In 2007 we couldn’t open a magazine, turn on the television or nip to the shops without being hit with messages about being green. It was the year that ethical consumerism went mainstream. It was the year that we started using reusable shopping bags, stopped resenting our local councils for making us recycle our rubbish and started showing interest in our carbon footprint.

2008 started in much the same way. In the February of that year free range chicken sold out in supermarkets after the ‘Hugh’s Chicken Run’ series aired on Channel 4. Later on in 2008 M&S began charging shoppers for carrier bags as part of the Plan A strategy and other retailers continued to message on their own ethical credentials. And then the credit crunch, that had been affecting the American economy for some time, hit our shores. House prices tumbled, and with them consumer confidence. Meanwhile increasing demand on commodities pushed cost prices up and food inflation began to rocket. The nation became worried about their jobs, their homes, their pockets and suddenly being green no longer made the headlines.

Two years on and there is a willingness and an amount of concern about ethical issues – at the end of 2009 about three-quarters of people polled in Great Britain said they were concerned about environmental issues. Climate change, packaging waste and air pollution were the environmental issues that people said they were most concerned about. But this concern does not necessarily convert to action in terms of changing buying behavior.

Can We Afford To Be Ethical? Can We Afford Not To?
Nielsen research shows that as we come out of recession fewer people are prepared to change their behaviour based on ethical and environmental considerations. In mid 2008, 20% of consumers were considered to be ‘ethically enthused’ – these people are described as those who show a real willingness to change their behaviour to benefit the environment and support ethical issues – this dropped to 11% by 2010 with many more people being ‘ethically inert’ (people who care to a degree but are not prepared to change their behaviour) now than 2 years ago (increased from 4% to 9%). The other 80% are those who care somewhat but are not fully committed or ‘ethically ambivalent.’

While 43% of people still claim that they try to buy products that are kinder to the environment (unchanged since 2007), there has been a significant drop in people who say they are willing to pay extra for such products, from 37% in 2007 to 28% in January 2010. In fact, 68% of people say that they would like to buy environmentally friendly products but that they think they are too expensive and similarly, 65% said they would like to buy ethically produced products but found them too expensive.

There is also a definite drop in people who now say they would be willing to switch brands if they thought the alternative had better ethical credentials compared to 2007. For example, in 2007 46% of people said they would switch to another brand if they thought the company who made it was more environmentally friendly, but in 2010 this has dropped to 37%.

Organic has been one of the hardest hit casualties of the recession with sales of organic goods in Grocery Multiples in decline by 15% in 2009 compared with total food growth of 5% for the year. In January 2010 only 23% of people said that they tried to buy any organic food and 46% said they never buy it.

Save the planet and save money
However, embracing some practices that contribute towards sustainability has made sense in the economic climate. Food waste became a big area of focus and here consumers found they could make a contribution to the environment and save precious pounds by being more careful about how much food they throw away. With food inflation peaking at 10% in August 2008, consumers used strategies such as buying smaller pack sizes to save money. The proportion of products sold on (what could be seen as waste driving) multi-buy promotions fell in favour of price cuts.

Switching to low energy light bulbs was given a big lift when Tesco reduced the price of these in store before the recession hit but the benefit of energy efficiency really came into its own amongst the backdrop of the recession. In January 2010, 46% of people said they try to buy energy efficient appliances or products compared to just 27% in 2007.

Other areas where people have increased their ethical efforts in the past 3 years include people attempting to buy products that have little or no packaging which increased from 45% in 2007 to 52% in 2010. The number of people claiming they actively try to buy products in recycled packaging has also increased from 38% in 2007 to 43% in 2010.

There is a slight increase in the number of people who claim to try to buy local products, up one point to 49% in 2010 and 62% of people claim they actively try to buy British. 44% of people say they actively try to buy free range meat and eggs and 21% say they actively try to buy sustainable fish (these last three are new to the survey so no comparable data is available). The trend to ‘grow your own’ has enjoyed a revival and 23% of people claim to grow fruit and vegetables.

Before the economic downturn, being seen to be green was very en vogue. It was a trend and many speculated at the time that it may be a passing fad. But coming out of recession we have noted a change in the consumer that could well embed itself for the long term. Values have been re-assessed, austerity has been exercised, the wasteful consumerism and excessive spending of the last decade has been proven to be an unsustainable way of life. Though consumers are not as willing and not as able to pay premiums for ethically produced food or to pay more because it is the latest trend, going forward this type of product does have a new found synergy with the more cautious and considered consumer. There is plenty of scope for growth in this area and where a product can offer good value and even savings to the consumer in addition to having sustainable and ethical credentials there is sure to be a market for the foreseeable future.

“These estimates help manufacturers and marketers better understand the markets that have ‘green’ potential, and help them focus their resources,” said Bruce Wilkinson, Vice President of Media and Communications for Nielsen Claritas. “Additionally, it helps them to plan media campaigns and determine inventory levels for each model, market-by-market.”

The research looked at the national ownership rates of high-mileage vehicles including the Honda Fit, Toyota Prius, Toyota Yaris and Mini Cooper. Using auto registration data from RL Polk and Nielsen’s PRIZM segmentation, the percentage of each segment owning these vehicles was calculated. Individual market potential then was calculated based upon the segment composition of each market.

The top ten was made up primarily of coastal metropolitan area, including Boston (4th), San Diego (5th), Chicago (6th) and Los Angeles (9th), all with populations of over one million. Two exceptions were the relatively small areas of Monterey-Salinas, CA (7th), which has a population of 234,000 and Honolulu, HI (8th), with a population of 442,000.

Places where gas guzzlers still rule the road tended toward the south and Midwest, with the states of West Virginia and Mississippi holding seven of the ten areas that had the lowest rates of green auto ownership.

Learn more about Segmentation & Targeting.

While consumers are generally on board with energy conscious products, their green behavior has yet to extend to their habits in monitoring and paying for the energy in their homes.

Services offered by local utilities such as whole house energy audits, energy efficient HVAC rebates and weatherization services were only used by 2 percent of respondents in the past year. Energy efficient appliance rebates were used by 4 percent.

Similarly, online energy services, such as real-time pricing, load management, and service consumption monitoring were adopted by only 3 to 5 percent of consumers in the past year.

With the energy industry poised for major changes, including a heavier reliance on technology in monitoring and delivery, the report emphasizes that energy providers have major opportunities if they can educate their customers to become more active in their energy use.

Respondents showed a continued interest in energy-efficient equipment in the home, with 25 percent of consumers having purchased an Energy Star certified appliance, lighting product, or heating or cooling equipment in the last year. However this percentage fell from 27 percent last year.

Energy conserving compact fluorescent light bulbs (CFLs) have shown strong adoption with 71 percent of consumers using at least one bulb in their homes. Nearly a third (30 percent) of those surveyed said they are using more than six.

One indicator that going green is not just a trend for younger consumers is that CFL use appears to increase with age. While 64 percent of those aged 18 to 34 are using the bulbs, so are 70 percent of adults 35-54 and 74 percent of consumers 55 and older.

Ownership of CFLs is highest among those with higher income and education levels, with 76 percent use among those making over $100,000 a year.

Download the complete Convergence Audit.

Robert Mooth, Vice President, Client Consulting, Nielsen BASES

SUMMARY: Half of Americans say they want to buy green products, but don’t. As the market has become more crowded – and the offerings more complex – consumers have also become more sophisticated. While the payout for successfully launching a new product as green can be substantial, getting there requires a unique approach.

When it comes to ‘going green’, the size of the opportunity is clear. The Natural Marketing Institute (NMI) estimates that the size of the green marketplace (defined as products that are organic, natural or have an environmentally friendly benefit for the purpose of this analysis), is expected to reach $420 billion by 2010. In addition, hundreds of certification programs now offer ‘eco-labels’ for green products. Yet evidence shows that there is still room for growth into untapped segments, as nearly half of American adults say they want to buy green products, but end up choosing conventional ones instead. How can marketers satisfy the consumer who aspires to buy green with innovations that also rationalize with a stable of ‘traditional’ branded products?

The rewards might justify the effort
Successfully developing and positioning a new product as ‘green’ can present different challenges from traditional new product launches. In addition to having a compelling consumer proposition, it’s also necessary to redefine competitors (are they green or traditional?), account for new pricing dynamics, adapt marketing communications tactics, and understand a new group of target consumers.

The payout, however, can be substantial. Nielsen BASES and NMI experience shows that green products generate healthy consumer purchase interest and have an easier time standing out from the competition, often resulting in solid volume potential for green initiatives. And while line extensions to major brands are often highly cannibalistic, green products can offer higher-than-normal incremental growth. As an added bonus, green products frequently command a premium price, giving manufacturers an opportunity to build profitability by line extending without being locked into line pricing.

LOHAS consumer model
NMI has interviewed U.S. consumers for their attitudes and behaviors toward sustainability and environmental concerns every year since 2002. From this knowledge, the LOHAS (Lifestyles of Health and Sustainability) segmentation model has been developed that classifies consumers into one of five groups, depending on their awareness and involvement in green issues.

The five LOHAS segments as defined by NMI include:

• LOHAS (17%) – active environmental stewards dedicated to personal and planetary health. These are the heaviest purchasers of green/socially-responsible products and the early adapters who influence others heavily.
• NATURALITES (17%) – motivated primarily by personal health considerations. Tend to purchase more LOHAS consumable products vs. durable items.
• DRIFTERS (24%) – while their intentions may be good, DRIFTERS follow trends when it’s easy and affordable. They are currently quite engaged in green purchasing behaviors.
• CONVENTIONALS (26%) – pragmatists who embrace LOHAS behavior when they believe they can make a difference, but are primarily focused on being very careful with their resources and doing the ‘right’ thing because it will save them money.
• UNCONCERNED (16%) – either unaware or unconcerned about the environment and societal issues mainly because they don’t have the time or the means – these consumers are largely focused on getting by.

Combining the LOHAS segmentation model with Nielsen BASES experience provides a unique lens for understanding opportunities for innovation in green.

Green doesn’t have to be niche
Many of the earliest entrants into the green segment were niche items due to a narrow consumer base, targeted benefits, premium pricing, and limited availability. However, these factors are all changing rapidly. In fact, as Nielsen examined over 400 green initiatives tested in BASES over the past two years, it was found that average consumer purchase interest fell nearly in the exact middle of the respective BASES Database.

Green has evolved to where it can be a mainstream consumer proposition in many categories. While nearly 20% of consumers fall into the LOHAS ‘environmental steward’ category, more than 60% have at least some interest in green, and are willing to try products that are relevant to their needs.

Extend an established brand equity
Branding is, of course, one of the primary considerations for green initiatives. Many of the early entries into the green segment were built around new brands to compete credibly. As consumer awareness and interest in green has evolved, mainstream brands have attempted to play in the green space as well.

The question is, should you try to extend an established brand equity into the green space, or invest behind a new one? Perhaps surprisingly, most consumers show a clear preference for buying green products from traditional brands. Even the LOHAS consumer segment is open to buying green products from established brands. While not all established equities could stretch into green, marketers should give preference to exploring the potential for brand extension for efficiency’s sake.

Getting beyond ‘niche’
To win at green, appealing to the LOHAS consumer is typically a critical first step. However, being successful in the mass market likely means that you need to move beyond the LOHAS consumer and attract another consumer group to your initiative. In Nielsen BASES experience, this broader appeal is what sets the strongest green initiatives apart from the weaker ones. The stronger green new product initiatives demonstrate similar growth in volume potential from LOHAS consumers as well as consumers in other segments.

One of the keys to succeeding will be to set a strategy for attracting one or more other segments beyond the involved LOHAS consumer to the initiative and optimizing communication for the target. Green products often have a dual communication challenge – convincing consumers that the new product delivers on both its primary benefit as well as its green promise. Some consumers will need reassurance on the core promise, while others will need to be convinced that it is truly green. Different segments will likely respond to different messages and features, so these choices are critical.

Few consumers will compromise
After paying a premium for most green products, most consumers are unwilling to make concessions on product performance. Post-use responses to green products in the Nielsen BASES Database indicate that consumers are nearly twice as likely to suggest that green foods improve their taste and that green household products improve their efficacy, relative to their feedback for traditional products. When trying a green household product or food for the first time, some triers may well be hypersensitive to aspects like taste and effectiveness. Regardless of ingoing expectations, it should be clear that manufacturers cannot afford to lower the bar, as consumers are unlikely to make repeat purchases for items that sacrifice performance for green benefits.

The right target
While the weakening economy shows signs of slowing the growth of green, we believe the longer term green shift will persist. Innovation in green will continue to be an area that grocers and manufacturers can leverage to differentiate themselves from the competition. Winning at green starts with relevant product ideas, but breaking through to a broad audience likely requires a more sophisticated targeting and communication strategy. Making thoughtful choices in this area could represent the difference between an initiative being a ‘nice little idea’ or becoming the next big thing.