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Article | January 5, 2012
Cost reduction as a ticket to innovation
Stuart Leslie, president of New York City-based design and innovation firm 4sight inc., explains how to achieve innovation that helps drive sales and profits with low risk.
How can cost reduction be used to drive innovation in package design?
By using cost reduction as a catalyst, my firm has been able to turn “projects” into new “products,” for the simple reason that it’s easier for an organization to get behind this type of innovation and make it a reality. Constantly with an eye toward driving sales, we’ve developed a methodology for achieving a unique package design that positively impacts consumers’ interaction with a product and builds profits at the same time. This approach—I call it “cost-reduction as a ticket to innovation”—serves as both a viable creative strategy and a business solution aimed at realizing measurable sales growth.
Key to the success of this approach is for consumers to see the innovation as transformational. The formula is as follows: Revolutionize the product; maximize the consumer experience with an innovation they value; reduce manufacturing costs; and increase sales. It’s good business sense from every angle.
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How do you sell this approach?
Instead of a client’s project team trying to prove to management that an innovation will increase sales, our approach encourages them to prove that the innovation won’t hurt sales. Typically, an innovative idea requires a strong and determined person at the top to push it through. There’s a distinct “leap of faith” mentality associated with propelling a product to market, largely based on the support of research. But research is not quantifiable the way cost reductions are, and no one is going to oppose cost savings, particularly when it doesn’t sacrifice product quality and actually has the potential to boost sales. With quantifiable savings on your side, you’re on a quicker (and less-resistant) path to getting the innovation to market.
How do you create a unique package design that positively impacts consumers’ interaction with a product and builds profits at the same time?
Our mantra is: If consumers don’t need, use, or value a product feature, then eliminate it and replace it with something they value (and costs less to produce), and improves their interaction with the product. This requires an open mind and tremendous flexibility. Once manufacturing costs can be reduced, and the consumer experience enhanced, the client is a staunch supporter of the innovation.
One of the new products my firm recently worked on shows how this creative business approach works. A new single-serve Heinz ketchup packet that allows consumers to both dip and squeeze, depending on their preference, holds three times more ketchup than the standard packet, meaning consumers use fewer packets, and retailers/restaurants save money.
Some innovations can be so powerful that when consumers perceive more value in a revamped package design, they’ll pay more for the product. Wrigley 5 gum is a perfect case in point. 4sight worked with Wrigley in creating the Slim Pack to replace the Plen-T-Pak, the first structural innovation in stick-gum packaging in more than 50 years. Consumers responded to the new packaging beyond our expectations, allowing the client to double the price of gum from 99 cents per pack to $2. The result? A record-setting performance for the new 5 brand—just under $100 million in sales in the first year on the market.
By incorporating the idea of cost reduction as a ticket to innovation, there are two choices: reduce the cost of a package/product, or sell the product for more money. The end result is increased profits.
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