How to Sell More Sustainable Products

[This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of the Tuck Knowledge in Practice Podcast is the audio record.]

Kirk Kardashian

Hey, this is Kirk Kardashian, and you're tuned in to Knowledge and Practice, a podcast from the Tuck School of Business at Dartmouth. In this podcast, we talk with Tuck professors about their research and teaching and the story behind their curiosity. Today on the show, my guest is Brian Bollinger, the Albert Wesley Fry Professor of Marketing at Tuck. Brian, a member of the Dartmouth class of 2003, is here to discuss his new paper published in the Journal of Marketing, which examines the profit potential and availability of sustainably marketed products. He finds that these products are often marketed to certain segments based on demographic stereotypes, which hurts firms' bottom line as well as consumers' access to sustainable products. Brian's interdisciplinary research portfolio aims to understand the causal effects of marketing and policy decisions, and the interdependent reactions by consumers and firms. Examples include drivers of solar adoption and pricing, the role of home automation and dynamic pricing on demand response, and response to information. His research has been supported by grants from the Department of Energy, the National Science Foundation, the Environmental Protection Agency, and others. His work has been published in all of the leading journals in marketing, as well as in journals in other disciplines.

Kirk Kardashian

Brian Bollinger, welcome to Knowledge and Practice. Thanks for being here.

Brian Bollinger

Thanks so much for having me, Kirk.

Kirk Kardashian

Yeah, it's a pleasure. So one of the main streams of your research is on energy and the environment. And you have numerous studies on the solar panel industry, water conservation, and green technology adoption. Can you talk a little bit about what drives your interest in these areas?

Brian Bollinger

Yeah, I would say it's a variety of factors. I was an engineering student here at Dartmouth, at the Thayer School, and at that point I became really interested in renewable energy sources. Those are among many different types of products that have a clear pecuniary benefit for consumers—there is an economic reason why you might purchase the product—but there are all these additional benefits as well, which may accrue either to that individual or to others. Trying to deliver and communicate those types of value is fascinating, and it's something where marketing can really play a role. So my interest broadened to things like renewable energy, consumer packaged goods, and health labels—areas where information barriers might prevent consumers from recognizing the other sources of value.

Kirk Kardashian

Interesting. Well let's dive into your new paper that we're here to talk about today. It's titled Sustainable Product Profit Potential and Availability, which was published recently in the Journal of Marketing. At the beginning of the paper, you explained how this study grew out of a survey you gave in 2024 at the annual conference of the Retail Industry Leaders Association, which I think is interesting. So tell me about that survey and how it led to this paper.

Brian Bollinger

Well, they sort of arose together, so we might have taken a slight liberty in ordering them sequentially within the paper. But we'd been thinking for a while about consumer packaged goods that have sustainability labels, like Marine Stewardship Council, Rainforest Alliance, or USDA Organic: How would consumers react to those labels, and how might firms provide those products? There's a literature on food deserts that has tried to disentangle whether places have less access to healthy foods because those products simply aren't available, or whether the lack of availability reflects consumer demand—consumers wouldn't want to buy those products. We realized that we might see something similar with sustainably labeled products. We did this project in collaboration with Circana, and we're very grateful to them for providing much of the data we needed for the analysis. When you look at the share of consumer packaged goods in the categories we studied that had organic or other sustainability labels, there was huge geographic variation, and you could see the buildup over time. We wanted to explain that variation. Again, it could be due to differences in consumer preferences across the country, or it could be because those products weren't actually available. That led to the survey that kicked off the project: We wanted to see whether leaders of these large retailers thought demographics predicted consumer demand and the profit they could generate from these products, and to what degree they tried to measure that.

Kirk Kardashian

Yeah. So, in short, you were getting at how retailers decide where to put their products in the market, right?

Brian Bollinger

Exactly. We found that many retailers believed demographics might predict demand for these products. Only a few thought demographics would predict the products' actual profitability, but they didn't really measure the relationship. That fed into the idea that these retailers were behaving in a way that we often do—and often teach in our marketing classes—where you think about the ideal consumer for your product, because that's where the most value is created. You talk about this representative consumer, the sources of value they would get, and, on the firm side, how you might monetize that value. But if you focus too much on the perfect customer, you might miss markets where there's clear demand for the product but not that stereotypical sustainable consumer.

Kirk Kardashian

Yeah. So just to kind of put it out there, what is the stereotype of the perfect consumer for sustainable products?

Brian Bollinger

Well, I think it depends a little on whom you ask, but you often hear about markets that are more urban, have higher levels of education and income, and have a higher percentage of white residents. At least anecdotally, these are the kinds of markets where people expect demand for more sustainable products. Those are some of the demographic variables we wanted to examine: Is there a larger market share of sustainably labeled products in those places? Is the availability of those products higher? And can we pull apart those two factors?

Kirk Kardashian

Yeah. So you alluded to it a little bit, but how did you go about studying those questions?

Brian Bollinger

Well, the biggest challenge, of course, is disentangling those factors. As I mentioned, we have this great partnership with Circana. It came out of a collaboration between the NYU Stern School of Business and Circana, formerly IRI, and that partnership helped make the data available to us. Before I moved to Tuck at Dartmouth, I was a marketing professor at NYU Stern, and that's where we began the research. At NYU's Center for Sustainable Business, they started hand-coding the labels on products across, I think, 32 different categories. We were able to see the microdata for only four or five categories—the store scanner data, where every consumer packaged good that gets scanned enters our data set. By pairing those data with the hand-coded labels, we could see what fraction of the products carried the labels and what fraction didn't. To disentangle the demand explanation from the supply explanation, we essentially had to control for the underlying profitability a firm would get if it launched a sustainable product in a specific market. That's where demand estimation came in. We couldn't see the profits for a sustainably labeled product because we don't see the cost side, but you can back out the likely costs if you assume the firm prices in an optimal way. With the price and quantity data and estimated price elasticities, you can infer the profit potential for any given product.

Kirk Kardashian

That sounds really complicated, but this is what you do. It's cool. I just want to clarify that the sustainable products we're talking about are packaged products with language on the packaging indicating that they're sustainable in some way. They might be organic, non-GMO, Fair Trade, or made with plant-based ingredients. That's what we mean by sustainable products, right?

Brian Bollinger

Yeah. I know I'm going back and forth between “sustainable products” and “sustainably labeled products.” They are products that have these labels on the front of the package. Most are third-party labels like the ones you mentioned: non-GMO, Certified Fair Trade, and USDA Organic. That's what we're referring to. We don't assess how much more sustainable these products are than conventional products. We're examining the communication aspect—how firms use these labels to convey the practices that went into creating the product.

Kirk Kardashian

Okay. And how do you get the demographic connection—the demographic data—from the purchases?

Brian Bollinger

We don't. For this project, it was all county-level analysis over time. We combined county-level demographics with county-level sales and price information for the different products at the UPC level. We also used some slight aggregation across products. What we really care about is whether you're buying the organic version of the yogurt versus the non-organic version, not whether you're buying vanilla versus plain. So there was some aggregation across things like flavor, but our focus was on county-level demographics.

Kirk Kardashian

Okay. So, in the simplest terms possible, you're studying the product data, overlaying county-level demographic data, and comparing where those products sell best.

Brian Bollinger

Exactly. Some of my prior beliefs were wrong coming into this. You mentioned that it was a complicated analysis, but it was really just running a bunch of flexible demand regressions. We regressed demand for a specific product on price and a number of controls to make sure we were capturing price sensitivity. I thought that, pretty universally, consumers buying these products would be less price-sensitive if they really cared about the sustainable dimension. You saw that in some markets, but not in others. In markets where I expected people to be less price-sensitive, the opposite happened. Then we realized why: In markets with very low penetration of sustainable products, the people who are still buying them are really price-insensitive. They want the organic product; they want Fair Trade. In markets where the products have become more mainstream, the marginal consumer may or may not buy depending on the price differential, and that's where you see larger price elasticities. We thought we'd see systematic patterns around price sensitivities or price elasticities, but we didn't. You really have to look at price elasticity in combination with the price and quantity to get the full picture. That's where you start to see systematic patterns across categories and across the country.

Kirk Kardashian

Hmm, wow. That is interesting. So it sounds like where sustainable products are harder to find, the people who do buy them are really seeking them out because they want them.

Brian Bollinger

Yeah. We can't say much about search because we don't see the search data, but the people who are buying these products really want them. Again, I went into this with the idea that there's a stereotypical sustainable customer, and that's whom firms might be targeting. Firms aren't necessarily incorrect: The profit potential—which combines price, quantity, and price elasticity—is higher based on some of the variables we thought might predict it, such as educational attainment, income, and how urban a place is. The question then became: Once we control for the products' profit potential, do we still see differences in their availability as a function of those same demographic variables? And the answer—

Kirk Kardashian

Yeah.

Brian Bollinger

—was yes.

Kirk Kardashian

Yeah, I was going to ask: What was the main answer? So the answer is yes, but break that down for us a little bit.

Brian Bollinger

We looked across the four main categories we studied and found, as one example, that the percentage of a county's population that is white did not significantly predict profit potential, but it did lead to higher sustainable-product availability. So there's a preconceived idea that some markets might not be as profitable—which is wrong—but that idea might lead managers to make incorrect decisions about whether to offer these products.

Kirk Kardashian

I think that's really interesting. To me, it seems important because firms may be leaving money on the table by not offering these products in areas where they wouldn't expect them to do well.

Brian Bollinger

That seems to be one of the implications. One caveat, of course, is that firms price in certain ways, and there are frictions in pricing that we don't account for. We don't actually see profits; we see what firms could make if they were pricing optimally. But products with similar flavors may have similar price points, or an organic and a non-organic variant may have a standard price differential. So this result assumes that you don't have other constraints and frictions that prevent a firm from charging a price that would extract as much profit as possible. With that caveat, yes, it looks as though firms might be leaving money on the table by focusing on that stereotypical sustainable customer and overlooking other places where there may be unrealized potential for this kind of product.

Kirk Kardashian

And on the flip side, you're also limiting the growth of sustainable products by not making them available to a large enough market, right?

Brian Bollinger

Absolutely. The analysis we're doing is very static. We're looking at shares and prices over time, but when we talk about profit potential, we're looking at the profit potential in the here and now. Products need to be available before people can learn about them. In an ongoing companion project, we're using other data provided by Circana: household scanner data rather than retail scanner data. Those data track the set of products an individual household buys and can help show whether consumers become more loyal to sustainable versus non-sustainable products as they become more familiar with them. If the products aren't available, that can never happen.

Kirk Kardashian

Yeah. I guess in this area of sustainable products, you can get a win-win if firms sell more of them. Ostensibly, these products are better for the environment and human health, so selling more of them could benefit society, right?

Brian Bollinger

Yeah, although a welfare analysis becomes much more complicated. You have to consider the side benefits of buying a USDA Organic or Fair Trade product versus the alternative. There can be costs associated with both the process improvements required to earn certification and the certification process itself. But a large segment of consumers appears to value products with these labels. One of the things the NYU Stern Center for Sustainable Business has tracked over time is what it calls the Sustainable Market Share Index, which shows that much of the growth in consumer packaged goods has come from products with these labels. While they represent a fairly small share of the market across the 32 categories, their growth is high and there appears to be potential. But they have to be available for consumers to buy them. And once consumers demonstrate demand, prices might be able to come down as well.

Kirk Kardashian

Right. Another potential benefit, I guess, is that a larger market could create better economies of scale for these products.

Brian Bollinger

Exactly. With something like certification, if it's a fixed cost, the more units you sell, the more units you can spread that cost across, and the cost should decline. One advantage of figuring out how consumers actually value these products is that we can then make those kinds of predictions.

Kirk Kardashian

What, in your mind, are the key managerial—and perhaps policy—implications of this paper?

Brian Bollinger

For this paper specifically, it's pretty low-hanging fruit. We talk about the challenge of getting access to data and figuring out what drives consumer decision-making. There's always a trade-off between the cost of getting better data to understand and quantify what goes into decision-making and the potential benefits. I think this paper shows that quantification can be very important. Focusing on the way we often think about targeting consumers—identifying your ideal target customer, creating a persona, and thinking about what drives that person's purchases—can lead you to neglect other important potential markets. If you actually map how these demographic features lead to higher or lower demand and willingness to pay, it will tell you whether it's profitable to launch a new or sustainably labeled product in a market you might otherwise have ignored.

Kirk Kardashian

Okay. It sounds like you're advocating a data-driven approach rather than a heuristic-driven approach here.

Brian Bollinger

Heuristics are easy to use. There's a reason we use them: They're convenient and low-cost. Again, the question is how costly the data-driven approach is compared with the benefits. In my opinion, if you can do it, the benefits of a data-driven approach are often worth the costs. I think this is one example where that would be the case.

Kirk Kardashian

And do you think about the implications of your paper from a policy perspective?

Brian Bollinger

Yeah, I think there are policy implications. You often see policy intervention when there's an externality or market failure that needs to be remedied. In this case, many of the markets where the products aren't offered seem to have similar potential profitability to markets where non-sustainably labeled products are offered. I'm not sure you need policy intervention to spur firms to make the products more broadly available. But once you add dynamic complications—consumers might have to learn about the products over time, and learning about one label may spill over to products with other labels—you may see more policy implications. That's where the follow-up project fits in. We're finding evidence that consumers exhibit loyalty not only to brands but also to the labels themselves. By label loyalty, I mean a combination of how much consumers like a label on a product generally and how much state dependence there is: I've bought USDA Organic in the past, so I'm more likely to buy it again. Those are situations where there are positive spillovers from one firm to another that shares the same label, and the firm might not internalize those benefits. That would be one argument for an incentive to get the label out there and help consumers learn about it, because that will benefit all firms that use those certifications.

Kirk Kardashian

Right. That's interesting. It's at least good to know that this may be an area where the government doesn't need to step in if the market can improve the situation on its own.

Brian Bollinger

It is. One thing that has been really helpful is having these third-party labels. One aspect we talked about is the role of trust. Marketing can be incredibly valuable for providing information, but consumers have to trust that information. Third-party verification, such as Marine Stewardship Council or USDA Organic, makes the information more trustworthy. One label we didn't examine was “natural,” because we thought the term was too nebulous and there wasn't any third-party verification of its use. In some ways, I would argue, that intervention has already happened—not just through government, but through third-party organizations that provide certifications. I think there's a strong case for intervention to create a framework in which information can be reliably conveyed and trusted by consumers.

Kirk Kardashian

That's a good point. When you came to Tuck, I think one of the first things you did was develop a new course for the MBA program, right? Sustainability and Marketing.

Brian Bollinger

Yeah. It's closely related to a course I taught at NYU. I obviously talk about how useful data-driven approaches are, so in addition to the Customer Analytics course I teach here, I teach a class on sustainability and marketing. One reason I created the course at NYU was that sustainability has often been an add-on, whether in academic programs or in the way businesses implement sustainability. Because much of marketing centers on the consumer, value creation, the extraction of value through price, and the communication of value, it seemed that this was where we should try to fit sustainability in. There's not much that's actually new; the frameworks are the same ones we use in marketing. It's about seeing how the decisions consumers and firms make might change based on other outcomes we care about. Consumers care about image motivation. Sustainable products can provide sources of value beyond the base value you get from consuming them. One challenge, in my opinion, is that sustainable products have often been marketed as a guilt offset: Buy this product, and you'll feel a little less terrible about doing whatever you're going to do anyway. But sustainability can augment the value created by a product's core functional benefit. A car can be cool to drive and happen to be an electric vehicle; the fact that it's an EV augments the value you're getting from the car. The same applies to consumer packaged goods. If you create a sustainable cleaning product that doesn't clean very well, people aren't going to buy it. You want a product that cleans really well and happens to be sustainable. And, Kirk, you mentioned some of the health benefits. It's not just about helping other people; personal benefits can accrue as well. So you have to start with the initial value proposition—the core reason the product exists—and then use sustainability to augment that value. That's what we try to cover in the class.

Kirk Kardashian

I think the idea of sustainability in the marketplace is really interesting because you can think of sustainability as another component of a product's value. You can isolate it as its own valuable characteristic, right?

Brian Bollinger

It's a characteristic. In some ways, it's its own characteristic; in other ways, it depends on what we mean by characteristics. You can think about the process. Back when Allbirds were incredibly popular, the value proposition wasn't, “Buy them because they're sustainable.” It was, “Buy them because they're super comfortable.” And the reason they're super comfortable is that they're made from this great, all-natural New Zealand wool. The attribute that made them more sustainable was used to explain why you got that initial value—the comfort. With many of these products, if we use the sustainable feature and think about the benefits it provides beyond being better for the environment, that's what will drive behavior among a larger segment of consumers.

Kirk Kardashian

I see. That's a different way of thinking about it than I initially had, because it sounds like you're saying sustainability actually makes the product better.

Brian Bollinger

It can. The challenge comes when the sustainability attribute makes the product work less well, or when people perceive that it does. A behavioral study a while ago showed that people perceived organic cookies as less tasty. All you need are some good organic cookies, and that perception can go away. With early organic or more natural cleaning products, there was at least a perception that they didn't clean as well. That's a challenge sustainable products have to overcome. In other examples, the sustainable attribute clearly augments the main product benefit. There's also a third category in which the two aren't related. But if you can find an area with a nice complementarity, where the sustainability attribute actually augments the main product benefit, that's where I think you can really go mainstream.

Kirk Kardashian

And is this something you talk about in your course—the essence of sustainability and what it means for products?

Brian Bollinger

It is. The course is really fun for me. Sustainability is in an unusual space because it's so fundamentally interdisciplinary. In the class, we look at case studies, bring in speakers, and draw on research—not only in marketing but also in finance and accounting. When you're making large investments in more sustainable processes, you need to know what the payoffs are and whether shareholders will reward you. It's a place where many disciplines intersect, including operations. Even though the class focuses on marketing and the role of sustainability within marketing, it's difficult to do that without touching on these other fields. So it's super fun for me.

Kirk Kardashian

It sounds like a really fun and interesting class to take, and it dovetails strongly with your research. Well, it's been great talking to you, Brian. Thanks so much for your time.

Brian Bollinger

Thank you so much for having me. It's a pleasure.