One of the most common questions in relation to green marketing and selling more eco-friendly products is what price should be charged for them. This can be a tricky issue because people who run a business, and their loyal customers, can often hesitate when it comes to changing prices.
And people who are just going into business need to have some sort of pricing benchmark so that their products and services will be comparable to those already on the market.
Business owners might be concerned that they will decrease sales if they increase prices. They might also be concerned that existing customers will feel they are getting a bad deal if they raise their prices.
Consumers are always concerned with getting good value for money. A price change might make your customer think that you don’t value them. However, as with most effective marketing, the important thing to do is to understand the needs of your customers and what drives them when making purchasing decisions. It is also important to understand your own unique selling point – that is, why they should do business with you.
So your first step is to determine whether or not your customers are interested in green products. An easy way to do this is to look at your current product line and see if your top sellers can be transformed into greener versions of their existing selves.
If so, your next consideration will be maintaining the quality of the item. It should be just as good, if not better, than the existing product – only greener. If this is the case, most customers will not mind a price increase. This is because price and value are two different things.
Price versus Value
For example, not everyone looks for bargain-basement prices and shops at Walmart. They might have ethical concerns about whether their workers are treated well, where the raw materials are sourced from, and whether or not vendors that supply their products are fairly compensated. Since Walmart fails on all three counts, ethical shoppers will “vote” for more ethical companies with their dollars.
Studies have shown that customers interested in green issues have indicated they would be willing to pay 10% to 20% more for a product if it is green, provided that it gives them at least the same satisfactory experience as a product which is not. This being the case, you can use your current pricing as a guideline and add 10%.
The Financial Impact of Greening
Your next consideration will be if anything is going to change in terms of your raw materials. For example, switching to post-consumer waste paper for your packaging instead of your present packaging might actually work out cheaper, so you could keep your price the same and still win, and be greener too.
Or you might also decide that you wanted to source your raw materials from a fair-trade co-operative in Africa. In this case, you might pay a little bit more for your raw materials than you were previously, but you would also be doing something which was more ideologically sound and in keeping with green issues and the ethos of creating a better planet for everyone.
Announce this change on your website as a way of explaining any price increase, and most customers will be more than happy to pay a little bit more.
No matter which decisions you make regarding pricing, make sure that your customers understand the value proposition. In this way, they will actually feel good about the price increase, because they know that they are doing something worthwhile with their money.