Winning eco-product strategies
[SERI FOCUS] Tavex, a Swiss jeans maker, lowered the costs of its wastewater treatment by replacing chemicals with tropical fruit.
An increasing number of companies around the world are rolling out eco-friendly products and riding the current green wave. The development of eco-products is expected to heat up further as companies try to address rising raw material prices, tougher environmental regulations and growing consumer demand.
Despite high expectations for eco-products, however, many companies expanding in this segment face three dilemmas. First, in their need to make the products marketable, manufacturers are discovering that eco-friendly materials are more costly, resulting in higher production costs. Second, with the rapid increase in the number of eco-products, hewing to this trend is no longer a differentiating marketing element. Third, a high level of consumer awareness about eco-consumption does not guarantee eco-product sales, making market expansion difficult.
To overcome the obstacles and strengthen competitiveness, companies must establish new strategies throughout the entire value chain.
The planning stage needs to prioritize consumer benefits. Consumers are not willing to trade function and quality for environmental protection. This was reflected in an online survey by Samsung Economic Research Institute. Of the 753 respondents, 54 percent said eco-friendliness is not as important as quality, while just 5 percent named it a priority when they make purchases.
Furthermore, eco-products that reduce the cost of ownership, such as those that have lower maintenance costs and are easy to dispose of, will be more attractive. Products that protect the environment and are user friendly, such as appliances that help save electricity with their intelligent sensor technology, are well positioned. Consumers are sensitive about paying extra to protect the environment. Companies need to give up on the idea that eco-products can be sold at high prices and instead focus on changing the production paradigm to reduce costs.
There are two ways to do this. First, companies need to minimize the energy and resources used for production. U.S. office furniture maker Herman Miller cut its material needs by using netting to replace traditional frames on the back of chairs. The experiment has resulted in affordable and popular chairs. In addition to curbing production costs, companies can find out the cause for environmental costs and remove them.
Tavex, a Swiss jeans maker, lowered the costs of its wastewater treatment by replacing chemicals with tropical fruit for textile finishing. Adidas invented a T-shirt dying method using carbon dioxide instead of water, saving 25 liters (6.6 gallons) of water and halving the energy consumption per T-shirt.
In terms of advertising, a growing number of eco-products are raising skepticism about their creditability and effectiveness. An intuitive approach is needed to catch the attention of indifferent or skeptical consumers such as adopting a name that is easy to remember or using relevant figures. For example, Levi’s introduced a new line of “WaterLess” jeans that use up to 96 percent less water. Seventh Generation, a green cleaning product brand, uses recycled cardboard and newspapers to make bottles for its laundry detergent and an inner pouch that holds the liquid detergent, allowing consumers to see that the company minimizes the use of plastics.
Last but not least, technology partnerships within the supply chain are especially important to develop distinctive products and minimize environmental risks. It is advisable that material makers and manufacturers forge a partnership to complement each other’s technological capacity. Companies may transfer advanced technologies to suppliers that lack technological capacity. When seeking innovative ideas or long-term funding sources, companies can expand partnerships with external stakeholders such as the government or consumers.
Simply making an eco-product and projecting an image is no longer enough to gain market share. Value and cost savings must be shown as well as evidence of a product’s contribution to protecting the environment. Sales should be driven by the mass market, unlike in the past when only a few purchasers with high awareness of the environment were targeted. At the same time, national values need to be considered. For example, U.S. consumers prioritize energy efficiency and the use of recycled materials. Taking these factors into account can help turn eco-products into a viable new market.
* The writer is a research fellow at the Samsung Economic Research Institute. Visit www.seriworld.org for more SERI reports.
by Ha Joo-hyun