Winning at Green Nielsen uk whitepaper

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Nielsen White Paper, February 2009

WINNING AT GREEN Exploring the Potential for Green Innovation using the Nielsen BASES System and NMI’s LOHAS Segmentation Model

INTRODUCTION When it comes to “going green”, the size of the opportunity is clear. Research from the Natural Marketing Institute (NMI) estimates the size of the green marketplace to reach $420 billion by 2010. In fact, hundreds of certification programs now offer “eco-labels” for green products. As the market becomes more crowded and the offerings become more complex, consumers also become more sophisticated. Yet there’s evidence 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. How can marketers satisfy the consumer who aspires to buy green with innovations that also rationalize with a stable of “traditional” branded products? Successfully developing and positioning a new product as “green” can present different challenges from traditional launches. In addition to having a compelling product, 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.

As the market becomes more crowded and the offerings become more complex, consumers also become more sophisticated.

This paper summarizes the key learning from combining NMI’s Lifestyles of Health and Sustainability (LOHAS) segmentation with Nielsen BASES expertise in new products. Some highlights:

The stage is set for many CPG categories to go green. Many food, personal care, pet products, and other categories have a strong opportunity for “green” innovation. Consumers express interest in new green options in many of these categories, and they are not perceived to be crowded with alternatives.

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, we 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 percent of consumers fall into the LOHAS “environmental steward” segment, more than 60 percent have at least some interest in green, and are willing to try products that are relevant to their needs.

Winning at Green

Copyright © 2009 The Nielsen Company & NMI. All Rights Reserved.


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