How much does sustainability cost a company?
07/24/2023 - Pricing strategy
The production and marketing of sustainable products is a rising trend with growing numbers of environmentally aware eCommerce followers daily. The same is true for brands and retailers that are becoming more environmentally friendly and aligned with sustainable development goals. Both goals are also increasingly valued by consumers. We tend to think that the cost of sustainability and change is high - but is this true? Is there some way to tackle this? Although you face several external factors that will impact your costs, with the help of optimal management and the right pricing strategy, you can boost sales optimization for sustainable products and maximize your growth.
Factors that increase the cost of sustainability
Implementing greener policies and procedures in eCommerce will involve initial costs that the business will need to cover in the medium and long term. This happens, for example, when installing solar panels or launching a fleet of electric vehicles to deliver orders. Producing organic and sustainable items is also usually more expensive, as it requires different raw materials or a more extensive manufacturing process. Longer production times also must be considered to avoid procedures involving high energy consumption.
The demand for sustainable products is also still lower than for substitute products. In many cases, this is because they cost more than regular products. Lower demand leads to lower production quantities and a higher unit cost. So, why should an eCommerce commit to sustainability?
Sustainability costs vs long-term benefits
Investing in transforming the company and implementing good environmental practices can deliver the following:
- Resource savings by having your own renewable resources and/or looking for more optimal solutions, for example, using a local supplier instead of long-distance freight transport.
- Strengthened brand image, greater engagement with environmentally conscious users and a higher loyalty rate.
- Opening new markets and reaching new target markets.
- Access to tax incentives on the back of implementing good practices.
Focus: the right pricing strategy
The right pricing strategy is the key to finding the delicate balance between the costs and benefits of committing to sustainability. This holds the key to optimizing sales of sustainable products and covering the costs mentioned above. Pricing must be competitive and profitable for the company while also showing how much commitment to the environment matters to the company.
You can achieve this delicate balance by using pricing tools with machine learning. These tools analyze millions of data from your company, the market, and competitors to always recommend the most appropriate prices while also adapting to changes in supply and demand. The key information analyzed includes competitors’ prices and the maximum prices customers are willing to pay for the different product categories. This software uses advanced pricing rules to set price limits and meet the expectations of customers who also seek to support sustainability.
Thanks to its algorithms, you can predict demand levels by analyzing historical data to optimize costs and meet users’ needs.
Category: Pricing strategy
