For any type of business, packaging is one of the main concerns. You will work hard to develop the perfect product, but the next step is to deliver it completely safe to your customer. But to the majority of entrepreneurs or managers, the cost of packaging is still important and they usually are unsure of how big that cost should be.
For many years, I have been advising business owners to choose the perfect packaging solution for them, in terms of price and quality. That’s why today we will be talking about budgeting your packaging solution and by the end of the article you will definitely know how much to spend on it. You will find out quickly…
How much should you budget your packaging solution?
You should budget your packaging solution between 1% and 3% of your products’ cost, depending on the type of brand. For a luxury brand, a higher percentage is advisable, while for a standard one, you can choose to spend less. There are hard cost involved, like structural and graphic design and hidden costs like time or storing unused inventory.
Now that you know what percentage of your products’ cost you should allocate for your packaging solution, it’s time to find out more about what you pay for and how to optimize your costs. I will make sure you get the best information available so keep reading!
How should you decide your exact budget?
The budget for packaging varies drastically, from business to business. That’s why, a good decision requires an analysis on multiple characteristics of your company. Here are some questions that can help you.
What functions should my packaging solution have?
Of course, the first thing you need to do is to decide how important is packaging to your product. Will the final customer buy the product because of how it is packed? Or it should only protect the product until the client can use it?
The budget will go up if your packaging solution has multiple functions. For example, fragile products often need multiple layers of packaging for enhanced protection, while products resistant to shocks, humidity or temperature can be packed lightly.
Is my brand premium or standard?
Then, you should think of your brand and type of product sold. Is it a premium one or a standard one? Will the customer expect to have a nice experience opening the packaging the first time? Or he will just rip it off and use the product one time?
Premium brands often spend more on packaging because they need to impress with the small details. They will spend up to 10% on their packaging, if their branding departments will decide packaging is one of their core advantages.
What influences the cost of packaging?
There are multiple factors that influence the cost of packaging and optimizing them will reduce your costs and increase your profit.
Hard Costs
First of all, think about the hard costs, the ones that you can anticipate and are directly linked to the manufacturing process. Some examples could be:
Structural design
The manufacturer needs a special digital file, containing the dimensions and materials, that can instruct the machinery into producing the packaging as you would like. Many factories will create that file themselves, but some will require you to have it already.
However, most of the time they will modify the document that you provide, so that it can work with their equipment.
Graphic design
You probably understand the power of packaging as a marketing tool. This is why one of the main hard costs is the graphic design. Whether that means colors, complex drawings or your logo, it has to be done by a professional.
Talk to your packaging partner about what he needs to produce the desired packaging solution and you will know exactly what to look for. You can even contact a branding company, if you want professional advice about the way your packaging looks.
Raw materials
The materials you use for your packaging can also influence your budget. If your product is high-end, you may want premium packaging, with premium materials and this will drive up your total cost.
Manufacturing process design
In the packaging industry, there are special procedures for the personalization of the final packaging solution. Nowadays, activities like UV spot printing, embossing or glitter application are chosen by many business owners, as methods that contribute to making every piece of packaging unique.
Hidden Costs
There are also a few hidden costs that come with your packaging solution.
Time
Time is the most important asset for humans and for businesses too! This is why, the process of packing the product should be as efficient as possible.
You may save some money by building a cheaper packaging solution, but if your people need a lot of time to assembly it before sending it to your clients, you didn’t win at all.
Storage
After thousands of packaging containers are delivered to you, you need a lot of space to store them. This is why you need to consider what are the costs of storing.
While it may be a good deal to order packaging in bulk, so you can get a better price, you need to think if you are able to store it all. If not, you can consider contacting a manufacturer that delivers smaller quantities on demand.
How can I optimize my packaging costs?
There are multiple ways you can get a better price for your packaging solution, if you consider all the costs mentioned above. Here are some of our suggestions!
1. Go for packaging that you can store easily
There are multiple packaging solutions that can be stacked efficiently. For example, wood pallets are designed to be stacked one on top of another. Cardboard boxes also come flat, so you can store them easily.
2. Focus on automation
These days, there are robots that will pack your products perfectly and quickly, based on a given algorithm. They should definitely be considered, but automation can also be done by humans, only by focusing on one part of the process.
For example, think of 3 people being specialized on a specific part of the process of packaging your products. One of them will fold the box, the other will prepare your product and the last one will put it in the box and send it forward. This way, your process will be more efficient, rather than having all three pack different products.
3. Have the courage to try something new
As technology advances, experts will always develop newer and more efficient packaging solutions, using special materials. By keeping track of the new innovations in the industry, you can choose a better packaging solution for your needs. It can look better or offer better protection, but either way, it will help your business. And most of the times, it will save you money!
You shouldn’t be afraid of changing or improving your current solution, because adapting is the key to optimizing your costs. But make sure you test an idea before implementing it!
Conclusion
Looking back, you should now have an idea of what your final budget should be. Take into account everything that influences your costs and also your brand’s and client’s needs and the perfect percentage will be obvious.
Now, if you feel like you are still unsure, you can always ask for professional help! Packaging brokers or even some manufacturers will be always happy to advise you.
