I think that all the cost and pricing strategies are highly interesting from a producer’s or strategist’s point of view, but I think that sometimes those strategists forget how they influence the customers perception of certain market segments. When green products came to the market they developed different strategies for all kinds of customer segments. They play with the emotions and knowledge of end consumers and apply the strategies that are most likely to result in high revenue for the company. That’s why it became difficult for end consumers to figure out what the price premium stands for. Of course many products communicate the reason for the price premium, but even in that case it is difficult to tell whether it justifies the whole premium. This is something that bothers me when I go through the supermarket and also influences my buying decision slightly towards products that are not marked as sustainable or have no price premium. I think that the marketing practices of sustainable products, combined with the pricing strategies, created a situation where we have a lack of trust in sustainable products because people don’t actually know what they really pay for. Peattie and Crane (2005) have described the methods that led to this state and labeled them as e.g. ‘green selling’ or ‘green harvesting’. This is also the reason why we see this strong trend towards transparency at the moment. Consumers don’t have trust in sustainable products due to their marketing history (to some extent at least) and therefore companies have to introduce new transparency mechanisms in order to restore the trust in sustainable products. This is an important step in justifying price premiums that really result out of more sustainable practices in the production process. Also Prof. Belz agreed that this trend of transparency will become even bigger in the future. Trust is an important factor in customer relationships in general, but I guess even more in sustainability related areas. New transparency mechanisms are one of the keys to help overcome the lack of trust and boost sustainable products. When it comes to pricing strategies I suggest that sustainable products should go more for a cost-based pricing strategy than value-based (if there are no transparency mechanisms at work), as it was the latter that induced the mistrust. Many green products are price competitive and shouldn’t be priced and promoted like luxury products in the market. I believe this could start a new green wave and put the trust back in sustainable products as well as their benefits.
And because you can’t write a proper blog these days without coming up with some new fancy word, let’s call it Trustainability™.