marketing issues

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BBC World ServiceTwo pieces of market research published in the last week give some more support for the view that opinion is moving towards accepting that climate change will require lifestyle changes. BBC World Service interviewed individuals across the globe. Power company E.ON produced its segmentation of British consumer attitudes.

The BBC survey suggested that over 80% of UK people are ‘ready to make significant changes in the way I live to help prevent global warming’. Nearly 90% think that changes in lifestyle will be necessary to address the problem. These numbers are approximately the same as among urban Chinese and only marginally higher than the US.

E.ON’s segmentation has over 20% of the UK already taking serious and possibly costly personal action related to climate change. Less than 15% actively reject any need to act now.

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The Advertising Standards Authority is struggling to hold the line on the advertising of environmental benefits. In June, the Authority put out a series of instructions trying to impose clearer conditions on advertisers. But it continues to have to adjudicate on a series of difficult decisions. Last week saw a wind power developer taken to task for over-estimating the carbon savings from turbines. The Authority had to decide which type of power station would produce less power as a result of a new wind farm – coal or gas. It took advice from the National Grid and proceeded to tick npower off, even though the power company was following rules previously set down by the ASA itself.

In at least one other country, the advertising regulator has thrown in the towel and told some advertisers simply to stop advertising green claims. Reuters reports that Norway’s Consumer Ombudsman has told car advertisers that ‘We ask that…phrases such as “environmentally friendly”, “green”, “clean”, “environmental car”, “natural” or similar descriptions not be used in marketing cars.’

We cannot be far away from this sort of rule in the UK. Green claims are almost invariably contentious and difficult to prove. We simply don’t have an accounting system that can deal yet with carbon. Advertisers are going to be forced to avoid any but the most clear-cut and well-documented savings.

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Many companies selling to UK families have a strong sense that consumer demands are shifting rapidly. M&S recently talked to Carbon Commentary about its perceptions of changes in attitudes and behaviour. This article compares its results with those of a survey by the Henley Centre in summer 2007.

During the last year or so, the percentage of ‘green zealots’ in M&S research has risen from 3-4% to nearer 8%. Henley also sees a figure of 8% for the two greenest groups ‘principled pioneers’ and ‘vocal activists’. A further 31% (Henley Centre) or 30-35% (M&S) are actively concerned and want to adjust their behaviour. There has also been a big growth in this group in the last year.

In both surveys another third are aware of environmental and ethical issues, but are unlikely to take active steps unless pushed. A final quarter or so don’t care very much. M&S says that they are ‘struggling’. Henley calls them ‘disengaged’.

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British Gas has launched a consumer gas and electricity tariff that will cost 10% more than its standard rates but which offers better green credentials than any other consumer utility tariff in the UK market.

The product has the following important features:

  • The electricity is derived from renewable sources. The company says that this is not the key ingredient of the tariff. Later in this note I try to explain why.
  • British Gas will buy and retire Renewable Energy Certificates for 12% of the electricity it supplies. This is probably the most important aspect of the proposition.
  • British Gas will ‘offset’ all of the carbon dioxide produced as a result of each household’s purchases. This is the most expensive part of the deal for British Gas.
  • There will be a small donation to a green education fund for schools.

BG says that it makes no extra money from the sale of its Zero Carbon product. This looks a justifiable statement to us. The important other questions to ask are:

  • Why did BG decide that 10% was the appropriate premium to its main tariff? It could have designed a less costly offering with reasonably strong green features. Do mainstream ‘concerned consumers’ regard 10% as an acceptable price increment? Did BG need to ‘gold plate’ the new product to avoid any criticism that it was a proper green tariff?
  • How will the company manage to ensure that it buys high quality offsets, and not the dubious offerings sold by consumer offsetting companies?
  • The product is slightly complex and difficult to explain. Can BG cut through the competing claims of other green suppliers to build a large customer base for this high quality offering?

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