Thursday, June 14, 2012

Even with Premium Pricing Demand for Sustainable Products Outpaces Supply

A new survey of executives from Accenture reveals that despite concerns that consumers are reluctant to pay more for sustainable products and services, more than half are charging a price premium for these products. Although less than half (47 percent) of executives polled expressed concerns that consumers will not pay more for sustainable products and services, 60 percent admitted to charging premiums. Almost three quarters (68 percent) claimed they can charge between 5 and 20 percent premiums. 17 percent claim they can charge premiums of between twenty and fifty percent. Yet, despite charging higher prices, over one third (37 percent) of surveyed businesses say they cannot keep up with customer demand for sustainable products and services.

When asked what actions they have taken to respond to rising customer demand, 44 percent of respondents claim to have promoted existing sustainability credentials. 43 percent have launched new products and services and 41 percent have checked their supply chain credentials.

"Companies are trying to meet consumer demand for sustainable products and services, but many cannot keep up," said Berthon. "Businesses will have to look beyond adapted or customized products, short runs and premium pricing. Now is the time to get closer to consumers, embed sustainability early in the innovation and design process and put in place the operational capabilities to meet market demand at scale and profitably."

There is ample demand for businesses to charge a premium for sustainable products and services. Additionally companies that embrace sustainability may be protecting themselves from price disadvantages that could cut into their margins.

In his recently released book of case studies titled "The New Sustainability Advantage," Bob Willard says, "We conservatively assume that companies not practicing good CSR could find themselves with a price-disadvantage that jeopardizes 10% of their revenue" (P. 144).

© 2012, Richard Matthews. All rights reserved.

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