A regional paper company introduced a line of recycled copy paper in the West and priced it 12% higher than standard copy paper. The price premium was assumed because the paper took more steps to produce and recycled paper from other producers was always priced at a slight premium. Market research in the environmentally friendly region also indicated that people were willing to pay more because using recycled paper was the right thing to do. The company’s recycled copy paper was high quality and contained 35% post-consumer waste – which was more than triple the 10% level required for the recycled designation. The paper did well in the first eight years, capturing a 10% share, but sales started to stall and the company wondered how it could jumpstart the growth without spending more on their advertising.
To get sales growing again two traditional assumptions were challenged. First, was the market research really telling the full story? Were people just saying what they thought you wanted to hear – that they were willing to pay more for recycled paper? Second, did recycled paper really have to be priced at a premium? After analysis it was determined, with improved production techniques, a price premium for recycled copy paper was not necessary. As a result, the price for its recycled paper was reduced to the level of standard copy paper.
With the price premium eliminated, the recycled paper was able to compete on a level playing field with all types of copy paper and sales started to grow again.