The Path to Innovation

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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.  

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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

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