At PRS, we evaluate hundreds of new packaging systems annually – and our clients often (and understandably) ask if we are able to accurately predict the impact of packaging on in-market sales. Fortunately, the quick answer is “Yes!” This fact has been validated by “meta-analyses” conducted by clients, analyzing PRS study findings and sales data across 50+ studies. It has also been illustrated by numerous cases of both “successes projected” and “disasters foretold” for both re-stages and new products. Through these analyses - and academic research (conducted at Wharton and INSEAD) - we’ve also been able to define a proven relationship between on-shelf performance measures (purchase from shelf, shelf visibility and shop-ability) and sales in market.
However, the more complex reality is that the connection between “pre-testing” and in-market performance is inexact. The primary reason is clear: In studies, we nearly always isolate packaging as a variable, while holding all other factors constant. But as we all know, the “real world” is rarely this clean. Packaging changes often accompany modifications to other elements of the marketing mix (advertising, pricing, etc.) – and they must “live” in an ever-changing retail and competitive context.
With that thought in mind, this article takes a closer look at the key factors impacting the in-market performance of new packaging. While these elements are complex and varied (across brands, categories, retail channels, etc.), we believe that approaching them systematically can yield insights to optimize packaging roll-outs and increase the likelihood of success.
Identifying/Exploring the Key Drivers
Certainly, there are a myriad of issues that can impact how new packaging appears and performs in-store, from competitive activity to the “retail realties” of shelving and lighting. However, in our experience, we’ve consistently encountered three (3) dynamics that can dramatically impact shopper behavior.
- “Soft” Rollouts
Over the years, our clients have shared a “rule of thumb” that new packaging often drives a sales decline in its first few months in market, before stabilizing and occasionally driving sales. Typically, this pattern is accepted as inevitable and/or spoken of in terms of shoppers “getting used to” new packaging, which becomes familiar after 1-2 purchase cycles. However, we’d offer an alternative hypothesis: Confusion at shelf driven by “soft” rollouts of new packaging.
When new packaging systems are pre-tested, the scenario is nearly always that of a complete and clean roll-out, with a full new design system on shelf. However, a trip to any local grocery or drug store reveals that this is not usually the in-market reality: For pragmatic and financial reasons, companies often allow old packaging to “sell-through” and/or introduce a new design on “leading” SKUs (as they complete the graphic design for the others).
Unfortunately, this is a recipe for confusion for the shopper (and perhaps the store personnel), who may encounter two packages for the same product – and/or a very fragmented appearance of the brand. The result can be just enough hesitation (“Which is the right one…Is one of them a private label knock-off?”) to lead him or her to a “safer” choice.
Certainly, the most obvious implication is to invest in full packaging roll-outs, when possible. However, this pattern also illustrates the importance and value of providing on-pack reassurance (i.e. “New look, same great taste.”), to help shoppers through this transitional period. In fact, we’ve seen some companies go even further to “pre-announce” upcoming packaging changes for major brands, such as Baked Lays.
- Point-of-Sale Support
A second (and obvious) factor impacting new packaging performance is in-store support, which can range from end-cap displays to in-aisle signage and shelf talkers. In fact, we’ve seen several situations, including the recent re-stage of Seattle’s Best, in which extensive in-store support appeared to accelerate (or drive) success far beyond what would have been projected from a packaging change alone. That’s doubly true for new product introductions, which frequently struggle to overcome their limited number of facings on shelf – and absolutely need signage to generate visibility and shopper awareness. U by Kotex and Colgate Optic White stand as two recent examples of new products that were supported heavily and effectively in-store, leading to successful launches. With that said, we’ve also found that it is dangerous to rely on POS to “save” a poorly-designed packaging system. In too many cases, in light of disappointing test results, we’ve heard clients reassure themselves that they will “fix the problem” through advertising and in-store support. But if the packaging is fundamentally confusing or alienating, even a significant investment is very unlikely to overcome this. In other words, in-store support can make a good packaging system that much more impactful, but it can’t make a bad system good.
Perhaps most importantly, marketers need to understand the respective roles of packaging and point-of-sale signage in the shopping experience, within their aisle and across varying retail channels (grocery, club, convenience, etc.). Once they understand this dynamic, often through in-store interviewing with PRS Mobile Eye-Tracking, it is a question of ensuring that the two vehicles work together and complement one another. For example, point-of-sale signage is often effective in creating a visceral or emotional connection with shoppers, while packaging is typically stronger at facilitating product selection and conveying key features/benefits.
- Changes in Pricing and/or Quantity
Packaging changes are often part of larger brand re-stages (tied to new advertising, aimed at a more premium positioning, etc.) – and/or they involve significant investments in new packaging structures (more differentiated packaging, more sustainable packages, etc.). For marketers, there’s an understandable desire to re-coup these investments, often by linking the brand’s new appearance to a higher price point (or perhaps a reduced product count). However, from a shopper’s stand-point, new packaging represents a signal to switch off “auto-pilot” and re-consider a brand’s proposition. Almost inevitably, even a compelling new package raises at least a brief reassessment or instant of uncertainty (“What’s this new look all about?”). Thus, a pack change is the moment that shoppers are most likely to notice a pricing or quantity change – and potentially to “define” the pack change in this negative light (“It’s about raising the price and ripping me off.”). Sadly, this trend has been accelerated by growing consumer skepticism, linked to experiences in which “sustainable packaging” turned out to be smaller packs and reduced quantity.
The net result is that changing packaging and pricing simultaneously appears to have a multiplier effect, leading to significantly more risk than either change woul have incurred individually, And in today’s world, this risk may be amplified further, given shoppers’ ability to share their indignation (and influence many others) via the Web. Unfortunately, it is a lesson that many companies have found the hard way, as compelling packaging re-designs have been undermined by negative reaction to accompanying price increases.
For marketers, the primary “take-away” is to tread very cautiously on pricing changes – and perhaps err on the side of waiting several purchase cycles, until shoppers have become familiar with new packaging. Perhaps as importantly, they should also be pro-active in “framing” packaging changes in a positive light, via on-pack and in-store messaging. Kraft Salad Dressing stands as one good example: When introducing more environmentally-friendly packaging, the messaging provided reassurance first (“Same 16 ounces”) and then defined the intended benefit of the new appearance (‘x% less packaging.”)
Moving Towards Better Execution, Research & Measurement
The issues outlined above translate into several clear principles for optimizing the roll-out of new packaging systems – and increasing their likelihood of in-market success:
1) Investing in hard/clean transitions, so that only new packaging appears on shelf
2) Investing in point-of-sale support, particularly in terms of driving attention/visibility for new products and smaller brands
3) Ensuring that on-pack messaging provides necessary reassurances or “defines” the packaging change
4) Avoiding the temptation to change packaging graphics and pricing (or product count) simultaneously
In addition, there’s certainly an opportunity to use research more effectively, in order to more accurately project (and impact) in-market outcomes.
- On one level, this means pre-testing packaging as it will actually appear to shoppers in store, within a full shelf context - and with anticipated pricing and on-pack messaging.
- On a broader level, it requires thinking more holistically: Rather than assessing packaging in isolation, marketers should be thinking in terms of “optimizing point-of-sale presentation” - and testing scenarios that incorporate changes in shelving, product assortment and point-of-sale merchandising.
Fortunately, research technology has evolved t meet this need. Through PRS Virtual Aisles, we are now able to assess new packaging systems in full store and aisle context, including end-caps, in-aisle displays and on-shelf signage. Importantly, we are able to show this packaging and store context at approximately life size – rather than on a computer monitor - which we’ve found to be critical to accurately gauging on-shelf performance. In a recent study, Virtual Aisles allowed PRS to gauge the impact of a new packaging system - with and without POS support – on sales growth for both the test brand and the full category. The findings helped our client to validate its investment in merchandising – and to persuade a retailer to allow its desired changes.
The final piece of the puzzle is stronger in-market measurement. While nearly all major CPG companies claim to acknowledge the power of packaging, remarkably few have disciplined processes for systematically tracking the impact of pack changes on in-market sales. If post-launch sales tracking can be done consistently – and linked to documentation of key factors tied to each change (in-store support, pricing changes, etc.) - marketers, designers and researchers will all benefit greatly:
- Marketers will be able to properly value packaging within their market mix modeling – and better understand the key factors driving in-market success within their categories.
- Designers will see greater investment in their field, as companies truly recognize the power of packaging – and become more confident in its ability to drive sales.
- Researchers will be able to enhance the predictive power of their studies, based on a consistent feedback loop of sales data.Over time, this will create a virtuous cycle, as better information and insight leads to more investment - and more effective launches of new packaging.