2009 National Technology Readiness Survey
Will Consumers Pay More for Green?

Summary

• When given the choice between two equally priced big-ticket consumer electronics products that are identical except that one is "manufactured in a way that is good for the environment," 92 percent of consumers will choose the one with the green advantage.
• It is notable that the other 8 percent would prefer the one that is not manufactured in an environmentally friendly manner.
• The average shopper will pay 11 percent extra for a big ticket electronic product that is manufactured in a green friendly manner.  This is $55 on top of a $500 price tag.
• Consumers who are leading edge in the adoption of green technology will pay more than others for green technology.  For example, Green Tech Leaders, the early adopters and influencers of green tech, will pay $66 extra.
• There is a market advantage to developing, certifying and promoting environmentally friendly consumer technology.  It is possible to charge more for such products, especially if the more receptive green tech adopters are targeted.

Introduction

Since 1999, the National Technology Readiness Survey (NTRS) has tracked beliefs about technology and key behaviors related to the internet and technology. It includes measures of consumer technology readiness and identifies emerging trends in e-commerce and society. The study is administered by Rockbridge Associates, Inc., a technology research firm, and is sponsored by the Center for Excellence in Service at the University of Maryland's Robert H. Smith School of Business.

The NTRS is based on a random sample of U.S. adults (18 years or older) and is administered by telephone. This report on "Will consumers pay more for green?" is based on survey results collected from January to June 2009. The results reported below are based on 303 consumers who indicated that they would be likely to "purchase an electronics product, such as a television or computer, that will cost at least $500" in the next two years¹. The margin of error on these results is +/- 5 percentage points.

Findings

Many companies are interested in the advantages of offering environmentally friendly products. This can mean a lot of things, such as being energy efficient, recyclable, or manufactured in a way that is friendly to the environment. This study examined whether offering such a product provides a marketplace advantage that allows companies to charge more for their product. If consumers will pay more, manufacturers may earn a higher profit from such products and/or be able to pass on potentially higher costs. For example, a manufacturer might use recycled materials or purchase power from a green provider. Companies may also invest in obtaining green certification or retooling manufacturing for retailers committed to green merchandising.

According to the most recent NTRS, 53 percent of consumers age 18 or older plan to purchase an electronics product such as a television or computer costing at least $500 in the next two years. These consumers were presented with a hypothetical choice between a green and non-green big-ticket electronics products, as follows:

"Suppose you were considering the purchase of one of two electronics products and each cost $500. Suppose they were identical in functionality, reliability, appearance, and energy consumption, except one was certified as being manufactured in a way that was good for the environment. Would you choose the green certified product or the regular product that was not green certified?"

The vast majority of consumers, 92 percent, would choose the "green certified" product over the regular one. While this shows a preference for environmentally friendly products, it is interesting that 8 percent would prefer the non-green product even though they would be "identical in functionality, reliability, appearance, and energy consumption" and would cost the same. As suggested later, this is at least partly due to animosity or skepticism towards green technology.

The other question of interest is whether consumers would pay more money for the green alternative, and if so, how much. This was addressed by re-asking the choice question but increasing the price of the "green product"². Figure 1 reveals the percentage of consumers who would prefer the green product at different price levels. For example, while 92 percent would prefer the green product if the differential were zero, 77 percent would prefer it if the differential were $25, 55 percent would prefer the green option if it cost $50 more, and only 31 percent would prefer the green option if it cost $75 more. Buy the time the green option costs $100 more, only 17 percent would choose the green option, and only a hardcore faction will choose the green product at a premium of $200 or more.

Another way of defining the price tolerance for the green consumer electronics option is the median, or the point at which half of consumers would choose the green option. This is estimated at $55. At $555, the green option would be priced at an 11 percent premium over the "regular option" priced at $500.

The 2009 NTRS classified consumers into 6 "green tech" psychographic segments that reflect different kinds of sentiments towards green technology. It is clear that consumers who are receptive to green technology or simply to benefiting the environment will pay more on average (median) for the green option. For example, "Green Tech Followers" are highly receptive to green technology and concerned about the environment, even if they are not the most influential - they will pay more than any other segment, $71 or 14 percent extra. "Green Tech Leaders" who are the early adopters and the most influential, will pay $66 or 13 percent extra. The survey included a small sample of "Anti-Greens" (17 respondents), an influential group that is skeptical and to some degree hostile towards the environmental movement. The price tolerance for this last group is directional because of the small sample, but is only $26; four out of 10 Anti-Greens would prefer the non-green option even if the prices were the same.

Implications

Although these findings pertain to a specific example (a high-end consumer electronics product), they provide clear evidence that consumers will pay a premium for a green certified product. This is not surprising because future purchasers are sympathetic to green issues:

• 87 percent believe more needs to be done to curb air and water pollution in our country
• 83 percent like to do business with companies that are environmentally responsible
• 72 percent personally try to encourage friends and family to be more responsible for the environment.

If a manufacturer offers a product that can be certified as being made in an environmentally friendly manner, the green product will have a significant advantage in the market over alternatives that are comparably priced and have similar features. The product can also be priced at a premium, which may be necessary if the green features add to the cost, but would also be a boon if the green version cost the same or less to produce.

If a manufacturer offers a green-certified product, it should target the segments of the population who are early adopters of green innovations. Among the big-ticked consumer electronics purchasers, 19 percent are "Green Tech Leaders," the first to adopt green innovations and the most influential. Another 27 percent are "Green Tech Followers" who are also committed to the environment and receptive to new technologies that help the environment.

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¹In the next two years, do you think your household will purchase an electronics product, such as a television or computer, that will cost at least $500?
²If the green certified product cost (INSERT LADDER PRICE FROM BELOW) and the regular product cost $500, which would you choose? INSERT LADDER PRICES UNTIL CONSUMER SAYS THEY WOULD CHOOSE REGULAR PRODUCT.