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064 - How to get customers to pay more for ethical products

Convincing customers to value ethical, vegan products. Ethical and sustainable ingredients, suppliers and packaging all cost more. This means you’re always going to be at a disadvantage if you are trying to compete on price with your ethical product.

But how can you get customers to see the extra value of buying from a company that has a mission?  And how can you convince them to pay that little bit extra for products that are trying to do good?  David turns to toilet roll (wait, what?!) to explain how to get customers to Give A Crap.

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Episode transcript

Hello and welcome to episode sixty-four of The Vegan Business Tribe Podcast with myself David Pannell, co-founder of Vegan Business Tribe.  And if you have a vegan business, or are thinking of starting one, then Vegan Business Tribe is here to support and inspire you not just to build a vegan business, but to build a SUCCESSFUL vegan business.
 
And just a quick catch-up on what’s been happening over at Vegan Business Tribe as we are fast approaching our two year birthday – and when I tell people we’ve been going for two years, I get one of two reactions:  either, “gosh can you believe it’s been that long”; or” wow!  I thought you guys had been around forever!”  And as we’ve now got hundreds of members we’re having a bit of a shake-up of our regular events. So we’re now adding in a new monthly EVENING networking meet-up for our members meaning we’ll now have three networking events a month – and that evening slot is one we’ve been asked for a lot, especially as it gives our US and Australian members another good timeslot but also our European members who might have a dayjob or have other commitments in the daytime.  And to tie in with this we’re also going to be adding in another timeslot for Lisa’s ‘Make It Happen’ goalsetting and accountability workshops that we do on the first Monday of every month.  So we’ll also be running a morning group which again will mean that people in different timezones will have more chance to come along, set their goals for the month and then be held accountable by the rest of our members.  And if you haven’t been part of a goalsetting and accountability group before, then do get down to Lisa’s monthly workshop, because it makes a massive difference when you share your goals with a group of people and then have them holding you accountable month to month to hit them.
 
And then finally, during March we’re trying out a new format for our vegan business clinics and I’d like to invite you to come and help us test it out – in our business clinics, we come together in a small group round-table to support each other and talk about any issues or problems we’ve got in our businesses, and they have proven to be one of our most popular events.  And we’ve tried doubling the number of clinics we were running, and then doubling them again to the point where we could just spend all our time doing nothing but holding business clinics – and we’ve still got a month and a half’s waiting list to join them!  So instead of being limited to just four members at a time, we’re trialing a larger group format using breakout rooms instead to keep the intimate feel of the sessions – but it also means that if you’ve got a problem in your business you’ll be able to jump on a clinic at short notice instead of having to wait a month and a half to get a place.  So if you’re a fan of our business clinics then you can really help us out by being part of our test group in March on the new format and giving us your feedback – just head to the website and go to the events sections where you’ll be able to book yourself on.
 
All these events are included in our monthly membership to Vegan Business Tribe – which isn’t expensive, it’s about the same cost of joining Netflix – and every one of you who signs up to the site doesn’t just get access to amazing support for your vegan business and access to an equally amazing community of other vegan business owners, but you are also helping us carry out our mission.  Your membership means that we can keep putting out this podcast every week, keep creating the free content we create to help vegan businesses and also do all the work that Lisa and I do to champion the vegan business scene around the world. So, as always, if you haven’t signed up as a member yet – just head over to the website and click on the big join button on the homepage and you’ll find out how you can support us on our mission to skill-up the vegan business scene and everything that you get in return, all for less than you would spend a month if you bought a cup of coffee a week from your local coffee shop.
 
OK, so I was just talking about our business clinics where our members can bring a problem that they have in their business, and I tell you – our business clinics are an endless source of topics for this podcast.  And one of the questions we had this week was how to convince a customer to pay more for an ethical vegan product.  And if you make purposely ethical products yourself, you know that often means not just using the same mass-market ingredients that others use.  You’ll know it’s about sourcing suppliers whose ethics and approach to business match your own, where they are doing as little harm as possible to the world and, in many cases, actually looking to do good.  And, often, these things cost more.  Plastic packaging is cheap and effective but stays around forever.  You WILL be outlived by your toothbrush.  If you want more ethical and sustainable packaging then it’s going to cost you more.  If you want to be sure that the oil you use in your products isn’t attributing to deforestation somewhere in the world, then there’s a chance you are going to be paying more for the ethical alternative.  And it’s not just products, you might have a service-based business – but making sure you are offsetting the climate impact of your business and finding time to also support good causes and ethical practices all takes money out of your profits and time out of your working day.  And these are extra costs that your competitors might not have.  If they just pay for the cheapest wholesale ingredients and don’t care about where those products have come from then either their retail price is going to be lower than yours or their profits higher.  Either way, if you simply try to compete on price then you’ve got no chance!  You’ve got to demonstrate WHY your product costs more.
 
Now, if you are the only person making your product, or if you are providing the ONLY product that solves a customer’s problem, then price is secondary.  If I’ve got a problem that is really causing me an issue then I’m weighing up how much I’m going to pay by how much I want that problem out of my life. But if you’re in a market where there are lots of ways for a customer to solve their problem, where there’s a lot of competition, then price is a real motivator for which product they are going to pick-up.  But as consumers, we are constantly making ethical choices when we spend money.  Which products we buy and which companies we support all dictates where money flows in the world.  So how do we convince a customer that it’s worth spending that bit extra to buy ethically?
 
Well first of all, let me tell you there is a market for every price point.  A product is rarely too expensive, it’s more likely that it’s being pitched at the wrong customer or you haven’t effectively communicated the difference your customer will experience when your product solves their problem.  In the last episode, I mentioned that Apple’s iPhone has continued to rise in price as more and more competitors entered the market with comparable products. Apple have never been worried about getting pulled into a race to the bottom. So we know that people WILL pay more for a product even if there’s a cheaper option available.  And before we get into the ethics of your product, that might actually be the mindset you want to take.  You might want to purposely position yourself as a premium brand, or you simply might want to market yourself just to those customers who want to spend more because to them that means they are getting the best – your ethical approach might just be one part of you bringing the best possible product to market for your highly discerning customer.
 
However, if your mission is big enough, if the change you are trying to make in the world with your business or your product is something that enough people believe in too – then getting people to join you on that mission, even if it costs more money, should be your entire business strategy.  Let me give you an example – Lisa and I voluntarily pay more than we have to for toilet roll.  Toilet roll is probably the most throw-away product there is in the world, it is literally designed to be a waste product and you can pick up toilet roll for 40p a roll if you buy a hefty multi-pack.  But Lisa and I recently moved over to buying our toilet roll from a company called Who Gives a Crap, who sell their recycled toilet roll at up to a pound a roll.  And why so expensive?  Well, actually a pound a roll isn’t expensive, we’re just used to supermarket prices.  Who Gives a Crap is made from 100% recycled paper, so it doesn’t contribute to the 27,000 trees that are chopped down every day to make toilet paper.  It’s eco-friendly and it doesn’t have any animal products in it – yes, many toilet rolls are not vegan can you believe, they use gelatine in the glue that hold the sheets together.  And because you buy direct from the company, they ensure that all their shipping and delivery is carbon-neutral.
 
But all that alone probably isn’t enough to make most people switch their toilet roll brands.  It’s a nice ethos, and some might even say it’s a gimmik, but what if I also told you that two and a half billion people in the world don’t have access to a toilet?  That basic minimal level of humanity that many of us couldn’t imagine life without, around a third of the world’s population doesn’t have it. It’s estimated that 800 children a day die due to diseases from lack of toilets and poor water sanitation. And what if I told you that you can do something about that by simply changing who you buy your toilet roll from?
 
Because 50% of Who Gives A Crap’s profits go towards providing toilet facilities to those people in the world who don’t have basic sanitation.  Who Gives A Crap are a B-Corp, meaning that they hold themselves to higher scrutiny and transparency than a regular for-profit business, and to date they have been able to donate over five million pounds to providing toilet facilities and improving sanitation around the world, or ten million Australian dollars with the business being originally based in Auz.
 
And this is important – not just their mission, but from a business point of view.  There are so many HUGE problems in the world that seem too big for us to do anything about as individuals, but what Who Gives A Crap are allowing us to do, as consumers, is to tackle these problems collectively, by just switching a buying habit. Is Who Gives a Crap’s product toilet roll, or is it social and economic change?  Which am I actually paying to buy?  Yes, I have to admit I’d never considered my environmental impact of buying toilet roll – but not only is the company helping me address THAT but it’s actually helping me to facilitate a bigger change in the world at the same time.  If I put my money into buying a supermarket brand of toilet roll, well I can solve the problem of wiping my bum and it makes some people rich.  But if I put my money into buying from Who Gives A Crap, yes, some people are still making a living, I’ve still got a solution to my TP problem but I’m also supporting a bigger mission.  By doing nothing more than spending time in the toilet each day – which I already do.
 
I’ve spoken in previous podcasts about this importance of having a mission, and the reason that mission-led businesses grow so fast is that anyone who believes in your mission is attracted to you and they tell others about it.  Lisa and I didn’t find out about Who Gives A Crap from a TV advert or a promotion, we found out by people sharing them on social media.  We’ve since told a whole bunch of other people about the company, in fact I’m telling hundreds of people right now on this podcast!  And I guarantee that a lot of you listening to this have already Googled ‘Who Gives A Crap’ and are flicking through their website right now.  All at zero cost of advertising to them – trust me, I’m not getting a kick-back here!
 
As ethical consumers, we are looking for companies to help us be more socially and environmentally conscious. But we’re also lazy, stressed and time-poor.  It’s one reason why the vegan marketplace is expanding so quickly – many people see buying vegan products as a shortcut to being more environmentally sustainable even though they don’t identify as being vegan themselves.  So if you provide an ethical product or service, your product is not just the thing you’re selling, your product is also allowing someone else to act ethically without really making an effort themselves and that’s got value. Now, you still have to solve the customer’s main problem and solve it well – if I couldn’t do the necessary with Who Gives A Crap’s toilet paper then, believe me, I wouldn’t stay a customer!  But if you can convince me about the extra impact that me buying your product creates, the extra good in the world I’m making happen simply by paying a little bit more to solve my problem (and then make me feel absolutely brilliant about it) then you’ve got a customer for life, even if you’re a bit more expensive.
 
So this is the question you need to ask yourself.  If you are getting the feedback that your product is too expensive, then ask yourself if you’re actually demonstrating why it costs more. Are you showing the customer what a difference it makes backing your product instead of a cheaper competitor?  Are you showing that the product they are holding in their hand is actually only part of the thing they are buying? Are you showing the story behind the product and are you sharing your mission?  Because you can’t go to Who Give’s A Crap’s website without finding out very quickly what they are all about.  You see the mission first and the product second. When you get your delivery, there’s a message printed on every flap of the box about what you are enabling them to do with your patronage.
 
And there’s a number of vegan companies that you will have heard me name drop.  We support them because we know that by spending our money with them, they’re bringing about the change we want to see in the world even though we can get similar products cheaper elsewhere.  Viva La Vegan Clothing was founded by Jay Charlton – if you go to their social media you’re as likely to see photos of their delivery vans picking-up waste food and delivering it to their local animal sanctuary as you are photo of their clothes.  Their clothing designs are all statement-based and designed to share the vegan message.  Every time we see Viva La Vegan at a vegan fair we’ll try to buy a new T-shirt or a hoody (even though my local supermarket was selling t-shirts with vegan messages on during Veganuary at a third of the cost) because we know that Viva La Vegan are working to bring about the change that we want to see in the world. And by ALLOWING us to be their customer, they are letting us contribute to that.
 
So you need to make sure that your mission and your ethics are front and centre.  It’s not enough just to have them as a bolt-on in the background because that makes you no different from the thousands of other companies all claiming green and ethical credentials.  Go to the websites of the huge fossil fuel companies and you would think you’d landed on the homepage of an environmental campaigning group. You need to be able to prove what you say and then communicate that to your customers, through your social media, through the messages on your packaging, through your point of sale material and your advertising and through everything you do.  And if you sell OTHER PEOPLE’S ethical products, then you need to be able to convey their message to your customers too.  So maybe you stock someone’s candles because they are the most ethically-made, cruelty-free candles and the founder has an amazing story that set them on that ethical mission.  It’s not enough to just put those candles on your shelf and hope a customer will get all that and be happy to pay more.  Make a sign explaining the brand’s story and pin it up next to the product, just like you get staff recommendations in your local bookshop.  And if you are supplying your ethical products to be sold in retail, then create that poster yourself – or point of sale material as we call it in the trade – explaining your story so that the store can use it to tell more people about you and your mission.  Use it to show the customers where their money will be going and what a difference they will be making in the world by choosing your ethical product and it’s worth spending a bit more to do that.
 
But no matter how big your mission and how big the change you are making in the world, you’re still running a business.  So you’re not simply asking for a donation, you’re delivering a product in return for that money.  And the reality is, even if your product is going to cost more than your competition to allow you to deliver it in an ethical way, it still needs to be affordable.  A pound a toilet roll still made me wince when by nature I’ve always been a bulk buyer of anything that could ever be considered everyday essentials.  I’m the dad who embarrassed my kids when they were younger by picking up the whole carton of beans in the supermarket whenever they were on sale. So there are other ways to make your offer more affordable.  First, if price remains an issue can you do anything to reduce the price of your product without actually reducing the profits you make? Can you find someone who makes a product using some of the same ingredients that you do and club together to buy your ingredients in bulk so that you can get them cheaper?  You could even create your own small buying group of independent companies so that you can place bigger orders for ingredients, packaging and even the consumables that your company uses so that you can negotiate better prices.
 
Another strategy to convince people to pay that little bit more for your product is to look at how to make it more affordable without actually reducing the price.  Returning to Who Gives A Crap as my example again, when I did a little bit more research I found their rolls are actually double the length of normal toilet rolls.  One of their big costs is getting the product to you, so by making the rolls bigger they are able to give more value per unit.  You get 400 sheets per role rather than the 160 you might get from a supermarket brand – so actually, this is starting to not be so as expensive as I first thought. They also only sell in bulk, and so if you buy a box of 48 rolls, that £1 a roll comes down to 75 pence a roll.  Now I’m starting to feel I’m getting a bargain – remembering they are also letting me reduce my environmental impact and putting 50% of their profits into sanitation projects at the same time.
 
And how about I turn that order into a subscription, so they’ll send me a new box full every 8, 12 or 16 weeks.  They’ll give me another £5 off as a special offer code.  And soon, they are giving me all the tools I need to start rationalising the increase in cost but also allowing me to exchange my commitment to them in return for savings.  And this is something you see a lot of companies offering. If a one-off purchase doesn’t work out as being economical, how about getting the customer to commit to a bigger purchase that brings the cost per unit, or per kilogram or litre or hour of your time, down instead?  Even if that means committing to buying your product over a longer timespan through a subscription, breaking the amount down they are spending per month, but resulting in a larger ongoing spend over the year.
 
You can look at setting up subscription services, pay as you go deals, payment plans, bulk buys, lease-hire – or even offering invoice financing if your product has a large enough ticket price.  There is a LOT of innovation around payment and business models that you can investigate to switch how people pay, to break down the costs – and many of them often result in your customers spending more with you in the long run. 
 
OK, so let’s wrap this one up with a bullet-point rundown of how to convince people to pay that bit more for ethical products:
 
  1. Sourcing ethical and sustainable ingredients, suppliers and packaging can all cost more. That means if you simply try to compete with your competitors on price then you’re always going to be at a disadvantage. To win that one, you’ve got to demonstrate WHY your product costs more, where that extra money is going.
  2. Remember, there is a market for every price point. A product is rarely too expensive, it’s more likely that it’s being pitched at the wrong customer or you haven’t effectively communicated the difference your customer will experience when your product solves their problem.
  3. As ethical consumers, we are looking for companies to help us be more socially and environmentally conscious. But we’re also lazy, stressed and time-poor. So if your company is doing all that on my behalf, then there’s a good chance I’ll be happy to spend more with you for the privilege.
  4. You need to put your ethics front and centre if that’s why your product costs more.  Embrace them and make your mission your entire business and marketing strategy.  When you do this, people will share your company for you.
  5. You MIGHT want to find a way to reduce the cost of your product, but without reducing your profits or watering down your ethics.  Can you club together with other companies to buy ingredients, supplies or even packaging in bulk so you can negotiate better prices?
  6. Or can you make your product offering better value for money?  For example, giving the customer the opportunity to buy in bulk to get a better cost per unit or to take a subscription so they are committing to spending more over the long term for a shorter-term saving?  And don’t forget all the different ways for people to buy that you can test, from pay as you go to invoice finance to make it more affordable.
 
And that’s it.  And remember we’re talking about this topic because this was one of the questions that came up at a business clinic this week – and if YOU’VE got a question you’ve been puzzling over in your business then don’t think you’re the first business to have ever had that problem.  You don’t need to re-invent the wheel, many other people before you will have solved the very same problem you are wrestling with, people like Who Gives A Crap, and you can go out there, study them and learn how they did it.
 
So one last thing before we finish – and this is where you can now help me out.  If your platform allows you to, I would love if you could give this podcast a like, a thumbs up or a five-star rating – even just a subscribe.  This is a massive help in getting us in front of new people and if you are listening on iTunes you can even leave us a written 5-star review – and if you do that I will love you forever, we can never have too many reviews!  Secondly, if you know someone else with a vegan business I would be really grateful if you could send them a link to this podcast.  And if you’re not sure how to do that from your podcast app then you can send them a link to the podcast page on the website.  We’re starting to really make a difference with Vegan Business Tribe – and we know this because of the amazing messages we get back from our members about the success they are getting from being part of the community or from taking in all this advice and support. And the more vegan businesses we can help become successful, the quicker we’re going to move towards this vegan world that I still think is only one generation away.  So if you can help us share our message, and if you’re not a member yet and you want to come join us on this mission then go take a look at veganbusinesstribe.com and hopefully we’ll be talking all about your vegan business too!
 
Thank you so much for joining us. Lisa and I appreciate more than you will ever know that you keep giving up your time to listen every week, and I will see you on the next one!

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