Are Consumers Really Willing to Pay More for Sustainable Products?
Sustainability is no longer a trend, but a business imperative. Whether it is because of compliances, investor-driven decisions or because of shifting consumer preferences- sustainability or, at least, showcasing sustainable business agendas is becoming the new norm for most companies. For the times they are a-changin’.
The Rising Cost of Doing Business
Let’s face it, most businesses have a hard time coping with the rising cost these days. Thanks to inflation, covid, disrupted supply chains- the list is long. However, the fear that looms is if raising their costs significantly would scare the customer away. When it comes to price, customers have the memory of an elephant. A higher-than-expected price sticks in customers’ minds. They may pay it once, but you don’t want to risk your product being mentally coded as “too expensive” and out of their future consideration. Once an opinion on a price is set in a consumer’s mind — it can be challenging to reverse this psychological impression.
Consumers Driving Sustainability
The good news is that there is a way to kill two birds with one stone (sorry, vegan readers). The Global Sustainability Study 2021, conducted by global strategy and pricing consultancy, Simon-Kucher & Partners, revealed significant global paradigm shifts in how consumers view sustainability and the associated generational differences in willingness to pay more for sustainable products and services. On the other hand various ESG solutions like supply chain sustainability software also helps and maintain all the ESG data without making the task daunting and never ending.
Globally, 85% of people indicate that they have shifted their purchase behavior towards being more sustainable in the past five years – however, we observe meaningful generational differences in attitude. When looking at both Baby Boomers and Generation X, 24% across each have significantly changed their behavior towards being more sustainable — this figure climbs to 32% for Millennials. Additionally, one third of Millennials are willing to pay more and choose a sustainable alternative when available, whereas older generations are less likely to actively choose sustainable alternatives (24-29%). Millennials and Gen Z are becoming a force to be reckoned with as they continue to represent a larger share of the consumer demographic.
The world over, sustainability is rated as an important purchase criterion for 60% of consumers, as they now see themselves as the agents of change.
“The relative importance of sustainability during the purchase process will continue to increase. Today, 50% of consumers rank sustainability as a top five value driver,” said Dr. Andreas von der Gathen, co-CEO of Simon-Kucher. “As expectations around sustainability climb, companies will face significant pressure to prove their sustainability credentials and continue to make it a central part of their value proposition.”
Eco-friendly products aren’t just a plus for consumers. 59% of those interviewed in a 2020 survey by Trivium Packaging stated that they were actually turned off by unsustainable packaging. This means that if your company isn’t paying attention to their eco footprint (for example, your sustainable packaging options), you could actually be losing a sizable number of customers.
Do Consumers Choose Sustainable Products Even If They Cost More?
So, consumers and sustainability goes hand in hand. Sustainable consumer also care about whether the companies they support are eco-friendly. But, support is one thing; are they willing to put their money where their mouth is?
According to statistics, they are. A recent study revealed that more than a third of global consumers are willing to pay more for sustainable products as demand grows for environmentally-friendly alternatives. The same Trivium Packaging survey mentioned above also found that 74% of consumers are willing to pay more for sustainable products. On top of that, around a quarter of those willing to pay more are willing to swallow an increased price of 10% or even more.
Another study from VELUX windows and roofing merchants, Burton Roofing, the numbers look reasonably promising. They found that:
- 61% of consumers would be willing to pay more for eco-friendly DIY products.
- 65% would be willing to spend up to 20% more on eco-friendly products
- 69% of 18–44-year-olds would be willing to spend more on eco-friendly products, compared to 50% of those aged 45 and over.
A stroll through your local supermarket is enough to reveal that most sustainability oriented products are not the cheapest ones. It is usually on the other side of the spectrum. Take the examples of Patagonia, or a more homegrown brand, Forest Essentials. The sustainable eco-friendly products of these brands are quite highly priced and may not be affordable to many. However, they are also successful brands. Their sustainability storytelling and green branding is so strong that consumers almost view it as an investment in their own health and the planet’s.
This shows that when a company makes their claims more transparent, it creates a positive differentiation and gives the company a priced based competitive advantage.
What does this mean for your company?
This means that you can actually improve your brand image, keep investors and consumers happy by shifting to more sustainable processes in your business. When you effectively communicate with a data-backed narrative that your rise in prices is because you are consciously choosing more sustainable options, the psychological impression of ‘too expensive’ shifts to ‘it’s worth it’. It evokes an emotional response in the consumer’s mind. Consumers are increasingly seeing themselves and their purchasing habits as an agent of change. So, the slight increase in cost becomes a small price to pay in light of the positive impact that he/she has made to the planet and people. All this while increasing the credibility of your brand and getting a ‘greener’ competitive advantage.
It’s time to shift gears and not view sustainability as an additional business cost but rather a massive lever to advance your business forward and get it future ready to attract customers with sustainability. As ESG becomes more prominent in business goals. It is time to see it beyond a compliance goal or mandate but rather to use it as a business advantage to solve the problems. Build and refine your ESG goals and data to aid your company’s growth.
The consumer preference for sustainability is only going to grow. Our goal at Snowkap is to help you transition to net zero no matter which point of business you are at. Through our platform, businesses can get access to a curated network of certifiers, specialists, technology and material vendors that help you accelerate in your sustainability journey. With cost-efficiency and speed, we help organisations to create a significant positive impact that leads to better consumer connect, business resilience, cost of capital and valuations. You can baseline & set targets to constantly make your operations more sustainable and create cost advantages
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