EXECUTIVE PERSPECTIVE

When is a packaging change most likely be worth the investment? Before design managers start a project, they should know which efforts are most likely to deliver a positive return.

Scott Young, President, Perception Research Services International

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50 Percent Wasted: Insights to Improve Packaging Success Rates and ROI

by Scott Young

I know half the money I spend on advertising is wasted, but I can never find out which half. This famous quote from John Wannamaker came as a result of his frustration over advertising spending, but it could just as easily apply to packaging. At Perception Research Services (PRS), we assess hundreds of new packaging systems annually and, in fact, we find that about 50 percent

succeed and are recommended for introduction. While this figure puts to rest the old canard that current packaging always wins in consumer research studies, it also represents a great deal of frustration and wasted resources. With this thought in mind, PRS recently reviewed its global packaging research databasealong with publicly documented case studies in which packaging is known to have affected in-market salesto see what

John Wannamakers frustration with advertising costs could just as easily be applied to packaging.

2011 The Design Management Institute

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Design Management Metrics: Assessing Quality and Outcomes

they could reveal about the primary factors driving the success (and failure) of new packaging. This article shares insights from that exercise, along with implications for managing design and using consumer research to improve outcomes and increase returns from packaging investments.
How do we measure and define success?

Before diving into findings, its worthwhile to explain how PRS tests new packaging systems and measures success. Perhaps most important, this methodology has nothing to do

with shoppers stated preferences or with comparisons between current and proposed packaging. Over many years, weve repeatedly found that direct comparisons of packaging systems (that is, beauty contests) are not relevant for projecting success because they do not have any connection with shoppers actual behavior in stores. Instead, packaging systems are assessed via monadic studies (that is, each person sees only one version of a brands packaging), which simulate the introduction of new packaging in market. Essentially, the primary question in each study is the following:

If the new packaging appears on the shelf, will shoppers noticeand will it make a difference? Of course, making a difference ideally means directly driving more sales, as this is the ultimate objective of most packaging changes. However, our experience suggests that this is a high hurdle, because only 10 to15 percent of the new packaging systems we test have an immediate (and statistically significant) positive impact on purchase levels from shelf. In addition, many redesigns are part of larger brand repositioning ef-

To gauge the impact of a new packaging system, the primary question is: If the new packaging appears on shelf, will shoppers noticeand will it make a dierence?

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50 Percent Wasted: I nsights to I mprove Pack aging Success R ates and ROI

forts. Thus, they are not solely about direct sales impact. They are also strategic in nature, with longer-term implications for brand health. Therefore, imagery and communication may be appropriate measures of success even though they may not translate immediately to more purchases. Taking this into consideration, we developed the PRS Packaging Performance Index, which incorporates measures of shelf presence (visibility and shop-ability), communication, and (importantly) customized measures tied to redesign objectives. Thus, the Performance Index asks such questions as: Did the new packaging maintain or improve the brands overall performance? Did the new packaging do what it was intended to (as per the design brief)?

By answering these questions, the Index serves as a measure of a new packaging systems potential to support brand strategy and build a brand over the longer term. It is the source of the 50 percent success figure cited earlier, because about one-half of proposed packaging systems outperform current packaging, as measured via the Performance Index. The Performance Index also provides another valuable function it offers a consistent framework for measuring packaging effectiveness across brands and categories. In other words, it allows us to determine the strength of a brands current packaging relative to the competition and to normative data (that is, results from other/similar studies). As it turns out, this last piece of information is critical for making the right decisions and improving packaging ROI.

Learning from experience

In reviewing both our database and publicly documented success stories (and disasters), we began with a relatively simple classification system, in which designs were segmented into three broad categories: big wins, big losses, and minimal impact. We then took a closer look to determine if patterns emerged in terms of brand profiles, performance measures, and design elements most closely associated with each situation. A synopsis is as follows: The big wins When we reviewed cases in which new packaging drove sales (in studies and/or in market), a relatively consistent brand profile emerged. The brands involved were smaller or midsize brands, as opposed to category leaders with dominant market share. They were brands with weak current packaging, which underperformed category norms on key dimensions (such as shelf visibility). Of course, both of these situations imply significant upside potential. What may be more surprising, however, is that increases in shelf visibility (as measured via PRS EyeTracking) were the single biggest driver of sales increases. While weve long known that unseen is unsold, this finding goes a

Current Packaging

100

Test Design K

105
5% improvement over Current packaging

Test Design I

115
15% improvement over Current packaging

80

100

120

The PRS Packaging Performance Index serves as a measure of a new packaging systems overall performance/improvement relative to current packaging and its potential to build a brand over the longer term.

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Design Management Metrics: Assessing Quality and Outcomes

ensure that the product wasnt By creating disruption on shelf step further. It confirms that when a lost in the refrigeratorand and/or embodying a key dimension new packaging system can lead more thus drove dramatic increases in on a visceral level. Nutri-Serums shoppers to engage with a brand consumption and repurchase. Body Wash packaging is a good on-shelf, it is highly likely to drive example, as it embodies beauty purchase. In fact, through studies The big losses via its thin, contoured shape. conducted in collaboration with the The cases in which new packaging Wharton and INSEAD schools of drove major sales declines predictably By providing a clear source of business management, weve found fit a different brand profile. Because added value. The snack n seal that getting shoppers to take a second the brands in question were typically feature on Chips Ahoy packaglook is an even more powerful prelarge and well-established, there was ing provided resealability, which dictor of purchasethat shoppers a significant risk of alienating current consumers linked directly to who take a second look are actually users. Whats more interesting is that fewer stale cookies, less waste, re-considering a brand. the current packaging of these brands and increased value. One example of a successful dewas not necessarily strong, as measign change is the Baked! product line sured by the Performance Index. InBy driving increased consumption. from Frito-Lay, in which a dramatic stead, the commonalities centered on The Heinz Fridge Pack helped change in packaging color created greater contrast on shelf, increased visibility, and drove sales. It is important to note that the dramatic color change was aligned with the brand strategy (to suggest a healthier product) and balanced by continuity in brand identity (to provide reassurance). Across brands, categories, and countries, weve also seen that new packaging structures have a greater likelihood (than graphicsonly changes) to drive success. Specifically, weve seen that effective structures can The new packaging for the Baked! Lays product line struck the right balance between disruption and continuity, and work on multiple levels: helped to drive sales.

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50 Percent Wasted: I nsights to I mprove Pack aging Success R ates and ROI

the nature of the packaging changes, and the performance measures that drove the sales declines. Typically, there were changes to multiple primary packaging elements, often including brand logo/ identity, packaging color, and/or

product name. As a result, the new packaging losses were nearly always linked to brand hesitation or confusion (Is this still my brand?) or to shop-ability problems at shelf (Can I find my variety?). While Tropicana is clearly the most publicized packag-

ing disaster in recent years, there are many other cases that fit this profile (Kraft Natural Cheese, Rembrandt tooth whitening products, and Pantene come to mind). Minimal impact While theres always a tendency to focus on dissecting major wins and losses, this third category is just as intriguing. It represents a great deal of opportunity cost and wasted resources, as extensive redesign efforts resulted in packaging that didnt move the needle. As with the other classifications, we were able to discern a common situational profile. These brands typically were well-established; some were even category leaders with dominant market share and current packaging that was relatively strong compared to category norms, suggesting limited upside potential. However, the more interesting patterns involved the product categories and the packaging changes themselves. We found a higher incidence of minimal impact changes in certain types of categories, including those linked more closely to product efficacy (such as over-the-counter pharmaceuticals and analgesics). Predictably, many of these changes were refreshes that did not modify primary design elements or offer new news (key claims, and so forth).

Across brands, categories, and countries, weve seen that new packaging structures have a greater likelihood than graphics-only changes to drive success, because they can have a positive impact on the shelf, in the hand, and in the home.

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Design Management Metrics: Assessing Quality and Outcomes

Essentially, these were cases in which brands were not making a difference on the shelf. More important, they were not giving non-users a fundamental reason to reconsider the brand (via new information or claims).
Increasing return from design

The findings and trends outlined here point to several implications for managing design more profitably and effectively: To increase ROI, its critical to focus on the right opportunities. Today, most efforts are focused on making specific design efforts successful rather than on deciding which brands to redesign. In fact, most companies lack a consumer-driven process for determining or prioritizing design efforts. Instead, redesigns are often driven by internal politics, competitive activity, predetermined timelines, and/or pure personal judgment (that is, The VP thinks it looks old). Our research instead suggests that if companies ask themselves the right questions, they can identify situations in which packaging changes are most likely to drive positive return. For instance, if they regularly measure the performance of their current packaging, it will help them to focus resources on the brands and packages that truly need improvement. Companies may be better served

by doing fewer but more-dramatic packaging redesigns. The high rate of minimal impact re-designs suggests that changing shopping behavior is challengingand that many packaging changes amount to cases of marketers talking to themselves rather than making a difference with shoppers. Thus, it can be argued that energy should be focused on dramatic changes that offer clear value to consumers (such as functional benefits) and/or are linked to delivering new information (such as a new feature or benefit). Marketers and designers face a difficult balancing act in modifying well-established brands. On one hand, design changes must be dramatic enough to disrupt at the shelf and drive brand re-consideration, or they are unlikely to have an impact. On the other hand, if changes are too dramatic, they run the risk of creating brand confusion and shop-ability concernsleading to disaster. While there is not a single formula for managing this conundrum, weve repeatedly seen that its important to strike the right balance between disruption and continuity. If there is a dramatic change in one area (such as packaging structure or color), it should be balanced by continuity in other dimensions. In particular, weve found that changes in brand identity and

product naming should be approached with extreme caution, as they are most likely to create confusion. Finally, our experience suggests that theres a need for marketers to establish more precise and systematic processes for in-market measurement. While our studies can isolate the impact of packaging in a research scenario (with no other changing variables), very few companies have a systematic process for tracking the impact of new packaging once its been introduced in-market. And because pack changes are nearly always done in conjunction with other elements (promotions, product changes, and so on), clean in-market data is hard to come by. As a result, packaging often falls prey to an old adage: What isnt measured isnt fully valued. And while there are numerous in-market success stories (and disasters), there are few systematic efforts to measure the impact of packaging across brands. To address this issue, marketers need to establish processes to control packaging rollouts more carefully. For example, by ensuring clean changes (versus a gradual turnover), documenting other key factors (such as promotions), and/or selecting lead retailers for new packaging, companies can better isolate the link between new packaging and sales, and ultimately

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50 Percent Wasted: I nsights to I mprove Pack aging Success R ates and ROI

gauge the value of packaging relative to other factors in the marketing mix.
Rethinking research

These findings also raise important issues regarding how best to utilize consumer research to drive packaging success. For example, they suggest a need to include the shopper earlier in the design process. Just as designers tend to focus on executing specific projects (rather than on identifying the most appropriate initiatives), researchers are now heavily focused on validation, at the very end of redesign efforts. In other words, after enormous time and energy have already been invested, research is done at the end to see if a package change has been successful. However, the 50 percent success rate suggests that, in many cases, we may have been applying our energies in the wrong direction to begin with. To prevent this, companies should establish a research process for periodically auditing or benchmarking the performance of current packaging (via an annual or bi-annual study), or develop a best practice of testing current packaging (versus the competition) at the outset of redesign efforts. Both approaches can help guide resource allocation (Which redesigns should we invest in?) and help set

appropriate and attainable redesign objectives. Along with observational/ ethnographic research in stores and homes, they can help uncover the right opportunities. Our findings also point to a disconnect at the screening stage. If 50 percent of design systems that go into evaluation do not succeed, legitimate questions should be raised about how packages are developed and selected for final testing. In fact, few companies employ consistent processes

tendency for shoppers to overstate differences when they directly compare designs (current versus proposed) often leads designers to think theyve made a big impact, when in fact, they havent gone far enough to move the needle in the aisle.
Moving the needle

To dramatically improve packaging success rates, designers and researchers need to start by defining their roles more broadly.
at the screening stage. Some brand teams use qualitative research, while others may rely on Web-based studies or judgment alone. In our experience, the primary breakdown or disconnect (between screening and final validation) centers on the shelf. As outlined earlier, weve consistently found that packaging systems succeed (or fail) at the shelf. Increased shelf visibility is a primary driver of sales, while poor shop-ability leads directly to major sales declines. However, packaging designs are often developed and screened in the absence of shelf context. This gapand the

To dramatically improve packaging success rates, designers and researchers need to start by defining their roles more broadly. For designers, this means going beyond executing individual projects well. It means focusing on the best use of resources and on improving return on investment from packaging design. For researchers, it means going beyond providing a scorecard to assess or validate new packaging systems. It involves acting as a partner in driving success by identifying the right opportunities, directing efforts to the right brands, and helping track in-market sales impact. If we can take these steps and evolve our priorities and working relationships, the result will be a better allocation of effort, and ultimately an improved packaging ROI. For, unlike John Wannamaker, we do have a good sense of where the 50 percent is wastedand we can put the processes in place to drive more wins.
Reprint #11222YOU18

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