Pricing, Product Cycles, and Sustainability
Products evolve for a variety of reasons, including technological and manufacturing advancements, sustainability initiatives, and market demands, among others. Most notably, the evolution of ecommerce and focus on sustainability continue to influence the development of new packaging products and updates to existing ones.
The two primary buckets that sustainable packaging innovation fit into at a high level are adding or removing material, and each comes with important pricing implications.
- Adding material: developing something new, like plant-based or more compostable material, to replace or augment a less sustainable option.
- Removing material: figuring out how to make a product with less material overall, which could be for environmental or cost purposes.
In the case of adding material, the pricing challenge becomes identifying and targeting the right subset of customers who are willing to pay a premium for more sustainable packaging. But when removing material, the biggest opportunity is to shift away from a cost-plus pricing strategy to align to the value of the market.
Just because you can make the same product with less material doesn’t mean your customers automatically expect a lower price. It would be wise to keep the same price, at a minimum, but you might even be able to raise it.
Have you ever had a package delivered that was so secure it was nearly impossible to open? And we’ve all received at least one delivery that looked like it got run over when the truck was pulling away – so there’s a delicate balance associated with removing material. But in either case, just because one product has a lower cost doesn’t mean it needs a lower price.
One customer might place the highest value on having the sturdiest box to use for shipping, while another might value the downstream cost savings of lighter shipping boxes more. Either way, your pricing can’t solely be left up to the product composition. If you’re not factoring in added value and willingness to pay, you’re leaving money on the table.
Ready to learn more about how we use Pricing-as-a-Service to optimize pricing and profit across products and initiatives for customers just like you? Find time to talk to one of our pricing experts about your business’ priorities and pricing needs.