Friday, November 27, 2009

Renewable Energies and Marketing Process

Renewable Energies (R.E.) is not something new today. What comes to mind when we think of R.E. include solar, wind, biomass, hydro and "foclear" (fossil/nuclear) energy systems. We see environment consciousness everywhere we look, from Prius (Toyota) to Efficient Dynamics (BMW) to an entire town illuminated only by LED lamps ("Green Avenue Azabu no Oka" developed by Toyota Smile Life Inc).

The race is on for newer and more environmentally clean technologies. The EU has agreed that by 2020, 20% of Europe's energy will be from R.E. sources, while Malaysia recently, in it's 2010 budget, introduced tax incentives for companies that are involved directly in R.E. services, systems and adhere to green standards outlined in the Green Policy. Even building architectures are going green like the Bird's Nest (venue for the 2008 Olympic Games in China) and the Copenhagen Towers.

It's only a matter of time when someone comes up with a catchy logo for R.E. to join the list like the recycle logo, or when R.E. becomes so embedded in our lives, that it becomes a "brand" we seek for... "R.E. compliant", and on your dinner plate for, "ingredients processed with R.E." 

This post is not about how to market R.E. or to promote clean energy, or why we should be more environment conscious - the Oscar winning documentary, campaign (and now book) "An Inconvenient Truth", by Al Gore successfully address that since 2006.

Here I would like to review how we can align the marketing mix strategies to be "green-focused".

Green Focused Marketing Mix

Products - Either a green technonology product or using R.E. directly or indirectly in the manufacturing process. Again we see this with automobiles, building architectures and books printed with recycled paper content and soy-ink printing. This creates more pies (see my earlier blog on "Creating More Pies") and opportunities for product innovation. However, it is also a threat for companies who ignore the warning in ensuring business sustainability.

Price - Current pricing strategies for green technology tends to be perceived as higher compared to standard products. This is either because of the high R&D costs incurred (as in automotive, photovoltaics), or you would be paying a premium for preserving the earth and environement. Pricing strategy needs to be attractive and competitive to encourage a more proactive diffusion of innovation process.

Currently total ownership costs are used to compare the benefits of green technology because the start up costs are usually very high, thus limiting the potential target market. How to overcome this is for companies to package promotions (including warranties) that makes the total ownership cost benefit more tangible and realistic.

Place - In marketing distribution strategy, there are endless ways to implement green focus; for example the product packaging, stores and distribution channel compliance, and also extending the green focus on third parties in the supply chain.

Promotion - Green incentives for customer, and also reducing waste from all the poorly planned promotion activities. Again, the awareness and making the choice for green technology is already a reward.

Services - Service standards to improve efficiency and green focused. Banks are now introducing e-statements as it has been estimated that over 50,000 trees are used to generate printed statements annually (HSBC advertisement below).

Corporate Mission, Objectives and Business Sustainability

Due to the growing awareness and consciousness, corporate sustainability objectives include a goal to reduce CO2 emissions and product carbon footprints, planting more trees, climate and resource preservation (including energy and water). European Eco Management and Audit Scheme(EMAS) requires an Environmental Policy to be in existence within the organisation, fully supported by senior management, and outlining the policies of the company, not only to the staff but to the general public and other stake holders. The policy needs to clarify compliance with Environmental Regulations that may effect the organisation and stress a commitment to continuos improvement.

Business for Social Responsibility(BSR), a leader in corporate responsibility since 1992, works with its global network of more than 250 member companies to develop sustainable business strategies and solutions through consulting, research, and cross-sector collaboration. These developments reinforce the importance of innovative, sustainable business practices that lead the transition to a low-carbon economy, promote economic development, and rebuild trust in business.

Improved Collaboration Reduces Waste

Companies need to focus on collaborations efforts rather than competition. Today we see competition creating marginally incremental enhanced features (higher megapixels, faster MHz etc) that drive constomers crazy trying to keep up with the names. We need more breakthroughs like the ipod and iphone that actually creates more pies. Within-the-pie competition leads to waste especially when companies try to out-perform each other's product features marginally - we end up with more inventory, sales efforts, promotion banners and advertisement inserts in your newspapers.

Of course some may argue that better products are achieved through competition. But so does synergies. And synergies augers well with consumers because they get the best of both worlds, while the collaboration benefits both competitors. A good example is NUMMI (JV between GM and Toyota since 1984) where technology and best practices are combined and challenged.

The Future of Marketing

Green technology and R.E. cannot be avoided and the demand will continue to grow. It has been estimated that the environmental technology industries in Euro will grow to as about 3.0trillion Euro by 2020. Marketing needs to play an important role in ensuring customer needs are effectively and profitably met, as part of a more sustainable business practice.

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