Wednesday, April 30, 2008

Green Opportunities in Volatile Times

Although the current economic climate may appear bleak, there is a silver lining to these dark economic clouds. All sectors are not being effected equally. While some are experiencing difficulties others are enjoying significant growth. A recent AdAge article by Abbey Klaassen reports that despite the gloom permeating other sectors, Google, Yahoo and Microsoft enjoyed earnings of approximately 30% this last quarter.

In difficult economic times, where are the opportunities to be found? Conventional wisdom suggests that higher income earners are better insulated against economic downturns. Lower and midlevel income earners tend to be more adversely impacted by economic slowdowns. A recent Ad Age article by Beth Snyder Bulik cites research that suggests that in the last few years there has been double digit growth in households with incomes exceeding $100,000 per year. But research also suggests that even affluent consumers are reducing spending, as a consequence, some of this group may be looking for bargains which translate to strategies as simple as price promotions. This growing affluent class is more diverse and younger than ever before. In the same article, Bulik points out that there are “some at the rarefied levels of wealth who are still spending at the same or increased levels. It may take more targeting or research, but there is evidence that certain segments are still indulging.” Targeted marketing efforts can be a bulwerk against weakening consumer confidence.

Identifying opportunities amongst the affluent, involves understanding their personalities and traits. Such an approach enables marketers to identify groups who continue to spend when others may not. AdAge has integrated the findings of demographic research and psychographic studies to define the personalities and traits of the affluent:

This group is made up of baby boomers and has the highest average income of the five personalities. This group is changing from “self-indulgent spenders to more socially responsible consumers.” This group is of particular interest to all who are seeking to market Green products and services.

Their incomes are below the average, but their spending on luxury goods is above average for the five personalities. This group is highly materialistic and they aspire for even greater upward mobility, they are determined consumers of luxury brands.

This group tends to live in the downtown area of major cities, they want the “best of the best”. They are the youngest of the five personalities (the majority are between 24 – 34 years old). This group will not be deterred by economic slowdowns. Their spending on luxury goods was considerably higher than average.

Although the sub-prime mortgage crisis has eroded the value of homes in America, the wealthiest 10% of Americans live in homes that hold low or no mortgages. “The spring 2008 study found that those who did have the lowest level of equity in their homes were least likely to make major purchases this year and also more likely to decrease spending on a variety of smaller-ticket” items.

Research from the Society for New Communications Research indicates that when buying new products, households earning more than $100,000 per year use a wider range of more sophisticated internet tools and search options than those earning less than $30,000 per year. The later tended to simply use and believe customer information the corporate website along with popular social sites like YouTube, MySpace and Facebook. Online customer care is very important for this group as it informs their choice of companies and brands.

However, it is important to note that market opportunities for Green products and services are by no means restricted to the affluent. Some reasonably contend that the proliferation of Green will present numerous opportunities for a large Green collar workforce, and in the process, provide a welcome boost to the American economy. Van Jones, founder of Green for All, an Oakland, California based organization that promotes green job training, was quoted in Newsweek saying that most of the new jobs will be in “weatherizing homes and offices, installing solar panels and retrofitting factories with ener­gy-efficient technologies…This is not an eco-elite, eco-chic movement for people who can afford to buy hybrid cars and shop at Whole Foods. The green economy to come is going to be a broad-shouldered, mass movement of American labor." We are moving beyond simple paradigms which ask us to make facile choices. As quoted in the same article, Dave Foster, executive director of the Blue Green Alliance makes the point clearly "It's not a question of jobs or the environment, it’s both or neither."

In the U.S., the two democratic candidates have stated they can add 5 million Green Jobs to the economy. This translates to opportunities in Green job training, and industries that are associated with or contribute to efficiency and alternative energy research and implementation.

In a Newsweek article entitled New Green Jobs, advocates indicate that they believe “green jobs can revitalize whole communities.” Jason Walsh of Green for All says, "With the right investments, the re­sulting green economy can generate a lot of good jobs at a far greater scale than a pollu­tion-based economy."

Successful online marketing of Green products, can be broadly separated into six groups. Specialists who are devoted to Green products or generalists who provide a submenu of Green products. Others serve as Green directories, shopping guides and product search engines.

As we will discuss in a forthcoming article, there are many Green investment opportunities. Stellar performers like FSLR earned a return of over 700% last year. But a note of caution is warranted, not all that appears Green is golden. Investors are encouraged to research claims beyond a company prospectus. As reported by LOHAS a new study released by the Investor Environmental Health Network (IEHN) indicates that “many company's are doing a poor job informing their shareholders about the market risks associated with their products.” Other investments may be profitable but some are at odds with the ethics of Green. As I reviewed in a previous article, biofuels have spiked the value of agricultural commodities and earned significant returns for commodity speculators, but they have also helped to drive up the price of subsistence food and thereby increase world hunger.

There are other benefits to difficult economic times. In boom times it is easy to ride the crest of the wave, periods of economic slowdown, force companies to focus on what they do best. The Green businesses that thrive will likely be those for whom Green is more than just an effective marketing vehicle.

Green opportunities are an eclectic grouping encompassing both methods and materials, spanning the gamut from energy generation to non-toxic cleaning products. They incorporate goals like sustainability, cradle to cradle design, source reduction, viability and green innovation. Alternative energy and Co2 reduction may be the most important widely known application of Green, but there are many other opportunities including Green building, environmentally preferred purchasing, Green chemistry and Green nanotechnology. Green opportunities add value and successful Green opportunities focus on fundamentals like meeting demand, product quality, and effective marketing.

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