Targeting the Market Green
By Byron Rohrig • Photo by Jerry Butts

Environmental scientist J.C. Randolph has been a “tree hugger” for more than 36 years, so when he talks about investing in the latest on-demand technology in his home, it’s no surprise that he’s not talking about TiVo but a new tankless water heater purchased to replace his old energy-guzzling system.

For an investment of about $1,000, the Indiana University professor who specializes in forest ecology reduced his household’s energy consumption by about 25 percent, helping to save money and Mother Earth at the same time.

But Randolph, who for 16 years served as director of Midwestern Regional Center of the Department of Energy’s National Institute for Global Environmental Change, is convinced that he’s more the norm than not these days, given the huge influx of “green” products — from home appliances to hybrid cars — flooding the marketplace. “It’s everywhere you look, from larger hardware chains to grocery stores,” says Randolph. “Environmental considerations have become part of the public’s buying process and a selling point for companies across the board.”

It’s true for Evansville builder Shane Clements, whose 30-year-old company, Eagle Construction, experienced its second-best year in revenues last year amid a national decline in new home construction by selling energy-efficient homes that appeal to eco-conscious clients. Clements (profiled on p. 31) is engaged in what’s known as “green capitalism” — the marketing of a money-making venture around an environmental theme. It’s a concept as old as the Earth Shoe, whose sales skyrocketed in the early 1970s after its Earth Day-inspired creator changed its name from the “Minus Heel Shoe.”

But it’s no longer on the fringes. The editors of Ad Week, whose magazine is read by advertising executives around the world, named green capitalism as one of the top trends of 2007, noting that green marketing has stepped “squarely into the mainstream” and is now embraced by a myriad of companies, from Wal-Mart to Chevron. As Ad Week noted, “the bottom line is there’s money to be made” from going green.

But critics of the trend and government regulators — including the Federal Trade Commission — worry that with green capitalism comes “greenwashing,” a term that describes the unjustified appropriation of an environmental virtue to sell a product, process, or service.

Earlier this year, the Federal Trade Commission launched a series of hearings around the nation into the matter of green marketing. The hearings were prompted, said Commission chairwoman Deborah Platt Majoras, by a proliferation of green claims that has resulted in a “heightened potential for deception.”

What accounts for the green explosion? There’s an array of reasons, but much of it revolves around what experts say are the major factors that drive consumers to select products: price, brand recognition, product quality, and fashion-ability. It is, as University of Evansville marketing professor Rob Montgomery notes, both hip and easier on the pocketbook to be a greener consumer these days. “In the past, people gave a lot of lip service to the idea, but it didn’t often translate into how they behaved,” Montgomery says. “Increas-ingly, though, there’s a sense that not only is it the right thing to do, but it’s the smart thing to do. The biggest driving force these days in the green movement is economics. Now that gas is $3.40 a gallon, we’re a lot more willing to buy a fuel-efficient hybrid. But back when gas was $1.30 a gallon, we might have said we were environmentally friendly, but we were still driving around in our Yukons.”

Much credit goes to the technology that makes greener products more appealing, more accessible, and more mass-marketed. “Things that have been in research and development for the past 20 years are finally reaching the point of going to market, and with that will come a continued flood of advertising campaigns for these green items,” predicts Frank Findley, a vice president at ARSgroup, an Evansville-based marketing and research company with offices around the world. He concurs with Montgomery that there is a definite shift in consumer behavior. “The recent trend has gone away from consumer awareness and consideration to actual behavior change where people are clamoring for green alternatives to existing products,” Findley says. “That’s what we’re increasingly seeing on the marketing side as a result.”

Just how loud the clamor is remains somewhat unclear, though. The Michigan-based Intellitrends Market Research, whose client list runs from eBay to Audi, found that from mid-year 2007 to the end of year, the largest increase in consumer buying was in the purchase of green products. There’s the promise of more to come: When asked about their future purchasing behavior of products and services that are specifically “green” or environmentally friendly, 93 percent of consumers in the United States polled by Intellitrends said they “definitely” or “may purchase” these products over others.

But Ipsos-Reid, a global survey-based market research company with affiliates around the world, recently released a study that found that consumers are also wary of green advertising with men apparently more skeptical than women: 75 percent of men polled believe labeling a product green is just a marketing tactic, compared to 65 percent of women.

That doesn’t surprise Montgomery. He says the problems with green labeling are increasingly like the ones associated with the word “organic” before the U.S. Depart-ment of Agriculture stepped into the organic marketplace in 2002 to establish a set of guidelines for use of the word. “You run the risk with green labeling that when everything is labeled ‘green,’ after a while, it means nothing and no one believes it.”

Montgomery doesn’t think we’ve reached that point yet, and he notes that the size of the audience receptive to green marketing is significant. For example, a recent survey conducted by Forrester Research, an independent technology and market research company, estimates that about 25 million Americans — a demographic group called the “bright greens” — are willing to pay extra for consumer electronics that use less energy or are environmentally friendly. Like J.C. Randolph, the Indiana University professor who invested in the tankless water heater in an effort to save money and the planet, Montgomery says economics is a powerful force but so too is the desire to do the right thing by future generations. “There’s a greater awareness that we’ve been consuming up our resources too quickly over the last 140 years or so,” Montgomery notes. “There’s a greater understanding among consumers that the decisions we make today will impact on our grandchildren.”

Despite the evident environmental benefit of an increasing number of products out there on the shelves, green is a term that has become as amorphous as it is prevalent in the marketplace. It’s a growing dilemma that has left buyers skeptical and interest groups adjusting their marketing microscopes, and as a result, some businesses are walking on semantic eggshells. When the Federal Trade Commission launched a review of its decade-old green guidelines, it did so a year ahead of schedule after noticing what FTC attorneys called “a proliferation of green claims in the marketplace.” The review, which will last well into the summer, has prompted FTC officials to warn advertisers that they need to start backing up their marketing claims — whether expressed or implied — with reliable evidence. That may work for a tankless water heater or a hybrid car, but how should you measure marketing campaigns that align themselves with the green movement like the one kicked off in January by Absolut vodka? Dubbed “Every Sip Makes a Statement,” the vodka maker’s campaign promotes “Global Cooling” by encouraging consumers to register on the liquor maker’s Web site, so they can activate an “eco-donation” to one of three “eco-charity” partners.

Green marketing is fraught with potential peril. Consider, for example, a greeting card manufacturer that increases the recycled content of its paper from 2 percent recycled material to 3 percent, allowing the company to claim its greeting cards as “now with 50 percent more recycled content than before.” The claim is technically correct, but it’s likely to give the impression that the increase was significant, which is, well, just plain wrong.

There are private watchdogs in the marketplace to guard against greenwashing, including a green marketing company called TerraChoice (www.terrachoice.com), whose clients range from The World Bank to the Marriott hotel chain. More than half of the eco-labels on today’s products, according to TerraChoice’s research, hype some narrow eco-friendly quality (say, recycled content) while omitting mention of more significant environmental drawbacks such as manufacturing intensity or travel costs.

Just how effectively a revamped version of the FTC’s guides will curb the proliferation of such dubious declarations is up for debate, but for those on the marketing side, here’s the rub: Buyers are starting to do their homework anyway. Online blogs and forums on Web sites like www.treehugger.com offer an immediate, interactive resource for everything from advice on which hybrid cars pack the most eco-punch to the smartest brand for rechargeable batteries.

So how can a business take that first step toward advertising thoroughly and credibly in the green arena?

Advertising expert Tom Hirons, who teaches marketing at Indiana University, urges companies interested in green marketing to get expert advice. “I would strongly recommend, just as you wouldn’t go into court without an attorney, not going into the advertising arena without a good advertising firm.” It’s money, he says, that is a wise investment, considering what’s at stake if the Federal Trade Commission indeed toughens its green marketing standards. Violation of Federal Trade Commission rules can result in hefty fines. Among the recent notable examples is the FTC’s action against ChoicePoint, a data broker hit with a $15 million fine for failing to safeguard consumer information from identity thieves. Another is the $413,000 fine levied against Cyberheat, Inc., for its mislabeling of its sexually explicit email spam.

Meanwhile, Jon Ruthenburg, vice president of the Evansville-based Gray Loon Marketing Group, advises his clients to maintain integrity in their message and be willing to examine their own motivation for employing a green marketing campaign. “There’s an increasing recognition among consumers that we have limited resources on this earth and that we can no longer live like we’re a limitless society,” Ruthenburg says. “We’re beginning to awaken from our apathetic stupor and realize we can’t go on forever living like we have been. That’s not some buzz or trend that’s just going to go away.”