Consumer responses to environmental and ethical issues Durrell Wildlife Conservation Trust Andrew Curry May 2007 1
The three waves of environmental and ethical behaviour 1972 1989 2001 2 Limits Green Globalisation 1962 Source: John Elkington/SustainAbility 2005 Rachel Carson, Silent Spring Limits to Growth published First green Consumer titles No Logo
Consumers are taking action to express dissatisfaction with companies 65 60 55 50 45 40 35 30 25 20 15 10 % 56 49 42 Which of the following have you done in the last year to express your dissatisfaction? 60 56 47 54 53 44 46 44 38 45 39 34 38 23 22 37 29 21 Stopped buying from companies who might damage the environment Stopped buying from companies who might act unethically Stopped buying from companies who supply unhealthy goods 40 34 28 32 32 32 5 ITA SPA AUS GER FRA JAP TUR USA UK CH RUS POL IND BRA 23 30 18 9 8 24 23 14 12 14 19 16 17 14 11 3
1 2 3 Underlying ethical/environmental attitudes appear strong I make sure I regularly buy products and services from companies that... Highest ranked Second ranked Third ranked Actively improve the environment AUS USA SPA GER FRA ITA UK JPN Actively treat their workers well Are transparent in their business practices Pay producers a fair price Actively support their local community Pay a proportion of their profits to charity Source: HenleyWorld, 2006 4
12000 The UK ethical market shows steady growth Value of selected UK ethical/green sectors, m, 1999-2004 10000 9,027 10,626 Ethical finance 8000 6000 4000 2000 0 7,395 7,679 6,924 6,479 5,284 6,061 5,175 3,469 3,765 4,047 2,570 2,764 2,833 1,984 2,567 1,037 1,299 1,553 1,448 1,098 1,521 1,644 494 865 115 775 8 13 1999 2000 2001 2002 2003 2004 Personal Food Green home Travel and transport Source: Cooperative Bank Ethical Consumers Report, 2000-2005 5
But there are limits to what consumers can do There is not enough evidence that green consumers on their own are able to change mainstream product markets I will if you will, Sustainable Development Commission (UK), 2006 6
Yet in some categories, green is all but mainstream Unleaded petrol: ~100% Recycled content newspaper: ~75% Free range eggs: 40% Fair trade coffee: 20% (ground coffee) Dolphin friendly tuna: 70% Source: I Will If You Will, SCRT 7
So how do markets move? Consumer world Product Awareness Price Performance Influencing factor Hygiene factors 8
The industry half of the equation Supplier world Public procurement Retailer leadership Legislation/ regulation Choice editing Product Industry agreement Supply side activity Consumer experience Source: Sustainable Development Commission/HCHLV analysis 9
So how do markets move? Supplier world Public procurement Consumer world Retailer leadership Price Legislation/ regulation Industry agreement Choice editing Product Awareness Performance Supply side activity Consumer experience Critical perception factor Hygiene factors Source: Sustainable Development Commission/HCHLV analysis 10
Consumer responses to environmental issues: the Henley segmentation 11
What is segmentation? The process of splitting customers into different groups within which customers with similar characteristics have similar needs. By doing this, each one can be targeted and reached with a distinct marketing mix. Market Segmentation, Malcolm McDonald and Ian Dunbar, 1995 12
Our approach to segmentation Soft - Insightful - Attitudes, Vales Needs, Lifestyles Hard - Actionable - Database, Behaviours Using intelligence to change or reframe the conceptualisation of the market Tripartite Approach Using advanced analytic techniques to unlock the power of combining customer data with research findings Future Proofed - Grounded in consumer trends Using trends intelligence to ensure the segmentation is forward looking and of lasting value to the business 13
Building the environmental and ethical segmentation Attitudinal factors Good consumption Global concern Desire to live ethically Responsibility Transport Behavioural factors Buying from good companies Doing easy things Buying local Complaining Boycotting Support causes Engaged activities 14
UK ethical and environmental segmentation LAGGARDS LATE MAJORITY EARLY MAJORITY EARLY ADOPTERS/ INNOVATORS Onlookers 26% Only moderately concerned about ethical and environmental issues Not particularly desiring to live ethically, or doing the easy activities Conveniently Conscious 35% Aware of, and fairly concerned about, environmental change and ethical issues Think that other people should be peanalised for not recycling, and companies for unethical behaviour Doing easy things like reducing water use, but not interested in ethical consumption or local issues Positive Choosers 31% Highly aware, concerned and feel guilty about their lifestyle Desire to live ethically, regularly buy from good companies and boycott bad companies However do not complain vocally Supporting the local community is also very important to this group Vocal Activists 4% Concerned, aware and active Positive Choosers who also vocalise their discontent Principled Pioneers 4% The most committed Positive Choosers installing alternative energy sources and calculating their carbon footprint INCREASING ETHICAL AND ENVIRONMENTAL CONCERN AND ENGAGEMENT Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 15
Good Consumption Global Concern Important to be able to buy locally produced goods Important to avoid fresh fruit & veg. flown in from another country Important to reduce the packaging on the products you buy I prefer to support my local shops rather than go to the supermarket Climate change is the biggest single problem facing the world today The world is rapidly running out of clean, safe drinking water Increasingly we are facing global food shortages that will affect us all In the last 12 months I have become more environmentally aware I think people who don t recycle should be penalised Companies should be heavily penalised if they act unethically Important to be able to recycle your rubbish Politicians should lead the way on environmental issues The idea of ethical living bores me I feel bad about not living as ethically as l would like to Being able to buy ethically produced goods Because of the impact on the environ t I feel guilty taking short haul flights I would be prepared to pay to use a road Four wheel drive vehicles should be banned in urban areas I feel guilty driving my car when I could use public transport instead Segment attitudes Responsibility Positive Choosers 114 121 106 111 123 116 106 112 108 116 111 117 144 137 144 139 132 165 172 Desire to live ethically Vocal Activists 111 115 151 135 125 121 133 142 103 114 110 132 152 147 152 127 120 173 Leisure and transport Principled Pioneers 103 104 141 152 122 95 148 125 96 97 87 107 143 148 143 132 161 234 197 189 0 50 100 150 200 250 0 50 100 150 200 250 0 50 100 150 200 250 Indices: 100 = UK Average Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 16
Segment attitudes Good Consumption Global Concern Important to be able to buy locally produced goods Important to avoid fresh fruit & veg. flown in from another country Important to reduce the packaging on the products you buy I prefer to support my local shops rather than go to the supermarket Climate change is the biggest single problem facing the world today The world is rapidly running out of clean, safe drinking water Increasingly we are facing global food shortages that will affect us all In the last 12 months I have become more environmentally aware I think people who don t recycle should be penalised Companies should be heavily penalised if they act unethically Important to be able to recycle your rubbish Politicians should lead the way on environmental issues The idea of ethical does NOT living bore me I feel bad about not living as ethically as l would like to Being able to buy ethically produced goods Because of the impact on the environ t I feel guilty taking short haul flights I would be prepared to pay to use a road Four wheel drive vehicles should be banned in urban areas I feel guilty driving my car when I could use public transport instead Responsibility Onlookers 40 39 35 52 54 72 65 75 74 68 60 54 62 73 73 72 80 77 86 Desire to live Leisure and ethically transport Conveniently Conscious 105 97 64 48 107 110 87 96 105 108 107 124 79 83 79 111 92 82 97 Indices: 100 = UK Average 0 50 100 150 200 250 Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 0 50 100 150 200 250 17
Conveniently Conscious and Positive Choosers are more likely to be women 100 % 90 80 70 51 43 52 60 41 45 Female 60 50 40 30 20 49 57 48 40 59 55 Male 10 0 Total Onlookers Conveniently Conscious Positive Choosers Vocal Activists Principled Pioneers Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 18
The extreme segments tend to be younger 100 90 80 70 % 20 14 12 11 15 21 15 25 17 18 15 14 9 15 65+ 55-64 60 50 40 30 20 10 0 16 19 16 16 19 19 25 15 17 18 20 17 11 13 10 15 14 20 18 20 13 29 45-54 35-44 25-34 15-24 Total Onlookers Conveniently Conscious Positive Choosers Vocal Activists Principled Pioneers Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 19
Positive Choosers and Vocal Activists are more likely to be ABC1 100 % 90 80 24 29 24 19 27 34 DE 70 60 50 40 30 21 29 22 28 21 30 20 14 30 26 20 20 C2 C1 20 10 26 21 25 31 33 26 AB 0 Total Onlookers Conveniently Conscious Positive Choosers Vocal Activists Principled Pioneers Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 20
The top 3 segments are far more likely to have actively engaged in ethical/environmental consumerism in the last year % Done in the last year 90 84 Buy Fairtrade products Buy food from Farmers Markets Buy locally sourced food that uses fewer food miles Buy environmentally friendly products 80 70 60 53 76 77 55 75 59 62 62 77 70 64 66 50 43 42 40 37 34 30 23 23 24 26 20 10 11 12 10 0 Total Onlookers Conveniently Conscious Positive Choosers Vocal Activists Principled Pioneers Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 21
The late majority is aware of climate change but less guilty % Agreeing 100 Climate change is the biggest single problem facing the world today Increasingly we are facing global food shortages that will affect us all I feel bad about not living as ethically as l would like to 90 80 77 76 70 60 50 40 30 20 62 44 37 46 32 22 66 66 38 31 54 50 59 65 54 55 10 0 Total Onlookers Conveniently Conscious Positive Choosers Vocal Activists Principled Pioneers Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 22
But they are up there with the top 3 segments in terms of making the easy changes % Done in the last year 60 50 44 44 42 40 37 34 32 48 45 50 51 49 49 40 41 37 37 34 Recycle more rubbish Switch off standby buttons Buy energy efficient light bulbs Increase energy efficiency in your home Reduce your water usage Use your car less for short journeys 46 42 43 44 36 37 33 33 38 39 34 33 30 26 29 28 27 20 18 19 13 10 0 Total Onlookers Conveniently Conscious Positive Choosers Vocal Activists Principled Pioneers Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 23
All but the laggards aware and willing to take fairly drastic actions % Agreeing 90 Climate change is the biggest single problem facing the world today I think people who don t recycle should be penalised Four wheel drive vehicles should be banned in urban areas 80 70 60 62 59 54 73 68 66 66 59 60 77 78 68 76 63 71 50 46 40 34 30 24 20 10 0 Total Onlookers Conveniently Conscious Positive Choosers Vocal Activists Principled Pioneers 24
What does this mean for business? 25
There are business benefits from engaging with green and ethical markets Increased investor returns Improved brand value Innovation Talent retention Reduced costs Improved strategic awareness Differentiation/ leadership Source: Henley Centre HeadlightVision 26
And there are risks in not doing so Thinking of damage to the environment and climate change, who do you think (UK) 70 60 65% is MOST at fault for causing environmental damage/climate change? 50 40 39% is MOST responsible for tackling environmental damage / climate change? 30 20 10 0 12% 11% 22% Individuals Industries / companies 10% Central government 2% Local government 3% 3% 0% Non Govt / Non-Profit organisations 6% 16% International bodies and agreements Source: HenleyWorld, 2006 27
So, by way of a conclusion What s happening, unbeknownst to many corporate leaders, is that the goalposts for their businesses license to operate have moved. There are higher expectations and more serious consequences, and the implications go way beyond protecting your reputation or managing costs In the end, that s the holy grail of sustainability investing to seize the opportunities, not just avoid the risks. David Blood, Generation Investment Management Investing in sustainability http://www.mckinseyquarterly.com/article_abstract.aspx?ar=2005&l2=21&l3=37&srid=396&gp=0 28
Thank you andrew.curry@hchlv.com 29
Appendix: Notes on segmentation
Common problems with segmentations My segmentation is too complicated too many segments My segmentation is too general age, income, gender etc My segmentation is not replicable no data beyond name or address My segmentation is too theoretical no-one understands what I m talking about My segmentation is too difficult to implement difficult to use for identifying and targeting customers 31
HCHLV principles of segmentation 1. Grounded in consumer trends and insight Capable of future proofing 2. Simple and memorable Ensuring that it is usable to all within the business 3. Marries hard data (e.g. value) with interpretative dimensions (e.g. attitudes or needs) Informing both targeting and tailoring of offers 4. Flexible in usage A framework that can be cut in different ways to meet different objectives within the organisation Informs both strategic and tactical decisions 5. Business relevant and Actionable Fit for purpose Can be implemented across systems within the business 6. Owned by the whole organisation, not just marketing 32
Attitudinal factors Good consumption Important: Being able to buy locally produced goods Important: Avoiding fresh fruit and vegetables that have been flown in from another country Important: Reducing the packaging on the products you buy I prefer to support my local shops rather than go to the supermarket Global concern Climate change is the biggest single problem facing the world today The world is rapidly running out of clean, safe drinking water Increasingly we are facing global food shortages that will affect us all In the last 12 months I have become more environmentally aware Desire to live ethically The idea of ethical living bores me (disagree) I feel bad about not living as ethically as l would like to Important: Being able to buy ethically produced goods Responsibility I think people who don t recycle should be penalised Companies should be heavily penalised if they act unethically Important: Being able to recycle your rubbish Politicians should lead the way on environmental issues Transport Because of their impact on the environment I feel guilty taking short haul flights I would be prepared to pay to use a road (motorway bypass city centre ) if it meant it would be less busy Four wheel drive vehicles should be banned in urban areas I feel guilty driving my car when I could use public transport instead Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 33
Behavioural factors Buying from good companies Regularly buy from companies that: Have a responsible waste management and recycling program Treat their workers well Pay producers a fair price Are transparent about their business practices Actively improve the environment Avoid using pesticides in their production processes Doing easy things Which of the following have you done in the last 12 months for ethical or green reasons: Switch off standby buttons Reduce your water usage Increase energy efficiency in your home Recycle more rubbish Use your car less for short journeys Buy energy efficient light bulbs Buying local Regularly buy from companies that: Manufacture or grow their products locally Actively support my local community Which of the following have you done in the last 12 months for ethical or green reasons: Buy food from Farmers Markets Buy locally sourced food that uses fewer food miles Complaining Which of the following have you done in the last 12 months: Complained about companies you feel are damaging the environment Complained about companies you feel are supplying unhealthy products Complained about companies you feel are acting unethically Boycotting Which of the following have you done in the last 12 months: Stopped buying from suppliers you feel are acting unethically Stopped buying from companies you feel are damaging the environment Stopped buying from companies you feel are supplying unhealthy products Support causes Regularly buy from companies that: Actively support developing countries Pay a proportion of their profit to charity Which of the following have you done in the last 12 months for ethical or green reasons: Buy a product because of its charity link Donate money to environmental charities Buy environmentally friendly products e.g environmentally friendly washing up liquid Engaged activities Which of the following have you done in the last 12 months for ethical or green reasons: Install an alternative energy source e.g. solar panels/ wind turbines Calculate your carbon foot print Source: HenleyCentre HeadlightVision Planning for Consumer Change 2007 34
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