ESM 210

1
ESM 210
Environmental Differentiation

• Magali Delmas

2
Environmental Product Differentiation
requirements

• Find willingness among customers to pay for
  environmental quality
• Establish credible information about the
  environmental attributes of its products
• Innovation must be defensible against imitation
  by competitors

3
Ciba Monsanto

• Ciba Specialty Chemicals Low-Salt Textile Dyes
• Waste water treatment costs fall
• Customers still focus on price of the dye per
  pound
• Monsanto main herbicide product Roundup
• Roundup 21 of total company revenues
• Creates public good and provides private benefits
• Investment in patentable improvements

4
Environmental Product Differentiation in
industrial markets

• Willingness to pay (driven by regulation)
• driven by considerations of total costs
• How it can enable customers to reduce the
  environmental impacts of their own operations
• Information customers must be aware of total
  cost reduction
• Need to prevent rivals from introducing closely
  related products

5
Patagonia and Starkist

• Patagonia
• Fabric from recycled polyethylene terephthalate
  (PET) and organic cotton
• Cost increase
• Marketing strategy linked quality environment
• Starkist
• Dolphin-safe tuna
• Unable to capture price premium after competitors
  match strategy

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Environmental Product Differentiation in product
markets

• Willingness to pay
• how to get consumers to pay for public goods?
• Halo effect
• Market segmentation plays an important role,
  environmental quality as a luxury good?
• considerations of brand identification and image
• Credible information
• technical difficulties what is environmentally
  friendly?
• Eco-labels, certifications.
• Barriers to imitation
• patent protection, proprietary know-how
• Company culture

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Organic food willingness to pay?

• Environmental sensitive practices public good
• Quality of product private benefit
• 1. Impact on health (GMOs, mad cow etc)
• 2. Taste
• Link between organic food and high quality food
• Gender (female), Younger, presence of children in
  family

8
Electricity

• Green power willingness to pay?
• Credible information?
• Barrier to imitation?

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Next week

• Monday
• Hayward Lumber case preparation
• Jill Dumain Patagonia
• Wednesday case discussion and lecture on
  Environmental Differentiation and Certification
  Schemes