The Green Deal has ignited a spark of creativity in the market, with exciting new products and services to capitalize on these regulations. But how do you make money from these new value propositions? And even more important, how do you create a premium return and beat the competition? Let’s take a look at the opportunities in product economics.
R&D projects related to the Green Deal must navigate the unique challenges and paradoxes of market demand and pricing, to achieve success. Understanding the potential profitability of a product is crucial to making informed decisions about product development and business design efforts – and that’s where product economics comes in.
The circular growth opportunity
One of the key advantages of embracing a circular economy is that it offers opportunities for innovation and business growth. By adopting circular business models, you can find new ways to generate value from your products and services, while reducing your environmental impact.
For example, we noticed companies, like ETAP, that traditionally sell single-use products can explore new business models that involve renting, leasing, or providing products as a service. In this particular case, light-as-a-service not only reduces waste but also creates a new revenue stream for the company. Similarly, companies can use recycled materials and waste streams as inputs for their products. This creates a closed-loop system that reduces resource consumption and promotes resource efficiency, for instance, the plastics-as-a-service business model we researched for Borealis.
If you incorporate circular principles in your business practices, you can differentiate yourself in the marketplace, attract environmentally-conscious customers, and enhance your brand reputation. Demonstrating your commitment to sustainability and the circular economy can create a competitive advantage while creating a better future for yourself and the planet.
Understanding consumer behavior and preferences
First of all, choice modeling is a key component of circular economy product economics because it helps to understand consumer behavior and preferences. It provides insight into factors such as product features, price, brand, and attributes that influence purchasing decisions. This information can help you make informed decisions about product design, pricing, and marketing strategies tailored to the unique needs of the Green Deal market.
Validating willingness to buy and pay
Secondly, it’s crucial that you validate customers’ willingness to buy and willingness to pay in the development of Green Deal products. Without this validation, you risk investing time and resources into a product that may not sell well, leading to losses and decreased overall success. Validating willingness to pay can help you determine the price point at which the target market is willing to purchase the product. This is critical for determining potential profitability and making informed pricing decisions.
In summary, to develop successful Green Deal-inspired products, you need to understand product economics. And to get a thorough understanding you need to assess choice modeling and validation of willingness to buy and pay. Navigating these challenges can be quite overwhelming, so feel free to check out our services to help you create profitable and impactful sustainable products and services driving the circular economy.
Interested to know what the future might look like for your sector? Our experts authored Flanders Circular Economy 2050, a vision of how our region looks at innovating our future (Dutch version only, sorry).
Want to discuss your Green Deal opportunities?
Leave your email address to book a 20-minute meet-up with David Pas, coordinator InnoLab, and get discuss how you can make the new Green Deal regulations profitable for your business.