In the world of structural innovation it is far easier to talk about innovating than it is to actually innovate. Large CPG companies are recognizing the need for structural packaging innovation but face many road blocks to actually implement it. The primary issue may very well be that their manufacturing assets are also their liabilities.
The Need for Innovation
In today’s day and age, consumers expect more from their brands and product offerings. People’s lives are faster-paced and they need solutions to fit their lifestyles. Since consumers are increasingly faced with overload from more than 55,000 brands on shelf, compared to just 15,000 brands in 1991, companies are going to great lengths to vie for attention, provide brand value and create a competitive point of difference. Marketers are awakening to the potential for packaging to play a role in the marketing mix, beyond containment and display. Packaging has the ability to engage all of the senses due to its aesthetic, tangible and functional nature. For many products, packaging can be a lasting brand ambassador throughout the product’s use and create desirable and memorable brand experiences. Companies are now exploring how packaging can create new usage occasions and/or drive new product formulations.
The Barriers to Innovation
Although there is the need and desire
to innovate, many obstacles exist which may restrict success. One is
the fact that structural innovation is not often done and most companies
have limited or no experience with it. For many, their packaging is
a common package form utilizing common equipment.
Consequently, marketers are often challenged
to innovate within unrealistic budgets and timelines. The realities
of packaging equipment procurement, setup and qualification timelines
are often not anticipated. It is expensive and time consuming to set
up an efficient packaging line; sometimes this is much more extensive
than product production equipment. It requires more factory space and
more equipment so as to be able to form, fill, seal and pack. Unfortunately,
many initiatives still place the emphasis and priority on product innovation,
relegating the package options to off-the-shelf solutions or no solution
at all. Adding to the complexity is the short tenure of brand marketers.
It is often difficult or impossible to attain success when project leadership
is constantly changing and/or short timelines are dictated by the need
for success within ones’ term. These established tenures may work
for product innovation but they don’t always work for packaging innovation.
There is also lack of accurate predictors for packaging return on investment
(ROI), making it difficult for companies to justify costs to upper management.
New packaging is often implemented along with other marketing strategies
making it difficult to measure its impact in isolation. Furthermore,
forecast modeling based on use testing is often inaccurate as consumers
may have no or limited context for evaluation. Often, long term packaging
benefits aren’t understood and the deeper emotional connections aren’t
manifested within the limited duration of a use test. Test markets may
be the best way to predict ROI, but can only happen with manufactured
products. Test markets can be time consuming, costly and are often not
pursued out of fear of prematurely sharing your idea with the competition.
Your Assets May Be Your Liability
The biggest barrier of all may be cost.
It is cheap to keep making what you already make or what the world commonly
makes. In part, profits are derived from manufacturing efficiencies
which generate low cost of goods. Availability of materials, standardized
equipment, scale and speed of manufacturing, drive costs down.
This problem is that the efficiencies that enable low cost of goods may actually encumber change. Once a company builds up its manufacturing assets and productivity, change becomes difficult to achieve. Most equipment is specific to a particular method of manufacturing and lacks adjustability. Furthermore, a company cannot just discard existing equipment and invest in millions of dollars of new equipment for each new packaging concept.
Change Mindsets and Reset Expectations
My first recommendation is to change a company’s mindset and stop thinking of packaging as an expense but an investment. For many companies, packaging may be the only untapped vehicle for differentiation and value-added. In the world of commodity products, unperceivable competitive product benefits, or over proliferation of products, packaging innovation may be essential in order to build market share.
Along with changing one’s mindset,
expectations also need to be reset. Packaging innovation may take longer
and cost more than product innovation. The packaging cost of goods most
likely will be more expensive than a common packaging format. It will
take time, and commitment to create the efficiencies necessary to reduce
the cost of goods. Appropriate timelines, budgets and ROI expectations
need to be established accordingly. Companies need to allow for experimentation
and the necessary trial and error associated with doing something for
the first time. They need to further forecast and strategize using broader
ROI timetables. If done right, meaning the packaging innovation has
been thoroughly tested with consumers and aligns with consumer trends,
gaps in the marketplace, and the business potential has been measured,
the innovation should stand the test of time, increase volume and profitability,
allowing for scale and efficiencies to be obtained.
Avoid Reactive, Short-sighted Initiatives
Save your time and money for the long term, “bigger bang for your buck” packaging opportunities. Too much money is wasted on projects that are doomed to fail due to false expectations, contradictory objectives, and/or insufficient budgets and timelines. It could very well be possible to offset the short term margin deficit of initially high cost of goods with money saved from avoiding ill-fated projects.
Fine Tune Financials Accordingly
To cover the added costs of package innovation, there are often opportunities to cost reduce the product or package less product and still be consumer acceptable. Others offset the cost of innovation with other savings like improvements in manufacturing, distribution, shelf pack out, etc. Are there more efficient ways to spend Marketing dollars? Or simply, have you offered your consumer a benefit that they are willing to pay more for?
Learn From Others
The standard packaging forms we have today weren’t standard in the beginning. The first glass bottle, metal can, paperboard box, plastic bottle and tray weren’t cheap. It took years of investment to optimize and standardize those formats. These examples are proof that it can be done. Your packaging concept can return on investment if it satisfies a lasting product and consumer need, invested in scale, and optimized overtime. The large flat panel TVs were hardly affordable when first launched, but offered a consumer benefit worth the added cost. Their format however, proved to be the ultimate desired solution for consumers. Limited at first as a luxury item for an exclusive audience; yet over time, with increased investment and demand, the cost of these items became more accessible.
Leverage An Internal Champion
It definitely helps to have an entrepreneurial
mindset. It further helps if you have a courageous leader with the authority
to commit. It has been said that the Sherwin Williams Twist and Pour
Paint Container was championed by the CEO. It was through his leadership
that Sherwin Williams revolutionized paint packaging. This was no insignificant
feat if you consider all of the paint shakers within each retail outlet
that needed to be altered to accommodate the new square configuration.
If you have commitment from the top it sure makes things easier.
Walk the Talk
Talk is cheap but innovation takes courage and commitment. If companies wish to stay ahead of the competition they must pursue new ways of doing things. There often isn’t a “silver bullet” solution, immediately available, that is cheap to make and earns market share. “Cheap to make” is most likely what you and your competitors are already making. Creating superior things people want and can afford that you can ultimately make for a profit is what you should strive for. Packaging innovation is no longer just about driving costs out but identifying benefits people are willing to pay for.
The author, Peter Clarke, is president
and founder of Product Ventures, a packaging and product design and
development agency. Contact Peter at 203.319.1119 or pclarke@productventures.com.
