Increase Packaging Costs? Really?

YES, especially if the extra cost provides a value add that is highly sought by your customers. Or if your package has discernably fallen behind your competitors.

How to know for sure?

If it has been some time (say 18 – 24 months) since you last did customer research, it likely is a good idea to get some feedback—ideally quantitative data.

Any benchmarks or suggestions?

First off, it is insightful to include core users of your Brand in a packaging benefits study in addition to competitive users. And make sure that if there is an age or consumption skew, include those consumers who represent the bulk of your volume. If you are losing market share, you absolutely want to hear from competitive users.

Let’s say that the category volume is increasing faster than the growth of your Brand. That trend would indicate that you are at a competitive disadvantage and adds urgency to figuring out what the core issue(s) are.

What questions to ask?

Start off by determining what the biggest and most important drivers of consumer demand are as it relates to your packaging. Then, see how your package performs against those top priority features. Most importantly, ask study respondents which package value added feature they would be willing to pay for. If possible, quantify the extra cost for the feature. If that new feature is highly desired and only costs 5 – 10 cents, you may have a clear opportunity to increase usage from current consumers – or potentially attract new customers to the Brand.

In the area of utility, some thoughts are opening and closing the package. How difficult is it, and does that process get more difficult for older hands? Is the inner freshness seal easy to pry open? Many packages today have such limited extra material that it is almost impossible to grab a corner of that seal. Or force consumers to use a knife or other sharp utensil to puncture that seal. Would your heaviest user consumer prefer a tab that is easy to get a hold of?

How about the jar lid or bottle cap or seal along the package top? Is it easy to open? For consumers, not your package engineers or designers. Is it easy to reclose securely, and does it stay closed after multiple usage occasions? If you have a reclosable feature, how hard is it to get that fully closed (and stay closed)? Some of those reclosable strips are so narrow that it is a challenge to get them to work. How about opening the top of the package to reveal the reclosable closure? Do you have easy to use notches, or do you require consumers to get out their scissors to get the top off?

How about getting the product out of the package? Yes, really, ask and find out. Some packages now have the cap or opening on the bottom to help dispense the product. Think ketchup or other condiments. Some have simple caps while others have a usage feature to limit the flow of the product. Think salad dressings or squeeze packages. Can consumers actually get all of the product out of the package? Or does the cap or lid make it impossible to empty the package completely?

How about product protection. Does your package prevent (or at least reduce) breakage to acceptable levels? Would the addition of a tray or divider improve your scores on that attribute? And does your package deliver against consumer expectations when it comes to freshness? Would a foil liner or multi-layer film or other advanced package material do a noticeably better job? And again, would your consumers be willing to pay for it?

What about storing your package in the pantry or refrigerator or freezer between usage occasions? Does it fit easily on those shelves, and does it stay upright? Is it stackable (to save space), or does it require a bin of some kind to keep the packages from falling onto the floor in the pantry (think snacks, nuts, toppings, brown sugar, etc.)?

Let’s now move on to the packaging material itself. In many product categories, sustainable packaging is becoming a critical factor. One that can be a competitive advantage, or certainly a noteworthy claim. In this case, consumers are increasingly aware of the environmental impacts of packaging waste vs. recyclable or reusable materials. Can you shift to a different material, or a package that uses less or a lighter material. This may be an area where a change might increase costs but where consumers would be willing to pay a bit more.

Lastly, look at the package design itself. Is the labeling and product info complete and clear, especially when it comes to nutrition, health claims and ingredients? Sure, lots of that stuff is government mandated. Are you better or worse than your competitors? Do you call out important features (like “lift here to open, or press here to reseal”)?

If you are like most companies today, you have had to deal with increasing costs from many fronts—ingredients, shipping, containers in addition to packaging. Increasing your retail pricing to recover those increased costs can be risky, especially if your competitors do not move as aggressively. That said, addressing a packaging value add deficit as part of total cost of goods review—and pricing action—can be a good time to level the playing field—or maybe even get a leg up.

The other option is to “pay” for the packaging value add through increased volume. That approach works best if you have a new feature that consumers consider to be a top priority and one that can stimulate increased product usage or a shift from competitive brands.

Our advice is to be conservative in your assumptions. Try to protect your overall profit margin. But do pay attention to what your consumer research tells you. It’s your Brand. Your packaging matters!

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