What would marketing be if it weren’t about persuading consumers to buy more stuff?
This might seem a strange question but it’s one that marketers could be asking themselves soon as the term ‘circular economy’ crops up more and more in the boardroom.
Driven by the need to address geopolitics, the looming world resource crisis, and the anticipated demand from three billion more middle-class consumers by 2030, the circular economy is a fundamental shift in thinking about how business operates. It would mean a transition from the predominant linear production-consumption model where the idea is to sell as much as possible at as low a cost as possible – essentially squandering critical raw materials – to a ‘circular’ model where consumption is collaborative, and products are designed so that lifespan is maximised and ‘waste’ becomes a resource.
The EU suggests this better of use of resources offers potential savings of €630 billion per year for industry, while the creation of new markets and services has the potential to boost EU GDP by up to 3.9 per cent.
According to the Ellen MacArthur Foundation (EMF), an organisation led by the former sailor and dedicated to accelerating the circular economy with industry, remaining in ‘business as usual’ mode will see price volatility surge alongside an inflation of key commodity prices. As such, EMF is working with leading economists, management consultancy McKinsey, higher education institutes such as MIT and Imperial College London, and global brands including Unilever, Renault, Cisco and Phillips to explore new circular business models where all of this is a fresh commercial opportunity, rather than a sustainability risk that needs to be managed. It’s a systematic overhaul and redesign of how business operates – way beyond recycling waste.
Rethinking The Building Blocks Of Marketing
For anyone in marketing, the implications of all of this will be profound, says head of strategy at consultancy Dragon Rouge, Nick Liddell.
“We will need to change how we think about many of the basic concepts marketers deal with every day: concepts such as identity and desire, loyalty and reward, and trust and transparency. These changes represent an opportunity to reinvent the role of marketing,” he says.
In the circular economy, as well as delivering shopping, supermarket brands might also take away consumer food waste or empty packaging – waste that will have value as a material that can be reprocessed.
Liddell points out that marketers have always sought genuine two-way consumer interaction, and to some degree, this has been facilitated by the emergence of social media. With the circular economy, however, the fact that the consumer may also become the raw materials supplier provides a much deeper and more genuine foundation for this.
While the marketer-customer relationship will change, so too will loyalty and reward schemes, shifting from cross-selling and upselling to rewards for being suppliers of insight, advice, recommendation and raw materials.
Swapping Owning For Sharing
Sharing and leasing models are vastly more efficient ways to use resources and eliminate wastefulness than individual ownership, but this creates a new challenge for marketers, Liddell says: how do you get people to desire something they will have access to but might never own? When it comes to identity and belonging, the more than a person defines themselves by what they own, rather than what they create or what they know or experience, the less inclined they will be to relinquish ownership. Such understanding will require marketers to re-engage consumers in different ways.
And while product supply chain transparency is often welcomed in the vein of provenance and ethics, when it comes to product sharing, restoration or re-use, the levels of transparency will have to be approached with consideration. There is a much greater squeamishness around personal items such as clothing, than there are washing machines or cars, explains Liddell.
So, with ‘closing the loop’ key to the circular economy, how might brands begin to engage customers? According to Ivo Salters, a service-designer who has been working with Vodafone to research this very issue, the first step is getting the company to take back devices.
“It’s important to educate customers about quality and value, and show them the benefits of re-marketed products such as re-furbished or re-manufactured products,” he says.
Vodafone has been piloting three propositions for the recovery of handsets: a buyback scheme, where customers return their handset to claim a cash reward; a two-year lease contract with monthly top-up fee to enable customers to keep up with the latest handset models; and a refurbishment scheme, where customers can access the latest software updates but on older models for cheaper.
According to Salters, the research so far has shown that the buyback scheme is the most popular.
“At the moment people do not know what to do with their old mobile phone and buy-back schemes offer a great solution by giving something in return. Many mobile devices become obsolete and customers are not aware of the return value and possibilities to hand in the used mobile phones,” he says.
To make this work, it has been important for Vodafone to give customers assurances that their personal data stored on the mobile device has been wiped, adds Salters. When introducing any new business model, building trust is vital, but even more so when customers have to give up their ownership of products.
While Vodafone has been exploring schemes to recover critical raw materials from customers, other brands, like UK home improvement retailer Kingfisher, are exploring collaborative consumption models. For Kingfisher, which has set a target of offering 1000 products with closed loop credentials by 2020, there’s also a ‘huge opportunity’ around services and the DIY sector.
Turning Products Into Services
Head of sustainability and innovation, Dax Lovegrove, has previously discussed the oft-quoted stat that a drill is only ever used for about 12 minutes over its lifetime. Opening products up as a service will form the basis for the new business model by maximising them to their full lifetime potential. What will make it work will be the platform and messaging – and fostering DIY skills, he says.
The circular economy might still feel a distant future, but getting to grips with its implications can never be done too soon. According to Wolff Olins senior strategist, Ben Maxwell, as the pace of disruption picks up, the role of the marketer will expand accordingly.
“The circular economy is an opportunity to move away from the notion of the passive consumer and instead reflect the rich variety of things that people do: have ideas, make things and share them,” he says.
Further information and discussion on the circular economy can be found at the Disruptive Innovation Festival.