A Call to Eliminate the Green Premium

Recycled ProductsThe green consumerism/ green consumption movement is gaining traction, as is the broader concept of sustainability. However, for the green consumption movement to become the dominant marketing paradigm, a radical change in the pricing strategy must occur: green consumption must become the low cost option in order for it to become the norm. That is, the current premium pricing scheme for green products and services has to change. The green premium is defined as the higher prices associated with green consumption.

Although not supported by data, my gut feeling is that few consumers would argue against the wisdom of purchasing products and services that are green and fair-trade certified IF they weren’t punished economically for doing so. Price green products and services lower than, or the same as, alternative products and services and the mass market change in purchasing behavior becomes a fait accompli. The concept isn’t that radical, especially if sustainable businesses enjoy cost advantages derived from their green business practices that they can pass on to consumers in the form of lower prices.

Two articles from 2009 offer similar perspectives. One is from Peter Korchnak who writes about Green as a Luxury and one is from Environmental Leader proclaiming the Growth of ‘Green’ Consumption on Hold. Both reach the same conclusion: the green premium is hindering mass market adoption of green consumption practices.

Although behavioral economists have pronounced homo economicus dead, in tough Farmers' Marketeconomic times consumers seek to maximize the utility of their purchases to the point (and thus supporting the contentions of the behavioral economists) of behaving irrationally in order to perceive saving money rather than actually saving money on their purchases. For example, my wife is willing to drive to a store a couple of miles away rather than shop at the local grocery in order to save 50 cents on a gallon of milk in spite of the additional cost of gasoline and negative impact on the environment associated with this behavior. And she’s proud of the alleged savings because they are visible and tangible. Conversely, explain to me the logic of paying $11 per pound for fair-trade organic green certified coffee when two pounds of mass produced coffee can be purchased for the same amount. Neither scenario is logical.

The point is that the perception of savings is as important, or possibly more important, than the economic reality. Until green products and services are perceived as the low cost, same or better quality alternative, they will continue to possess limited mass appeal. For green consumption habits to become the norm, buying green needs to become an economic necessity instead of a luxury. Reward consumers for making green, fair-trade, choices and see how quickly our purchase behavior changes.

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