The Packaging Challenge

Stephen DeAngelis

September 21, 2010

Decisions about how a product is packaged can have enormous consequences. Consumers rarely think too much about the packaging products they buy come in. I can assure you, however, that manufacturers, distributors, and retailers think a lot about packaging. The marketing website KnowThis.Com provides an enlightening overview of “packaging decisions [that] are important.” They include:

Protection – Packaging is used to protect the product from damage during shipping and handling, and to lessen spoilage if the product is exposed to air or other elements.

Visibility – Packaging design is used to capture customers’ attention as they are shopping or glancing through a catalog or website. This is particularly important for customers who are not familiar with the product and in situations, such as those found in grocery stores, where a product must stand out among thousands of other products. Packaging designs that standout are more likely to be remembered on future shopping trips.

Added Value – Packaging design and structure can add value to a product. For instance, benefits can be obtained from package structures that make the product easier to use while stylistic designs can make the product more attractive to display in the customer’s home.

Distributor Acceptance – Packaging decisions must not only be accepted by the final customer, they may also have to be accepted by distributors who sell the product for the supplier. For instance, a retailer may not accept packages unless they conform to requirements they have for storing products on their shelves.

Cost – Packaging can represent a significant portion of a product’s selling price. For example, it is estimated that in the cosmetics industry the packaging cost of some products may be as high as 40% of a product’s selling price. Smart packaging decisions can help reduce costs and possibly lead to higher profits.

Expensive to Create – Developing new packaging can be extremely expensive. The costs involved in creating new packaging include: graphic and structural design, production, customer testing, possible destruction of leftover old packaging, and possible advertising to inform customer of the new packaging.

Long Term Decision – When companies create a new package it is most often with the intention of having the design on the market for an extended period of time. In fact, changing a product’s packaging too frequently can have negative effects since customers become conditioned to locate the product based on its package and may be confused if the design is altered.

Environmental or Legal Issues – Packaging decisions must also include an assessment of its environmental impact especially for products with packages that are frequently discarded. Packages that are not easily bio-degradable could draw customer and possibly governmental concern. Also, caution must be exercised in order to create packages that do not infringe on intellectual property, such as copyrights, trademarks or patents, held by others.

According to Maeve Hosea, packaging is particularly important for products sold primarily through traditional bricks-and-mortar enterprises [“Consumers look for design on their path to purchase,” MarketingWeek, 8 September 2010]. She writes:

“Up to 70% of purchase decisions are made in store and are heavily influenced by pack design and merchandising. Since most people still use bricks-and-mortar supermarkets, there is a huge opportunity to both build loyalty over time through clever pack design and make people change their minds at the time of purchase. Design can be a very powerful marketing tool, argues Mike Smart, design strategist for the Design Council. ‘Design gives form to the idea and the role of the designer is very much to understand and position themselves between the ideas world and the physical product on shelf. Designers have a focus on the craft of making something but maintain the integrity of the research behind that brand.’ Good designers bring the whole consumer experience of the product to life through the packaging, he adds. This encompasses how it is perceived on shelf, how it is taken home and how it is disposed of. Imagery, brand values, product functionality and pure innovation are some of the many ways packaging can add value to marketing strategy. Dan Hill, author of marketing title Emotionomics, says: ‘Packaging can influence through the use of clever colour schemes, size, material quality, unique shapes or size.’ Packaging’s role is to deliver all the aspects of the brand promise and deliver it in an emotional and compelling way.”

Costs must always be weighed against sales and the less packing material that is required the cheaper the product is to produce — and the higher potential profit margins. Dell, which doesn’t have to compete on shelves with its packaging, claims to have eliminated millions of pounds of packaging over the past two years [“Dell Eliminates Use of 18.2 Million Pounds of Packaging Since 2008,” Business Wire, 24 August 2010]. In making packaging decisions, Dell executives assert that they follow “the company’s “three Cs” packaging strategy, which focuses on the cube (packaging volume); content (what it’s made of) and curbside recyclability of its packaging materials.” Another company that prides itself on “green” packaging is the Procter & Gamble Company [“P&G Pilots Sustainable Packaging for Beauty Products,” Environmental Leader, 13 August 2010]. The article reports:

“The Procter & Gamble Company (P&G) plans to pilot the use of renewable sugarcane-derived plastic on selected packaging for its Pantene Pro-V, COVERGIRL and Max Factor brands, starting in 2011. The sustainable packaging also is 100 percent recyclable in existing municipal recycling facilities. P&G says the sugarcane-derived plastic is a significant development in sustainable packaging because it is made from a renewable resource. The company explains that the new material is made in a process that transforms sugarcane into high-density polyethylene (HDPE) plastic, a type commonly used for product packaging. P&G plans to source the plastic from Braskem SA, which manufactures the material using ethanol made from sustainably-grown Brazilian sugarcane. The pilot will be rolled out globally over the next two years, with the first products expected to be on the shelf in 2011.”

Detractors counter that thousands of acres of rainforest have been destroyed so that sugarcane can be grown. As you can see, packaging decisions, even those a company believes are in society’s best interests, can have some consumer blowback. One of the most intriguing articles I’ve read recently about packaging focuses on the efforts of Doug Herrington, vice president for consumables at Amazon, to get suppliers to use different packaging for on-line consumers than they do for in-store consumers [“Packaging Is All the Rage, and Not in a Good Way,” by Stephanie Clifford, New York Times, 8 September 2010]. Clifford reports:

“Doug Herrington’s office at Amazon.com suggests that he is particularly bad at getting items out of their packages. Along his wall, there is a Philips Norelco shaver still in its plastic clamshell casing, coffee pods in their retail display containers and a bottle of Tide inside a box. But Mr. Herrington, vice president for consumables at Amazon, is trying to make a point: With a typical online purchase, ‘you’ve got a ton of packaging and a ton of work ahead of you,’ he said. For nearly two years, Amazon has been trying to get manufacturers to adopt ‘frustration-free packaging’ that gets rid of plastic cases and air-bubble wrap — major irritants for consumers and one of Amazon’s biggest sources of customer complaints. But the frustration persists. Only about 600 of the millions of products Amazon sells come in frustration-free versions. And other big online retailers, like Walmart.com and Target.com, have not embraced the new packaging, even when manufacturers make it available.”

When you think about it, Amazon’s idea makes a lot of sense. Products shipped by Amazon don’t need to have fancy packaging because the sale has already been made. The problem for suppliers, of course, is that they would have to create two lines for every product, one line for packaging products for traditional retailers and another line for on-line retailers using frustration-free packaging. That’s not necessarily cost effective. Clifford continues:

“For brick and mortar retailers, traditional packaging remains popular because it can help deter theft. But in Web shopping, there is general agreement that the alternative packaging is a hit with consumers, and that it is simple for packaging companies to create. It is also environmentally friendly, using recycled and recyclable cardboard rather than plastic and wire ties, quicker to produce than the retail packaging and costs less. Now Amazon, still determined to get more manufacturers to sign up, is making the case by taking the angry customer feedback on old-school packages directly to the product makers. Compared to the traditional versions of the products, frustration-free products have earned on average a 73 percent reduction in negative feedback on the Amazon site.”

According to Clifford, some suppliers have succumbed to the pressure and made it work. She explains:

“The strategy worked for Philips, the electronics company. It recently made the packaging change on its Essence electronic toothbrush when the company saw the feedback. ‘It wasn’t necessarily that the product was the issue, it was the unpack experience — you’ve got to get scissors or knives,” said Stephen Cheung, senior consumer marketing manager for Philips Oral Healthcare. Philips asked the supplier AllpakTrojan if it could create a new package. Because manufacturers usually use one supplier for the plastic part of their packages and another for the cardboard, ‘even before you make anything you’ve lost a little efficiency in the design process,’ said Dave Hoover, sales manager for AllpakTrojan. With this project, though, AllpakTrojan could use a single material, and it went through a machine just once instead of the two to three times required for the traditional package. ‘From design to finish, it’s as efficient as it gets,’ he said. Within three weeks, AllpakTrojan had designed the new container, tested it by dropping it from various heights and putting it on a vibration table and had it ready. The toothbrush’s travel case protected the brush head, and cardboard compartments held the charger and toothbrush base. Without the fancy printing, shiny cardboard backing and plastic, ‘it’s much less expensive,’ Mr. Hoover said. And the environmental benefit was significant: the square footage of material used was much smaller, and the cardboard was recycled and recyclable. Philips said it was so happy with the change that it was looking to switch the packaging for other items. The company said it was also pushing other online retailers to adopt this packaging, to tepid response.”

Clifford confirms what I noted above: “big manufacturers” are reluctant to adopt two packaging options because of “the complexity in having different packages for physical retail and electronic retail and a lack of coordination among the major e-commerce companies.” Clifford continues:

“‘One of the biggest hurdles is to convince a company that it’s worthwhile, or the volume is there, to sell the same product in two different formats,’ said Anne Johnson, director of the Sustainable Packaging Coalition, an industry working group operated by the nonprofit institute GreenBlue. And because retailers did not work together on a common standard, ‘you don’t end up with unified approaches to these issues, therefore you never solve these issues,’ she said.”

Clifford notes that there have been some “hiccups” in Amazon’s efforts to get frustration-free packaging right. She reports, for example, that hard drives shipped in such packaging were damaged in transit and “Amazon switched that packaging back.” Nevertheless some suppliers are providing products in the new way.

“In addition to Philips, recent converts include Polaroid and Procter & Gamble. Brands like Duracell, Bounty and Tide introduced their own frustration-free packages. Duracell, which offers a 28-pack in a frustration-free version on Amazon, had ‘been getting rave reviews from consumers about the packs on Amazon,’ said Bob Jacobs, Duracell marketing director. Mr. Jacobs said Duracell made that packaging available to all Web sites that sold the 28-pack, but a check on Target.com and Walmart.com showed that those were still selling only the plastic-encased retail packs. Target said it did not have a similar packaging program but was exploring more e-commerce-friendly options with some vendors. Walmart.com said it reviewed the size of shipping boxes and tried to minimize the environmental impact. ‘It’s such a win-win proposal,’ said Nadia Shouraboura, vice president for global fulfillment at Amazon. ‘We don’t expect to make a miracle in a week, but I think over time it’s going to happen.'”

I suspect that as e-commerce continues to grow suppliers will realize that profit margins for products sold on-line can be increased even more if the packaging used to ship them is significantly cheaper than the packaging used to generate product interest in traditional stores. When the volume is high enough to make running two lines for packaging profitable, suppliers will jump on the bandwagon. Humorist Dave Barry once wrote, “More and more products are coming out in fiercely protective packaging designed to prevent consumers from consuming them. These days you have to open almost every consumer item by gnawing on the packaging.” I think that Doug Herrington wishes he would have written those words. He certainly agrees with them. I’ll have more to say about packaging tomorrow.