Customer experience (CX) is a key differentiator and primary driver for business success. Huge investment goes into increasing loyalty and customer lifetime value. But increasingly, a company’s values and actions, in particular sustainability, are playing a part in consumer demand.
The trend is clear – a study shows that between 2015 and 2019, green marketed products contributed an outsize share of consumer goods growth in the US.
Conscientious consumers want to know that their services and product choices have a positive sustainable impact. Therefore, forward-thinking businesses are using sustainability as a powerful lever to increase customer loyalty and consumer spending. And when businesses get this right, performance benefits, and so does the planet. It’s a win-win.
How does becoming more sustainable fit into consumer demand?
To appreciate where sustainability fits into consumer demand, we need to understand that several factors such as price, quality, convenience, and speed come into play. Whilst sustainability is increasingly important to customers, 55% of consumers say they still base their purchasing decisions on convenience and cost over sustainability and environmental impact, according to a PFS report.
This is sometimes referred to as the ‘green gap’ – the difference between consumer intentions and what they actually buy. However, many organisations are finding success in their attempts to reduce this green gap.
An important part of this success story comes from the role that sustainability plays in generating a stronger emotional response and deeper engagement from new and current customers. A great example of this is the Adidas X Parley shoes, which are produced from the equivalent 11 plastic bottles collected from the Indian Ocean and Caribbean Sea. The shoes were first produced in 2015 and by 2020, Adidas had sold in excess of 30 million shoes at around £170 per pair. Conscious customers saw that Adidas were able to produce high quality shoes that were also having a positive sustainable impact through their more sustainable product design, and were willing to pay the difference in price for a product that better aligned with their values.
How to develop successful sustainable products and services
For organisations to develop successful sustainable products and services, they will need to carefully manage the impact to the customer experience. The key here is to minimise any negative impact on price, quality, and convenience, whilst using the sustainability lever to maximise the benefits of driving value alignment with customers to create brand advocates.
In parallel, organisations need to manage the internal trade-off between generating customer demand and creating a positive impact on the planet, with business feasibility and viability in terms of cost, operations, and technology.
This new way of thinking and driving innovation is nicely summarised in this circular economy model introduced by the Board of Innovation ‘How to hit the innovation sweet spot’.
Some organisations are leading in this space and reaping the benefits. Tesla for example, has nailed a sustainable value proposition that is right in the centre of the innovation sweet spot and is bearing fruit with a soaring market valuation (more than Toyota, Ford, and Volkswagen combined).
A few characteristics that bring to life Tesla’s successful value proposition include:
- The positive climate impact compared to traditional car maker competitors.
- Cars are developed as software which means Tesla is constantly able to release new features and value to its customers. Tesla has a streamlined online sales process that also enables customers to customise products.
- Battery technology significantly reduces the overall cost of ownership.
- After some initial challenges, Tesla cars now have a reputation for outstanding performance, unique design, and innovative self-drive features.
- A viable business model through automation and investment in a clean energy ecosystem thanks to relationships with material providers, acquisitions, research, integrated supply chains.
Look at end-to-end value streams, and reflect on how to adapt your business model
To bring sustainability into your CX, you need to take a step back, look at end-to-end value streams, and reflect on and adapt your business model.
- Start by taking a persona-led approach to help you understand the current and future needs of your customers (and employees!), and allow you to target customer segments successfully
- Look at your organisation’s end-to-end value stream (the series of steps an organisation takes in order to provide value to customers) and the business architecture that underpin the CX. Identify quick-win opportunities to create a positive sustainable impact while understanding the limitations of your current business model and strategy.
- Define the business capabilities that need to be put in place to drive the change (e.g. R&D, or circular experience design) and how you will drive this mindset shift over time.
- Always keep an eye on the customer trade-off of sustainability with price and convenience, and the internal trade-off of viability and feasibility with profits.
- Develop solutions that go beyond physical & digital products and services, and consider the behavioural aspect changes that are required from customers to bring them on the journey.
- Empower and educate your employees to spot continuous sustainability improvements; you need those involved in your value-stream to feel able to identify additional quick wins and strategic changes
Every organisation will have to go on this journey
Consumer expectations, employee sentiment, and wider government regulations mean that every organisation needs to consider how they bring sustainability into their organisations and their customer experiences. Considering this, here are a few final tips:
- The journey takes time, and you won’t necessarily get it right straight away. At this point, focus on doing something rather than nothing, and taking that first step.
- Consider how you can be transparent, honest, and open with your customers. It’s ok to admit you’ve got a long way to go. Trickery and short-termism will not win customers.
- Push the agenda: rethink, reimagine, don’t replace. Replacing one material with one that is even more toxic is not a solution.
- Really walk the sustainability talk. Don’t just say you’re going to do something and then ignore your promise. Don’t create a sustainable product but then not operate in a sustainable way internally. Customers want authenticity.
- Understand the benefits; not only within a growing customer market but also the employee value proposition. Individuals want to work for companies that prioritise sustainability – giving you access to the best talent.
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