How Manufacturers Can Innovate Cost Savings

How Manufacturers Can Innovate Cost Savings

As consumers continue to tighten their wallets, product manufacturers are feeling the pinch. Add higher costs for health care, energy and raw materials to the equation and many manufacturers are forced to cut costs to maintain sales and profitability.  But if there is one overarching message for manufacturers, it’s this: do not pull back on innovation or marketing support.  Nielsen research reveals that brands that continued to invest in these areas during a downturn performed significantly better than their peers once recovery takes hold.

Nielsen looked at more than 100 client engagements over a five year period to develop the four following guiding principles:

  • Reducing the package size: a risky move that must be balanced with a conveyance of additional auxiliary benefits such as convenience
  • Increasing the package size: A preferable option, but must communicate to consumers something more than value for money
  • Changing the packaging materials: a margin-enhancing move that can also leverage consumer goodwill
  • Changing the ingredient formulation: a high-risk move that must not compromise consumer experience or perceived quality

At the end of the day, consumers are seeking more value for their limited money.  But value is more than price: it is about a quality product that satisfies a need.  Cost-saving innovations, when done in isolation, tend to lead to declines in perceived value and appeal.  Manufacturers need to know their consumers and communicate the auxiliary benefits gained from these innovations to ensure sales growth.

Read a full analysis of the pitfalls and rewards of the four principals described above and learn how manufacturers can innovate cost-savings in the current edition of Consumer Insight.