Money Is Not Enough To Make Consumers Go Green

By Martin Gronemann

Money matters, of course, but to make consumers go green there are other, more emotional levers that ought to be explored with the same interest and attention that have been paid to financial incentives. Among the myriad energy-saving devices, products, and services, two types are continuously primed as cost-effective ways of saving energy: insulation and transportation. Yet, in neither of the cases is cost efficiency a sufficiently strong motivator for consumers.

Potential savings don’t make Danes insulate their homes

On the home page of the North American Insulation Manufacturers (whose motto is “Insulate today. Save tomorrow”), a description reads:

“A home insulated with fiberglass, rock wool, and slag wool insulation is one of the most cost-effective ways of saving energy and reducing heating and cooling bills … It is one of the lowest-cost options for improving the energy efficiency of your home.”

This type of savings-conscious endorsement is true for policymakers as well. In a call to action, President Obama said:

“Insulation is sexy stuff. Here’s what’s sexy about it: saving money. Think about it this way. If you haven’t upgraded your home yet, it’s not just heat or cool air that’s escaping; it’s energy or money that you are wasting.”

Although economists and climate-change experts agree that insulation is one of the best ways to save money and energy, there is large unleashed potential in this field: In 2009, we conducted an analysis of Danish households that revealed that the majority of homeowners could benefit financially from further insulating their homes.

When gas prices rise, Americans buy gas-guzzling vehicles

In 2011, the average gas prices in the U.S. rose more than 21 percent. This means that gas expenses took up a larger portion of the average family budget than it had in thirty years. Guess what happened to the sales of SUVs, America’s all-time-favorite gas-guzzling vehicles: they increased. Sales of small SUVs increased by 21 percent, sales of medium SUVs by 23 percent, and sales of large SUVs by 7 percent. Even sales of pickup trucks rose by 11 percent [1].  Even though SUV sales in 2011 did not reach the heights of the early 2000s, the case serves as a reminder that financial incentives alone will not make consumers opt for greener products.

Financial incentives are an added benefit, not a main driver

So if saving money can’t make people go green, what can? To answer this, we must figure out the actual value of each sustainable product. People don’t buy a house because they want to save money; they buy a house to build a home where they can be themselves, relax, and feel safe. While price matters, it isn’t the main factor. The same can be said of buying a car. Public transportation may mean saving money, but fulfilling the aspiration of owning a car may outweigh price logic for the consumer.

For sustainable solutions to work, businesses and policymakers need to understand the complex relationships consumers have with the products they buy. To capture customers, businesses should focus on creating a value proposition that taps into the desires and aspirations of consumers instead of focusing solely on the functional benefits of a product. To convince consumers to buy and use environmentally friendly alternatives, new products must inspire equally strong desires and aspirations as those they are intended to replace.

References:
1. 2012 ReD Associates analysis of U.S. SUV and pickup-truck sales data.

[Banner image by Francesco Gallarotti via Unsplash]