By PAULINE TINGAS
But measuring the return on your packaging investment is easier said than done.
The most beautiful curve is a rising sales graph. Clearly, a statement like that can only come from a man who understands business. But Raymond Loewy, who is widely recognized for that quote, also knows a thing or two about “curves”. Arguably one of the 20th century’s most influential designers, he was a whiz of 1940s and 50s industrial and commercial design with iconic works like the Lucky Strike logo and the Coca-Cola bottle to his credit.
It was relatively progressive for Loewy and many of his contemporaries to tout the connection between business and design. Though in the 70 years that followed their reign, the idea hasn’t really developed much more than that. That there is a link between the two variables, most will agree. It is the exact relationship between them that remains elusive—the topic of many conference agendas and much debate.
But that doesn’t stop CPG executives from squeezing their brand design and packaging teams more than ever to make their disciplines more accountable and to work on nailing down the return on their investments.
It’s all part of a larger story, says Jerry Kathman, president and CEO of LPK, the Cincinnati-based brand identity agency.
“Our customers have been good at measurement on the manufacturing side of the consumer goods world for years,” he says, “but there haven’t been good measurements in marketing. And the measurements that did exist are in question. Nielsen ratings, TV recall—there’s a lot of grumbling about that. In the world of design, there have also been various forms of testing and validation that have been promoted and then discounted over the years.”
Indeed, the push for marketing accountability has been growing for years. But the discourse seems different today, Kathman says. “Anyone assessing the landscape realizes we’re in the midst of an important dialogue.”
Packaging is in the spotlight
The conversation has ramped up because packaging has come into the spotlight as a viable marketing tool—in part, because former go-to disciplines like TV advertising have faltered.
“Packaging has historically been underleveraged. But now there’s a major shift in ad dollars toward it,” says Peter Clarke, president of Product Ventures, the Fairfield, Conn.-based product and brand development firm.
Increased competition from store brands is also causing more marketers to give their packaging a closer look.
“It’s been driving a lot of [national brands] to invest in new structures, and new structures tend to mean bigger investments,” says Scott Young of Perception Research Services in Fort Lee, N.J. “These bigger investments mean there are more instances of questioning whether it will pay off—management wants more accountability.”
Such discussions have typically been between the head of design or packaging and the brand manager or financial people, but some say the responsibility for packaging ROI is slowly migrating to design agencies.
“It used to be that our clients owned that problem. We owed them good design and our client base owned the outcomes,” LPK’s Kathman says. “Now, we’re accountable—that’s a big shift, and one many designers are facing with consternation.”
A damper on innovation
The reason for the angst? “A lot of what we do resists quantification,” Kathman says. “How do you measure a good idea?”
The inability to measure breakthrough ideas means that ROI pressures can often put a damper on innovation. At best, Kathman says, they tend to favor incremental changes; at worst, they can kill a good idea that just needed to be modified. “There’s money left on the table by companies that are using go/no-go metrics instead of using research to help redirect ideas,” he explains.
ROI is also considered inappropriate by some because it is too focused on the short term.
|The bumpy road to ROI |
A pilot study to measure in-store marketing that was scheduled to kick off in 2007 came to a crashing halt when Procter & Gamble and Wal-Mart both pulled out this summer. Spearheaded by POPAI and the Association of National Advertisers, the program was looking to bring the same kind of metrics used in radio and TV to retail advertising. The stoppage only highlights the difficult task of persuading CPG marketers to share confidential data—a similar job that rests before the packaging industry if there is ever to be agreement on what constitutes ROI. PepsiCo and Coca-Cola are reportedly still committed to the study.
“Packaging is something that builds a brand over time,” says Jack Gordon, CEO of AcuPOLL Research, which recently developed a tool that measures the emotional appeal of packaging. “ROI is more than a result you’re going to see in three to six months. Is it possible to see ROI when a company changes its package? Yes, but there’s a longer window. It’s not like a promotion.”
The inability to truly quantify package design often leaves some brand marketers hesitant to move forward on major packaging initiatives.
“Packaging innovation comes at a big price tag because of the equipment to make, fill, assemble and ship it—the investment is huge. But there’s nothing to prove that it’ll return for them,” says Product Ventures’ Clarke.
It's a situation that puts brand marketers in the entrepreneurial seat, which, Clarke says, is an uncomfortable spot for many of them. “Risk is something they don’t want to take on when they are responsible for the bottom line,” he explains.
In the case of Sherwin-Williams, which smashed category norms with its innovative paint container, Clarke says it was the CEO who took responsibility for the initiative. “The CEO pushed it through, and he shared it with their stockholders—those are the tricks companies are using.”
Those who don’t necessarily have the CEO’s support for their packaging initiatives have always had measures like market share to gauge their performance. But experts say such traditional metrics just aren’t enough any longer for bottom-line oriented CPG managers, who’d much rather hear about financial variables like a company’s stock price.
And that’s really the crux of the ROI dilemma today. In the attempt to prove why package design sells, how and by how much, there is little agreement on what even constitutes an appropriate ROI measure.
Not waiting for ROI metrics
Rather than wait for a definition to develop, though, brand marketers are spending more time and money validating their designs and protecting the budgets they’ve already secured for their packaging initiatives.
|Putting stock in design |
Britain’s Design Council (www.design-council.org.uk) took a creative approach to demonstrate the link between corporate design investment and stock market performance by compiling a hypothetical portfolio of 63 design-savvy companies (selected by the number of design awards and nominations they earned). The resulting data revealed that the Council’s “Design Index” outperformed the rest of the market, bettering the Financial Times Stock Exchange (FTSE) 100 index by 200 percent over 10 years. How’s that for a return?
They still may be unable to prove that a package will be profitable, but they are using more evolved research techniques to make a stronger case that specific package designs or systems will prevail.
“[The measurement of package design] used to be an area where a lot of people left it to their own judgment. For a long time, it was management’s judgment or a designer’s judgment,” says Perception Research’s Young. “That evolved to qualitative work like focus groups. But to some degree focus groups were replacing ‘management as art director’ with ‘shopper as art director’—that’s also a pretty bad idea.”
What’s been changing, Young says, is the respect for numbers. “Everyone realizes that when you’re talking about ROI, you have to move from qualitative research (which can be done right, he points out), to some form of quantitative research.”
There’s also much more understanding of the importance of shelf context in evaluating designs. “That’s really key,” he says. “It’s not just talking to 20 people and showing them three options, it’s more about simulating the introduction of a new system and seeing what happens.”
Specifically, Young says, better research can help determine whether a new packaging system is going to impact preference and, ultimately, selection over the competition. He says it can also help determine whether consumers would be willing to accept a price increase that would allow a brand to pass along its increased cost.
“That’s how you start to get at things like ROI,” he says. “It’s important to research the right way.”
Though what constitutes “right” has changed for many packaging research firms in recent years. The strong ROI climate has altered the way such firms work.
“We’re doing research much more holistically,” says Young. “We’ve been combining traditional packaging studies like shelf presence and attitudes with usage studies like in-home use tests. We’re starting at the shelf and following through to the purchase and usage experience.”
Even designers are getting on board and agreeing to more quantitative measures.
“Designers have historically been anti-measurement. We love and value qualitative research like mall intercepts, one-on-ones or something where people can react to our work,” says LPK’s Kathman. “But that just speaks to the immaturity of the profession. In general, now, everyone recognizes that metrics matter. The era of the self-righteous designer is passing, and that’s a good thing.”
Kathman advocates design firms becoming more involved in the development of standardized ROI metrics. “We have to earn our way just like other components of business. We can use our expertise as visual people and participate in the dialogue,” he says. “If designers aren’t involved, we’re going to be watching the rush to numbers killing great ideas.”
A hybrid solution is likely
Such a massive change in mindset points to how the packaging ROI dilemma will likely play out. And it seems most of the players agree the solution will have to promote two ways of looking at ROI—the solution, they say, will be a hybridization of data: qualitative learning and gut intuition.
“There’s always going to be some judgment here,” says Young. “We do our best to provide some metrics while also saying that research, in general, is an aid to judgment, not a replacement for ultimately making decisions. The proper end game is that it will help illustrate the value of effective packaging in a way marketers and financial people can understand.”
To arrive at standard terms and tools for the qualitative part of the solution, though, the industry has a long way to go.
“It’s an unfinished discussion,” says Kathman. “Consultants claim to have the perfect model. But these are false promises—there’s an embarrassment of foolproof systems that aren’t delivering on their claims.”
Instead, he says, the industry must come together as a whole.
“It would be great if there was a commitment on the part of major manufacturers to determine a common set of practices and terms for everyone to be working against,” Kathman says. “But it’s the same dilemma, ‘What do we share, and what do we hold as proprietary?’”
Clarke agrees and says that, while he understands the risk involved in offering data, the ROI solution will only come if brands are willing to disclose their financial outcomes.
“We need to have success stories, like the Folgers canister, reveal their results to the industry. They don’t have to shell out money to develop the tools, but just share information and feed it to quantitative research suppliers. Sharing will help.”
Until then, he says, “Either you have the entrepreneurial mindset to go after it, or you may miss the boat waiting for the predictor.”
The author, Pauline Tingas, is the Senior Editor of BRANDPACKAGING.
Where to go for more information...
• Brand design.
At LPK, contact John Recker at 513.241.6401 or visit www.lpk.com
• Brand development and design.
At Product Ventures, contact Peter Clarke at 203.319.1119 or visit www.productventures.com
• Consumer research.
At Perception Research Services, contact Scott Young at 201.346.1600 or visit www.prsresearch.com
• Brand-building research.
At AcuPOLL, contact Jack Gordon at 513.943.0020 or visit www.acupoll.com