How to Make Customers 28% Happier!

0:00From Entrepreneur Media, this is Problem Solvers, a show in which entrepreneurs do what entrepreneurs do best, solve unexpected problems in their business. We were completely wrong. And I'm just like, it's not selling. It was like, we have to start from scratch. I'm Jason Pfeiffer, the editor-in-chief of Entrepreneur Magazine.

0:22Thomas McKinley was once a product marketing specialist at Google. And he looked around one day and realized, you know, this place, Google, and for that matter, pretty much every place is really far behind the times in using the latest scientific research to actually inform the way that it does marketing. And why does this happen? Well, because nobody has the time to read 20-plus page dense research papers. They're not even written for us. They're written for other scientists. That's Thomas. And he started to think, this is just kind of wrong. What I found absurd is that we spend so much money and energy and some of the brightest people in the world to study this scientific research in the field of business, primarily in the field of marketing.

1:12And in practice, though, it takes us 10 years, sometimes 20 years to actually start using this to optimize our businesses. So he started to do something about it. Thomas is now the founder of ARI. That is A-R-I-Y-H. Which stands for Academic Research in Your Hands. And right now it's a newsletter, which I subscribe to. That's how I found him. It's a really great newsletter. Every week he emails out one study and the big takeaways from it. Really interesting stuff. You can find it at A-R-I-Y-H dot com. And anyway, I thought, You know, what would be really interesting is if I asked Thomas to pull together some studies that showed exactly how sustainable products actually made money.

2:05Because oftentimes people think about sustainability as a kind of austerity. It's about doing with less, or maybe it's about a kind of greenwashing. But no, actually, Thomas dug into it for me. And he came back with these three studies. We published a piece in the print edition of Entrepreneur Magazine. And now also we're talking about it here on Problem Solvers. These three studies that showed that eco-friendliness and sustainability makes customers happier and more willing to spend money. Pretty fascinating stuff. One of the main drivers behind this is you need to think of it from the buyer's perspective, as always.

2:45Right. So why are people buying your product? Most of the time, unless we're talking about something very, very functional, right? So tax software or a screwdriver. But if we're talking about a nice T-shirt, a dress, a candle, they're usually buying it to feel good, right? To be happy, to enjoy it. Now, the beauty about it is what quite a few studies have found is that sustainability, when we know, for example, that we're using a sustainable product or that the company that we're buying from is sustainable, we feel good about ourselves. And that adds to our enjoyment of the product. So here's what we're going to do on this episode of Problem Solvers.

3:29Thomas is going to walk me through those three studies that he identified and exactly why they work. And I imagine that by the end of it, you might start thinking a little bit more about how the things that you do don't just deliver good value to consumers, but also just deliver good emotions to consumers and how doing good can do good for them too. That's all coming up after the break. With more and more brands looking for smart solutions to help them meet their sustainability goals, innovative paper-based packaging stands out as an ideal choice. Today, makers of everyday items from cosmetics to liquid detergents are now turning to paper as the preferred packaging material.

4:16Beyond product protection and retail shelf appeal, paper-based packaging is highly sustainable because it's made from a renewable resource and is designed to be easily recyclable, something that's good for brands and consumers who want to do their part for the environment and here in the u.s paper companies work with private forest landowners to grow and maintain forests at a rate nearly double the volume needed to make the paper packaging and boxes we rely on every day so when brands choose paper-based packaging they're helping to support the growth of our forests paper-based packaging is an easy way to do good for the planet learn more at how life unfolds.com slash innovations.

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5:45And in fact, Indeed is the only job site where you only pay for applications that meet your must-have requirements. Start hiring now with a$75 sponsored job credit to upgrade your job post at indeed.com slash problem solvers. Offer good for a limited time. Claim your$75 credit now at indeed.com slash problem solvers. Indeed.com slash problem solvers. Terms and conditions apply. Need to hire? You need Indeed. All right, we're back. I'm talking with Thomas McKinley of ARI, that is Academic Research In Your Hands, A-R-I-Y-H.com is where you can find the newsletter. And we're going to dig into these three studies because they're so interesting.

6:30And the first one we're going to talk about comes from the Journal of Consumer Research. And I'll just pick up the conversation here. The title is this very wonky because all studies seem to have these very dense subjects, but it is the green consumption effect, How using green products improves consumption experience. So break that down for us. What did they actually find here? Yes, what they found is that if when people are using a product, they know that it's a sustainable product, that's important. We'll go and look at that more in a moment. Once if they know that a product is sustainable, they enjoy using it more.

7:07One very practical example here is that they give different participants the same Sony headphones. And to one group, they said, just listen to the song and tell me how much you like it. To the other group, they did exactly the same thing, but they told them these headphones you're using are very sustainable, recyclable, very good for the planet. Then they measured how much people liked the song. The ones that were told that their headphones were sustainable enjoyed the song 12 % more, which is crazy. That's so wild. Yeah. Just that is the only thing that's different. And I assume that there isn't like a diode that you can stick on someone to see how much they like this.

7:44So this is self-reporting. You're asking people basically, how happy are you with this experience? And the people who simply had one variable factor, which was that they were told the headphones were made with recyclable materials, they were happier. They enjoyed the experience more. Exactly. And what's even crazier, and I love this one, is that people, when they were told that the dish detergent they were using was eco-friendly. They enjoyed washing the dishes 23 % more. That's so weird. Right. And then there was another one, which was that a sustainable pen, a pen made with sustainable materials.

8:24People said that they enjoyed writing with it 28 % more. Exactly. Like might really help you get over your writer's block if you have that. Yeah. So what are people to do with this information? This is fascinating. Yeah. So I think before looking at how you can use it, why is this happening? OK, yeah. So when we're using a sustainable product, we feel that we're doing something pro-social, the researchers call it. So we're doing something good for society. And this gives us this warm glow feeling of feeling good about ourselves. And this extends to how much we enjoy using the product or even the experience around the product.

9:06And this happens unconsciously. So we're not aware of it. And it only happens when we're actually using the product. We don't expect it to happen when we're thinking, OK, I'm going to buy that product or not. So in this specific study, the use is more in terms of when people are using the product, you can improve their experience so that they will be more likely to come and buy it again later or buy more products from you. Now, how you can do this is you need to be very conscious about the fact that people need to be aware that it's sustainable when they're using the product. So what I recommend you do is try to be very clear, maybe on the product itself, explaining why and how it's sustainable.

9:51So let's say that you're a restaurant and you're using reusable chopsticks. That's more sustainable. But maybe add a message saying that we're using reusable chopsticks because it's more sustainable when you're doing good for the planet. So remind people, well, and let's say that you're a software company. You're a SaaS. Try and put it clear and center when people are using it. Have a little badge somewhere saying that you're using zero emissions cloud hosting. So it's sustainable hosting, right? The beauty of this is that it's so broadly applicable. Just make sure that yes, your product needs to be sustainable and remind people when they're actually using it.

10:32Yeah, right. Because then you're inviting them to enjoy that experience and to feel good about themselves, which is a really funny but useful insight that saying, you know, like with the chopsticks saying these are sustainably sourced or reusable or whatever. This isn't just you flexing your sustainability cred. This is inviting consumers to feel good about themselves for having selected you and having this experience, which is then processional, which is really fascinating. Thomas, let's move on to the second one, which is from the Journal of Consumer Behavior, here another wonky research title, which is Consumer Intention to Purchase and Corporate Social Responsibility, colon, Evidence from an Experiment in an Entrepreneurial Context.

11:15So this comes down to how people feel about the quality of something. Tell us more. Yes. So this study found that sustainability can signal the quality of your product before people buy it. So it can act as a very strong signal for people to decide whether it's worth even looking into your product and buying it. Now, the beauty of this study is that it also focused quite a lot on startups or little-known brands. So what the study found, for example, is that when people were told that small business was environmentally sustainable, they were almost twice as likely to sign up to their newsletter promoting their products, from 45 % to 82%, which is huge.

12:02Huge. Now, why did this happen? Well, this was quite a known business to the end user. So when we don't have much information about a business, we look for any good signal to tell us whether we should buy it from there or not. And if a company is credibly sustainable, so for example, shows that it has a sustainable initiative, does good for society and the environment, we see it as a very positive signal that it's trustworthy and has high quality products. That's because we believe that if a company cares about ethical issues, they also care about selling good quality products. So how can you use this?

12:42First of all, try to think of what are some sustainable initiatives you can run for your small business or your startup. For example, you could pledge to have net zero emissions, or only sell easily recyclable products. Again, the very important thing here is just make sure that you do communicate that very clearly. In this case, to people when they're maybe discovering your company or your products for the first time. Yeah. It's so interesting to think about how for a small brand that isn't well-known, every single little piece of information that their brand consumes is going to have an outsized impact on how a consumer understands that brand.

13:24And so you have to think, well, what are the things that are going to communicate that I am relevant to and trustworthy for this consumer? And it turns out that the big takeaway for me here is that when a consumer hears sustainability, they make a direct connection to quality. And because they are looking for quality, they are therefore more motivated to learn more about the brand. It's a very clear pathway once you see how that connection is made in consumers' minds. Exactly. And it's particularly important when you're new in the market, because, yeah, people are worried that your product will be bad.

14:04You don't have the proof to back it up yet. So these signals become very, very important. Yeah. All right, let's look at the third one here, which is from the Journal of Retailing. And our wonky title here is The Influence of Corporate Social Responsibility Appeals on Product Sales, Which Appeal Types Perform Better? So here, we're just going to start measuring some money here because this study found that sustainability drives revenue. Take a sip. Exactly. In this study, what researchers did is that they analyzed the data from about 10 million sales of groceries across the U.S. And they measured what different types of groceries in terms of what different type of sustainability or doing good claims they had and how much revenue, how many sales they had compared to other ones which didn't have certain claims or had different types of claims.

15:01What they found is that products that had sustainable claims, such as eco-friendly packaging or a certification that they're sustainable, like a badge on the packaging, or were organic food. They had higher revenue, 6.4 % higher revenue. Of course, this is controlling for the fact that these products usually have higher prices. Yeah. So this is an actual higher amount of revenue and sales that they had. What's quite interesting here that they found is that other messages that related to doing good, but not directly to the sustainability of the product, such as the fact that the product is fair trade or supports a certain NGO or was animal cruelty free, they barely moved the needle in terms of revenue.

15:55So it has to be about the sustainability of the product itself. Again, let's remember that in this case, we're talking about specifically groceries. Yes. Well, earlier we looked a bit more broadly at different products. Why does this happen? Yeah. Because products that are in themselves sustainable, they give us direct benefits. Like we saw earlier, they make us feel better about ourselves. Maybe we even expect them to taste better, right? If it's an organic food. So that's why people would be willing to buy them more and to spend more. Because it feels more like a necessity. You got to take care of yourself.

16:33Exactly. Exactly. And so how do you use this? Well, make sure that on the packaging of your products, you show that it's sustainable. One very strong way that they found worked are maybe third party certifications. Yeah. So have a badge from a trusted association, have that on your product. Yeah. Of course, extremely important, and I will never stop saying it, don't greenwash. So claim that you're sustainable only if you really are. If you're not, sooner or later, it will come back to bite you. It will backfire as it should. Yeah. People will know, and then they will buy a lot less. Exactly. The opposite effect.

17:20And it will probably destroy your brand. Yeah, exactly. Thomas, these are all really, really fascinating. And I take away from this that we often think as entrepreneurs, when we think about sustainability, we're thinking, oh, well, this is something that I have to do for my brand. This is a thing that is required or is expected or something. But what you forget is that people are processing this information in ways that you may not have anticipated. that this is not just about people checking things off a list. This is about people feeling better about themselves or discovering that they feel happier because of something or that it helps them.

18:05I'm thinking about the quality one. It helps them filter the noise around them easier because they're looking for quality versus not quality. And this is a signal of quality that ultimately all of this stuff really comes down to not just doing something because it's right, which is a good thing by itself, but for the purposes of smart business, understanding your consumer and understanding what makes them happy and then making sure that you're delivering on that. What do you think? Exactly. I couldn't agree more. You can use it in so many different ways to add value to what you're already doing.

18:40You're not just doing good, but you're doing good for your business. Thomas, how can people find more of your work? If you want more science-based recommendations to grow your business, just join at re.com. That's A-R-I-Y-H dot com. It doesn't cost anything. Just join and you'll get a new insight every week. And I enjoy it every week. Thomas, thanks so much. Thank you so much, Jason. And that's our episode. I would love to hear what you think and maybe even about a problem that you solved. You can find me at my website, jasonfeiffer.com. J-A-S-O-N-F-E-I-F-E-R.com. Also, I have some more useful stuff for you.

19:22I write a newsletter about how to future-proof yourself and become more adaptable and optimistic. I would love for you to sign up. It is at jasonpfeiffer.bulletin.com. Also, check out my other podcast. It's called Build for Tomorrow. In each episode, I take on some belief that we have that holds us back from progress and show you why it is not as bad as you think. Problem Solvers is a production of Entrepreneur Media and comes out every Monday morning. So make sure you're subscribed so you don't miss an episode. Thanks to Deepa Shah for production. My name is Jason Pfeiffer. See you next week.