Green washing, and a plan to fight it
As a flowering example of cashing in on the green movement, consider a company called Tested Green.
Before it was censored by the Federal Trade Commission last month, Tested Green claimed to certify green products for as much as $549.95. But according to the FTC, Tested Green was merely a pay-to-play scheme. After customers paid — either $189.95 for a Rapid certification or $549.95 for a Pro certification — Tested Green gave them its logo and the link to a “certification verification page” that could be used to advertise their “certified” status. The agency charged that the respondents violated the FTC Act by providing the means to deceive consumers.
More than 100 customers paid various fees to have their products endorsed by Tested Green between February 2009 and April 2010.
In the cease-and-desist settlement, Tested Green did not admit guilt. Still, the case stands as an example of the need for reliable verification services in an increasingly green world. And a group of LBM retailer organizations are taking the first steps with a program they’re calling “Claim Check Verification.”
The Building Products Retailers Alliance, a group of state and regional LBM trade associations, launched the program this month with the help of Intertek, a third-party auditor with more than 1,000 labs and offices across the globe.
Bill Tucker, president of the Florida Building Material Association (FBMA), told Home Channel News that the idea for the program came from a group of pro dealers looking to certify retailers that carried green building materials.
“There was a realization that the real ‘green’ problem was ‘green washing,’ ” Tucker said. “The dealers at the meeting were confused about what was and wasn’t green and how they could determine which was which.”
After contacting Intertek about putting together a green certification program, the Chinese drywall problem surfaced, according to Tucker. “That occasioned us to think about the need for verifying claims for all types of building products,” he said. Thus the Claim Check program was born.
In addition to the FBMA, the alliance also includes the Construction Suppliers Association, the Illinois Lumber and Building Material Dealers Association, the Kentucky Building Material Association, the Northwestern Lumber Association and the Southern Building Material Association.
The challenge of quantifying pocketbook patriotism
Having worked heavily with marketing research for more than 30 years, I know just how useful it can be to make better business decisions, but like all tools there are limitations. One very important issue with marketing research is that we often measure peoples’ attitudes, but what we really care about is their behavior. In some cases, there is a very close link between the two and sometime not so much. Let’s consider two examples.
As our first case we want to understand what people put on their hamburgers. We could ask them a very straightforward question and give them a list of condiments from which to select. Since there is no acceptable answer, people are very likely to give you good information. Were we to check, we would likely find an almost perfect correspondence to what people said in the survey and what ends up on their burger. Why say you use ketchup in the survey if you don’t?
Now let’s take a different case and ask people if they are willing to pay more for a plumbing part if it came in a package made from recycled materials. Here the respondent may consider that there may be a socially acceptable answer. If I care about our world, certainly I should be willing to pay more for that recycled packaging. This bias toward the socially acceptable answer can yield market research information that is much more optimistic about the sale potential of products with recycled packaging materials.
A good example of this type of issue was faced when the Home Improvement Research Institute (HIRI) decided to look at green benefits in some depth. HIRI made sure to get a profile of respondent attitudes toward green, but also to look at the green behaviors they have exhibited. As expected, there was a good-sized group of respondents who talked a good green game, but didn’t walk the walk.
While we may get inflated answers, we can track trends over time. In fact, The Futures Company does regular tracking of consumer attitudes on a broad range of issues. Since 2007 it has been examining the dimensions of what it means to be a good citizen today — including buying products made in the USA. As one might expect there was a clear rise in this measure as the economy weakened, with the selection rising from 60% in 2007 to 70% in 2009. But as the economy improved slowly in 2010, the rating fell to 61%.
Does this all mean that “Made in the USA” lacks marketing value? Clearly that is not the case. It just means that one needs to be careful when interpreting the absolute values in this type of research results and also not to rely on this attribute as a sole purchase motivator. With the current economic problems and unemployment, there is no doubt a desire to buy American when possible. As with most things, some people will see the benefit of buying American to be worth more trade-offs than others. If product quality and price are competitive, then the “Made in the USA” label can be the deciding factor.
My recommendations would be for American manufacturers to make their products as attractive as possible, with “Made in the USA” a bonus. While we work in a global economy, there is no problem rooting for the home team.
A 23-year industry veteran, Fred Miller is the managing director of the Home Improvement Research Institute (HIRI). He can be reached at [email protected]
Counterpoint: Priced out of America
This “Made in the USA” issue of Home Channel News profiles several companies that point to the benefits of domestic manufacturing. But for many more companies, sourcing product to low-cost overseas factories makes compelling economic sense. Home Channel News interviewed an executive from one such company — a manufacturer of a well-known brand of home improvement products — who spoke openly on condition of anonymity. Call him “Manufacturer X.”
Home Channel News: Your company is looking to manufacture more of its product in China. Why?
Manufacturer X: The big issue is cost. Our retailer customers are not allowing us to increase prices. And even if they did, they wouldn’t allow us enough to substantiate the margins we would need to survive. By going overseas and taking advantage of the lower cost structure, we are able to survive and compete.
HCN: Was it a difficult decision to bring manufacturing out of the United States and into China?
Manufacturer X: We watched a major portion of our business slip away, and that volume has hurt us dramatically — both in dollars and loss of employment. We’d love to remain a domestic manufacturer for all of our products, but due to demands of the marketplace, we’ve been forced to do it.
HCN: Describe the cost savings that you see overseas.
Manufacturer X: Let me put it this way: We have a machine here in the U.S. We load it up and it runs, turning materials from one end into packaged products at the other end. We move the product into the warehouse with a forklift. It’s all automatic, and still it’s 30% more expensive than manufacturing in China, where the same product is made by people. And that includes paying the freight, duty and cost fees. That’s just an example of the tremendous cost savings available to Chinese-made products.
HCN: What about the logistical benefits of domestic manufacturing? Are they meaningful?
Manufacturer X: Yes, they are. For instance, what if you’re forecasting 10,000 pieces, and all of a sudden the market demand is 20,000? If you’re buying from China, you’re not going to be able to get that extra 10,000. In the States, I can ramp up production quickly. In China, it’s 90 days from order to shipping.
HCN: Americans think U.S. products are better. Are they right?
Manufacturer X: That is accurate. I believe American-made products are significantly better than Chinese and other foreign suppliers. The quality of the goods from overseas is just not the same as the quality of goods in the U.S.
HCN: Can’t overseas factories be managed with the same high-quality standards and specifications as in the United States?
Manufacturer X: Yes, they can be set, but it’s an awful lot of work. And it’s part of what we have to specify when we go overseas. We have to specify every tolerance. It takes a lot of work and a lot of engineering work to get to that same quality standard as you’d find in the U.S.
HCN: How would you describe the consumer and DIYer — to what degree do they want Made in the USA products?
Manufacturer X: Generally, the consumer says they want Made in the USA goods, but when placed in a purchase situation, they tend to buy the cheapest goods available. But there seem to be more people asking for Made in the USA, and their voices are growing louder. The problem is, the majority of the volume of the marketplace is purchasing based on cost of goods. And the lowest cost of goods has moved overseas.
HCN: Is there a happy ending for domestic manufacturing?
Manufacturer X: The happy ending is that not all U.S. manufacturing will go overseas. There are specific markets and specific manufacturing processes that will continue to be done in the U.S. But they’re not going to be the large-volume, the large-scale processes that we have known in the past. They are niche small markets that have specified needs that a U.S. manufacturer at this point is the only one that can provide.