Many companies are on a path to become more sustainable. Large efforts are undertaken to establish sustainability measuring and emissions reporting systems following the ESG regulation wave. Sustainable products are developed or offset mechanisms are integrated in the offering. But around the corner, an even bigger challenge is lurking: Motivate customers to follow. There is a lot of evidence that customer adoption is low. This is not on the radar and will put many net-zero targets at risk. This white paper proposes an approach to accelerate customer adoption of sustainable products.
A recent survey amongst companies (Deloitte, 2023) has shown that 75% of companies have increased their sustainability investments. MITSloan (2016) reports that 90% of executives believe that sustainability is important. More and more companies pledge ambitious emission reduction paths to achieve net-zero targets. ESG reporting is being established alongside financial reporting systems and will even become mandatory in the EU. Sustainability related initiatives are initiated throughout companies, involving many departments, not just the head of ESG. Some of these initiatives are internal, like Scope 1 reduction measures or gaining ESG transparency in the supply chain. But many are customer facing, like developing more sustainable products or transforming the assortment to a lower CO2 footprint. Green-washing is no longer an option.
What was once a fringe topic has moved to the core business: Companies are eager to move on sustainability. But: Do customers share this eagerness?
The Say-Do gap and the challenge of changing habits
At first glance customers seem to be onboard. There are various studies and surveys that claim to show that 90% of GenZ demand sustainable products (Forbes, 2022). Another report indicated that 65% of customers (HBR, 2019) say they want more sustainable and eco-friendly products. There are many other reports that consistently point in the same direction. But, do customers actually walk the talk and act accordingly?
Unfortunately they do not. Only about 26% of shoppers that indicate that they want sustainable products shop accordingly. A look at CO2 compensation for flying confirms it: Less than 5% of customers compensate for their emissions (ATAG, 2020 and Politico, 2022). People only indicate their intention (Nielsen, 2015), but the number of people that will act is much lower. Customers might say they will behave in one way, but act differently: There is a Say-Do gap standing in the way towards reaching ESG goals.
An innovation leader who also heads sustainability initiatives of a global construction material supplier, one of the largest CO2 emitters, brought up the key challenge:
“Reporting is important. We need the data to start to measure. But the real challenge will be to convince my customers that the new, more sustainable product delivers the same value as the one they have been using for years if not decades”.
We believe this challenge is universal: Products that deliver value build trust over years. Habits become deeply ingrained. New, more sustainable solutions are a call to customers to change their deeply ingrained habits.
And habits are stubborn: Changing habits is extremely challenging in any market or industry – from retail to finance to engineering to healthcare. Think of your last new year resolution: People really mean it and intend to go to the gym more often – but then fail to live up to it.
Companies having defined CO2 reduction goals and having set up the reporting systems will soon be in a position where the reduction path will stagnate. Because all quick-fix measures have been implemented and the product offering is not converting to more sustainable offerings.
So, what can be done to create new habits faster and speed up sustainability adoption?
How can companies speed up sustainability adoption?
Here are some good news: This challenge is known to us at Vendbridge from more than 120 projects in innovation. Because innovation, at its core, also requires a habit change from customers.
Our approach to ensure fast customer habit changes is simple: We find the levers and barriers of change via a process that uncover deep motivational insights beyond superficial understanding of attitude or intentions. We call this process CFI, standing for Customer-Focused Innovation. It is based on Jobs-to-be-done and has successfully been applied over 120 times.
In a nutshell, CFI identifies and measures unmet customer needs and habit change barriers, in order to spin a growth mission (like accelerating sales, developing a new product, devising a new market strategy or creating a horizon 3 innovation) towards those unmet needs. The basic assumptions are: People only change if they perceive a benefit larger than the benefit of the current solutions and with the power to overcome adoption barriers (like price, accessibility etc.). A benefit is a solution to a problem, i.e. the unmet need. If people don’t see the benefit of sustainability they don’t follow.
You can find out more about the CFI approach here.
Tailoring the strategy towards market segments
A recent CFI case in grocery shopping found: Not for all customers does sustainability have the same relevance, i.e. there are different segments of customers with different sustainability needs.
Two dimensions related to sustainability drive the segmentation: Firstly, the level of sustainability aspirations, i.e. some want to be very sustainable, some have less ambition or even none at all. Secondly, the strength of the barriers achieving these aspirations, like for example price, ready availability or cultural acceptance. In a two-by-two matrix, four distinct segments emerge:
The Super-Sustainable: They have high ambitions and found ways to achieve these ambitions. For example, they know the best places to buy sustainable products, take pleasure in healthy, but less tasty food, have the budget to replace meat with vegetarian meat alternatives, conform in their social bubble, etc. The CFI project found they make 10% of the market.
The Anti-Sustainable: They are the opposite. Low to no ambition levels without any barriers. They actively behave anti-sustainably as a counter-reaction. For them, sustainability is an ideology that they are fighting against. Changing their habits will be a very delicate affair. We found they represent 10% of the market.
The Conflicted: They are in constant tension between the ambition level, which they share with the Super-Sustainble, and the challenges they face to live up to these ambitions. For example, they are not willing to pay the price for the organic option. Or they have to go to the company canteen with limited or no sustainable alternatives on offer. The barriers they face can range from the simple fact that they don’t have that much time to more complex psychological barriers like not wanting to upset someone. For them, changing to more sustainable habits looks like a mountain to climb over. We found they represent about 30% in the market.
The Relaxed: They have much lower ambition levels related to sustainability. They made up their mind that they are not concerned and thus don’t want to change. Sustainable or not, they are at ease. To activate them and change their habits is a major challenge. In the CFI study, they make about 50% of the market.
Each of these four segments require a different strategy, to change old habits and move to the more sustainable product solution.
Luckily, CFI measures for each segment the segment-specific unmet needs and barriers in a data-driven manner. The result is shown in a format we call Value Map:
Each dot in this map represents one customer need. Some of the needs (right of the vertical median line) seem to be more important than others (left of the line). And some of the needs are less wll served (below the median line) than others. These are pain points that the people in the segments have for the Job-to-be-done To shop grocery.
Some of those pain points have nothing to do with sustainability, like finding a product quickly in a store. But others are clearly related to sustainability, e.g. knowing as precisely as possible how much CO2 was emitted in order to transport the product to the place of purchase.
Knowing these insights allows us to devise a segment-specific strategy to convince the consumers to come on board. Assumptions are removed and discussions about what matters to the customers are shortened. Strategies formulated based on the customer pain points have a much higher likelihood to ensure fast adoption of new, more sustainable products.
The first revelation is to recognize that each of the four segments needs a totally different strategy. Super-Sustainables and Anti-Sustainables can not be approached the same way, with the same products. The Conflicted needs other approaches than the Relaxed, if you want to succeed. A decision has to be made which segment or segments should be targeted. We recommend to focus on the Conflicted and the Relaxed. They represent the chunk of the market. Furthermore, the Super-Sustainable have already moved to a more sustainable behavior and the Anti-Sustainable are hard to win over.
Habit-breaking value propositions that click with each segment
What is it that resonates most with these segments? How should products and communication be shaped to achieve faster and higher adoption? This comes down to creating value propositions with the power of changing old habits.
Customers have a strong status quo bias (see this seminal HBR article for more, 2006) and don’t like change. If however the pain of today's solution gets unbearable or the promise of the value of a new solution vastly exceeds the value of today's solution, customers will change.
The proposition has therefore to be reframed for each segment the company wants to target, by playing out those benefits that resonate best. For the sustainability challenge, we use four distinct meta strategies to design habit breaking value propositions for each segment:
Different from conventional value proposition designs, which are mostly targeted at investors, our approach is to create compelling sales narratives. We consistently link the uncovered and measured customer pain points and barriers of one of the segments with a unique promise which is supported by the product solution.
Focusing on pain points rather than gains creates stronger activation. Research has shown that people respond more to communication about negative attributes - pains - than about positive attributes (Frank, D.‐A., Chrysochou, P., & Mitkidis, P., 2023) and negativity bias research shows that “negative information consistently affects consumer decisions more than positive information of equal intensity”.
If you’re interested in the details of how we at Vendbridge craft habit-changing value propositions then go here for more.
In our sustainability case, the strategies for the four identified segments look as follows:
Super-Sustainables: This is the most obvious strategy. Emphasize the sustainability benefits of the new products in supply chain, product design, packaging, communication and recycling. Key is to identify what signals sustainability in the hearts and minds of the Super-Sustainables. This varies across categories and industries. While it might be durability in one case, e.g. clothing, it’s about regionality in another, e.g. food. There are many examples of sustainable products that are targeted for the general market, but in reality their value proposition only resonates with the few Super-Sustainables. This can be a dangerous trap. A good example for this strategy is Beyond Meat:
Conflicted: This calls for a more sophisticated strategy. On the one hand, you need to lower the barriers. At the same time, you need to emphasize the core benefit of the category and use sustainability only as a reassurance, ideally in the form of a USP versus non-sustainable alternatives. The category benefit conveys why the customer should buy the product in the first place. The reassurance benefit gives the customer a reason and justification to purchase without a bad conscience. Think of labels like Nikin or others in clothing that plant trees, etc. for each product that is purchased. In this case the core benefit of the product is something else, like style, etc. but the sustainability concerns and barriers are lowered.
Relaxed: The challenge with the Relaxed is to activate them to switch from an existing and established solution to a new, more sustainable product without even mentioning the sustainability attributes as the sustainability message will simply not resonate. A good example is Planted, a meat replacement product that promises better taste than meat. Taste is one of the key category benefits of food. Sustainability is not even mentioned. If true, i.e. the product tastes better than meat, the Relaxed will try and possibly switch to Planted, thereby unconsciously behave more sustainable.
Anti-Sustainables: Anti-Sustainables call for a completely different approach. Ignore sustainability and find ways to reframe sustainable products via other relevant benefits. Good examples can be found in the car industry, e.g. large pick-up trucks moving to electric, but featuring muscles and power.
Speed up the adoption of more sustainable solutions
Corporates agree: The end goal is to reduce the footprint and achieve the ESG targets fast. Measuring and reporting emissions is the starting point. But the next challenge will be achieving the reduction path. Quick-fix measures will be implemented fast and will have an impact. But in the end, the main lever is the product that a company offers. Unfortunately, there are many signs that customers don’t follow quick enough. Adoption rates of sustainable solutions are slower than wished. This is perplexing because when asked directly customers state that they want more sustainable solutions but then don’t act accordingly: The Say-Do-Gap.
The Customer-Focused Innovation approach helps to overcome this gap by focusing on the customers needs and the adoption barriers. When measured in a market, a data-driven approach is possible to create concrete and actionable strategies based on Pain Points. Success chances of changing customer behaviors will increase.