WELCOME TO the first-ever Pricing for the Planet Week - DAY 4
From Nov 4th to Nov 8th
Sustainability, where to start and what to do?
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DAY 4 - AGENDA
​Get ready for Day 4 of the PricingForThePlanet Week – where we crack the code on the 'Green Premium' and uncover how sustainability isn’t just a buzzword, but a powerful value driver. Today, we’ll dive into strategies that turn eco-initiatives into financial wins and explore how going beyond the green standard can unlock untapped potential. Brace yourself for a day packed with transformative insights, expert discussions, and a bonus session that will challenge you to think bigger and greener!
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If you encounter any issues, feel free to reach out to us at info@pricingfortheplanet.com.
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Please use your free access to our Pricing For The Planet online community to ask questions and to network (see bottom section of this page)
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Enjoy!
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​Part 1
Green Premium: Capitalizing on the Value of Sustainability
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Speakers:​
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Key Takeaways:​
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Green Premium Challenges:
Despite initial expectations, only 1-7% of consumers are willing to pay more for sustainable products. Companies are pivoting towards value-based pricing, where sustainability contributes to tangible benefits like reduced total cost of ownership.
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Nicolas from BCG highlighted a shift in green premiums from being a simple “premium price tag” to a value-based approach. This means companies are increasingly focusing on total cost of ownership (TCO) for customers. For example, products with sustainable attributes might help customers save on energy costs or extend product life, allowing companies to justify a higher price by proving long-term savings. BCG’s insight here is that green premiums are most effective when linked to measurable value for the customer.
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Gabriel from Schneider Electric shared a compelling approach: their choice to price their circular business line at the same level as new products. This strategic decision underscores that remanufactured or circular products, despite initial assumptions of being cheaper due to their nature, logistics, manufacturing costs, hold equivalent value in terms of warranty and quality. This move not only aligns with Schneider’s long-term vision of integrating secondary inputs into their supply chain but also supports profitability while signaling commitment to sustainability without compromising perceived product value.
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Aurelie from Pricing Hub shared that when traditional data analysis fails to capture nuances around green premiums, they rely on controlled pricing experiments. This experimentation helps retailers determine the willingness to pay for green products and can include testing various price points with adjusted sustainability messaging. This method goes beyond price sensitivity to help companies understand what sustainability attributes resonate with their customers, refining how green premiums are communicated.
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Sustainability as a Long-Term Strategy:
Companies need to see sustainability not as a short-term cost but as a strategic investment that supports profitability and competitive differentiation.
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B2B Sector Outpacing B2C:
The B2B market is leveraging sustainability more effectively for market differentiation and regulatory compliance.
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Data and AI are Essential:
Utilizing accurate data collection and AI-driven pricing tools enables companies to test strategies and optimize their green premium while proving their value to customers.
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Holistic ROI Metrics:
Including non-financial KPIs such as brand reputation, talent attraction, and risk management can create a more comprehensive view of the return on sustainable investments.
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Practical Advice for Companies Starting Sustainability Initiatives
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Sustainability Goes Beyond Marketing: It needs to be deeply embedded into business models and financial strategies for long-term impact.
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Circular Economy as a Differentiator: Incorporating recycled and remanufactured materials offers potential for sustainable growth without pricing compromises.
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Strategic Use of Data: Transparent and accurate data is vital for proving sustainability claims and building trust with customers and stakeholders.
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Communicate the Value Clearly: Ensure that sustainability attributes are backed by data-driven messaging to highlight their tangible benefits to customers and stakeholders.
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Watch the full video:​​​
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REPLAY FROM THE PRICING FOR THE PLANET ANNUAL SUMMIT 2023
Green Premium with John Pineda, Managing Director and Partner, BCG ​
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John Pineda, Managing Director and Partner at BCG, shared insights from his journey in pricing and sustainability. His presentation revolved around understanding the challenges and opportunities in integrating sustainability into pricing strategies. He discussed the notion of the "green premium" and examined the complexities surrounding its implementation in different industries, particularly B2B sectors. He provided perspectives drawn from consumer research, conversations with Chief Sustainability Officers (CSOs), and insights from sessions at the Aspen Institute and with private equity investors.
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Key Takeaways:
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Evolving Perception of the Green Premium:
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Initial narratives around sustainability were centered on its high costs, with Bill Gates’ "green premium" concept emphasizing the additional expense associated with green initiatives.
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John highlighted the importance of viewing pricing not just as price points but as a way to create and share value. This shift helps uncover the potential for pricing strategies that account for sustainability without solely focusing on increased costs.
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Challenges in Capturing a Green Premium:
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Despite growing demand for green materials (e.g., green steel, green logistics), the ability to pass on green premiums is limited in many markets. Some industries may even need to absorb these costs, making monetization challenging.
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Risk and compliance management can act as a "premium," especially when companies face business loss risks if they fail to meet sustainability standards.
Approaches to Monetizing Sustainability:
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Value Game: Positioning highly differentiated, sustainable products as premium offerings (e.g., green steel). This approach may start with skim pricing but should evolve into long-term strategies that balance value-sharing.
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Choice Game: Developing a range of sustainable product offerings that align with different levels of customer willingness to pay. This approach leverages segmentation to appeal to varied customer needs and price sensitivities.
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Investor Perspective on Sustainability:
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John pointed out that investors, including private equity representatives, are increasingly scrutinizing sustainability as part of risk management and growth strategies. The message is that a company’s ability to manage sustainability risks is indicative of its broader risk management capabilities.
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The "growth engine" argument suggests that sustainable products, while not dominating market share, represent a significant portion of market growth, making them attractive investments.
Complex Pricing Strategies for Sustainability:
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Many high-carbon sectors have traditionally operated on cost-plus or elasticity-based pricing. John encouraged a rethinking of these strategies to better align with the investments made in sustainable innovations.
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Companies should explore strategic pricing that supports sustainability goals while positioning themselves as market leaders in green initiatives.
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AHA MOMENTS
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Regulatory Pressures as Market Drivers: Regulatory requirements and cascading sustainability mandates from major clients create strong incentives for companies to invest in sustainability or risk losing business.
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Differentiated Shades of Green: The idea of offering different "shades" of sustainable products (e.g., varying degrees of carbon reduction in green steel) allows companies to cater to segmented market demands.
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Balancing Immediate Gains and Long-term Transformation: While some strategies focus on capturing short-term premiums, a long-term transformation mindset is necessary for true sustainability integration.
Conclusion: John emphasized that capturing the value of sustainability in pricing requires a nuanced understanding of customer segments, strategic offer differentiation, and leveraging innovation. Companies must consider if they should price for adoption to gain market share or focus on maximizing short-term gains. Pricing leaders need to move beyond just price point discussions and influence broader strategic decisions to embed sustainability into the core of their organizations.
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Watch the full video:​​​
WEBINAR
Going Above and Beyond the Green Premium with Saloni Firasta-Vastani, Author of Purpose Driven Pricing and Professor at Emory University (LinkedIn)
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Key Takeaways:
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Purpose and Profit Balance: Companies need to align corporate social responsibility (CSR) with core business operations to create a model that supports both profit and purpose.
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Stages of Maturity for Sustainability:
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Stage 1: Awareness of environmental impact.
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Stage 2: Education and acquiring knowledge to implement sustainability without compromising profitability.
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Stage 3: Aligning internal objectives with sustainability goals and integrating them at the functional level.
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Stage 4: Engaging consumers and partners to drive shared value and adoption of sustainable practices.
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Role of Pricing as a Strategic Lever:
Pricing is not just a tactic but a strategic tool to enable sustainable growth and market positioning.
Companies can initially use green premiums to recoup R&D investments, followed by achieving economies of scale to expand market share.
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Consumer Segmentation for Sustainability:
Consumers can be segmented based on their willingness to pay for sustainable products, from those willing to pay a premium to those resistant to change.
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Examples of Purpose-Driven Pricing:
Charging a small fee for public goods (e.g., parks, mosquito nets) can enhance resource utilization, maintain quality, and create long-term positive impacts.
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Practical Advice for Companies Starting Sustainability Initiatives / So What?!
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Integrate Education and Training: Ensure sustainability and pricing strategies are part of continuous education at all organizational levels to empower teams and align them with sustainability goals.
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Leverage Data for Pricing: Use consumer segmentation data to understand who is willing to pay a green premium and tailor pricing strategies to maximize adoption without sacrificing profit.
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Adopt a Purpose-Driven Approach: Align your pricing and sustainability initiatives with the company's core mission and values, and communicate this to consumers for better engagement.
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Evaluate the Full ROI of Sustainability: Move beyond traditional ROI metrics and consider broader impacts such as customer retention, access to new markets, and brand reputation.
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Communicate Value Clearly: Educate consumers on the benefits of sustainable products, focusing on long-term savings and positive environmental impact to build trust and drive adoption.
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Watch the full video:​​​
Don't let the digital format hold you back from networking!
By joining this event, you have a free access to our Pricing For The Planet online community, where you can:
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Ask live questions and respond to open discussions on the platform
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Connect with others and start meaningful conversations
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Access exclusive content throughout the week
So, no more excuses—head to our online platform, start networking, and ask your questions!
Continue the journey with us!
We’re excited to launch our community-driven learning platform, The PricingForThePlanet Leanring Platform, designed to fill the critical skills gap at the intersection of business and sustainability.
Extensive research and conversations with leading headhunters have shown that the ability to monetize sustainability will be one of the most highly valued skills in the near future.
Join us as we empower professionals to turn sustainable practices into profitable strategies, driving both environmental impact and business growth.
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