Will consumers ever get over the price hurdle for sustainable goods?

Discussion
Photo: RetailWire
Dec 09, 2021

Despite heightened awareness over climate change threats in recent years, surveys continue to battle it out over how much of a premium consumers are willing to pay for sustainable goods.

A recent survey of 3,000 U.K. consumers from Asda, for instance, found 55 percent prepared to make significant lifestyle changes to reduce their carbon footprint, including recycling (89 percent), turning off lights or devices when not using them (84 percent) and driving less (52 percent).

Fifty percent, however, say they are not prepared to pay more for greener everyday items such as milk and bread. Seventy-six percent said lower prices would help them shop more sustainably.

Asda said the findings suggest that greater collaboration is needed between suppliers, manufacturers and retailers to remove the price barrier.

A survey of about 10,000 consumers across 17 countries from consultancy Simon-Kucher & Partners taken in July found 60 percent rating sustainability as an important purchase criterion. Only 34 percent, however, were willing to pay a premium for sustainable products. Gen Z (39 percent) and Millennials (42 percent) were more willing to pay up compared to Gen X (31 percent) and Boomers (26 percent).

Simon-Kucher said the findings showed “there is a market for ‘mission-driven green’ companies.”

More encouragingly, a survey of 1,200 U.S. consumers from October from B2B software comparison website Capterra found 75-to-80 percent willing to pay higher prices for sustainable items across food and drink, apparel and household products categories. About 60 percent would pay “a little more” or “moderately more” across categories.

A July survey from First Insight and Wharton’s Baker Retailing Center of more than 1,000 U.S. consumers found 68 percent willing to pay more for sustainable products, up from 58 percent from a survey taken in 2019. The improvement was attributed to heightened eco-consciousness from older generations.

“The global pandemic caused many to rethink their consumption and its impact on the health of the planet, yet Gen Z have been consistent in remaining true to their sustainability values while also educating and influencing the generations that came before them,” said Greg Petro, CEO of First Insight, in a statement.

DISCUSSION QUESTIONS: Do you think most consumers are willing to pay a little more, a lot more or no more for sustainable products? Will that change much in the years ahead or does pricing and/or messaging around sustainable goods have to be reassessed?

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Braintrust
"Companies need to get more creative here on sustainability, rather than making more environmentally friendly packaging for the same product, and asking consumers to pay more."
"The ability to identify, map and compare products accurately is still unavailable, so in its present state, sustainability is just a marketing play."
"Reader beware: I am the lead author on the Simon-Kucher sustainability study."

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24 Comments on "Will consumers ever get over the price hurdle for sustainable goods?"


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Mark Ryski
BrainTrust

The impacts of climate change are self evident and this is driving the change in consumer perceptions and willingness to accept higher priced sustainable products. The surveys are indicative of it, but I suspect that there’s still a “knowing-doing gap” – people want or intend to do the right thing but their actual behavior may be driven by other factors, like high inflation and affordability. I do believe that the cost for sustainable products will continue to come down and make sustainable vs. affordable a trade-off consumers won’t need to make.

Ken Morris
BrainTrust

I believe most consumers will pay a bit more for sustainable products but the key is “a bit” more. How much is too much? The localization of sustainable products can keep prices reasonable but variables like seasonality and decentralized buying come into play. People like their fruit in Maine in the winter so localization is a challenge when geography comes into play, and it isn’t easy to control a decentralized buying group, but there is a movement afoot to buy local so I believe it is worth the effort.

Nikki Baird
BrainTrust

First of all, you have to take a huge grain of salt alongside any surveys based on what consumers SAY they will do, because they often will say things that make them feel good about themselves, but then do something completely different at the shelf.

But aside from that, I don’t think price is necessarily the biggest issue. I don’t think you can separate “price” from “effectiveness” or “equivalency.” With the “green” cleaning supplies, it doesn’t matter if they cost less or the same if they don’t work as well or you have to use a lot more in order to get the job done, for example. It’s not just about price, it’s about what the price pays for. In the supplier/retailer collaboration on finding the right price point to get consumers to buy, you can’t ignore the equivalency aspect.

Jeff Weidauer
BrainTrust

Consumers like the idea of sustainability, but not if it will cost more. The sustainable supply chain needs to focus on greater efficiencies to reduce costs in order to get more people to act in their own best interests.

Katie Thomas
BrainTrust

It’s not about price in isolation – these “sustainable” products are often about asking consumers to pay more for effectively the same product. Consumers will always pay more for certain things (e.g., consider the entire luxury goods sector, or any Apple product) but those things need to deliver on customers’ quality expectations at a “fair price.”

Companies need to get more creative here on sustainability, rather than making more environmentally friendly packaging for the same product, and asking consumers to pay more…

Neil Saunders
BrainTrust

What people say in surveys is not always what they do in practice. Very few people want to be unsustainable in their buying habits. But when it actually comes down to it, factors like price, taste, quality and other things trump sustainability – at least for most shoppers. That means sustainability has to be an add-on that comes alongside other benefits. However it is the case that people are more conscious about sustainability and will try and act on it when they can and where it does not cost too much and disadvantage them in other ways.

Lee Peterson
BrainTrust

As Warren Buffet says, “value is what you get, price is what you pay” — a notable difference. But until American consumers understand the value of eating healthy they’re not going to pay for it, unfortunately. There should be a public health message, like we had for smoking. Then there’s the food desert issue for neighborhoods all over the country, where it’s not a choice. So it’s a very complex question that ultimately is answered with a no — most Americans won’t pay more for better foods.

Liza Amlani
BrainTrust

As long as retailers and brands educate consumers on the impact and outcomes of choosing sustainable product, the customer will get over the price.

There are more options to choose from than ever before and as long as consumers have options, transparency on a product’s journey and carbon footprint, and start to understand their own impact to the environment, then customers will pay a little more.

The fact is sustainability values are becoming more and more important to customers and retailers. There is no choice. The impact of irresponsible manufacturing practices to our planet is not an unknown fact. COP26 gave us insight into what countries and brands are willing to change and as long as the carbon neutral promises translate to real change, sustainability will become a mainstream option that will be expected, no matter the retail price.

Dr. Stephen Needel
BrainTrust

Shoppers will never get over the price hurdle for sustainable goods as long as the goods are more expensive and are being compared to “regular” products. We’ve seen this for years, first in Europe and now here – nobody says no to green products, but not many people buy them just because they are green.

Paula Rosenblum
BrainTrust

This is a question of social class. It’s easy for me to say “I’d pay a lot more” because I can afford to. I don’t know what your average Walmart shopper or coupon collector would say. It’s actually really classist.

Evan Snively
BrainTrust
Evan Snively
Director of Planning & Loyalty, Moosylvania
9 months 23 days ago

Vrity (a data company that helps brands measure the economic impact of their values) has stated that 82 percent of U.S. consumers will be willing to spend more on a brand that shares their values. So in theory, if sustainability is a brand value for 50 percent of Americans, around 40 percent (50 percent x 0.82) of Americans will be willing to pay more for that brand. I don’t necessarily see that “willingness to pay more” changing in the coming years, but I do see sustainable products becoming more the norm, so hopefully “regular priced” sustainable options will be within reach for everyone.

Jeff Sward
BrainTrust

There’s an expression that says something about the fact that change does not happen until the pain of changing is less than the pain of remaining the same. The pain of sustainable products being more expensive is only part of the conversation. We read about the need and importance of sustainability every day, but on any given day we might not experience any immediate pain for our current habits. So we just roll along. Momentum is a powerful force. But the environmental pain is coming to your neighborhood soon.

David Spear
BrainTrust

Effectiveness and utility are not the sole drivers of purchase, but they carry considerable weight in the decision. If a sustainable product costs more but is not as good as a non-sustainable product, the average shopper is going to purchase the better, more effective product. If they’re equally effective, I still think the majority of consumers will purchase the cheaper product. It’s on companies to develop sustainable products that are BETTER than regular products and cost the same or LESS, which then makes the purchasing decision justified in the mind’s eye of the shopper.

Shikha Jain
BrainTrust

It’s about the consumer demand in conjunction with company objectives. As younger consumers make up more and more of the workforce and build wealth, they will shift their demand to green-friendly alternatives. In fact, the willingness to pay for sustainable goods is decreasing and will continue to do so until it becomes table stakes. This is the equivalent of digital transformation that has been happening over the last few decades. No company operates on pen and paper anymore. Similarly, a few years from now, companies that are not sustainable may no longer exist. Reader beware: I am the lead author on the Simon-Kucher sustainability study.

Jenn McMillen
BrainTrust

There is always a difference between what consumers say they will do and what they actually do. People want to do the right thing, but it always comes down to money. When it starts to hurt financially, you’ll see true intent.

Raj B. Shroff
BrainTrust

Few consumers are willing to pay a more for sustainable products. What other panelists have said about these surveys is spot on.

I think as sustainable products become more entrenched in our everyday lives and as the cost of source tracking becomes less (using blockchain technology), the increased awareness of what is and isn’t sustainable will lead to 1.) a further increase in the amount of sustainable products 2.) lower costs, some of which will be passed along to consumers. And as some point, consumers will have to pay extra for non-sustainable products (like charging for grocery bags).

What’s explained above isn’t new, it’s the same thing any new product, service or concept (organic, etc.) goes through.

Shawn Harris
BrainTrust
Shawn Harris
Board Advisor, Light Line Delivery
9 months 23 days ago

In our current economic climate I do not believe that consumers will want to pay more, but ultimately will they need to? I see sustainability efforts as early tech — expensive to start, until economies of scale take over, motivated by persistent consumer demand for change, shareholder pressure like we are seeing from Blackrock, and government incentives. I see the shift occurring over the next five to seven years. By the way, I wonder what happened to Gen Z’s concern for the environment and sustainability, given the rise of SHEIN.

Matthew Pavich
BrainTrust
The answer isn’t binary – it depends on the individual products and the consumers. The wonderful news for retailers is that they don’t need to have a one-size-fits-all to drive the growth of sustainable brands. Using the right analytics, they can see which sustainable brands consumers are willing to pay a little more for and which brands they are not. With the right pricing platforms they can even shift demand from less sustainable products into more sustainable ones by adjusting pricing gaps — they can measure and repeat if working. They can do the same with promotions and evaluate the impact of promoting top sustainable brands. Sustainability goes beyond just Brand A and Brand B or Product X vs. Product Y. Simply using trade-up pricing strategies can lead to less packaging while increasing revenues. Shifting demand into bulk products via pricing and promotions can also lead to more sustainable outcomes. The one thing that is clear is that pricing is key to driving sustainability and influencing demand. Having the right practices in place can help… Read more »
Natalie Walkley
BrainTrust
Natalie Walkley
Director, Korber & Enspire Commerce OMS
9 months 23 days ago

The social desirability effect will impact this survey (people responding how they feel they should respond vs. reality). Additionally, the phrasing of “significant lifestyle changes” can be interpreted in a myriad of ways. For some, it may be simply turning off the lights. For others, it may be paying twice as much for sustainable goods. When brands tie sustainability to a strong mission or core value — it increases the buy-in from consumers to pay more (think Allbirds).

Shep Hyken
BrainTrust

This is a hot topic. Consumers are attracted to the companies that support causes (in this case sustainability) that they are passionate about. And many of those customers feel that their cause is, to some degree, more important than the lowest price.

Mohamed Amer, PhD
BrainTrust

What consumers say and do can be very different. Intent and behavior are distinct and situationally bound. Focusing on price allows brands and retailers to avoid facing our existential climate threat. Four decades ago, consumers were offered a healthier organic food option in a supermarket format with Whole Foods. Today, organic foods are everywhere. Just as organic foods are about healthier eating, sustainable goods are about a healthier planet. Price is always a factor, but there’s much more in the value equation. Leadership calls for tackling the thorniest dilemmas, not creating escape valves.

Ananda Chakravarty
BrainTrust

This question can’t be answered until there is clarity in what constitutes a sustainable product. The challenge is that packaging, advertising, and information is not available on the accuracy of a product’s sustainability — especially lower down the food chain. Any CPG can create an “all-natural, organic, cage free, carbon neutral” brand without mentioning that it was shipped over 5000 miles in heavily polluting trucks. The ability to identify, map and compare products accurately is still unavailable, so in its present state, sustainability is just a marketing play. Customers know this, so prices won’t shift until there is are credible oversight in this space.

Craig Sundstrom
Guest

Fifty percent, however, say they are not prepared to pay more for greener everyday items.
So when the rubber — “responsibly sourced” of course — hits the road, people don’t put their money where their mouths are, but keep it in their wallets. We can either be discouraged by the dissonance, or appreciative of the candor we ultimately coax out.

But it makes sustainability an uphill battle, either way.

Anil Patel
BrainTrust
Today’s society is very well positioned to meet a human being’s basic necessities. The issues confronting Generation Z and Millennials are not the same as those confronting prior generations. In other words, because it is no longer difficult to meet basic necessities, Generation Z is more focused on living a healthy lifestyle and making sustainable decisions. The willingness of consumers to pay more for any commodity is determined by their ability to pay and the expectation of future fulfillment as a result of consumption. As a consequence, high-income households have little difficulty switching to sustainable goods as long as they have access to them. In general, sustainable goods are more expensive. Even if some low-income groups are made aware of the benefits of sustainable goods, it would be unreasonable to expect them to purchase these high-priced items. The next best option would be to reduce other costs and make sustainable things available to this income bracket. I believe that it’s high time we take serious measures to reduce the prices of sustainable goods and made… Read more »
wpDiscuz
Braintrust
"Companies need to get more creative here on sustainability, rather than making more environmentally friendly packaging for the same product, and asking consumers to pay more."
"The ability to identify, map and compare products accurately is still unavailable, so in its present state, sustainability is just a marketing play."
"Reader beware: I am the lead author on the Simon-Kucher sustainability study."

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