Multi-functional packaging can mean added value without added risk.
With economic news seemingly worsening by the day, it's no surprise that today's consumers have become increasingly value-conscious and scrutinize every dollar spent. Needless to say, it's been difficult for companies across industries to encourage customers to loosen their purse strings and spend. Multi-functional packaging, which adds consumer value without exorbitant price increases, could be the solution.
In better days, when larger R&D budgets were the norm, investing in innovation was a no-brainer. Companies had resources to dedicate to finding the next breakthrough product to command market leadership and generate sales. While this strategy remains a good one no matter the business climate, belt-tightening and bottom-line scrutiny are making R&D dollars hard to come by.
What we propose is a shortcut to new product innovation through multi-functional packaging. By using this tactic companies can add value and develop new, differentiated and successful products with less investment and little risk. A close look at how multi-functional packaging sells reveals why this important trend is sure to have staying power – and more importantly, how manufacturers can leverage it as an innovation booster.
What it means to be multi-functional
The term functional packaging seems redundant – of course all packages are functional. They house food and beverages from processing through delivery, keeping products safe and contained until they are ready to be consumed.
However, multi-functional packaging takes the basic concept of packaging one step (and in some cases several steps) further. Rather than just acting as a container or package, multi-functional packages serve a variety of purposes, helping consumers use the product in an easier, more efficient way. These added features all translate into greater end-user value and can help manufacturers turn a commodity product into a revenue-generating success without breaking the bank.
One example with which you are sure to be familiar is Ramen Noodles, one of the first well-known examples of a mass-produced multi-functional package. The container serves not only as a package but also as the means by which to cook the product and then to eat it. Consumers avoid the mess and hassle of cooking and also avoid cleanup completely.
It's no question that competition on the supermarket shelf is intense. Brand owners have always gone the extra mile to develop packaging that is eye-catching and stands out from the crowd. Products with engaging graphics, sharp colors and interesting designs grab attention and sell more; they convey quality and can also spur impulse buys.
Multi-functional packaging takes the principle of brand differentiation one step further. By creating a package that is of inherent use to the consumer, the brand is offering value that stands apart from the competition.
A key point here is that the package must be of "inherent use" to the consumer, and manufacturers must understand what their customers want. No product, no matter how innovative or sleek, will be successful if it is not perceived by consumers as needed. Whether the new package results in added convenience or less waste, it is important that there is a demand for the benefit the new feature will provide.
An example of this brand differentiation principle at work is microwave popcorn, a modern convenience that all of us have come to love. It was not that long ago that consumers had to use a plug-in popcorn popper. While the process was fun, when it was time to melt the butter and add the salt, things could get messy and clean up was anything but a snap. There was a need for an easier way.
Microwave popcorn was a game-changer because it solved this unmet need. Not only was it as cheap as regular popcorn, it cut out at least four preparation steps and eliminated clean up. One could remove a popcorn bag from a three-pack box and three to five minutes later have steaming, perfectly coated popcorn ready to eat. Not only did the new functional package make consumers' lives easier, it led to an explosion in popcorn sales. With more than 80 percent of U.S. homes containing a microwave, domestic popcorn sales grew from just $100 million in 1985 to more than $1 billion just twenty years later.1
Unique user benefit
Finding an unmet market need and ideating to solve it is the formula for a successful product. Once companies start directing efforts at developing a product to meet the unmet need, it is also essential to ensure that the cost of the added feature does not exceed the perceived added value.
Convenience is often one of the biggest advantages in choosing products that utilize multi-functional packaging. A number of studies show that consumers will spend more for products that allow for ease-of-use or on-the-go consumption.
A look at the yogurt market segment reveals several examples of this concept put into practice. From the initial concept of putting fruit at the bottom of yogurt, processing and packaging engineers designed highly functional yogurt containers with fruit, nuts and other additives that could be packaged atop the container and easily opened and mixed in the yogurt at the time of consumption.
This led to other multi-functional packaging innovations with yogurt, including the addition of a utensil to the package and, more recently, the introduction by General Mills of Go-GURT®, a product that comes in a tube form that can be squeezed out for eating on the run. Not surprisingly, this multi-functional packaging innovation is a hit with the 15 and under market segment, where it delivers much-needed nutrition in a fun and convenient package.
In this case, the company did not attempt to launch a brand new product but instead sought to change product delivery and the pay-off was great, with first-year sales of more than $100 million. Due to Go-GURT and other packaging innovations, U.S. yogurt sales have increased by nearly 60 percent from 1998 to 2003.2
Perhaps the most recognized buzz word of the 00s, sustainability, started as a grass roots effort on behalf of consumers to live more environmentally friendly lives where they would consume fewer resources and produce less waste. However it quickly became a smart business strategy and now is an indelible component in corporate business practice.
And while the more complex packaging that is often associated with multi-functional packaging can be at first viewed as less sustainable, a closer look proves that many functional packages are significantly more sustainable than the competition.
Small short-term investment, large long-term gain
The business value of multi-functional packages is clear. Their uniqueness is a selling point and their added value helps to differentiate products from competitors. They also offer benefits to consumers that a stand alone product just can't match. Products that offer convenience, versatility and competitive price points are always winners. And compared to many other products, functional packaged products offer clear cut sustainability advantages.
Given these benefits, it's easy to see why consumer package companies large and small should investigate multi-functional packages to drive sales and grow new business in these challenging economic times. Companies that anticipate market needs and solve them with targeted product design and development efforts will be able to get ahead in this somewhat dismal economy by providing added value.