Environmental Cost Leadership

Companies strive to distinguish their products and services. They do their best to present them with features that consumers eventually value higher than rivals’. Such efforts often lead to higher costs, and aiming at price premiums via differentiation strategies is a viable solution for these companies to cover such costs. When it comes to eco-oriented products, it is not much different. As explored in detail in Chapter 5 if being green costs more, the company has little choice but to try to obtain returns from eco-investments via eco-branding strategies. This is okay for firms that are able to tap into niches for eco-oriented products but, by their very nature, niches represent only a small slice of the market. No matter what efforts companies make, markets have limited scope for differentiation. Industrial markets (or business-to-business — B2B), in particular, have a very strict sense of costing, and obtaining price premiums is normally attached to eventual savings during product use. In other words, no matter how eco-friendly a product is, when competing in price-sensitive markets, it has to be cheap first.