Business strategists beware! Article 13’s insightful new research report “The Vanguard of New Product Development” provides rich evidence that unless you learn about the issues and language of sustainable development; your products will lag behind those of your competitors.
Business strategy doesn’t mean much without taking on broad consumer views, needs and trends. Does the consumer influence NPD? And if so, are consumers pushing products towards or away from sustainability?
As companies serve ever more complex markets, we are seeing more and more segmentation. Since the recognition and labelling of “yuppies” in the 1980s, businesses selling goods direct to the consumer have been seeking out carefully defined groups of customers and then advertising products to appeal uniquely to those groups. Understanding these market segments, predicting their needs and desires, their location and their wealth, is all part of the art of the marketeer. “Empty-nesters”, “dinkies” and “the pink pound” have all been targets. Now the marketer must ponder the ethical consumer.
The ethical consumer is a small niche market, but a growing and changing one. The ethical consumer used to see their role as boycotting companies or products. The ethical consumer was a force that attacked a brand more often than a product. Nestle, Nike, Shell and Barclays all felt the brunt of emerging consumer power in the 1980s and 1990s. The campaigning role of consumers was essentially a negative one, cutting sales and punishing a company. Today, as “The Vanguard of New Product Development” reports, the ethical consumer is moving away from being solely a negative influence towards taking on a positive role, boosting sales and enhancing returns for companies who proactively develop goods and tailored to the ethical niche.
The slow but steady growth in the organic food sales is well documented. In the food and drink sector, the fastest growing companies include those producing fruit and cereal energy bars and pure fruit smoothies.
In the highly competitive clothing sector, Funky Gandhi are taking Katherine Hamnet’s designer T-shirts with a message several steps further. Funky Gandhi are a T-shirt business trading on the fact that sustainability underpins their business model, their product design, and their supply chain. As another example, Vancouver “culture jammers” and corporate gadflies Adbusters are reaching out from magazine publication to make shoes . Their “black spot” sneakers, launched this autumn, are selling well, tapping the market for conventional design remade with sustainability in mind.
Perhaps it’s not surprising that the opportunity to boost sales by appealing to the ethical consumer is most visible in sectors like food and clothing, where markets are most closely linked to fashion. But looking beyond the occupants of that niche, what is the evidence that the consumer cares about sustainability? Beyond those who haunt the organic aisles of Waitrose, take the time to stock up on groceries at farmers’ markets or browse the organic cotton clothing areas of boutiques, who is looking for sustainable products?
The evidence presented in “The Vanguard of New Product Development” suggests that consumers might care more about very specific issues rather than mysterious and elusive “sustainable development”. While broad-brush sustainability remains a stakeholder and shareholder relations issue, specific issues can be related directly to an individual and their family. Consumers are starting to make the link between the products they choose to buy and issues such as climate change, particularly when that issue translates into a cost.
For example, if your supplier in the UK has not sourced enough renewable energy to meet climate change regulation requirements, they pay a fine, and you see your electricity bill starts to climb. So you are more inclined to look for ways to reduce your energy use. Low energy light bulbs and energy efficient appliances are products which increase market share as a result. An office manager is as likely to choose to get printer cartridges refilled as much for cost reasons as for environmental reasons, but both motivations have helped build Environmental Business Products from a garage business re-using and recycling inkjet cartridges to a company employing 200 people in 5 countries, recently reaching a turnover of £25m.
When food scares like BSE or Foot & Mouth threaten your family’s health, or air pollution increases the child asthma rate in your community, then you are more likely to press for products that reduce those risks. Organic and local produce, or low emission vehicles, are the products whose sales increase as a result.
Additionally, most people in the UK are consumers of services that they don’t pay for directly. Educational services are one example, transport is another. Bigger than both of those is the health service. The market for health and well-being products in the UK is a huge one. And the companies growing fastest in serving that market are the companies aiming to deliver “natural” products, that is, products with low environmental impacts. In early October, the Financial Times reported on the healthy financial growth of companies gaining new markets through eliminating toxicity in their products. The article focussed on Tristel, a company which manufactures chlorine dioxide as a biocide that is benign to organisms other than its target bacteria.
Recognising that the consumer can be a patient (or a passenger, or a pupil) provides motivation for health service providers (or transport or education providers) to seek out innovative products which contribute to their “customers” overall well-being. In several parts of the UK, the NHS is undertaking projects to increase the local and seasonal sourcing of food for their huge catering operations. This means a specific sustainability issue is driving enormous growth in a particular market. The issue is the health of patients, and the risks to health that arise from complex food chains.
In conclusion: the halcyon days when every consumer is an ethical consumer are not yet here! Most consumers don’t care about sustainable development, because they don’t understand it. But that doesn’t mean that products that contribute to sustainability don’t appeal to consumers. In the niche ethical markets of the last two decades, consumer power equated to negative influence. Today, the niche markets are subdividing even further into issue-specific markets, and consumer power is seen in the way consumers exercise positive choice. As “The Vanguard of New Product Development” makes clear, the rewards of moving ahead of the market, developing products and services which respond to emerging themes, are starting to become significant.
So business strategists, be alert to ethical consumers in all their guises. You cannot spot ethical consumers by their sandals and Greenpeace membership badges any more. Where a specific issue impacts on them, and their well-being, the new ethical consumer applies pressure for innovation towards sustainability in your goods and services. And remember, if your ultimate consumers are stakeholders not simply customers, cost is not their prime concern.
Sustainability could be the factor which really drives your company’s success.
25 October 2004
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© Article 13 2004