Consider CamelBak water bottles, which are free of the plastic additive bisphenol A (BPA). In 2008, the plastics industry was shaken by stories linking BPA to health concerns ranging from ADHD (attention deficit hyperactivity disorder) to cancer and heart disease. Eastman Chemical responded by launching Tritan, a BPA-free co-polyester that has since been widely used in consumer plastic products, notably those of Eastmans’ customers: bottle manufacturers Nalgene and CamelBak.
Although consumers had to pay a 30 to 40 percent premium due to the higher production costs of Tritan, Eastman Chemical reported that it was “a really great success”. The reason? Its effort to brand, certify and promote awareness of the sustainable plastics together with the bottle makers paid off. The mental association of Tritan with safety and environmental sustainability led to a greater WTP of a segment of end users.
The specialty materials company has since made bold investments in molecular recycling. Made of 50 percent recycled material, Tritan Renew lowers carbon dioxide emissions by 23 percent, while reducing the sustainability premium from 30-40 percent to 10-20 percent.
Willingness to pay for a product can also be increased if it brings overall cost savings. Consider how water utility companies often lose 30-50 percent of water as leaks go undetected or are too costly to fix. Aquarius Spectrum (now under Aliaxis SA) has developed a system of sound sensors to detect leaks in hydrants and pipes. The data is analysed by AI models to identify leaks, significantly reducing the cost of detection and repair for the utility company while also saving water – and the environment. Such a product appeals especially to countries that import water, such as Singapore.
Creating new markets
In the automobile industry, even if some consumers are willing to pay a premium for electric vehicles (EVs) as compared to internal combustion engine cars, intense competition and overcapacity is quickly eroding that premium. Moreover, the higher production cost of EVs puts heavy pressure on EV sellers.
To maintain or even increase profits, companies can extend the size of the market by growing sustainability-driven demand in adjacent segments or creating new markets (as depicted by a shift of demand to the right along the horizontal axis in Figure 5). For EVs, this will likely mean launching less expensive models to appeal to the mass market or specialised vehicles such as small trucks to target price-sensitive companies.
