Procure! for procurement sake

Although politicians have been avoiding phrases like “green shoots” in recent months, the general consensus seems to be that the economy is once again starting to cultivate. Whether spending or saving is the best route to recovery, many companies have been erring towards caution by cutting as many ‘unnecessary’ costs as possible. I wanted to reflect on how this has affected the packaging industry.

First some facts…

P&G known as the biggest spender in the world of marketing implemented a 5.4% budget reduction between 2010 and 2011 having already reduced their advertising spend by 20% in 2009. At the same time General Motors reduced its yearly marketing budget by 16%, while concurrently channelling 15.7% towards online methods.
Even within the world of media, ironically, there is a reported drop of 11% in marketing spend across the board.
(sources: Times Business, Research-live.com, EHow.co.uk)

The general trend is to spend more effectively by targeting consumers covertly through social marketing campaigns. Analysts therefore predict that marketing using online channels will overtake all other streams by 2016.

“P&G lay off 1600 staff members after discovering it’s free to advertise on Facebook”

So how does this affect packaging?

One of the prevalent strategies that companies seem to have adopted is to re-focus this spend in areas such as procurement. In the boom years, the driving force behind packaging sourcing and spend was the marketing department whereas in recent times, there seems to have been a significant increase of incumbent procurement companies and departments. There have been many new agencies offering these services on behalf of brand owners, while existing print management companies such as WilliamsLee-Tag and HH-Global have been diverting their attention to the world of packaging.

“Why you should consider a career in procurement”

If we can reduce cost of goods and increase competition in the world of packaging this is a good thing, although sometimes the ‘cheaper’ solution isn’t always the most cost-effective.

When outsourcing packaging, it is easy to reduce the cost of materials (e.g. weight reduction or material conversion strategies) or simply remove additional supply chain costs such as print enhancements, reducing the amount of component parts or offering a ‘generic’ branding alternative across territories or form factors. These kind of cost savings are quick hit and easy to quantify.

The Procurement Strategy

The problem with cost reduction strategies is that even when comparing direct campaign effectiveness, the long-term benefits of brand quality can be difficult to measure when trying to gain trust and recognition in the new world of social media. Cost inherently (but not always) affects quality so it is important when designing packaging that we fully understand the benefits and effectiveness of the plethora of finishes and materials in our toolbox.

The good news is that many of the manufacturers, meeting the challenge by being careful with costs and reducing spend during the recession have started to see comfortable balance sheets leading to new investment in premises, technology and machinery.

The packaging holy grail…

I’ve always believed that it’s the little details that count in the battle between good and mediocre design. By understanding the brand message and intended usage it becomes easier to convey this through use of materials and design. But even then, it is important to involve the right people throughout the supply chain from marketing through to manufacturing to ensure that the initial message is communicated in an effective and coherent way.

If you’re looking to promote a product through the viral effects of social marketing, the way it looks on shelf (or tiny .gif thumbnail) is no longer enough. In order to achieve the holy grail of a “YouTube unboxing moment” we must consider the whole opening experience. The unquantifiable and subjective ‘look, feel and quality aspects’ are key to the “I want one of those” effect. It is therefore important, while being conscious of price, to consider all the elements of the packaging such as material choice and design style during the evaluation stage. This way we can begin to really understand the wider effects of packaging upon brand effectiveness and customer opinion.

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