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When I read the article on mindful consumption, it gave me some valuable insights into how to redirect consumption, but still some questions remained open. Now in the lecture on customer costs in particular one aspect regarding mindful consumption got my attention.

We all know that overconsumption is unsustainable consumption; still we consume more than we need. Overconsumption has devastating consequences for personal, economic and environmental well-being. Companies, however, have not yet fully acknowledged the problem of overconsumption, as consumption is a business driver. To pick up on sustainability concerns of consumers, firms started valuable greening approaches. Firms initiated green consumption by selling more eco-friendly products. So, how does this help with the problem of overconsumption? Unfortunately, those green strategies are inadequate for neutralizing the impact of overconsumption; consumption per person is still increasing.
Given this setting the authors suggest a market-driven approach to redirect consumption which they name mindful consumption. This approach implies both consumers’ mindset and their behavior. Mindful consumption is characterized by consumers caring for themselves, the community and for nature. Research has shown that overconsumption reduces individual happiness. It is harmful to the community and violates nature (peak oil, peak soil etc.). Therefore, a caring mindful consumer would be motivated to not over-consume. Regarding behavior the authors emphasize temperance in three types of consumer consumption behavior. Consumer need to show temperance regarding the acquisition of goods they do not need, regarding disposable and potentially obsolete products as well as regarding competitive consumption.

But why would companies implement a mindful consumption approach?
The article gives two reasons: Consumers already turn to a new lifestyle of frugality. Hence, companies should leverage on that development. This, for me, raised some questions: Why do we then still see increasing consumption? In class, we discussed that e.g. LOHAS do not strive for less consumption. So where can we find this frugality? The article gives evidence via surveys conducted among American customers. So, the new frugality can be found in America?
The authors name a second reason: marketing that drives overconsumption leads to a negative marginal profitability. This is based on the assumption that all external costs are internalized, i.e. environmental, social, marketing, and debt costs. I think this aspect has to be linked to the customer costs of the product. Customer costs consist of price, purchase costs, use costs and post-use costs.

Regarding price, in the last lecture we discussed value-based and cost-based pricing strategies from a company perspective. Given the internalization of all external costs, cost-based pricing necessarily has to lead to higher prices compared to companies that do not internalize external costs. In the case of price-sensitive customers (in mass markets) companies have to focus on reducing the other components of customer costs, i.e. purchase costs, use costs and post-use costs. Another approach would be to substitute the initial price of buying the product by a rent or leasing agreement.

Value-based pricing takes on the consumer’s perspective. The price is based on the value the customer assigns to the product. Usually customers see a higher value in sustainable products. Therefore, the value-based pricing strategy does also offer room for internalizing external costs.

I think, given that companies internalize external costs and are able to relate it to customer costs, mindful consumption can increase marginal profitability.

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Following last week’s lecture on customer cost I was reminded of “The Story of Stuff” video and its assertion that the costs that we as consumers see is far from the societal costs. It would seem to me that there is somewhere that “costs” are grossly underestimated by both firms and consumers. In many ways I would argue it is the flawed system of attributing cost that leads to over-consumption and many of the resource and environmental issues that follow.

Efforts like governmental regulations, ISO regulations and certifications help to internalize some of the previously unrecognized societal costs. With regards to sustainability I don’t think we go far enough. At least in the sense that sustainability means that future generations will be able to maintain the current consumer society. I think that there exists too much complexity and within this an inherent inability to understand all the costs that current production or consumption causes. Unrecognized costs exist in both the present and in the long-run making it even harder to fully grasp the consequences and what may be a “sustainable cost” for something like a litre of gasoline. Such a cost would have to take into account associated costs of future scarcity, costs associated with climate change, environmental degradation, adverse health effects due to pollution and so on. I recognize that such a system of pricing is completely unreasonable due to the inability to fully recognize the consequences of any given action, especially in the long term. However, if it was possible to present value future costs and include them in the costs of products how might this lead to truly sustainable consumption?

Suomen Kuvalehti has made revealing graphics about where the ingredients for a frozen pizza made in Finland, in Pudasjärvi actually come from. The only ingredient in the pizza bought in Pasila that does not have double digits for its travelling distance to the factory is the water.  The flour used in the pizza has traveled merely 70 km, so also it can be considered local. All the other ingredients have much longer trips behind them. For instance the cheese comes from Britain (1900 km), onions from Poland (1900 km) and pineapples from Costa Rica (9900 km). A simple frozen pizza is a truly magnificent product of global collaboration and well-functioning logistics network.  I cannot help but wonder what might be the pizza´s carbon footprint compared to a pizza made at home from scratch, possibly using Finnish onions and locally produced cheese etc. Do economies of scale have a significant effect in the production stage of the pizza? Hm…

Unfortunately the article is Finnish, but the awesome kilometres of the ingredients in the graphic are worth taking a look at. 

http://suomenkuvalehti.fi/jutut/kotimaa/tasta-on-pakastepizza-tehty-ja-nain-kaukaa-ainesosat-tulevat-tehtaalle?fb_action_ids=10151471904728700&fb_action_types=og.recommends&fb_source=other_multiline&action_object_map=%2210151471904728700%22%3A138602912985472&action_type_map=%2210151471904728700%22%3A%22og.recommends%22&action_ref_map=%5B%5D

Don’t ever bore me. Make me laugh instead.

In yesterday’s lecture someone brought up the subject of “guilty conscience” again. I personally believe some marketers are using ineffective emotional appeals to market sustainable products – they make people feel guilty. As we saw in our lecture on sustainability communications last week, playful, entertaining and informative messages will yield better results when it comes to sustainability.

Yes, indeed – making us feel guilty about our lifestyle won’t work. Instead we’ll probably stop reading your message. We consumers want to hear extraordinary and funny stories, we want to be part of the story and feel empowered and be the heroes. Rainforest Alliance’s follow the frog viral video is one example of where a message is delivered in a very funny, entertaining and informative way – have a look at this funny video:

 

Now, I want to share my comments on Rainforest Alliance’s follow the frog viral video.

AIDA: attention, interest, desire, action

First, as you might have noticed, from the very beginning the story tries to gain the audience’s attention by focusing on the second person “you”. It’s personal and thus effective as it relates to the audience’s own lives. It’s quite likely that many “LOHAS” will identify themselves with the guy in the video. In many ways, this guy is ordinary, and that’s why it’s so easy to relate to him. Like most of us, he’s just a regular guy with good and bad habits. He has a family and job. He’s concerned about environmental issues like the destruction of the rainforests and feels he needs to do something about it.

Second, with great cautious the story attempts to show the audience that there’s a problem – It reminds the audience that they have a role to play in sustainable development, but they’re doing nothing about it. Here, the message plays on the audience’s guilty conscience, but it manages slip away almost unnoticed. It then takes the audience on a journey – surprisingly the guy in the video gives up everything to go and protect the rainforest. And this is exactly the kind of crazy thing some “LOHAS” want to do. But, of course, this never materializes.

Third, the story presents a solution and call for action: you don’t have to give up your comfortable life and travel to the ends of the earth to save our planet. An effective call to action is created using the imperative (command) verb “follow”. Follow the frog – a clear and simple request for action: In your everyday shopping, buy (again imperative) Rainforest Alliance Certified products if you want to help preserve our environment. The underlying message of the story is: salve your conscience by buying, consuming Rainforest Alliance certified products – it’s sort of you scratch my back and I’ll scratch yours.

Isn’t it funny? – sure I’m sharing it.

Many might think it was really clever of Rainforest Alliance to use a viral video advertising. It’s unpaid (eWOM) and a reliable source of information for helping consumers make buying decisions. Besides, it seems Rainforest Alliance had a clear target in mind: students, celebrities and other “LOHAS.”

But, entertaining, surprising, taking the audience on a journey was the secret and based on Rainforest Alliance’s blog, it worked: “Celebrities Asked Their Friends and Fans to Follow the Frog”. Yes, usually when most people watch funny videos the first reaction is they want to share it with others. Actually, a research on viral video and video sharing conducted by Dr. Karen Nelson gives evidence on this subject. According to her study “emotions drive shares”… she found that highly arousing videos that elicit positive emotions are shared the most” (McNeal, 2012, p.12).

Indeed, in many situations, emotions have the power to motivate people to respond. Rainforest Alliance seems to know its audience’s needs and concerns and chooses an effective emotional appeal that creates a positive response to their message. They know their target and sort of try to speak the same language.

Some casual people might see Rainforest Alliance’s follow the frog video as just funny. Other people might see it as ecologically useful, giving benefits to consumers and the environment while others might see it as supporting more consumption. As a student, worker and consumer, I see it as a way to learn – and the video really made me laugh:)

Sources

http://www.rainforest-alliance.org/

Celebrities Asked Their Friends and Fans to Follow the Frog. (http://rafrogblogus.wordpress.com/category/follow-the-frog-week/

Marguerite, M. (2012, p.12). The secret to viral success. Marketing Research, p.10-15.

Very interesting Interview with Dr. Karen Nelson

 

 

 

Today’s lecture topic was the total customer cost, that is, all the monetary and non-monetary costs the customer encounters when engaging in a purchasing process. In addition, the strategies of value-based pricing and cost-based pricing were discussed in the lecture. Different costs such as purchase costs (search of options, information of options, travel to the store etc.), use costs (energy and water use, maintenance, switching etc.) and post-use costs(collection, storage, disposal etc.)  were introduced, and examples of both value- and cost-based pricing strategies were thought through in groups.

One example of a sustainable brand using value-based pricing that came to my mind is Nespresso. Nespresso is a quality coffee brand offering capsule coffee machines and a variety of different Grand Cru coffees provided in recyclable capsules. Nespresso positions itself as a high-quality brand, quality and freshness being probably the most important aspects in its brand strategy. Many of the brand’s coffee machines are energy-efficient, for example they use less water than many other capsule coffee machines and turn off automatically after a certain period of time. Additionally, the aluminum capsules are completely recyclable.

It can be argued whether capsule coffee machines and capsule coffee in general are sustainable or not. I think Nespresso has both made and communicated sustainability pretty well to consumers. It practices an AAA Sustainable Quality Program, paying premiums of 30-40% above the market price to promote quality coffee farming practices. The program also helps small-scale farmers to improve their businesses and aims to continuously reduce its carbon footprint and emissions. Nespresso uses Life Cycle Assessment (LCA) in its processes, considering the sustainability of its products and actions throughout the supply chain. And this is just a few of the brand’s sustainability efforts, that are vastly described in the company’s web site http://www.nespresso.com.

Nespresso’s pricing strategy is definitely value-based, since the customer and the ultimate, unique, luxurious coffee experience is at the core of the brand. I think, because of the variety of its sustainability actions, and, more importantly, the proofs and evidence of its actions on the web site www.nespresso.com, make Nespresso a perfect example of a sustainable brand engaged in value-based pricing.

Since consumption is not just a major determinant of personal, social and economic wellbeing but also the cause for direct and indirect environmental damage, Seth et al. in their paper “Mindful Consumption: A Customer Centric Approach to Sustainability” suggest that consumers should be the center of the sustainability agenda. They introduce the concept of customer-centric sustainability (CCS) and propose the concept of mindful consumption (MC) as the guiding focus of the CSS approach. According to them “customer-centric sustainability refers to the consumption mediated impact of marketing actions on environmental, personal and economic well-being of the consumer.” And they define mindful consumption as a consumption that “connotes temperance in acquisitive, repetitive and aspirational consumption at the behavior level, ensuing from and reinforced by a mindset that reflects a sense of caring toward self, community, and nature.”  

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One of the economic rationale presented by authors for promoting CCS is that over-marketing reduces the profitability, that most of the profit comes from a small subset of customers and a substantial proportion of customers are unprofitable. I think this argument is valid only at the industry level and not at company level perspective. For example, when Coke is marketing its products it does so without knowing the point where they will begin to face the marginal customer that starts to decrease the profitability. And there are competitors such as Pepsi who are marketing without knowing that marginal customer as well. This makes both the companies to face the typical “game theory” situation where they do not want to lose that additional profitable customer and go on continuing their marketing to the point where it becomes over marketing.   Since the threshold of optimal marketing is not known beforehand it is also a risk for a company to lose its marginal profitable customer to its competitor just because they failed to market. Since marketing decisions are made at individual company level and every company wants to push their limit to reach out each marginally profitable customer over-marketing is bound to happen.

 From practical point of view the definition of MC that the authors provide indirectly promotes a very ascetic lifestyle. Idea of promoting temperance in consumption behavior might be good for the environment but from a company’s point of view it is as if you are cutting off the branch that you are sitting on. If people were to nurture the true essence of mindful consumption, they would have to actively avoid what has been the norm of their daily life. Products and services other than the ones necessary for survival might become obsolete. Let’s take Coca Cola itself, if this company was to practice CCS marketing they would have to actually stop selling their products because they are more prone to health hazards and environmental degradation than the benefits. Similar logic of cost-benefit analysis focusing on mindful consumption can be extended to many of the products and services that we use in our daily life. In absence of any best technologically enhanced alternative that reduces the negative impact of our consumption habit the best alternative for such products and services would be to reduce or stop their use. In the context where increasing number of people are aspiring to take the path of consumerism it is also a challenge to come up to an optimization that sets the best consumption habits. What people in Europe define as the best consumption habit might not be the same as what the Chinese or Indian think is the best, and the ethical issues associated with this ambiguity might itself be a problem for the companies.    

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Going shopping these days is overwhelming, especially if you’re out to buy something somewhat indispensable to sustaining your current life style (and no, chocolate does not qualify). Im talking along the lines of soap, washing detergent, toilet paper, toothpaste…you get the picture. I usually just want to get my product/necessity X and escape the masses of equally frustrated shoppers wondering up and down the aisles of Too Many Choices.

Voting for a better world via my wallet and doing efficient shopping seems to be becoming an increasingly impossible equation. Since when did I need twenty variations of toilet paper?  Rows and rows of assuring science about double-ply absorbency rates, “Flush&Go”s and Nordic Swan certificates. Cut the cr*** and give me something sustainable and kind on my behind!

ImageDoing really the right thing and making the (subjectively) best choices becomes painfully time consuming with more and more companies trying to weave green stories and certificates into their products. “Communication is not always in line with the reality of the corporate culture and behavior” as my colleague Andrea rightly points out. She also gives a great example of a (marketing) campaign of Krombacher, a German brewery, promising to donate part of the earnings gained from sold beers to save chunks of rainforest. Customers buying Krombacher beers feel good about supporting rainforest conservation while justifying and feeling better about their own consumption habits…only that Krombacher is going all magician on us and wafting one rainforest clad-hand in our faces while distracting us about the fact that they’re not doing an Amazon ant’s worth of improvement in their actual production methods towards being more sustainable.

Who would’ve ever though making beer-buying decisions would turn out to be so tough one day? (that is obviously assuming that you care about the impact of your purchase decisions)

In our world, you need to buy to live and you live to buy. A fact you can’t run away from in your new squeaky Nikes. Additionally I don’t think we would last very long if we had huge pangs of guilt and distress after every single purchase.  This issue was touched upon during some interesting discussion during our lectures: to what extent do feelings and emotions motivate action? (or non-action?) Guilt can definitely sit with you long after swiping your Visa. So how do we internalize certain values and moral responsibility that affect our decisions?

Individual moral responsibility will carry you through daily decisions fairly well but paying a “social” price and losing face for being the only weirdo not conforming to collective expectations of making smart choices will definitely get you squinting at labels more attentively.

Greenwashed products can lull us into a false sense of having done good but showy eco-design and matching messaging can only get companies so far: we can read and we can investigate. We demand more proof, more action. Society at large also seems to be sprouting movements dedicated to see that we do actually try and buy our way into a better future.