Marketing Sustainability in Retail – Understanding Consumer Market Trends

1. Marketing Sustainability in Retail – Understanding Consumer Market Trends Laurie Demeritt

2. Sustainability from a Consumer Perspective The Hartman Group, Inc.

3. The Hartman Group, Inc. • A full-service strategic consultancy and market insights provider. • Founded: 1989 • Headquarters: Bellevue, WA • Staff Composition: Anthropologists, sociologists and psychologists, visual analysts and linguists, MBAs, marketers and innovators • Tinderbox: Dedicated to culture, innovation and trends

4. Michelle Barry, PhD Sociocultural and Medical Anthropology James Richardson, PhD Anthropology Shelley Balanko, PhD Applied Social Psychology David Moore, PhD Sociology Jarrett Paschel, PhD Sociology Nasser Kamali, PhD Sociology Kirk Cornell, PhD Business and Industrial Anthropology Brent Baxter, PhD Sociology Greg Prang, PhD Sociocultural Anthropology Samantha Goodwin, MSc Visual Anthropology Karen Stockert, MA Cultural Communications and Design Arwen Kimmel, MA Linguistics Lucy Norris, MA, Food Studies Melissa Abbott, MS Food Nutrition Multi-Disciplinary Team of Experts

5. Sustainability Study Research Methods • Qualitative Consumer Immersion • Over 150 hours of consumer interviews • In-depth interviews in homes • Social network parties • Observation of sustainability activities • Consumer photo journaling • Field locations:Chicago, Raleigh, Boston, Newark, Los Angeles, Seattle • Quantitative National Survey • Custom online survey; sample size 1,600 • Nationally representative survey of the US population • Conducted January 2007

6. A Consumer Centric Approach to Sustainability • We designed our research methods to give consumers great freedom to talk about specific topics however they liked • We asked consumers to describe their dealings with many of the things that sustain and support human life (e.g.,food, water, air). • We asked general, open questions, such as: • “Is this weather typical for this time of year?” • “What comes to mind when I say the words “tap water”?” • “What do you consider safe food?” • We introduced the term sustainability only near the end of our interviews to gauge consumer familiarity and understandings of it

7. Sustainability has a History • “Report Says Global Warming Poses Threat to Public Health” • —The New York Times • "Most Consumers Say They Would Like More Green Products” • —The Financial Times • "More New Alternative Fuel Vehicles Continue to Roll Off US Automaker Assembly Lines” • —The Oil & Gas Journal • "Tomorrow's Shade of Green: Environmentally Oriented Construction Materials for the 21st Century” • —Home Improvement Market • "Can Retailers Turn Green This Year?” • —Marketing Magazine • These headlines all occurred between 1996 and 1997

8. Sustainability Seems to Be Everywhere These Days • Home • sustainably harvested wood • solar panels • programmable thermostats • natural/organic cleaners • green waste recycling • faucet aerators • Sources • writings: Al Gore, Michael Pollan, Marion Nestle • food movements: Slow Foods • blogs: Greentopia, Ideal Bite • lifestyle retailers: Whole Foods Market, Timberland, IKEA, American Apparel • Food & Beverages • fresh, local, seasonal, organic, biodynamic • farmers markets, CSA • wild salmon, grass fed beef, free range chicken • Rainforest Alliance, Free Trade • Goods • green/organic skin care • bamboo & hemp clothing & bedding • reusable shopping bags • Prius, bus pass, biking • Sigg water bottles • Garden • garden in every school, urban gardening • grow-your-own veggies & herbs • drip irrigation system • ladybugs • native plants • Pet Care • raw foods • organic food • herbals, acupuncture • non-toxic pet grooming products • non-PVC toys

9. “Sustainability” is NOT a Household Word • Though widely used in business circles, the term “sustainability” is little used in consumer circles. • Just over half (54%) of consumers claim any familiarity at all with the term “sustainability” (and most of these consumers cannot define it appropriately upon probing) • Only 5% indicate they know which companies support sustainability values (unaided) • 12% indicate they know where to buy products from companies that support sustainability values • As a marketing term, “sustainability” has limited traction; it is not a household word

10. Sustainability Awareness • Though the term “sustainability” is limited in usage, most people operate with varying degrees of “sustainability consciousness.” • Sustainability consciousness refers to the way people link everyday life to “big” problems (e.g., food, water and air quality) • Sustainability consciousness is not just about “eco-conscious consumers” and the environment • It’s everyday people and broadly distributed across society • Sustainability consciousness emerges as consumers gain experience dealing with risks in everyday life

11. Risk in Everyday Life • Most consumers believe that daily life requires practical adaptations to risks if potentially harmful outcomes are to be avoided. • Some adaptations to risk are firmly established habits • Avoiding unfiltered tap water whenever possible • Wearing sunglasses and sunscreens to “block out harmful UV rays” • Avoiding outdoor exercise on high pollution days • Some adaptations to risk are only now emerging • Using sanitary wipes to wipe down grocery carts • Routinely using air filters in living rooms • Questioning the purity of water in plastic bottles

12. Perception of Risks from the Environment Percentage answering “Agree” rather than “Disagree” or “Neither agree nor disagree.”Source: 2007 Sustainability Survey (n=1,489 consumers within the World of Sustainability).

13. Current Adoption is Incremental Many consumers are making incremental individual changes, but primarily in activities that are low-sacrifice and low-risk, require little to no monetary investment (with the exception of food) and need no significant change in behavior (e.g., turning off the water faucet while brushing teeth). Initial changes toward a sustainable lifestyle are more about making conscious decisions and choices and investments of time rather than purchasing products.

14. Current or Future Participation in Sustainable Activities *Examples provided to respondents were “church, school, human services, neighborhood advocacy group, [and] arts organizations.”Note: Remaining percentage—answering, “I’m not ever likely to do this”—is not shown.Source: 2007 Sustainability Survey (n=1,489 consumers within the World of Sustainability).

15. Occasional Organic Usage is Consistently Strong 2000 2006 2008 Daily 8% 9% 7% Weekly 9% 14% 12% Monthly 5% 6% 8% Occasionally 34% 44% 42% Never 45% 27% 31% Sources: Healthy Living, August 2000 (n=4,942); Organic 2006 Survey, December 2005 (n=2,109); Organic 2008, March 2008 (n=2,161) Note: Percentages may not sum up to 100% due to rounding.

16. The “Absence of” Leads the List of Properties Suggested by Organic From the following list, what properties do you think are implied or suggested by the term "ORGANIC"?

17. Consumers Are Most Willing to Pay a Premium for Fresh Organic Categories For which organic foods/beverages are you willing to pay 30% more than their conventional versions? Organic category buyers (Primary HH shoppers who have purchased organic in particular product category in past 3 months) (n = 87 to 877)

18. Sizing Sustainability • Consumers can be analyzed according to their lifestyle orientation within a given “world” of activity—here the “World of Sustainability” • Segments vary according to the intensity of involvement in that world. • The Core: The Core is the most intensely involved - early adopters, trendsetters and evangelists • The Mid-level: The majority of consumers are in the Mid-Level, they are changing their attitudes and behaviors • The Periphery: Consumers begin their journey at the Periphery of the World, and are usually more attitudinally than behaviorally inclined

19. Defining the World of Sustainability • A small percentage of consumers (7%) do not participate in the World of Sustainability in any meaningful way. • Consumers who are not in the World of Sustainability are those who: • “Rarely” base their purchasing decisions upon their concerns for issues such as the environment and social well-being and fail to do so because “I’m not really concerned”. • AND • Chose the response “I don’t think there are significant problems facing the world at this time.”

20. Measuring Involvement in the World of Sustainability The World of Sustainability can be segmented according to how consumers make sense of risks. This is because they think about sustainable products in terms of lowering risk to themselves, to a community or to the world.

21. Who is the Periphery Consumer? • Meet Linda. • If gas prices rise even higher she feels she has a “good reason” to trade-in her SUV • Drinks water from the tap unless it smells and/or tastes “bad” • Does not believe “the hype” about organic food • Believes climate change might be happening but defers to the experts • Travels with a waterless hand sanitizer because she wants to avoid germs in public places • Just bought an energy efficient dishwasher because of a rebate • Curbside recycles because it lowers the cost of her trash bill

22. Who is the Mid-Level Consumer? • Meet John. • Lacks deep knowledge of organic farming, but buys organic occasionally because it makes him feel “safer” • Wears sunscreen because the “hole in the ozone layer makes it more dangerous to be in the sun” • Uses a water filter on the kitchen tap but not in the shower • Recycles out of an ambiguous sense of moral duty • Ponders the possibility of buying a hybrid vehicle someday • Enjoys buying brands that symbolically align with his identity and values

23. Who is the Core Consumer? • Meet Kim. • Pays premium prices for items produced by companies who treat their workers fairly • Avoids plastic packaging and containers due to concerns about “leeching” • Strategically plans errand trips so that she can minimize her gas consumption • Recently purchased sustainable cotton bed sheets for her home • “Follows” some of the products she buys throughout their lifecycle • Buys only cruelty-free personal care products • Believes her purchase decisions are a form of direct democracy

24. Dimensions of Sustainable Lifestyles Core, Mid-level and Periphery Sustainability Consumers are drawn to different attributes of products, settings and services.

25. Key Purchase Criteria: Periphery • Convenience • Availability in stores; ease and efficacy of use • “If it’s hard to find or I can’t figure out how to use it, forget it.” • Price • Consumer perception vs. actual price; how added value is conveyed • “Why would I pay 10 bucks for a light bulb?” • Personal Benefits • Health is typically the primary benefit • “I’m trying to do the right thing for myself and my family”

26. Key Purchase Criteria: Mid-Level • Expert Opinion • Weighing options; seeking direction; reinforcing choices • Ambivalent reliance on science (subject to change and too complex) • Derived from friends, family and colleagues: “My sister knows all about this, she’s hard core.” • Experience • Meaningful interactions with products and companies • Relevant product design and use • Opportunities to connect through storiesabout people, places and processes • Knowledge • About benefits (for self and others), company values, resonance to way of living and goals

27. Key Purchase Criteria: Core • Greater Good • Expanded consciousness; holistic thinking about how we live and interact with each other and the world • “The decisions I make and the things I do impact more than just myself” • Partnership • Striving for similar goals and ideals; like-minded; equal participation and effort • “We’re in this together” • Transparency • Access to company values, policies, and practices; open communications • “Nothing to hide” • Authenticity • True and consistent; values driven • The “real deal,” “grassroots,” “the way things should be”

28. The Mid-level Represents the Largest Opportunity • The Mid-level is changing their attitudes and behavior regarding sustainable products • The Periphery isn’t putting their money were their mouth is and the Core is going entirely outside of mainstream distribution channels to buy sustainable products

29. The Mid-level Thinks About Sustainability Realistically Food that’s healthier for my family and the planet | fresh, all natural, local, few ingredients, little packaging, pesticide-free Trade-offs occur in finding the balance between the right thing to do and what’s reasonably priced, well known and trusted brands, “what my family will eat,” “picking and choosing my battles” Food producers need to show “value added” through sustainable practices, attention to detail, extra care, passion about what you do Sustainability means… “doing the right thing,” but also “doing what you can” because there is “no silver bullet” “Doing what you can” includes living more simply, giving back, recycling, reducing waste, education, being connected “Doing the right thing has to be balanced by my family budget and by how our life runs.”

30. Key Triggers to Participating in Sustainability

31. Why Environmental and Social Well-Being Concerns Have No Influence on Some Purchasing Decisions 2007 Sustainability Survey (n=1,489 consumers within the World of Sustainability).

32. Feeling that the Quality of Life Will Change for the Worse Percentage answering “much worse” or “somewhat worse” to the question: “When you think about the direction things are headed, how you think the quality of life will change in each of the following areas?” Source: 2007 Sustainability Survey (n=1,489 consumers within the World of Sustainability).

33. Sustainability Perceptions are Evolving to be More Proactive and Local • Personal, not political • Optimistic and hopeful • Focus on social elements of sustainability Small, easy, positive= Mass participation

34. Sustainability Awareness Works from the Inside Out The home is the place that is most stable and safe. The farther one ventures outside a familiar environment (into the outside world) the more uncertainty and risk one expects to encounter. Products that clearly have a direct personal benefit to health and well-being are the gateway to purchasing sustainable products. Therefore, food and beverage products are top of mind when it comes to purchasing products with sustainable values.

36. Sustainable Product Adoption

37. Systems Thinking and Interconnectedness The ability and tendency to look “beyond the personal” is a marker of systems thinking which believes that everything is interconnected. Examples of systems thinking that motivate increased interest in sustainability include: • Having children tends to dramatically increase mental and practical investments in issues of sustainability • Participating in outdoor recreation that centers on or around wilderness areas brings face-to-face confrontation with balancing conflicting needs • When a cherished “way of life” shared by many people comes under siege of broader changes (when a future life that was assumed as a given by the group becomes threatened) questions of sustainability are likely to arise (e.g., “Will I have access to clean water?”, “Will I still be able to buy local produce?”)

38. Sustainability and Food Quality Shows respondents who “agree”. Source: 2007 Sustainability Survey (n=1600).

39. Sustainable Food Cues by Product Category

40. Consumers Believe Businesses Should Provide Leadership in Environmental AND Social Aspects of Sustainability Most companies are only talking about environmental initiatives when it comes to sustainability. These companies talk about “green” as though it is the only element that consumers consider to be part of sustainability. Equally if not more important than environmentally responsible business practices are human ethics and social responsibility. Consumers expect and want to know that businesses treat employees and other stakeholders well in terms of safety and fairness.

41. Important Business Practices Influencing a Consumer to Buy a Product Shows agreement with “very important” and “somewhat important”. Source: 2007 Sustainability Study (n= 1,600)

42. Strategic Guidelines Around Sustainability Orient company innovation, communication and experiences toward consumer definitions, not industry definitions, of sustainability. Health and wellness involvement is the most significant connection point consumers have as they enter the World of Sustainability. Link personal health and/or wellness benefits to sustainable products and services wherever possible. Stay cognizant of where products and services fall on the sustainability adoption pathway to determine which dimensions of consumption to address and what key benefits, language and visual cues to leverage.

43. Sustainability Language The most relevant linguistic themes and imagery around sustainability are: Hope Connection Responsibility Similar Values Local Artisanal Reliability Care/Nurturing Control Health Fresh Unpackaged Authenticity Simplicity Efficiency Simple Living Organic Seasonal The most relevant linguistic themes and imagery for food specifically are:

44. Strategic Guidelines Around Sustainability Address key barriers to regular participation: price, convenience and availability. Allow participation in products, services and retail experiences to be flexible and occur in the course of a consumer’s everyday behavior (i.e., shopping at the grocery store, dining out, at a social event). Follow Core consumers to identify possible future trends in sustainability.

45. Strategic Guidelines Around Sustainability Open up” the business for direct consumer input as well as transparency about company processes, values, etc. Communicate brand and company narratives that connect consumers to the people, places and processes that epitomize your company. Show them how the company is part of a community, and stay inclusive. Create opportunities for consumers to connect and share their experiences and opinions with one another.

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