Cost Benefit Analysis in Environmental Friendly Marketing

Contents

Abstract

Marketing and Environmental-Friendly Marketing

Cost Benefit Theory

Application of a Benefit Cost Analysis

References

Internet Resources

Abstract

In this article we first define and describe the concept and main points of environmental friendly marketing. We present the six important steps that must be followed to have a successful marketing strategy. We make a short introduction into cost benefit analysis, present the basic points of the cost benefit analysis theory and define the various types of benefits and costs.

As a conclusion, an example in the sector of “passive” houses (Niedrigenergiehäusern) is presented, in order to evaluate the options that a consumer has to choose from, when facing the residence dilemma.

Marketing and Environmental-Friendly Marketing

The objective goal of every company, which originates from its profiting nature, is to maximize its profits by using strategies of conventional marketing. In this process there are always some negative side-effects that are related with the society and the environment. The environmental problems that modern way of living has caused have led to the concept of a new marketing strategy. A strategy that considers the consequences that are caused to the nature and thus also further to the society. Environmental-friendly Marketing takes the whole product life cycle into consideration and aims to achieve the minimum ecological impacts. Its goal is to satisfy the needs of the customer and at the same time to minimize the needs in energy and in raw-materials. (Belz, 2002)^[1]

Environmental-friendly marketing, contrarily to conventional marketing, is not so simple to be applied, due to the constraints and the guidelines that must be followed. According to Belz (2002)^[2], there are six key steps that must be followed in order to fulfill the concept of environmental-friendly marketing.

The fist step is the analysis of the social and economical problems that arise during the production phase of a product. During this phase, the negative effects that are threatening the environment must be detected. A method developed, known as Life Cycle Analysis (LCA) can assist us. LCA is a method, which helps us to identify all the negative results that are caused to the environment during the whole production phase of a product, from its creation until its disposal.

Second step is the analysis of the customer demands. To fulfill the customer demands is a determining factor for the success of a service or product in the market. To better understand the consumers that are potential customers for environmental-friendly marketing, we can separate them according to Belz (2001)^[3] into three categories:

- The first category is the ecological active consumers, that are well informed about the environmental problems we face, and are ready to sacrifice more things – that means to bear a higher cost – in order to use products or services that are environmental-friendly.
- The second category is the consumers that can be made ecological active, but they are not willing to sacrifice a lot of their “property” – either that is time, or money or convenience or else – in order to use such products.
- The third category is the consumers that are passive, and they are not willing to sacrifice anything to use environmental-friendly products.

Environmental-friendly marketing can be successfully applied having as target group the first two categories of consumers. We must keep in mind that customer demands are dynamic, that means they change through time and get affected by technological progress, innovations and more. These two first steps combined together, give us an overview, where and if environmental-friendly marketing can be applied.

Third step is the normative aspect of environmental-friendly marketing. With the term “normative” we describe the ethical dimensions of environmental-friendly marketing. Mainstream marketing sees individual persons just as consumers, whose behavior and decisions is determined mainly by advertisements (Pohl, 2001)^[4]. On the other side, environmental-friendly marketing observes the consumer as part of the society, with responsibilities and social awareness. Environmental-friendly marketing has as purpose to provide all the necessary and proper information about all the aspects of a product or a service. Its aim is to set the consumer in a position able to make the best choice for him. According to Rafee and Wiederman (1985 , 1989)^[5], an important factor for the success of environmental-friendly marketing in a company, is the recognition of the ecological and environmental responsibility it has, and the adoption of it in the company’s profile.

Fourth step is the strategic part of environmental-friendly marketing. It refers to problems such as “which consumers will be interested in a certain service” or “when is the best time to launch a new campaign or a new product into the marketplace”. According to Meffert and Kirchgeorg (1998)^[6] there are three ways to point out the benefits of environmental-friendly products:

- The fist way is to emphasize on the environmental and social benefits of a product, convincing the consumer to choose it for these. Besides these, the quality and the price of the product are to be considered. Typical examples of this category are the “fair trade” products that aim at highly environmental-friendly-active consumers.
- The second way is to treat the attributes of a product like quality and price in an equal way as the social benefits of the product. These products aim to consumers that have social and environmental awareness but they also don’t want to make compromises into the quality of the products or to pay much more. Typical examples of this category are the “BIO”-labeled products that can be found in super markets and also in discount markets.
- The third way is to point out the attributes of quality and / or price, and also add as an additional benefit the social and / or environmental aspects of the product. Typical examples of this category are brand name cereals that have the exact same attributes as the other products in their category, but offer additionally that “the wheat used in producing these cereals is made from organic farming facilities” or yoghurt that is “made with not genetically mutilated milk “.

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^[1] Belz, F.-M. : Nachhaltigkeits-Marketing. Ein entscheidungsorientierter Ansatz.

^[2] Belz, F.-M. : Nachhaltigkeits-Marketing. Ein entscheidungsorientierter Ansatz.

^[3] Belz, F.-M. : Nachhaltiges Marketing schafft nachhaltige Kundenvorteile.

^[4] Pohl, T.A. : Marketing in der Sozialen Marktwirtshcaft. Eine Streitschrift fűr die Erneuerung der Marketing-Ethos.

^[5] Raffée, H und K. P. Wildermann : Die Selbstverstörung unserer Welt durch unternehmerische Marktpolitik.

^[6] Meffert, H. Und M. Kirchgeorg : Marktorientiertes Umweltmanagement.