Commentary: Consumer Demands and the Market for "Green"

Lead Author: Dr. Jeff Howe

Publish date: 02.01.2007


For well over 20 years the wood products industry has been asking the question: “Do customers really care about green?,” And, more recently, making the statement: “No one is asking for certified wood, so why should I offer it?” Consistently, underlying the industry reticence to embrace green practices is the primary excuse that “customers aren't requesting it, so why should I offer something they so obviously don't want (otherwise they'd ask – right?).” Perhaps, however, the truth is that customers rarely request new products and waiting for them to do so puts your company out of the running.


Let's face it, a few years ago did anyone see teenagers lined up at the local electronics store begging for a small white plastic thingy that can record and play 10,000 songs, costs $300, and could only download well through one website? Or, fifteen years ago were customers going into those same stores asking for phones that didn't have cords and that would work just about anywhere based on a series of towers strategically placed? Or where were the long lines of customers in the 1960s and 1970s waiting outside of electronic stores in hopes someone would offer a machine that zapped food with some kind of radio wave that caused it to cook in just a few minutes. Huh, maybe people just weren't that smart. Certainly they should have recognized that they wanted these things and, given their current popularity, must have been pounding down the doors in anticipation; weren't they? The truth is, that is not the way the system works.


In reality, consumers just pick from the various product options they are currently aware of and have access to. In fact, in recent years the dominant market trend has been access over options, meaning that growth in the convenience market has outstripped the volume of new products being offered.


The reality of the consumer product selection process is that it is really more of an evolution than a revolution. The process is a bit like natural selection with both a survival-of-the-fittest version (aka popularity contest) and Darwinian-like preferences for adaptations and specific traits that enhance the product's success (e.g. sale ability).


Basically, the system works like this: a group of products are put on the shelf, customers choose certain versions (the survivors) and distribution channels react by weeding out the weak, modifying the “close” and enhancing the best-sellers.


Today, most products fight for real estate or shelf space, and the Home Depots of the world increase or decrease the floor space available to vendors based on the product's success. The better a company reacts to this market feedback mechanism the more successful the company. The greater the number of options that are available and the greater the speed of the producers in reacting to consumer's tendencies, the happier the customers become.


Often, a contributing factor to success is the length of the marketing channels (meaning the number of intermediaries between manufacturer and end consumer). In theory, the shorter the channels are, the quicker the response. However, it is often also true that the shorter the channels the larger the players and the greater the power of the producers. In this case it may take a bold stance by customers to incur significant change in producer behavior. A case in point is the stance of the New York Times in saying to producers that they must have environmentally friendly paper for their newspapers. In this case buyer power exceeded producer power and the channels were short, so both demand and supply began changing relatively quickly.


Today, many wood products have relatively long channels of distribution. Thus reaction times to customer's interests are relatively slow. In addition, for some products the producers are relatively remote and their products are highly regulated by traditional grading systems and building codes. Thus, actual customer dissatisfaction is often disguised by the customer's inability to seek alternative solutions. It is one reason a free-market system works most efficiently in situations with few regulations. Construction lumber is an example of a product with remote producers, long channels, and high levels of regulation by both grading systems and codes. Construction lumber is also a product that has varied only modestly in the last 100 years despite significant user disillusionment.


In addition to long channels of distribution, the wood products industry is also one of the most fragmented of any industry in existence. By some estimates there are over 50,000 wood products companies in North America today, and this headcount excludes the entire distribution network and building trade (general contactors, builders, and remodelers). This fragmentation and the dispersed nature of the industry results in a very slow transfer of consumer trends from marketplace to the forest.


The figure below depicts the difficulty of transmitting consumer information back through industry channels despite consistent survey results that indicate that 85%+ of consumers care very much about the environment, and that forests are among their top concerns.


This figure demonstrates that it takes a significant number of industry participants to impact the overall market. With only a few “green” companies currently in the marketplace, it isn't terribly surprising that few customers are bothering to ask for products that they haven't heard of and don't have access to. Even if most of the customers were “green” as many surveys suggest, the scarcity and dispersed nature of those wood products businesses actively participating in formal green practices, e.g. certification, is a clear hindrance to market development.


The book Tipping Point suggests that 13 percent of the market is necessary to incur permanent change. In the case of the North American wood products industry this would calculate out to suggest a need for 6-7,000 active industry participants to cause a permanent change in behavior, rather than just the several hundred that are actively involved currently. What this figure really shows is how easy it is to ignore consistent consumer information.



Mac didn't survey people and ask them “do you wish you had an IPOD” prior to its existence! They did ask things like “would you be interested in a product that was small enough to fit in a shirt pocket, lightweight, could hold your whole song collection and you could listen to it any time?”


The basic rule of surveying is to ask the consumer what benefits they would perceive to be valuable. Thus the correct question to ask consumers about wood is: would you prefer wood that came from sustainable sources? And when asked this question, consumers have generally responded a resounding yes.


Unfortunately, until we get “green” wood on the shelves, and it becomes familiar and accessible to the consumer, and a matter of real choice and clear selection criteria, we won't know how they truly vote. The wood products distributor who first recognizes the potential for green in the marketplace, and who seriously promotes such products as other product lines are proactively promoted, is likely to discover a sizeable, growing, and profitable market.


Dr. Jeff Howe

February 2007