Sustainable products have higher revenue

Topics: Messaging & Copy | Product | Brand & Strategy | Ads
For: B2C
Research date: December 2022
Universities: John L. Grove College of Business, Shippensburg University & Rawls College of Business, Texas Tech University

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📝 Intro

Scientists analyzed revenue from over 10 million sales at grocery stores across the US.

How do products with labels such as ‘organic’, ‘eco-packaging’, or ‘certified sustainable’, hold up against those without them?

Turns out, you’re not only saving the planet - but earning more revenue. A beautiful win-win.

📈 Recommendation

Clearly label your product with logos, descriptions, and third-party certifications about its sustainability. Your revenue will likely be higher.

Mention your product’s material (e.g. compostable), packaging (e.g. recyclable paper), production (e.g. non-polluting factory), or it being organic (e.g. no chemical pesticides).

Other descriptions about how your product is ethical (e.g. supporting an NGO, cruelty-free, fair trade), have a much smaller impact on revenue.

🎓 Findings

• Products with one or more of the following sustainability claims have higher revenue:

  • Eco-friendly product material (product made with materials that minimize waste)

  • Eco-packaging (packaging from recyclable, less harmful, materials)

  • Eco-friendly production (production process that is less harmful to the environment)

  • Organic (food grown without chemical fertilizers or pesticides)

• An analysis of over 10 million transactions at a US grocery store chain, found that:

  • Products with these sustainability messages had 6.4% higher revenue than products without them

  • Products with other ethical messages (product that supports a cause or NGO, animal cruelty-free, or fair trade) had 0.8% higher revenue compared to products without them

  • Ads boosted sales of products with sustainable messages by 5.8% but did not increase sales of products with other ethical messages

🧠 Why it works

• Sustainable products provide us with direct benefits (real or perceived). That can be self or social approval, health benefits, nutritional value, or taste. Choosing to buy them can also make us feel good for supporting a cause we value.

• Messages about sustainability remind us of this benefit, making us more likely to buy them.

• Other ethical product claims (e.g. fair trade, supporting an NGO) focus on our altruistic motivation, so they are less direct, and weaker.

• On top of this, buyers of products with sustainable or ethical benefits tend to be more educated and have higher incomes - so they are less price sensitive.

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✋ Limitations

• From this analysis, it’s unclear whether higher revenues are due to more sales or higher prices than average. ‘Green’ or ‘ethical’ products tend to be branded and positioned in a way that allows them to command higher prices.

• The study looked at grocery store transactions. It did not test products or any services that are not normally sold in grocery stores.

• The data is from physical stores. When shopping online it might be harder for customers to find and buy such products. Very few online stores offer search and filtering based on sustainability.

🏢 Companies using this

• Companies increasingly market their products as ethical or green.

• Sustainability messages are used by a host of companies including:

  • Eco-packaging like Evian’s bottles with recycled plastics and Pepsico’s Sun Chips’ biodegradable plant-based packaging

  • Eco-processes: Companies like McDonalds, Coca-Cola, and FedEx have redesigned their logo and packaging to reduce ink usage in their printing

• Though less effective, messaging around ethical causes is also common, particularly in the cosmetics and beauty industry (e.g. no animal testing) or in items like chocolates and coffee (e.g. fair trade).

Coca-Cola recently switched to eco-friendlier materials for some of its products. Dasani water now uses 100% recycled plastic and other brands switched to clear bottles (vs green) to improve their recyclability.

⚡ Steps to implement

• If your product has them, include a reference to eco-friendly material, packaging and production processes or organic credentials in your product messaging and packaging. Careful - if this isn’t backed up by facts, it will backfire.

• Test different variations of how you describe and showcase your sustainability claims (e.g. logos of different sizes and colors, different certifications).

• Test your sustainability claims as the central messages in your ads, to see if they perform better than your talking points you normally use.

• Not only can it increase revenue, but sustainability initiatives will make you feel more trustworthy and your products seem higher quality - especially if you are a startup or small business.

🔍 Study type

Market observation (analysis of 10 million transactions over 25 months across 10 grocery stores and 80 product categories).

📖 Research

The influence of corporate social responsibility appeals (CSRAs) on product sales: Which appeal types perform better? Journal of Retailing (December 2022)

🏫 Researchers

• Sunhee Choi. John L. Grove College of Business, Shippensburg University.

• Dale F. Duhan. Rawls College of Business, Texas Tech University.

• Mayukh Dass. Rawls College of Business, Texas Tech University.

Remember: This is a new scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

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