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Price: The Ultimate Sustainability Metric
September 5th, 2012
Price is one of mankind’s most effective communications tools; it will also prove to be the ultimate sustainability metric. Here’s why: 85% of consumers say they will buy a more sustainable good or service versus a less sustainable one if their prices are equal. As an entrepreneur and business owner this market research finding stunned me. How often in a business career do you get an opportunity to win 85% market share just by winning price parity?
This finding also lit my fire as a professional economist to quantify the global market-size potential for price-competitive sustainable goods and services. The research result was a stunning estimate that a $10 trillion global annual economy for more sustainable goods and services will emerge as early as 2017. My most recent calculations are that 2011 was a milestone year where $1 trillion of more sustainable goods and services were sold around the world.
Price Parity Can Spark Double-Digit Sales Growth
The speed and scale of revenue growth when more sustainable products gain price competitiveness can be stunning. Here are two 2012 examples drawn from the energy industry: When the unsubsidized cost of electricity generated from rooftop solar systems in Hawaii dropped below the utility’s price for electricity, the number of applications for building permits to install rooftop solar systems leapt by over 70%. And when the price of natural gas in the US dropped below $3 per MMBtu, its use in producing electricity almost doubled. The result was the dethroning of King Coal, and its emissions that are twice that of natural gas-fired electricity generation, from its historical perch as the fuel of choice for electricity generation.
Small Business Example: JJH Paint and Auto Body
This same type of sales success is available to smaller businesses. A favorite example is JJH Paint and Auto Body, which I coached on being price competitive and green. JJH Paint and Auto Body is a wonderful family-owned business located in Salt Lake City, Utah. They serve their customers with quality work at competitive prices. Their business goal was to win clients in the government and corporate market segments. I worked with the founding owner’s son to install water-based painting technologies that lowered their costs and environmental footprint. Doing so also gained them competitive positioning as one of only five paint shops out of a hundred in Salt Lake City using this technology. We also worked on installing higher efficiency lighting and water-saving devices that lowered their costs and earned the business a highly valuable certification as a Salt Lake City E2 green business. With these milestones we redesigned the marketing pitch to prospective corporate and government clients representing JJH Paint and Auto Body as a price-competitive green supply chain solution. Within 90 days of their transformation they won Avis and the Salt Lake City Police Department as new customers. Today they are expanding their building, have hired new work associates and are looking at opening a second shop in another town.
Walmart’s Strategy: Make All Products Sustainable And Competitively Priced
Walmart is pioneering the ultimate sustainable pricing strategy. Their goal is not to have a section in their store offering green products; it is to make all of their products more sustainable while also maintaining their every-day low pricing market positioning. A key element of their implementation plan is the development of sustainability scorecards to be used by all their buyers in evaluating Walmart’s approximately 100,000 suppliers. Their 2012 progress was the launch of the first 100 buyer scorecards. Success by Walmart will be the ultimate sustainability game-changer moving sustainability to price competitiveness.
From Walmart to Main Street, the emerging path to winning revenue growth is to offer smarter, healthier, greener, price-competitive products and services. That is the ultimate sustainability metric for business success. It is also the ultimate metric for restoring American jobs, the economy and our environment.