(I posted this last month on my MIT Sloan Management Review column. It’s an interesting story about how a company’s sustainability efforts can help improve brand value with customers and drive sales. To be honest, I wasn’t sure if the results here are, in fact, “a huge deal” as described below. I know there are not many examples like this, so i’m inclined to see it as important — and I’ve heard from people in a few sectors who want to duplicate the result/finding. Let me know if you have other examples and what you think.)
It’s long been an open, burning question for sustainability advocates: Do consumers care about a company’s environmental and social practices — and do they care enough to give that company more business? The question is easier to answer in some sectors than others: People vote for organic food, for example, with their dollars. But in the service sector, it’s particularly hard.
So I was very interested to see an unexpected company, Caesars Entertainment, attempt to concretely measure consumer interest in its sustainability efforts. As background, Caesars is a large casino and hospitality company, with $5 billion in sales, 55 million square feet of air-conditioned space across dozens of large properties, 63,000 employees, and 115 million visitors each year. (Full disclosure: I advise Caesars executives as a member of its external citizenship and sustainability council.)
Even through some tough financial times recently, the company has done solid work to improve its environmental and social performance. Its absolute greenhouse gas emissions are down 23% since 2011 and water use is down 11% over the last decade. The company has set science-based targets for emissions reductions, including for its suppliers (which is still rare). On the social side, the company has done extensive work on diversity, equity, and inclusion in supply chains and operations, with 42% of its management roles filled by women. Caesars has also invested time and money in training employees to spot and stop human rights and trafficking abuses.
These are hard areas to quantitatively assess, but Caesars has a culture of financial focus and data collection. So more than most companies, it has measured the impact of its sustainability efforts on the productivity and happiness of its “team members” (that is, its employees). The data is clearly positive, and that alone has been valuable. But a couple of years ago, the company took aim at the thornier question of customers’ interest in sustainability. How much do they care about its environmental and social responsibility efforts?
A ‘Huge Deal’: The 1.5% Revenue Bump
Caesars designed an interesting test program to get at the question of how much its sustainability efforts were driving customer activity. The Caesars data team split members of the company’s “Total Rewards” loyalty program living near a single property (Harrah’s Resort Southern California) into two groups.
They sent the first group some information about the resort’s environmental program, called CodeGreen, including how Caesars built a 5.5-acre solar field, offered employees electric-vehicle charging stations, planted an onsite garden for produce, and recycled 42 tons of waste each month. (In 2013, MIT Sloan Management Review published a case study on the evolution of the CodeGreen program and its impact on internal operations.) In contrast, the control group got zero information about CodeGreen. Over the next six months, the customers who heard the CodeGreen pitch increased their spending, compared with the control group, by a statistically valid 1.5%.
But how good is a 1.5% bump in revenue? Gwen Migita, Caesars’s vice president of social impact and inclusion and Chief Sustainability Officer, recently declared it “a huge deal” at a conference on metrics. For context, plenty of marketing tests yield no result, so, as Migita described it, the internal reaction from marketing execs was skeptical at first. They checked the data and are expanding the test to other properties, which is a good sign that they’re convinced.
Pro-Green Efforts Can Affect Customer Word of Mouth
I’d point to two other reasons that the 1.5% bump in revenue is a real and positive result, both from Caesars’s own data and from my own broader view on consumers and sustainability.
First, from the company’s data: Caesars measured not just revenue increases, but the impact of the pro-green messages on an important marketing metric as well: Net Promoter Score (NPS). NPS measures word-of-mouth support or criticism of a brand, and a detailed, data-rich study by the London School of Economics clearly tied improved NPS to increased sales. It’s easy to see why: As the study put it, “People systematically rate word-of-mouth advice above all other forms of communication when deciding what to buy.”
Caesars surveyed the test guests, and among those who recalled seeing the messages around their sustainability efforts, there was a 7% increase in NPS — that is, 7% more customers checked 9s and 10s on the survey of how likely they were to recommend the brand, with 10 being the most likely. Thus, Caesars consumers who read the materials spent more money while also feeling more positive about the brand overall. This is a big deal.
The second reason I’m impressed with the result is because of the sector we’re talking about. People do spend more for sustainable products, but almost entirely in a few categories, like food and personal care. Some consumer packaged goods companies use the framework “in me, on me, around me” for predicting how consumers weigh healthier or greener products. Things going “in me” like food and beverages are where consumers prioritize buying healthier and more sustainable options, which we see clearly in large and growing markets for organic foods ($45 billion in sales in the U.S. alone) and meat substitutes. The “on me” category refers to personal care products like shampoo, soap, lotions, and perhaps apparel, which partly explains the success of some of the most sustainability-focused brands in the world such as Patagonia. Finally, “around me” includes cleaning products and other home goods.
But when you get farther from the things that touch us daily, there are fewer examples of true green success. The Toyota Prius was a big winner for many years, even when it was priced at a premium. For sectors even farther from our bodies — services like banking or, in this case, hotels — the story is less clear. These companies face less consumer pressure to green their operations but do face rising pressure from business-to-business buyers.
In hospitality, consumer pressure to go green is really low. I’ve worked with clients in the hospitality sector for years, and what I’ve concluded is that when we consumers visit hotels on vacation or business, we are, to be blunt, slobs. We want to avoid thinking about the hard things in life, like hanging up our towels. Yes, the little cards in hotel rooms asking us to skip daily linen service to do our part for water conservation are nice, but guests are not nearly as engaged as they are when they’re shopping for food and other personal products.
Hotels are an escape. And let’s be frank: Casinos are another level entirely. “What Happens Here Stays Here,” as Las Vegas’s official marketing campaign once put it. That adage refers to a lot more than towels and energy use, but you get the point.
From my perspective, any increase in customer interest and revenue based on Caesars’s sustainability practices is surprising and important. The overall lesson here is simple: Most large companies now have real accomplishments to point to, including significant reductions in energy and water use, large purchases of renewable energy, supply chain efforts to improve worker conditions, and much more. Companies get that employees care, and now some big investors do as well. But perhaps consumers care more than we thought. Companies should gamble a little (sorry), brag about the work they’re doing, and reap the rewards.
(This post first appeared in MIT SMR)
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