Recession Proof Packaging Strategies

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Today, as we look to our new administration

to right the economic wrongs, our focus has shifted dramatically. 

As a nation, we have been obsessing over the economy, specifically trying

to understand consumers’ spending habits in this environment. Companies

and retailers alike are focusing on how to survive in these unprecedented

conditions.  These difficult economic times call for smart thinking

from our industry leaders as we strategize on how to protect brands

from the effects of the recession with long-term packaging solutions. 

Short-sightedness has no place in the packaging industry in today’s

economic climate if we are to survive. 

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 The Value of Packaging:

Consumers have become skeptical of traditional

advertising campaigns that make false promises and unrealistic claims.

The enormous diversity of media outlets today also adds to the fragmentation

and ineffectiveness of traditional advertising.  This fragmentation

reduces the potential to reach large numbers of consumers, and the

Wall Street Journal points out that “the $138 billion dollar advertising

industry seems unprepared for an interactive future.” 

As a consequence, some companies have

shifted their marketing budgets away from advertising and are finding

package design to be a far more efficient use of their dollars and a

more successful means of connecting directly with the consumer. 

Packaging has come a long way in recent decades – evolving from generic

cost-driven formats to the highly differentiated value-added brand ambassador

it is today.

In the current economic environment,

there’s a need for brand building that’s right for the times and

acknowledges consumers’ interactive experience with the package itself. 

This ability for packaging to double as “visual advertising” has

always been one of its primary strengths, particularly as shoppers are

far more cautious with their spending.  For many brands, the package

provides the tangible point-of-difference from one product offering

to another, particularly when there is no perceptible difference. 

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The Rise of Store Brands

Walmart reports that sales of many private

label categories are up by 40 percent this year.  According to

the Nielsen Company, private label sales account for more than $81 billion

in the United States, up 10.2% over 2007.  With the pressure of

today’s economy, consumers are opting to purchase store brands rather

than the more expensive national brands.  In fact, 72 percent of

shoppers in 2008 purchased store brands, up from 69% in 2005, according

to the Nielsen Company.  Most store brand innovation has traditionally

come by way of graphics changes, with Target, Safeway, and Publix leading

the way.  But store brands are becoming more sophisticated than

ever before. Take Target’s Archer Farms Cereal canister, for example.

The innovative package has hand-friendly proportions and a flip-top

lid, differentiating it from the generic bag-in-box format that is difficult

to recluse. The brand has also brought reclosability to the chip aisle,

with flexible bags that feature a press-to-close zipper. This may be

the sign of more structural innovations to come from store brands.

 Reactive Initiatives:

With the rise of store brands and structural

innovation, there has also been the escalating fight for companies to

get “green marks” for sustainability.  Over the last decade,

studies have shown that Americans’ awareness of and sensitivity to

the environment has continued to grow.  However, because there

aren’t many short term ways of addressing the sustainability challenge,

companies have begun to make minor and/or cosmetic changes in an effort

to be part of the movement.  

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Many of today’s environmental strategies

play on the misperceptions of consumers and offer erroneous “green

claims.”  “Greenwashing” is a serious threat to building

and maintaining brand trust.  This is a classic over-correction,

knee-jerk reaction due to the lack of concern for the environment in

the past.  If the environment had been a package requirement, along

with cost and convenience, we wouldn’t be in this “quick to fix”

situation.  Like all other decision-making processes, to make a

major, meaningful change requires forethought, time and investment. 

 The Economic Downturn

In these economic times, consumers are

scrutinizing prices and sizes very carefully and are looking to determine

whether there is an intrinsic value to the product.  Brands are

struggling to maintain margins with the rising costs of goods. 

Companies are reacting by reducing the amount of product in a package

that looks like it contains the same amount as before.  This strategy

may fool consumers, but potentially threatens brand trust. 

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On its web site, Ben and Jerry’s vocalized

buyers’ concerns over the recent reduction of the pint-size ice cream

package by Häagen-Dazs.  “One of our competitors (think funny-sounding

European name) recently announced they will be downsizing their pints

from 16 to 14 ounces to cover increased ingredient and manufacturing

costs and help improve their bottom line," the copy reads.   

Hard Times Call for Smart Thinking

It is imperative during these tough economic

times for brands to discover what consumers perceive to be the fundamental

value of your brand’s packaging.  Consumers will often say they

want everything included in a new package design, but are not willing

to pay for it. 

Marketers and designers must engage with

consumers and understand the brand’s assets so as to effectively target

the “sweet spot” between what a consumer desires and can afford

and a brand can make for a profit.  The point here is to save money

by eliminating unneeded features and unnecessary waste, and focus your

investment on those meaningful differentiators that drives brand value

and maintain consumer loyalty. 

Too many brands suffer from SKU proliferation

which leads to consumer confusion, added costs and brand/product cannibalization. 

According to McKinsey, there were 15,000 brands on American grocery

shelves in 1991.  A decade later, there were 45,000 brands. 

Clearly, the choices are exhaustive for consumers. 

Store-brand

Costs can be saved by focusing on primary

SKUs.  Instead of downsizing to maintain margins, companies need

to focus on how their consumers actually use products and invest in

research to discover product consumption patterns and retail turn rates. 

Right-sizing can maximize shipping and distribution costs as well as

limit SKU proliferation.  A right-size package may offer creative

pricing flexibility as well as drive brand loyalty.

Packaging systems entail scale and efficiency

derived from significant manufacturing capital investments.  One

cannot simply scrap a factory and build another one for a short-term

solution.  Companies will succeed by focusing on planning ahead,

staying the course and avoiding short-term distractions. 

The key during these tough economic times

is to be smart with your investments, cut costs that aren’t fruitful

and apply the savings to areas that continue to deliver.  Packaging

must be thought of as a long-term investment in brand differentiation

and the most effective form of advertising to create sustained brand

value and maintain loyalty. 

Peter is a visionary entrepreneur who founded

Product Ventures in 1994 to create the ultimate strategic creative agency for

the research, design and development of manufactured goods. His passion for

excellence and dedication to helping clients shape products and packaging to

enhance consumers’ lives have garnered Clarke enormous recognition

throughout the industry.   He is a frequent commentator in the

media, as well as a sought after speaker. Contact Peter at 203.319.1119 or pclarke@productventures.com.