Show Me the Money: Cost/Benefit Analysis Needed for Green Marketing

According to recent research from the Institute for Public Policy Research (IPPR), consumers in the United Kingdom are tired of hearing about climate change.  Despite acceptance of climate change as a growing problem, people don't want to be told to do their share by cutting carbs out of their personal carbon footprints. The report recommends that green marketing campaigns focus on cost-savings benefits of low carbon products, rather than rely on an environmental appeal.

On this side of the pond, a similar attitude prevails among both consumers and organizations which should inform how green products and services are marketed and sold.  While the need for global action to address climate change has gained broad acceptance, the willingness to change local behavior and, more importantly, to dig into personal or corporate budgets to fund green initiatives is driven more by a practical cost-benefit analysis than idealogy. The analysis typically considers both tangible ("hard") and intangible ("soft") benefits and costs but assigns more weight to tangible ones.  Green marketing must be able to demonstrate that the sum of the benefits sufficiently outweighs the sum of the costs. 

Here are examples of the kinds of benefits and costs associated with green energy solutions:

Benefits:

• lower bills for energy, waste and recycling storage and removal, operational or maintenance staff (hard benefits)
• faster and more consistent heating & cooling (mainly soft benefits) 
• better reputation for social or corporate responsibility inside and outside the entity (soft benefit)
• reduced liability for violating air and water pollution regulations (soft and hard benefits)

Costs:

• upfront purchase or project price (hard costs)
• ongoing operational and maintenance charges such as financing, fuel, repairs, administration (hard costs)
• time, effort, and expertise needed to investigate, select, and start using it (soft and hard costs)

Let's take a look at green IT to see what motivates organizations to act.  Few organizations are willing to spend much money just to improve their reputations among workers or the public.  What does motivate organizations is the ability to reduce costs.  The energy needed to power and cool computer server and storage equipment in datacenters represents significant costs.  Green IT solutions such as server consolidation through virtualization and switching to servers and networking equipment that consume less power and generate less heat are a win-win for the IT budget and for the environment.

Now let's take a look at efficient cars to see what motivates individuals or businesses to act.  Only a limited segment of the population is willing to pay $5-20K extra for a car especially if it has reduced mileage, passenger, or storage capacity just to be a good green citizen.  The cost differential between a traditional gas car and a hybrid, plug-in electric or fuel cell car must be small enough to enable the customer to recover the difference through fuel savings within the anticipated period of ownership, say 5-7 years.  This is easier when gas prices are high and are headed even higher.

Given the emerging nature of green products and services, two additional considerations need to be addressed.  First, is the green product or service available to be examined or "test driven" and purchased in a convenient venue connected with an existing supplier or partner?  Second, is the green solution a straight forward substitute for something that the customer already plans to buy or replace?  If the answer to either question is no, then demonstrating a favorable cost-benefit analysis will be harder and marketing will need to be even more creative and targetted to show that the green solution fits in today's marketplace.

Thoughts?