Food for Thought

May 28, 2009 - 09:03

Use Packaging to Increase Unit and Dollar Sales

If you subscribe to the Costco theory of packaging, having a larger unit package size (and larger unit price) should result in greater sales in both units and dollars. But some recent information now suggests that in today’s tight economy, as consumers look for ways to stretch their shrinking disposable income, doing just the opposite and reducing the package size can actually result in higher total sales in both dollars and units.

Tesco’s Fresh & Easy Markets recently reduced the size of their fruit and vegetable packaging. It still features the same quality and freshness of previous packaging but contains about half the individual units of the previous packaging. For example, the new packages of bell peppers now contain two individual peppers rather than four. The new, smaller packages are priced at 98 cents each, which is slightly less than a 50 percent reduction in unit pricing. The goal was to give the consumer more options and greater flexibility while allowing them to maintain an overall budget. Within the first few weeks of the new program, Fresh & Easy saw an 11 percent increase in unit sales and a slightly higher dollar sales increase.

Could this have any implications in the marketing of ornamental plants? It could as many consumers were looking for bargains this spring. In general, consumers who perceive that they have taken advantage of a sale or bargain, come away from the shopping experience feeling good about their purchases and the retailer, and they’re more likely to patronize that retailer on future shopping excursions.

Recently, middle management at a large color supplier to a major home-improvement chain were discussing how they purchase plants at their local box store. A transportation supervisor, not educated as a horticulturist, said, “My wife and I decide what our spending limit will be, then we go to the store and see what the best deals are and how much we can get for what we have budgeted. I’d much rather buy five or six smaller plants than one large $10 plant.”

If a retailer offers 6-inch annuals at $5.99 each or 4-inch annuals at $1.99 each, would customers be more inclined to replace the purchase of one 6-inch annual with three 4-inch annuals, or would they instead buy four, five or six of the 4-inch pots — which would increase both unit and dollar sales? Could we increase unit and dollar sales through the use of discounts and coupons? The good feeling about the shopping experience persists as long as the consumer thinks they’ve received a bargain.

Relating to the Frugal Consumer

In an economy that continues to present challenges for every business, relating to increasingly frugal consumers who are more cautious than ever with their spending becomes a major concern for retailers and their vendors. Although spending is predicted to increase during 2009, no one is projecting an immediate return to the almost uncontrolled spending of earlier in the decade.

In an attempt to maximize their purchasing power, shoppers who have experienced decreased or even static disposable income are seeking value and rationalizing need before almost every purchase. A new shopping discipline is emerging: Consumers are asking, “Do I really need this?” or “Can I get along without this?” before almost every purchase, big or small. Even the consumers least affected by the economic downturn who still have significant disposable income are cutting back as evidenced by a sharp decrease in the sales of luxury items. Well-heeled shoppers are rationalizing purchases, seeking simplicity and demanding deals.

So how do retailers (and their vendors) relate to this new wave of consumer consciousness that transcends all categories of shoppers? By highlighting value, offering better prices or bargains, emphasizing local ownership and supply, and leveraging environmentally friendly aspects of both the product and the retailer, we may be able to appeal to the new consumer and convince them that a purchase makes economic, environmental and functional sense.

Highlight Value

When consumers act rationally, they shop for what they need and not what they want. They generally don’t need much and always will look for a bargain or sale before paying full price. To appeal to this consumer, you and your products have to stand out from other retailers. Offering merchandise that looks the same as the competitors leaves you with only price as a means to encourage sales. New, fresh and unique products are the key to inspiring this consumer to buy. Knowing your customers makes this much easier. Providing a value that is not available from competitor’s products along with superior customer service negates price-point-comparison shopping. Cheapness does not equate to value.

Emphasize Local Ownership and Supply

“Local” means different things to different people. Emphasizing the local aspect of your business is twofold: You can have a local heritage and involvement in the community, and you can have “local” sources of product supply. The local aspect of the products is easily accomplished when retailing perishables such as produce and, of course, ornamental plants. Packaging and delivering the message of the various “local” aspects of the business or your products is always a challenge, but the rewards from consumers can be significant.

Be Eco Friendly

In a study recently conducted by Information Resources Inc., researchers found that nearly 70 percent of consumers would be more likely to support businesses and products that were cognizant of their impact on the environment and society. Having a positive impact on these could become very rewarding: Some estimates put the value for sustainable products at more than $400 billion by 2010. Marketing eco-friendly products and practices doesn’t automatically offset the effects of a challenging economy. Consumers will still be cautious about how they spend disposable income and gauge the value of purchasing eco-friendly products or supporting eco-friendly manufacturers. Long gone are the days when it was relatively easy to convince shoppers that they couldn’t live without a certain product, even if they really didn’t need it. Artificial demand is almost impossible to create, and just being “green” and appealing to the consumer’s emotions is not enough: A product’s eco-friendliness needs to be authentic, delivered clearly and concisely, and provide a desired value to the consumer.

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