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

KJ and I recently had the opportunity to chat with Erik Blachford, the CEO of Terrapass.   I think Terrapass is a fascinating business, in part, because it’s a for-profit enterprise, with a goal of being self-sustaining, rather than relying on donations.   It’s a carbon-offset company, whose core value is helping people who want to take responsibility for their contribution to global warming by allowing them to invest in an alternative energy project by purchasing a carbon-mitigating “pass”. 

The strategy that Blachford articulated is consumer focused. The philosophy is that using carbon offsets is a personal choice that will have a natural uptake as more and more people use them to offset environmentally unfriendly activities such as car usage and air travel.  Presumably, businesses will be impacted by a groundswell of employees and customers who: 1) are concerned with climate change, 2) are taking action to mitigate it, 3) want their employers and vendors to participate.

Terrapass has a new program called “Carbon Balanced Business”.  Targeted towards businesses, it is marketed as a way for businesses to keep employees happy.  However, most of Terrapass’s current business focus seems to be selling partnersips.   Companies like Expedia, car rental companies, retailers, and notably, the Ford Motor Company re-sell the Terrapass carbon offsets as an add-on to their products.   Erik indicated that Terrapass will invest in additional salespeople who can build business relationships.  I think this is a great idea, because the potential for Terrapass to create one-to-many relationships seems too good to pass up.

But I wonder if Terrapass is missing an opportunity to sell its product directly to businesses for their own use.  I’d like to see Terrapass put together some corporate-targeted programs with large companies.   Most large companies have sustainability programs or are thinking about them.  For companies who know they need to do something, and are not sure where to start, it’s a no-brainer– what could be easier than buying carbon credits?  Corporate clients could provide scale and a financial foothold for a fledgling company.   Terrapass is an easy way for a company to get started down the path with a relatively small investment and no process change (this, of course, presents its own problems, but that’s another day’s blog).