CleanTech WebLog

In the debut issue of HBR Green (from Harvard Business School), Steve Bishop of design firm IDEO wrote an article entitled “Don’t Bother with the Green Consumer”. This is a catchy and provocative headline that obscures the real issue. I believe there is a “green consumer” market – i.e. consumers who prioritize sustainability above other product features. But, it’s a niche market. Some companies can target this market and be financially successful (e.g. Burt’s Bees).

The fact is that many companies must address a broader market. And the vast majority of consumers – and business customers – are looking for other (non-green) benefits first.

This does not mean that product marketers can ignore sustainability issues when they are developing market requirements for new products. It means that marketers and product developers face the very interesting challenge of devising products that incorporate sustainability while still meeting the customers’ other (in most cases, higher priority) needs. It’s an exciting challenge, full of real opportunity for those who like to innovate and want to beat their competition in the marketplace!

There are lots of examples of companies that are using green benefits to create a market opportunity or to differentiate from competitors but are not leading with those benefits in their messaging.

Green Plug, the DC hub company that made such a splash at the recent Consumer Electronics Show, is a good example. The product replaces multiple, device-specific chargers with a single charging hub that calibrates the electrical charge delivered to each device’s particular needs. All this is managed through a protocol called Greentalk. I had a chance to hear CEO Frank Paniagua talk about his product at a recent meeting at the MIT-Stanford Venture Lab. He quipped that a few years ago, his company would have been labeled a tech company but now it’s labeled “cleantech.” Paniagua emphasized the top consumer benefit of convenience (having only one charger for multiple electronic devices). For manufacturers who adopt the Greentalk protocol, the benefits are lower bill of materials costs. Secondarily, “green” benefits accrue to both constituents (consumers and manufacturers). The consumer will reduce energy consumption because the Greenplug hub automatically shuts off power flow to the device once it is fully charged. The manufacturer may benefit from fewer end-of-life product disposal costs.

Another example is the Technotrash service offered by GreenDisk (not related to GreenPlug). GreenDisk’s biggest customer segment, the entertainment business, sees the primary benefits of the service as “secure, documented destruction of products,” with the recycling as a secondary benefit. GreenDisk solves a pressing customer problem while at the same time delivering a “green” benefit.

Lexus marketing efforts for its hybrid cars is another case in point. See my post on “Tailoring Cleantech Messages to Your Target Market.” Lead with the top priority product benefits as seen by the target customer and then deliver the ancillary, somewhat less tangible, benefit of doing less harm to the environment.

As Bishop puts it, consumers “want solutions to their day-to-day problems that also make sense for our environment.”

In many industries, some of the most promising opportunities are niche markets – requiring specialized products or services that are outside the mainstream. GreenDisk, a provider of nationwide* electronics recycling services, is an interesting example of a “green-focused” company successfully addressing a niche opportunity.

While GreenDisk offers a range of electronics recycling services, the company’s primary focus is on recycling “technotrash” for businesses and organizations (e.g. libraries and universities). Technotrash consists of all the little parts and pieces associated with electronics products such as electronic media (CDs, DVDs, videotapes, cassette tapes) and their cases, hard drives, zip drives, cables, cords, digital cameras and their chargers, handheld scanners, mice and more.

Greendisk offers secure, convenient, environmentally responsible disposal of these small items. Because the electronic media, in particular, may contain proprietary information or copyrighted material, GreenDisk will provide a certificate of destruction. This is particularly important to one of the company’s key target segments – the entertainment industry.

To meet the range of customer needs, GreenDisk offers three levels of service:

• Custom Electronics Recycling – They send a truck to pick up material – typically in the 1-3 ton range, but they will arrange pickup for as little as a single pallet of e-waste and have even handled one project of 400,000 pounds.
• Technotrash Pack-IT - The customer packs the technotrash in their own shipping carton and sends it to a GreenDisk facility, paying a recycling fee that amounts to about 30-35 cents per pound.
• Technotrash Can (the most widely used service) – GreenDisk ships a corrugated, shippable collection box to the customer; the customer fills it over some period of time, then downloads a shipping label and automatically orders a Fedex pickup.

I recently caught up with Mickey Friedman, the COO of GreenDisk. Several key themes emerged that seem applicable to many cleantech companies going after niche markets:

• evolving as the market changes – When GreenDisk started out almost 15 years ago, if focused on providing a service to companies like Microsoft and Lotus, who needed to securely dispose of excess software inventory. In those days, a box of software might include as many as 30 diskettes. As the market evolved and the nature of the disposal problem changed, so did GreenDisk. It began addressing the disposal needs of not just the manufacturer but also the end customer. Mickey expects the markets to continue to evolve and the company to evolve with them.
• creating the right business model – As a bootstrap operation, GreenDisk did not have excess cash to expend on building its own facilities and handling all aspects of the operation. The company focused on creating the right partnerships with recycling facilities, fulfillment operations and others in order to cost-effectively deliver a nationwide service.
• tailoring the value proposition – One of GreenDisk’s most important business segments is the entertainment business (e.g. studios and music production companies). For this segment, the secure, documented destruction of products is perhaps even more important than the environmentally responsible recycling aspect. Once again, this demonstrates that the “green” message is not always the most appropriate lead-in. (See also my post on “Tailoring Cleantech Messages to Your Target Market.”)
• marketing on a shoestring budget – The three most important elements of their marketing efforts to date have been: word-of-mouth, Google ads and search engine optimization (SEO). Mickey found that the SEO effort, in particular, was quite inexpensive and had a positive impact in a very short period of time.
• telesales is the next priority – Now that GreenDisk has implemented a financially sound business model, its next investment will be in a telesales program.

This niche market surely shows that one person’s technotrash is another’s treasure.
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* 48 contiguous states

Many corporate purchases of cleantech products are made based on anticipated savings of some sort. But measuring the actual savings can be a challenge. So, I get excited when a cleantech product comes along that includes built-in results measurement. Ridespring is a great example.

Ridespring is a service that automates and promotes corporate commute trip reduction programs. Here’s how it works:

• Customized Website - Ridespring creates a customized commute website for your company. The site is hosted by Ridespring and accessible to all employees. It offers information about commute alternatives (i.e. commutes by means other than single-passenger car trips) and provides links to resources for planning commute alternatives (e.g. public transit, vanpool programs, etc.). The customized Ridespring website also offers employees a way to connect with other employees who want to carpool – either regularly or occasionally.
• Driver/Rider Matching Program - Employees register with the site and can offer rides to, or find rides with, other employees for carpooling purposes.
• Incentive Program - An incentive program is tied in to the service. Employees earn points for using alternative transportation and these points allow them to win prizes. Prizes are tailored to match the interests of the company’s particular employee population. Individual employees can also enter in their typical commute length, gas price paid and miles-per-gallon (MPG) in order to calculate gas savings.

Ridespring takes care of the website customization and hosting, incentive program administration and employee communication related to the trip reduction program. And the Ridespring service automatically tabulates statistics about trip reductions based on information provided by employees who log their trips in order to claim their incentive points. Individual employees log their commute data on a screen that looks like this:

Employees can even choose to receive an automated weekly reminder to enter their commuting statistics.

Employers are then able to obtain reports about employee participation, rides offered and car trips removed (example below).

Since employees are able to input their typical MPG and miles traveled, the system has the potential to calculate estimated reductions in gasoline usage and CO2 emissions.

Sure, it’s not a perfect reporting system, since employees could potentially lie about their commutes in order to get incentives. It’s the honor system. But since the prizes tend to be relatively inexpensive rewards, I would guess that most company cultures would “out” and “shame” the liars. The beauty of this reporting system is that it’s integrated into the service itself and the manual effort required to gather the data is spread among the employee participants. The input process is pretty painless and literally rewarding.

As a company offering clean technology products, you may have a great story about how your product is better for the environment than your competitors’ offerings. But, if your message does not resonate with your target market, it will fall on deaf ears.

How do you get your cleantech message across when environmental benefits are not of primary, secondary or even tertiary importance to your target – especially if you, personally, think they should be? Should you evangelize the environmental benefits with the hope of changing your customers’ value systems? Most for-profit companies would not undertake such a quixotic quest. This sort of values evangelism is even more doomed to failure when you are selling to a market segment where you already have a strong market position and an established track record and brand.

The Lexus hybrid marketing team takes an interesting approach to this dilemma. They acknowledge that their affluent customers do not want to sacrifice design, quality, performance or luxury when buying a hybrid vehicle. In an interview with CleanTech WebLog last week, Lexus marketing manager, Kimberley Gardiner, told us that her customers’ “luxury car needs must be met, first and foremost.” After that, the customers are willing to entertain other benefits such as lower emissions, higher gas mileage and fewer trips to the gas station. The Lexus hybrid tagline — “gives more to the driver, takes less from the world” — embodies this priority of perceived values.

Once Lexus customers are engaged in a dialogue about the environmental benefits of choosing a Lexus hybrid, they may begin to explore other aspects of what Lexus calls “Hybrid Living” or how they can “minimize their impact on the environment without sacrificing comfort and luxury.” This seems to build on the idea that when you buy a Lexus, you are buying more than a car. You are making a “lifestyle purchase.”

So, Lexus has created a lifestyle website, Lexus Hybrid Living that highlights “luxury ecodesign,” covering eight different product categories from architecture and art to travel, food and wine. Of course, transportation, featuring Lexus hybrid vehicles, is one of those categories. The site displays high production values, with luscious photos and video. It serves up the environmental message in a way that is informative, entertaining and palatable to the affluent Lexus target customer. In tone, it is quite consistent with the Lexus rewards program that is open to all Lexus owners – not just hybrid owners.

Perhaps the Hybrid Living website will change the behavior or impact the values of some of the Lexus hybrid vehicle owners. But those changes do not have to happen before the consumer purchases the product. Because Lexus knows its customers and understands their needs and wants, the company can speak to them in a way that will actually be received. The “values evangelism,” if you choose to call it that, is soft-peddled, not preachy, inviting, not strident. Over the long haul, it just may have a small, positive impact on the values of a group of consumers with significant purchasing power.

Lexus has found a way to tailor its cleantech messages to its target market by focusing on how environmental messages best fit into its customers’ needs and perspectives — a lesson to us all.

Greenwashing – touting ecological benefits while hiding environmentally damaging practices – is something cleantech companies must avoid. And since cleantech companies, by definition, must make claims about the “cleanliness” of their solutions, they are particularly vulnerable to accusations of greenwashing.

The fact is: if you are marketing and selling products that claim to be “green,” “organic,” “sustainable,” “energy-efficient,” etc., you will be held to a higher standard. Prospective customers are more sensitized to all aspects of what you are doing from packaging, to manufacturing and delivery processes, to what vehicles your service people drive, and even to whether you stock and serve bottled water at your office. They’re on the lookout for whether you are “walking the talk.”

Business consequences of making partially true claims or of claiming “virtue” in one area while hiding “vice” in another include:

• Getting “outed” by bloggers, activists or watchdog groups – leading to stagnant sales or even boycotts,
• Loss of credibility – resulting in customer skepticism about current and future claims of product benefits and elongating sales cycles,
• Damage to your brand or reputation,
• Derailing the conversation from the main benefits you’re selling and setting up additional obstacles to closing a sale,
• Possible regulatory action – in the U.S., the Federal Trade Commission (FTC) has the power to investigate advertising claims, force a company to halt a marketing campaign and/or fine a company for violating regulations. (The FTC has issued a “Green Guide” – FTC Part 260 – that governs environmental marketing claims and will begin to update it in January 2008.)
• More difficulty recruiting new talent – (see The Wall Street Journal article on How Going Green Draws Talent, Cuts Costs and my post of 11/27/07.)

So, how can you avoid being accused of greenwashing? First of all, be honest about your environmental claims. It’s not really possible to offer a solution that is completely “sustainable.” Some non-renewable resources will be used at some point. But you can avoid the “Six Sins of Greenwashing” described by Terrachoice Environmental Consulting, by making sure you:

• have considered the hidden tradeoffs when you make a claim (e.g., delivering solar energy solutions while polluting groundwater in a production process),
• have proof for your claims,
• are specific about your claims,
• make claims that are truly relevant to the product you are promoting,
• are not actively promoting what amounts to the lesser of two evils (perhaps exemplified by “organic cigarettes”).

Additional suggestions come from David Wigden’s thoughtful post on Defining Green Brand Leadership. He recommends, among other things, that companies be accountable, transparent and visionary in order to rise above the fray and take the ethical high road in their claims.

Cleantech companies do not want to be accused of greenwashing. Luckily, such accusations can be avoided by thoughtful, responsible marketing communications.