Marketing: Opportunity for Innovation" (Lincoln-wood, Illinois: NTC Business Books, McGraw-Hill, 1998).

6. Note that the scope of this article is marketing strategy; it does notextend to questions related to corporate social responsibility,

7. S. Smith, "Targeting the Green Consumer" (Bensenville, Illinois:Plumbing S Mechanical, 2000),

8. J, Ottman and V. Terry, "Strategic Marketing of Greener Products,"Journal of Sustainable Product Design, Issue 5, April 1998: 53-57.

9. "Investing in our Future: Packaging Operations," Anheuser-BuschAnnual Report, 1998, p. 1.

10. B. Gifford, "The Greening of the Golden Arches — McDonald'sTeams with Environmental Group to Cut Waste," San Diego Union,August 19, 1991, pages C1 and 04,

11. M.J. Polonsky, "An Introduction to Green Marketing," ElectronicGreen Journal, 1(2), November 1994.

12. P. Waldman, "Chain Sawed: Fisher Family Falls into a CredibitltyGap in California Forests," Wall Street Journal, Feb, 23, 2000: A1.

13. S, Bernold, J. Cassidy, R. Gilbert, H. Mullin, P Perreault and R.Schwemmin, "The Gap and the Mendocino Redwood Company," athttp://faculfy-gsb.stanford.edu/groseclose/Papers/Gap.pdf: C. Emerf,"The Rally That Wasn't," San Francisco Chronicle, Nov. 18, 2000: D1.

14. M.J. Polonsky and PJ Rosenberger III, "Reevaluating Green Mar-keting: A Strategic Approach," Business Horizons, September-October2001: 21-30.

15. J. Makower, "Follow the Leaders: How Consumer Products Com-panies Burnish their Credentials," The Green Business Letter (Oak-land. California: Tilden Press, 2002),

16. "Statement and Aspirations for Social Responsibility" at http://www.honestea.com/responsibility/content.

17. "Complying With the Environmental Marketing Guides," U.S. Fed-eral Trade Commission, 1992.

18. M.E. Marshall and D. Mayer, "Environmental Training: It's GoodBusiness." Business Horizons, March-April 1992: 54-57,

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