Should Green Products Be Priced Higher?

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Here's a real world quandary. At TerraCycle we recently launched a line of ultimate eco-friendly cleaners. Their efficacy is great (same or even better in some cases than the synthetics). They are packaged in used soda bottles, with end run triggers, and moreover, they retail at a strong price ($2.99 for a 1L bottle). We've gained some fantastic distribution from Office Max to Target and have been happy with the sell through.

So here's the question: At mass market, our cleaner is a great price vs. other eco-brands such as Mrs. Meyer's, which retails for $4.99 for a 1L bottle of, say, Window cleaner. We even do better than 7th Generation which is in the $3.99 range. However, we are $0.70 more expensive than Windex, which retails for $2.29, or generic, which is priced even lower.

Our sell through at our retailers is very strong, so we could keep our price at $2.99 and be the best price in the eco-field but still be a premium to the national brand. Or we could cut our margin and either match or even beat the prices of the conventional brands. It would hurt margin, but it should increase market share. It would be a bold but tempting move since we may be able to gain market share beyond the "eco-cleaner" category.

What do you think we should do?

Tom Szaky is the founder of TerraCycle, a New Jersey based company that makes fertilizer using worms and produces retail products from recycled goods. The firm was started while he was a student at Princeton University. Tom was named "The No. 1 CEO Under Thirty" by Inc. magazine in its July 2006 issue.