Marketing Sustainability in Retail Understanding Consumer Market Trends

Laurie Demeritt

Sustainability from a Consumer Perspective

The Hartman Group, Inc.

The Hartman Group, Inc.

A full-service strategic consultancy and market insights provider.
Founded: 1989 Headquarters: Bellevue, WA Staff Composition: Anthropologists, sociologists and psychologists, visual analysts and linguists, MBAs, marketers and innovators Tinderbox: Dedicated to culture, innovation and trends

Multi-Disciplinary Team of Experts

Michelle Barry, PhD Sociocultural and Medical Anthropology James Richardson, PhD Anthropology

Shelley Balanko, PhD Applied Social Psychology

David Moore, PhD Sociology Jarrett Paschel, PhD Sociology Nasser Kamali, PhD Sociology Kirk Cornell, PhD Business and Industrial Anthropology Brent Baxter, PhD Sociology Greg Prang, PhD Sociocultural Anthropology Samantha Goodwin, MSc Visual Anthropology Karen Stockert, MA Cultural Communications and Design

Arwen Kimmel, MA Linguistics

Lucy Norris, MA, Food Studies Melissa Abbott, MS Food Nutrition

Sustainability Study Research Methods

Qualitative Consumer Immersion
Over 150 hours of consumer interviews
In-depth interviews in homes Social network parties Observation of sustainability activities Consumer photo journaling

Field locations: Chicago, Raleigh, Boston, Newark, Los Angeles, Seattle

Quantitative National Survey

Custom online survey; sample size 1,600 Nationally representative survey of the US population Conducted January 2007

A Consumer Centric Approach to Sustainability

We designed our research methods to give consumers great freedom to talk about specific topics however they liked We asked consumers to describe their dealings with many of the things that sustain and support human life (e.g.,food, water, air). We asked general, open questions, such as:
Is this weather typical for this time of year? What comes to mind when I say the words tap water? What do you consider safe food?

We introduced the term sustainability only near the end of our interviews to gauge consumer familiarity and understandings of it

Sustainability has a History

Report Says Global Warming Poses Threat to Public Health The New York Times "Most Consumers Say They Would Like More Green Products The Financial Times "More New Alternative Fuel Vehicles Continue to Roll Off US Automaker Assembly Lines The Oil & Gas Journal "Tomorrow's Shade of Green: Environmentally Oriented Construction Materials for the 21st Century Home Improvement Market "Can Retailers Turn Green This Year? Marketing Magazine These headlines all occurred between 1996 and 1997

Sustainability Seems to Be Everywhere These Days

Food & Beverages

fresh, local, seasonal, organic, biodynamic farmers markets, CSA wild salmon, grass fed beef, free range chicken Rainforest Alliance, Free Trade

Home
sustainably harvested wood solar panels programmable thermostats natural/organic cleaners green waste recycling faucet aerators

Sources
writings: Al Gore, Michael Pollan, Marion Nestle food movements: Slow Foods blogs: Greentopia, Ideal Bite lifestyle retailers: Whole Foods Market, Timberland, IKEA, American Apparel

Goods
green/organic skin care

Garden
garden in every school, urban gardening grow-your-own veggies & herbs drip irrigation system ladybugs native plants

Pet Care
raw foods

bamboo & hemp clothing & bedding

reusable shopping bags Prius, bus pass, biking Sigg water bottles

organic food
herbals, acupuncture non-toxic pet grooming products non-PVC toys

Sustainability is NOT a Household Word

Though widely used in business circles, the term sustainability is little used in consumer circles.
Just over half (54%) of consumers claim any familiarity at all with the term sustainability (and most of these consumers cannot define it appropriately upon probing)
Only 5% indicate they know which companies support sustainability values (unaided) 12% indicate they know where to buy products from companies that support sustainability values

As a marketing term, sustainability has limited traction; it is not a household word

Sustainability Awareness
Though the term sustainability is limited in usage, most people operate with varying degrees of sustainability consciousness.
Sustainability consciousness refers to the way people link everyday life to big problems (e.g., food, water and air quality) Sustainability consciousness is not just about eco-conscious consumers and the environment
Its everyday people and broadly distributed across society

Sustainability consciousness emerges as consumers gain experience dealing with risks in everyday life

Risk in Everyday Life

Most consumers believe that daily life requires practical adaptations to risks if potentially harmful outcomes are to be avoided.
Some adaptations to risk are firmly established habits
Avoiding unfiltered tap water whenever possible
Wearing sunglasses and sunscreens to block out harmful UV rays Avoiding outdoor exercise on high pollution days

Some adaptations to risk are only now emerging

Using sanitary wipes to wipe down grocery carts Routinely using air filters in living rooms Questioning the purity of water in plastic bottles

Perception of Risks from the Environment

Percentage answering Agree rather than Disagree or Neither agree nor disagree. Source: 2007 Sustainability Survey (n=1,489 consumers within the World of Sustainability).

Current Adoption is Incremental

Many consumers are making incremental individual changes, but primarily in activities that are low-sacrifice and low-risk, require little to no monetary investment (with the exception of food) and need no significant change in behavior (e.g., turning off the water faucet while brushing teeth). Initial changes toward a sustainable lifestyle are more about making conscious decisions and choices and investments of time rather than purchasing products.

Current or Future Participation in Sustainable Activities

*Examples provided to respondents were church, school, human services, neighborhood advocacy group, [and] arts organizations. Note: Remaining percentageanswering, Im not ever likely to do thisis not shown. Source: 2007 Sustainability Survey (n=1,489 consumers within the World of Sustainability).

Occasional Organic Usage is Consistently Strong

Daily Weekly Monthly Occasionally Never

2000 8% 9% 5% 34% 45%

2006 9% 14% 6% 44% 27%

2008 7% 12% 8% 42% 31%

Sources: Healthy Living, August 2000 (n=4,942); Organic 2006 Survey, December 2005 (n=2,109); Organic 2008, March 2008 (n=2,161) Note: Percentages may not sum up to 100% due to rounding.

The Absence of Leads the List of Properties Suggested by Organic

From the following list, what properties do you think are implied or suggested by the term "ORGANIC"?

Absence of pesticides No artificial flavors/colors/ preservatives Absence of herbicides Absence of growth hormones Absence of antibiotics Absence of genetically modified foods Safer for one's health Environment-friendly Better for one's health Absence of food irradiation Fresh Absence of Mad Cow Disease (BSE) Higher nutritional content Premium product Better taste Better treatment of farm animals Locally grown Family (small-scale) farms Sustainable production 17% 27% 27% 24% 22% 34% 31% 48% 45% 67% 64% 63% 58% 57% 69%

83% 78% 78% 75%

Consumers Are Most Willing to Pay a Premium for Fresh Organic Categories
For which organic foods/beverages are you willing to pay 30% more than their conventional versions?
Meat/poultry (including deli, fresh) Fresh fruit Soymilk Milk Fish/seafood Breads Fresh vegetables Eggs Cheese Hot cereal Coffee Juice Yoghurt Vitamin supplements Fresh prepared (e.g., sandwiches, salads) Bulk goods Other dairy (e.g. butter, sour cream) 65% 64% 62% 62% 61% 61% 60% 60% 56% 54% 52% 52% 51% 51% 49% 47% 47%

Organic category buyers (Primary HH shoppers who have purchased organic in particular product category in past 3 months) (n = 87 to 877)

Sizing Sustainability
Consumers can be analyzed according to their lifestyle orientation within a given world of activityhere the World of Sustainability Segments vary according to the intensity of involvement in that world.
The Core: The Core is the most intensely involved - early adopters, trendsetters and evangelists
The Mid-level: The majority of consumers are in the Mid-Level, they are changing their attitudes and behaviors The Periphery: Consumers begin their journey at the Periphery of the World, and are usually more attitudinally than behaviorally inclined

Defining the World of Sustainability

A small percentage of consumers (7%) do not participate in the World of Sustainability in any meaningful way. Consumers who are not in the World of Sustainability are those who: Rarely base their purchasing decisions upon their concerns for issues such as the environment and social well-being and fail to do so because Im not really concerned. AND Chose the response I dont think there are significant problems facing the world at this time.

Measuring Involvement in the World of Sustainability

The World of Sustainability can be segmented according to how consumers make sense of risks. This is because they think about sustainable products in terms of lowering risk to themselves, to a community or to the world.

Who is the Periphery Consumer?

Meet Linda.
If gas prices rise even higher she feels she has a good reason to trade-in her SUV Drinks water from the tap unless it smells and/or tastes bad Does not believe the hype about organic food Believes climate change might be happening but defers to the experts Travels with a waterless hand sanitizer because she wants to avoid germs in public places

Just bought an energy efficient dishwasher because of a rebate

Curbside recycles because it lowers the cost of her trash bill

Who is the Mid-Level Consumer?

Meet John.
Lacks deep knowledge of organic farming, but buys organic occasionally because it makes him feel safer Wears sunscreen because the hole in the ozone layer makes it more dangerous to be in the sun Uses a water filter on the kitchen tap but not in the shower Recycles out of an ambiguous sense of moral duty Ponders the possibility of buying a hybrid vehicle someday

Enjoys buying brands that symbolically align with his identity and values

Who is the Core Consumer?

Meet Kim.
Pays premium prices for items produced by companies who treat their workers fairly Avoids plastic packaging and containers due to concerns about leeching Strategically plans errand trips so that she can minimize her gas consumption Recently purchased sustainable cotton bed sheets for her home Follows some of the products she buys throughout their lifecycle Buys only cruelty-free personal care products Believes her purchase decisions are a form of direct democracy

Dimensions of Sustainable Lifestyles

Core, Mid-level and Periphery Sustainability Consumers are drawn to different attributes of products, settings and services.

Key Purchase Criteria: Periphery

Convenience
Availability in stores; ease and efficacy of use If its hard to find or I cant figure out how to use it, forget it.

Price
Consumer perception vs. actual price; how added value is conveyed Why would I pay 10 bucks for a light bulb?

Personal Benefits
Health is typically the primary benefit
Im trying to do the right thing for myself and my family

Key Purchase Criteria: Mid-Level

Expert Opinion
Weighing options; seeking direction; reinforcing choices Ambivalent reliance on science (subject to change and too complex) Derived from friends, family and colleagues: My sister knows all about this, shes hard core.

Experience
Meaningful interactions with products and companies Relevant product design and use Opportunities to connect through stories about people, places and processes

Knowledge
About benefits (for self and others), company values, resonance to way of living and goals

Key Purchase Criteria: Core

Greater Good
Expanded consciousness; holistic thinking about how we live and interact with each other and the world The decisions I make and the things I do impact more than just myself

Partnership
Striving for similar goals and ideals; like-minded; equal participation and effort Were in this together

Transparency
Access to company values, policies, and practices; open communications

Nothing to hide

Authenticity
True and consistent; values driven The real deal, grassroots, the way things should be

The Mid-level Represents the Largest Opportunity

The Mid-level is changing their attitudes and behavior regarding sustainable products
The Periphery isnt putting their money were their mouth is and the Core is going entirely outside of mainstream distribution channels to buy sustainable products
Periphery
Knowledge Behavior Values just getting started not consistent price + convenience growing fairly consistent price + convenience personal benefit experience + knowledge Doing what you can Has to balance participation in products with feasibility Makes changes to lifestyle when new information on sustainability is available

Mid-level

Core
gurus, experts way of life greater good + partnership transparency + authenticity Doing the right thing Believes actions now directly affect future generations Regularly makes changes to lifestyle when new information is available

Attitude

Doing something Believes in improving own quality of life when possible Makes changes to lifestyle when it becomes widespread and convenient

The Mid-level Thinks About Sustainability Realistically

Doing the right thing has to be balanced by my family budget and by how our life runs.
Food thats healthier for my family and the planet | fresh, all natural, local, few ingredients, little packaging, pesticide-free Trade-offs occur in finding the balance between the right thing to do and whats reasonably priced, well known and trusted brands, what my family will eat, picking and choosing my battles Food producers need to show value added through sustainable practices, attention to detail, extra care, passion about what you do Sustainability means doing the right thing, but also doing what you can because there is no silver bullet Doing what you can includes living more simply, giving back, recycling, reducing waste, education, being connected

Key Triggers to Participating in Sustainability

Why Environmental and Social Well-Being Concerns Have No Influence on Some Purchasing Decisions
65% It takes too much money. 40% There are too many other things I have to worry about. 23% 21% 32% 14% It is too complicated. 23% 29% 12% It takes too much time. 16% 22% Core Mid-level Periphery 29% 33% 51% 57%

Acting alone, I can't have much impact.

2007 Sustainability Survey (n=1,489 consumers within the World of Sustainability).

Feeling that the Quality of Life Will Change for the Worse

Percentage answering much worse or somewhat worse to the question: When you think about the direction things are headed, how you think the quality of life will change in each of the following areas?
Source: 2007 Sustainability Survey (n=1,489 consumers within the World of Sustainability).

Sustainability Perceptions are Evolving to be More Proactive and Local

Personal, not political

Optimistic and hopeful Focus on social elements of sustainability

Small, easy, positive= Mass participation

Sustainability Awareness Works from the Inside Out

The home is the place that is most stable and safe. The farther one ventures outside a familiar environment (into the outside world) the more uncertainty and risk one expects to encounter. Products that clearly have a direct personal benefit to health and well-being are the gateway to purchasing sustainable products. Therefore, food and beverage products are top of mind when it comes to purchasing products with sustainable values.

Sustainable Product Adoption

Systems Thinking and Interconnectedness

The ability and tendency to look beyond the personal is a marker of systems thinking which believes that everything is interconnected. Examples of systems thinking that motivate increased interest in sustainability include: Having children tends to dramatically increase mental and practical investments in issues of sustainability Participating in outdoor recreation that centers on or around wilderness areas brings face-to-face confrontation with balancing conflicting needs When a cherished way of life shared by many people comes under siege of broader changes (when a future life that was assumed as a given by the group becomes threatened) questions of sustainability are likely to arise (e.g., Will I have access to clean water?, Will I still be able to buy local produce?)

Sustainability and Food Quality

Shows respondents who agree. Source: 2007 Sustainability Survey (n=1600).

Sustainable Food Cues by Product Category

CATEGORY
Produce

SUSTAINABILITY CUES
local, organic

Chocolate
Coffee Salad dressing Seafood Cereal Juice Eggs Bottled water Grains Meat and poultry Wine Bread Tea Cheese

organic, fair trade, donation to charity

local, organic, fair trade, shade grown organic, donation to charity wild organic organic, indigenous support (e.g., Goji and Acai) local, free-range natural sources, donation to charity local, organic, environment cues local, free-range, growth hormone-free, antibiotic-free local, biodynamic local, organic, artisanal organic, fair trade local, organic, artisanal

Consumers Believe Businesses Should Provide Leadership in Environmental AND Social Aspects of Sustainability
Most companies are only talking about environmental initiatives when it comes to sustainability. These companies talk about green as though it is the only element that consumers consider to be part of sustainability. Equally if not more important than environmentally responsible business practices are human ethics and social responsibility. Consumers expect and want to know that businesses treat employees and other stakeholders well in terms of safety and fairness.

Important Business Practices Influencing a Consumer to Buy a Product

Shows agreement with very important and somewhat important. Source: 2007 Sustainability Study (n= 1,600)

Strategic Guidelines Around Sustainability

Orient company innovation, communication and experiences toward consumer definitions, not industry definitions, of sustainability. Health and wellness involvement is the most significant connection point consumers have as they enter the World of Sustainability. Link personal health and/or wellness benefits to sustainable products and services wherever possible. Stay cognizant of where products and services fall on the sustainability adoption pathway to determine which dimensions of consumption to address and what key benefits, language and visual cues to leverage.

Sustainability Language
The most relevant linguistic themes and imagery around sustainability are: Hope Connection Responsibility Similar Values Reliability Care/Nurturing Control Health Authenticity Simplicity Efficiency Simple Living

The most relevant linguistic themes and imagery for food specifically are:

Local
Artisanal

Fresh
Unpackaged

Organic
Seasonal

Strategic Guidelines Around Sustainability

Address key barriers to regular participation: price, convenience and availability. Allow participation in products, services and retail experiences to be flexible and occur in the course of a consumers everyday behavior (i.e., shopping at the grocery store, dining out, at a social event). Follow Core consumers to identify possible future trends in sustainability.

Strategic Guidelines Around Sustainability

Open up the business for direct consumer input as well as transparency about company processes, values, etc. Communicate brand and company narratives that connect consumers to the people, places and processes that epitomize your company. Show them how the company is part of a community, and stay inclusive. Create opportunities for consumers to connect and share their experiences and opinions with one another.

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