Ep 176: Driving demand for circular economy: What marketers need to know | Kantar and Swapfiets

[01:00:00.320] - Pippa How do we drive demand for circular propositions? That's one of four action pathways highlighted in a new marketing playbook for a circular economy created by the Ellen MacArthur foundation and Kantar. We'll be exploring the other action pathways on the show over the next couple of months, so make sure you're subscribed so you don't miss those episodes. I'm Pippa, and a couple of weeks ago I went to Amsterdam to meet Jonathan Hall, managing partner at Kantar Sustainable Transformation Practice, and Amanda Gandolfo, head of brands at bike subscription service Swapfiets, to find out more about how to drive demand for circular propositions. Jonathan, can you start by telling us what drives consumer demand for circular products? Do the consumers know they want these things? [01:00:47.780] - Jonathan Hall Wow, good question. So I guess you need to take a step back if we're thinking about the consumer perspective on circular economy and circular products. So I'd literally go back as far as thinking about the values that really define society and have defined society really since the post war, post second World war period, because those are things which you can ladder back up to things like circular products as manifestations of what we see in culture. And I think if you think about these things in terms of generational theory, we're going through a pivot at the moment, which we've only seen the like of that once before in the last 130 years. And that was after the Second World War when we saw a shift from a sort of institutionalism which defined the pre war era, to individualism. And that was driven by the boomers. It was manifested in brands like Levi's and Harley Davidson and Marlboro. And, you know, they really rode that wave. And now we're going through a transition from individualism into something which we call mutualism right now. There will be lots of pushback. There always are in terms of when there's fundamental change. [01:02:06.770] - Jonathan Hall And we're seeing that. But the trend lines are clear now. Circular economy is very much a part of that value shift. And people will be looking to products and services and experiences and brand owners to help them transition. And they may not see these things as circular themselves. They may not even know what circular is. But the point is they're buying into the benefits and the propositions which the circular economy represents. And one final point here, I would say, is that it's late millennials and Gen Z, who are in particular embracing this value shift. And they're the biggest cohorts that we've ever seen. They're obviously the future. They're defining the emerging economies and we're going to see a wealth transfer of $84.4 billion trillion dollars from boomers to those generations by 2045 in the US alone. [01:03:01.890] - Pippa Wow. So that's a huge economic opportunity there. And Amanda, Swapfiets, can you tell us about it? Because it feels like it's hitting a lot of these points that Jonathan just mentioned. [01:03:13.240] - Amanda Gandolfo Well, of course. So Swapfiets is the first bike subscription company ever. So we kind of founded a new category and essentially what we offer is bike as a service. So we have identified, this was almost 10 years ago actually, that biking is a big hassle. So whenever you have to bike, you need to take care of your own repairs, maintenance, let alone if your bike gets stolen. And of course, as a shift onto a more sustainable way of just getting around in the cities, we all want to promote cycling, but now there was just this hassle on people's lives and a barrier to start. So we exist to take the hassle away from biking. We exist to bring worry free biking to everyone. And the idea is quite simple. You have your own bike, you pay per month and we take care of the rest. So if you need any repair or maintenance, if your bike is stolen, we take care of it. And I think what we realize we're actually doing is promoting more livable cities by doing that. So the more we take the hassle away from biking, the more people are encouraged to cycle, the more our cities get livable. [01:04:35.180] - Amanda Gandolfo And we also see that we encourage a lot of people to start cycling as a result. So even in markets, so we started in the Netherlands, we are very famous here, but we have already expanded to seven other countries, including London in the uk, France, Denmark, Germany and so forth. And in markets where cycling is not commonplace, this is where our service is even more important because we take people by the hand, we explain all they need to know about a bike and so forth. And this is where we see a massive opportunity for growth. And it's interesting, right, because we are a circular business in our core. But that is not the thing that we are communicating or it's not the thing that we're leading with. We are truly leading with convenience and what people want in their lives, which is cycle without worries. [01:05:29.360] - Pippa So with those different geographies you're talking about, there are there also different marketing needs because I imagine in Amsterdam you're doing less convincing of people trying to get non cyclist cycling. But in London, it's not inherent to the way of living there at the moment. So how do you adapt to that? [01:05:47.180] - Pippa Interesting question. At first, of course we are a scale up. So it's not that we have all, all the resources and marketing themes everywhere to think it through every step. But one of the things that we realize it's core is indeed the convenience and the worry free part of it. So if you are in a market where people are cycling already, you do know of the hassle, so you want convenience. That's the case in the Netherlands. If you are in a market where you don't know how to cycle, you also want convenience because you just want someone to take you by the hand. So in the end, the core human value, let's say, or need that we are addressing, it's quite similar in a way. And we do tailor communication so people feel, for example in London you could tell that they want to feel more confident as they cycle. So that's something that we cater to depending on the market. [01:06:37.960] - Pippa Yeah. And Jonathan, a brand like Swapfiets, it does have that inherent circularity to it. But what about other brands? Where are the blockers? When does marketing step into that whole ecosystem? [01:06:53.700] - Jonathan Hall Yeah, I mean, how long have we got there? There are so many blockers, I think that marketers experience and they're both external and internal. So I think the two big external ones that we should talk about, one is the value action gap, which many listeners will be very familiar with. So the gap between people's stated values and beliefs and their actual actions. And in our latest work, the gap there is 85% of people want to live a more sustainable lifestyle, 29% follow through. So we've still got a gap which is as substantial as it has been for the last two decades. So that's a real issue. The second one is all about greenwashing. So we have an increasing perception of greenwashing on the part of consumers. Again, latest work of ours, 56% of people think that they've been misled with regard to sustainability issues by brands. And that is across all sectors across the world. It varies slightly, but still. So you've got a huge erosion of trust there. So two big blockers there for marketers to overcome. But then internally you have marketers who feel that they don't feel confident, the awareness of issues is low, the capability that they feel is low. [01:08:10.920] - Jonathan Hall They don't feel competent to actually address these issues from a marketing perspective. They don't really know what circularity implies for them. There are also issues that they have to address with regard to the perceptions of cost. So internally people think that circular products cost more money and that's also a major issue for them. I think we also see that when issues aren't hardwired into people's KPIs, then they don't do things. So again, if a CMO is trying to affect change within the marketing discipline, but then those brand managers across the world, in Brazil or wherever, don't actually have it in their metrics and that, you know, it's going to be difficult to move. And in fact, work that we did with the World Federation of Advertisers in a report called Sustainable Marketing 2030, we looked at barriers and the top seven barriers for marketers were all internal. Amazing. [01:09:14.730] - Pippa What kind of things are you hearing? Is it that thing around cost and not understanding it or are there other things that play there as well? [01:09:22.210] - Jonathan Hall Yeah, exactly. So overcoming those perceptions of cost, I think that sense of capability and being able to address that in a way that's competent. People are struggling to know where to start. They need a lot of help. [01:09:35.640] - Pippa Yeah. And I imagine there are marketers listening to this episode thinking, yeah, this sounds like a problem, I'm sure. What solutions do you have for them? Where is that opportunity to drive this demand for circular products? [01:09:47.700] - Jonathan Hall I mean, I think the many marketers, because if you think about the core skills that marketing has, it's really about proximity to the consumer consumer. It's then being able to think about how do I influence the value chain to be able to deliver products and services which meet those consumer demands in the optimal way. And there are obviously issues around differentiation within those products. So I think that's what they understand. And I think if you can start to frame circularity in those terms and connect those two, the intersecting circles of circularity and marketing as we've done on the playbook that we've collaborated on, then I think, you know, there's a way through. [01:10:34.080] - Pippa Yeah. Amanda, I wonder if any of that chimes with you or if I have all these issues. [01:10:39.320] - Amanda Gandolfo Jonathan? No, I think I can speak a bit to it. Prior to my role at Swapfiets, I was at Unilever for more than seven years and I went through shaping a purpose driven brand, Hellman's from scratch. From when the Hellman's was just a hamburger sauce, sauce for hamburgers, until crafting the make taste, not waste global proposition for the brand, including super bowl commercials and so forth. And I think one of the big things I take with me and I would encourage to every marketer is for you to provide a great solution for your customer. You need to fall in love with the problem. And it was really when we stepped into the shoes of people. And back then it was about food waste, for example. And we were like, okay, how can we market a food brand and relate that to waste? Isn't that unsexy? Isn't that unappealing? Like, what are we doing? We want to solve a problem in their lives, but how exactly does the brand fit and so forth? And one of the things we did realise back then is that people in their homes, they have a major problem with managing their food. [01:11:49.620] - Amanda Gandolfo So you start your week with the best of intentions, but then midweek, so you buy a lot of salad and vegetables, and midweek it all goes to waste. And no one of us wants to do that. It's the same in other categories, right? We all have great intentions, but then life gets in the way. And that's where you see the say and do gap. And what we realized is like, okay, can we create a tool or a campaign or a behavior change program, which is what we did back then, to also help these families not only because of the sake of food, but also use their most wasted ingredients in order to make delicious meals? And then this is where Helmann's back then could step in. And I think it all started with falling in love with the problem of food waste and with the problem that families face when managing food in their homes. Same thing for Swapfiets. For us to craft the proposition, it was all about falling in love with the hassle of cycling, understanding how people perceive it, and then we can craft a great solution for them. And of course, when you're marketing any solution or any problem, any product, you're not marketing, oh, buy this because it's sustainable. [01:13:00.680] - Amanda Gandolfo We need to make this a win. I see a lot of a challenge that marketeers have, especially in big companies where they're like, oh, let's try to be sustainable now. And then they create like this one little product or this one little category that no one cares about. It's margin decretive for the company and we don't have enough money because we need to sustain the core. And then they are like fighting and putting a lot of resources into that, only to after six months, sort of, it's the first item in the list to be cut. And I am a big fan of making it a triple win, right? A win for the society and for customers that get more value out of this, a win for the company that get higher margins and is able to move towards the right thing and of course for the environment as well, as we all end up Winning. And I think, especially for example when you talk about, I think we spoke earlier today about refuse in Brazil. I was back in the day in Brazil in the personal care category. So I've also been through that. And we're like, oh, let's move to refuse because that is more sustainable. [01:14:04.250] - Amanda Gandolfo Guys, we have a major economic crisis. People are moving into refuse and getting bothered to change from a package into another package and dealing with that sort of. Yeah, it's not a perfect plastic package that you just pump and it's beautiful. I don't know if you've ever used refuel. It's a bit messy. [01:14:22.920] - Pippa Yeah. [01:14:23.390] - Amanda Gandolfo But people are willing to go through that because it's much more value for them. This is how they're gonna keep using their favorite soap and giving that to their family with the beautiful fragrance that they love. And where like we're, this is what we're marketing and this is where big transformation in sustainable packaging or in sustainable practices. This is where I believe that is. [01:14:44.880] - Pippa And do you think that's what helps address that think do gap that you were talking about, Jonathan, where you're not focusing on this big sustainability green story which also has this risk of petering out or being greenwashy. It's selling, it's meeting the user needs for whatever, regardless of whether it's circular or not. [01:15:07.970] - Jonathan Hall Do you want to go first? [01:15:11.790] - Amanda Gandolfo So I think companies should not try to embed sustainability or circularity because they want to sell more. They should be doing it because it's the right thing. It is probably better for their economics and for the margin of products depending on how you do it. And I think people, when presented with a choice, if you have two products, they both address your needs in a sort of equal way. And one cherry on the cake, it's more sustainable. Yeah. Then the choice is obvious. But if we're going to make our customers choose, hey, this is more sustainable, but this is more flashy and beautiful and it's actually the same price. Then we're putting our people in a very difficult position. And this is where the mismatch happens between what they say they would do and what they actually do, which is to buy the fleshy one. [01:16:05.210] - Pippa Do you agree with that, Jonathan? [01:16:06.690] - Jonathan Hall Yeah, I think what Amanda said, both points there are for me how you position circular products effectively, which I think there's a what and there's a how to it. And I think the what is about you need to think about benefit led propositions, which is exactly what Amanda's been describing. Swapfiets and when you were at Unilever as well. I think if you look at the marketplace for circular products and services and broadly for sustainability, the mistake that marketers keep making is they've for so long been working with their colleagues up the value chain to create something which is more sustainable because they want to do the right thing. But actually then they make the mistake of putting that proposition in the foreground of what the products or service in the marketplace. And the reality is that we as consumers, we buy those products and services. It's very well documented that there are certain category drivers that we're looking for, and they'll be to do with taste or quality or performance or whatever it is according to the sector or category. Now, they don't go away just because you're buying a circular or sustainable product. [01:17:19.370] - Jonathan Hall You're still looking for those things. There are, of course, certain segments of consumers. We're probably those types who will try things more than others, but we're still gonna come back to products and services that actually deliver what we expect them to. Now, the trick is developing circular products which actually are circular. They are better for people, they're better for planet, but they also at least deliver parity or ideally, they outperform existing products and services on the marketplace. So I think from a WAT perspective, that's what. What you absolutely need to do. And you can pick off those behavioral barriers in the, say, do or value action gap as well, because they're easily documentable. You can do some research, you'll know that to do with price or convenience or cost or performance, whatever it is, you can pick those off. But I think the how is often forgotten as well. And at Kantar, we have the world's biggest communications evaluation database. And what we've done is we've gone back over the last 10 years, looked at all of the ads. We have like 60,000 ads a year, whatever it is, and looked at those where there is either an environmental or a social component within that ad. [01:18:37.030] - Jonathan Hall And what you find is that the ads which are most effective are the ones which actually leave people feeling inspired, leave people feeling, I can actually do something about this, actually give people a sense of that being a solution. Because if you leave them feeling downhearted or guilty, then you're not gonna change. Behave. [01:18:58.540] - Pippa Yeah, you can't shame people into shopping more sustainably. We've talked. We don't have much time left, but we've talked a lot about buying things, buying stuff, and something we're talking more and more about in the circular economy space. Is circular business models where we've got rental, resale, those kind of things. And Swapfiets is a product as a service. So how do you market something when somebody could be like, oh, I could just go and buy a bike. How do you fight against that and win people around to having a product as a service instead? [01:19:33.310] - Amanda Gandolfo Interesting question. That's really my day to day. So I think one of the things we need to get clear at, and I really like to talk about no bullshit marketing, which is like when I arrived, I remember that our founders and in general people in Swapfiets, we're all passionate about bikes. And sometimes I would see meetings where people would be discussing the specs of the bike and how the bike is. I was like, guys, let's get clear about who our audience is. [01:20:02.940] - Pippa It's not the Tour de France. [01:20:04.540] - Amanda Gandolfo It's not the Tour de France. If you would love bikes, you would probably get your own bike Surprise. With all the specs that you want in the color that you want. People that come for Swapfiets, most of them, I cannot speak to all of them, but most of them, them don't care about the bike. They care about going from A to B. And that's a very important distinction, right? So if someone is comparing our product to a new product, for example, and I must say our product is extremely high quality, so I could still make that comparison, but as it breaks down much less than the rest. And that's an interesting thing about Swapfiets. We say that we are the only buy company that doesn't want our buy to break because we keep it in the value chain as long as possible. So once a bike is returned, we repair it, reuse it, recycle it if it's needed, and then we give it to the next member. So it's in our best interest to learn from every bike and every repair to make sure the bikes break as little as possible. Which goes a bit against us because people are like, they stay with us for one year, their bike doesn't break. [01:21:14.350] - Amanda Gandolfo So they're always, always on the move. And then after, when you're paying the service, they're like, oh, why do I need them again, okay, I'm just gonna return this, and so forth. So anyways, but it's very interesting because once you get clear on who your audience is, you really double down on the convenience, the service, you reassure them that the product is high quality, that it's not. Because that's a barrier that we have right in the sort of second hand resale, reuse. Repair or subscription base when it comes to products people are like oh it's a rental so it's not good. It is great and we make sure it's great. [01:21:50.920] - Amanda Gandolfo So I would say that reassuring people on quality, reassuring people that we've got what they need and they can have peace of mind. Which speaks to Jonathan's point about we want people to feel something, we want them to feel worry free. And in our communication it's not only about saying hey it's cheaper to get a swap fees than to get this or the bike is good. No, it's about the worry free feeling to cycle with all your problems taken care of. So you might have problems in your life but not on Swapfiets. [01:22:21.940] - Pippa I love that. That's a strong mind. [01:22:26.100] - Amanda Gandolfo I might use it for my next convey. Let's see. [01:22:28.480] - Pippa So it's selling the idea that if your bike breaks down that's not your problem. It's Swapfiets. [01:22:33.500] - Amanda Gandolfo Exactly. [01:22:34.160] - Pippa I love that. [01:22:34.950] - Amanda Gandolfo It's almost like having, you know, when you are in a situationship that you don't really need to commit to it. It's like the no commitment bike that res well with Gen Z as well. Sorry, not Gen Z with everyone. [01:22:49.920] - Pippa We are running out of time here sadly but I wanted to know if you have something to share with marketers listening as a quick action or maybe something to think about whilst they're cycling to work or going about their lives. Jonathan, can I start with you? [01:23:04.560] - Jonathan Hall Sure. And I think one of the things that marketers struggle with with regard to circular economy once they've got their heads around it is how do I sell it internally. And I think the what we talk about to the marketing community is a lot of those people that you need to convince don't buy the moral argument or they aren't necessarily prioritizing it. So I think framing the conversation as a value argument for both short and long term is the way that you need to think about that. Those are the rules of the game that we know. And I think if you go back to the playbook that we've worked on together, we identify key levers there that we can employ. I think there are very strong evidence of brand growth. It's all about building resilience into the business model. You can talk about cost savings and efficiencies, you can talk about competitive advantage and you can talk about an improved customer experience as Amanda's been describing with regard to swap feats as well. It reimagines how you relate to the consumer and it gives you a lot more Points of contact. [01:24:16.280] - Pippa Yeah, like a whole menu to go off. Amanda, what would you say is your final point for fellow marketers? [01:24:24.740] - Amanda Gandolfo I think for me is make people feel something. Whenever you're thinking about your proposition, the value, what you're communicating and especially your campaign, which is a consumer facing final line. Because we know a lot of work goes into those campaigns and those products. But in the end people get get one thing, one line, one feeling out of all that work. And if you're not feeling it when you're doing probably your consumer will not feel it either. So sometimes, especially when we talk about complex subjects, either circularity or sustainability or even explain a subscription model to someone who doesn't know about it, if you yourself or you're trying to far fetch or you're trying to make it work and too many things into there probably in the other, in the other end it will not be well received or people will not really get it. And sometimes an image or a video will speak a thousand words for a thousand words, but you need to believe it in it yourself before you start 100%. [01:25:30.020] - Amanda Gandolfo Yeah. [01:25:30.490] - Pippa Well, words of wisdom there. Thank you, Amanda. Thank you Jonathan for joining us. And we will also share that marketing playbook that you have worked on with the Ellen McArthur Foundation. [01:25:39.400] - Jonathan Hall So excellent. [01:25:40.330] - Amanda Gandolfo I would love to read that. Thank you. Thank you. [01:25:44.880] - Pippa So we heard that we're going through a shift from individualism to mutualism and there are lots of opportunities for the circular economy here. But we also heard that consumers don't necessarily need to know about a circular economy. It's for marketers to solve their problems. You can find out more about that in the marketing playbook linked in the show notes of this episode. Don't forget to subscribe to the circular economy show so you don't miss our upcoming episodes on the other marketing pathways. Thanks for joining us. See you next time.