In the late 1990s I stood with Dr. Henry Kelly, assistant director from the White House Office of Science and Technology Policy, at the country’s pioneering, large-scale sustainable development, The Community of Civano, and shared my concern that our project was faced with a number of competing public policy, environmental and business needs. And to make matters worse, I told one of the nation’s sustainable thought-leaders, “The project’s solar advocates felt we had fallen short of our initial commitments, the alternative material builders were concerned that we were letting too many conventional builders in the master-plan, the traditional stick builders worried that our design codes required excessive engineering to meet the high energy efficient and water conservation standards, our construction lender couldn’t understand why we were allowing nonprofits groups to shape our private-sector marketing strategies, the city and state officials felt their role was to police us versus partner with us and our equity investors wanted to know how all of this complexity was going to affect their returns.”
In short, everyone was a little disappointed with our progress. Dr. Kelly laughed and said, “Well, then you’re probably right where you need to be. After all, it’s about balance.” When we launched the project a few months later and up until the time we sold the development, it was the fastest-selling community in its market.
Today, many businesses still grapple with the challenge of embracing and investing in longer-term sustainable positions when measured against short-term cash flow needs, government regulations or taking too public a stand on what may appear to be a controversial subject. How far should a company go to push the sustainable envelope before such decisions degrade EBITDA or isolate consumers, particularly in light of a tough economy and global competition? Where is that amorphous point on the economic chart that shows the transect between the consumer’s desire to have healthier food, air and water, a cleaner environment, less dependence on foreign oil and more sustainable construction materials, and their willingness to pay more or do with less?
Every industry, region and product category varies but the good news is the latest market research suggests consumers are moving rapidly toward values that embrace wellbeing, sustainability and relationship building. Companies that have products and policies that reflect these values can better differentiate themselves in the marketplace and charge a small premium.
Civano, working with the market research firm American LIVES, has been tracking consumer values associated with wellness and sustainability for the last 18 years. During the period between 1995 and 2005, personal wellbeing was being pursued, at various levels, by approximately 30 percent to 40 percent of the population. However, in our latest study that focused on Baby Boomers, we found this number had more than doubled for this target group. Eighty-four percent were “somewhat to very interested” in health and wellness programs.
Personal wellbeing is firmly rooted and expanding, as is the interest in planetary wellbeing. The connection between individual and environmental health is not lost on the consumer. Those who embrace personal wellbeing and the target group who believe in sustainable principles are significantly overlapping segments. In our national Boomer survey completed last September, 66 percent expressed concern about the air and water quality and processed foods their family was exposed to. Ninety-two percent preferred less toxic construction and maintenance materials. Ninety-seven percent were leaning toward high energy efficient heating and cooling systems for their home. Eighty-nine percent felt strongly that, “it is in our self interest to improve our energy independence.” And, 85 percent were interested in a home with a smaller carbon footprint and less operating costs.
In assessing whether the consumer would pay more for green, sustainable practices, we found a majority of respondents in the Boomer study indicated they would spend a little more for a healthier green home, with the average willing to pay 7 percent more for their purchase. Commercially, 87 percent looked favorably on a hotel company that had a green design and implemented sustainable practices with half of those surveyed willing to pay up to 5% more to stay at such a place. Therefore, healthier greener design is a strong market differentiator for a business and can solicit a small premium provided the price point stays within a competitive market range.
Individual wellbeing, environmental health, cost savings from energy efficient design and mechanical equipment, safer air, water and food, and reducing our geo-political exposure to external energy sources are overlapping issues. Businesses would be wise to understand the interconnectivity of these topics and respond to these emerging consumer values. After all, a company that offers wellness programs, provides healthier food, sources and supports local business, promotes renewable energy or has better air and water filters in their new homes or businesses can ingratiate themselves with the consumer and differentiate their company in the marketplace without being drawn into a polarizing debate.
In a price sensitive market with increasing global pressures one way to grow consumer loyalty, as a compliment to putting out the best product, is to embrace the values that have emerged from the recent economic downturn; wellness, sustainability and community (relationships). Twenty years ago sustainable design was considered “an accessory or minor option” in product development, whereas today, with the shifting values found among consumers, it is becoming an important product differentiator – if not necessity – in a competitive world.
As businesses work themselves out of this downturn, many people are managing their lives versus feeling excited and hopeful about their nation’s future. The impact from the financial crisis, coupled with the aging of the Baby Boomer and the nation’s increased concern over global competition is having an emotional affect on the psychology of the consumer. People are learning to live and spend differently. These factors and changes due to technology have many focused on what’s important to them – individual and planetary wellbeing and personal relationships.
Even in a slow economy there are business opportunities when the psychographic dynamics within a large consumer group shifts. Most particularly, as Baby Boomers continue their emphasis on relationship building and social values they will gravitate toward authentic companies and products that reflect the values and lifestyle they aspire to. For instance, with new home sales comprising just 10% of total sales, builders should consider designs that include better air circulation, less out-gassing materials, great water filters for drinking and alternative energy options – in addition to tight energy envelopes – to compete with and differentiate their product in comparison to the plethora of existing housing inventory.
In the near term, two drivers will impact consumer choices: price point, and the ability to enhance wellbeing and personal relationships. The latter driver will linger on well beyond the economic recovery.
Kevin Kelly is the founder and owner of Civano Living, a lifestyle-oriented boutique resort real estate advisory firm and Civano Development, LLC, a sustainable master-plan development company. He has 30 years of experience in real estate and community economic development and provides consultation services to some of the largest development and hospitality companies in the US and abroad. His lifestyle expertise includes wellness programming and sustainable design.