Understanding the Value of Packaging
Looking at your package from the perspective of your customer, the consumer and the competition can help you understand its true value.
Packaging value is the “Holy Grail” for packaging leaders across the value chain.
The packaging world is still trying to break the code and we are getting closer. We have identified a number of components and tests that we can use to help us understand if the new packaging on a product refresh or a new product is worth the money.
There are many dictionary definitions of value. One I like is:
“Value = worth in usefulness or importance to the possessor, utility or merit.”
In past articles, I have discussed consumer trends and noted how important they are to packaging and product value. Top consumer trends include taste, performance, convenience and nutrition. Packaging enhancements clearly add value to products by having windows to connote freshness, having a zipper to signify freshness and convenience and so on.
It is also important to step back and recognize that consumers buy products not packages. Having said that, the package is the primary communicator of the product inside and it provides the key shelf impact (the so-called “first moment of truth”) that consumers and shoppers need to be able to make their product choice. This is another way packaging provides value.
At my company, we describe value in the following way:
As you think about this simple equation, it helps you understand that price, benefits and competition are key and need to work together to get to the right overall product value. For example, you can buy a 32-ounce yogurt tub or you can buy a 4-pack of single-serve 4-ounce yogurts for about the same price. With the 4-pack, you get one-half as much yogurt!
Now think about the benefits of convenience, value, freshness and portability and all that that affords. Alternatively, consider that the 32-ounce tub can be used for recipes by heavy users. Both packages provide value in different ways. It is critical to consider the importance of packaging early in the development process so that you deliver against key consumer wants and needs.
In the past articles, I have written about the tremendous growth of private label, which is now private brand (PB). You should take notice that PB almost always has the same packaging enhancements as the national brand but is 30% less costly.
Having reviewed value definitions, trend importance and product/package relevance, let’s cover some of the package-related testing that can be conducted to better understand packaging value. Behavior scan test markets are often identified as the best way to understand packaging value because you can test new and current packaging with real consumers over time. The problem is this kind of testing costs hundreds of thousands of dollars. Usage tests and mall intercepts are also used as a means to get at packaging value, but they tend to be a bit artificial and are also pretty expensive.
We are seeing more virtual and on-line testing. This technique has improved over the years. Though touch, feel and usage are preferred, you can get some good directional insights for packaging.
Matched market testing is a great way to get at packaging value. This testing involves small-scale tests (from five to 10 stores) where you isolate the markets and put packaging enhancements in one market and not the other then measure purchase intent over time. These types of tests can provide 70% confidence and cost less than $100,000. Yes, that is still a lot of money but knowing this information can provide a much bigger payback. A Brand Union study noted that poor packaging design was costing U.S. marketers more than $2 billion.
The one other, and most important, place that you need to sell packaging value is to your leadership team. Why should they pay two to three times more for one package than another? This is easily taken care of by creating case stories where you show the old product/package versus the new product/package and then describe the benefits, packaging costs, retail sales and sales forecasts.
I wrote about this before: the move from paper to plastic jugs for single-serve flavored milk helped reinvigorate milk sales.
Be sure and think about packaging early, get your company on board through case stories and use the tips above to create successful, enhanced value packaging for your company.