Deans, Kenneth R.

Hamlin, Robert

Welsh, Robert S.

English

Research Papers in Economics

Virtual Packaging: A Challenge
for the Twenty-First Century
Robert Hamlin, Kenneth R Deans, and Robert Welsh
Introduction
Thispaper examines the impact that the Internet
may have on package-based communications in the
fast-moving consumer goods (FMCG) indushy. This
is an area in which current knowledge is based on
experience and incremental developments, rather
than on formal research. The advent of the Internet
could cause changes that have major implications as
the FMCG purchase environment develops beyond
industry’s current base of experience.
FMCG Package Design: The Current Position
The vast majority of all consumer goods that
are purchased today are packaged. During the sec-
ond half of the Twentieth CentuIY the role of the
package as a communicator has been revolutionized
by the establishment of the self-service format for
the vast majority of FMCG or packaged goods.
Consequently, this has required the package to
change from apassive instrument of communication
to an active instrument of persuasion targeted at a
consumer who had not yet made a decision to pur-
chase. The package now occupies a central role in
active market communications in the FMCG indus-
try. A supermarket may have up to 40,000 products
on its shelves. Only about 30 of these are supported
by communications on televisio% radio, and cinema
at any one time. Up to 500 may be supported by
print communications, such as newspaper adver-
tisements, inserts, or fliers. These communications
are largely promotional rather than persuasive in
nature. The remaining 39,000—PIus products are
solely reliant upon the package to communicate in
the shelf location merchandising environment.
Therefore, the package is a factor in initiating a
purchase or maintaining a purchasing habit by the
consumer (Miles and Lubliner, 1999). Even those
products that are supported by remote communica-
tions rely on package-based communications to
assist with recognition or recall of the advertising
Robert Hatnlin and Kenneth R. Deans are Senior Lecturers in
Marketing, University of Otago, New Zealand. Robert Welsh
is Professor of Marketing, Central Michigan University.
message when the consumer is engaged in the pur-
chase decision process.
The life or death of products and brands in the
self-service environment thus depends upon what
goes on in the few seconds that it takes for a con-
sumer to make a decision to select one of the alter-
natives that are offered to them. The participants in
this decision process arethe consumer, the packages
of the alternative products that they are evaluating,
and the immediate purchase environment-including
incidental human participants, such as childre%who
influence purchases.
Packaging-Related Literature
The only operational model of consumer deci-
sion-making that academic marketing has offmed to
the FMCG indus~ is the “Theory of Planned Be-
havior” and variants (Fishbein and Ajzen, 1975). AU
of these models rely upon the consumer having an
organized body of knowledge with which to struc-
ture Wher decision. However, FMCG purchase
decision processes are associated with low involve-
ment decision-making, which is related to theories
of learning that do not give rise to structuredkuowl-
edge (Assael, 1992).
The literature contains no operational models
of low involvement decision-making, which can be
driven by the unstructured knowledge that the exist-
ing models of low involvement learning produce
(Hamlin, 1997). The FMCG industry is, therefore,
largely on its own as it goes about systematically
optimizing its package-based communications.
During the past 40 years, the FMCG industry has
devoted substantial resources to the practicalities of
package-based comrnunicatiow and large numbers
of people have participated in the development of
communication concepts for packages. At present,
only two books and a few papers in iudustry-
oriented journals (Miles and Lubliner, 1999; Hine
and Pietcb 1997) deal with packag-based commu-
nications as a definite discipline.
Despite this, the industry’s package communi-
cations practices do seem to be based upon a con-
sistent concept of how packages interact with con-
sumers. This concept is based on a model of con-Hamlin, R., K.R. Deans, and R. Welsh Virtual Packaging: A Challenge for the Twenty-First Century 121
surner decision-making that addresses the core
problem of how consumers make rational and pre-
dictable decisions on a basis of incomplete and
unstructured knowledge.
This model could best be described as cue-
based decision-making. The decision between the
alternatives available is made in the presence of
the packages concerned. The consumer’s evalua-
tion of them is structured around heuristic con-
structs that are retrieved from the general, un-
structured knowledge of the consumer in response
to the cues that the products and their immediate
environment present, not around a long-term
structured knowledge that the consumer already
has of these specific products. A structured
knowledge, which is capable of supporting a
rational choice by the consumer, therefore exists.
However, it only exists for a very short time, at
the time and place that the decision is made.
While the cue utilization literature in academic
marketing is extensive, this body of knowledge
has yet to be consolidated into a formal decision
model of the type that the FMCG industry appears
to be using on an ad hoc basis.
Selling FMCG Products in Cyberspace:
The New Challenge
At present, package design and package-
based communications are empirical processes,
which are based on the collective experiences of
those that are involved in the work. However, the
rapid rise of the Internet as a medium of com-
merce will likely give rise to challenges that this
body of experience, gathered over a long period
of time, may not be fully able to cope with. The
worldwide value of electronic commerce, in 1996,
was $2.7 billion and is forecasted to reach $1.2
trillion by the year 2002. The driving force is the
exponentially increasing capabilities of the con-
verging technologies of computing and telecom-
munications. What was a great disadvantage-the
distance from and time to major markets-is
immaterial in the instant world of global digital
networks where the minimization of the barriers
of time and distance result in efficiency gains in
the business demand chain. The democratic nature
of the Internet has allowed individuals, small and
medium businesses, and large corporations alike
to easily participate in electronic commerce. The
likely impacts of electronic commerce are difficult
to identify, but they include: (Deans, 2000):
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
easy and cost-effective access to the global
market for both producers and consumers;
access for anyone with a computer, an Internet
connection, and a credit card to become a
global consumer;
greater effectiveness in the delivery of services
and SUppOIt;
shortened product cycles;
simplified ordering processes and reduced
inventory;
closer interaction between producers and con-
sumers by allowing them to communicate di-
rectly without the intervention of Imditional in-
termediaries, such as importers, exporters,
wholesalers, and retailers;
lower transaction costs;
lower barriers to entry (trade and economic);
improvedaccessto informationfm theconsum=,
(10) a move toward products that are ~ical of a
(11)
“knowledge” economy (iimmcial and other
services, software, travel, entertainment, and
high-value niche market goods) an& hence,
well-suited to electronic commerce;
the ability to move from mass production of
lower-valueproducts to the mass customization
ofhigher-value“customized”productsdeveloped
in directconsultationwith the iinal customeq
(12) shift from a national market to a giobal marke~
(13) effkctivecol.kqwe of space,time,anddistanw,and
(14) use of the Internet to perform advertising,
public relations, and market researc~ and to
initiate sophisticatedcommunication strategies.
Until recently, companies marketing industrial
goods, services, and higher-priced consumer goods
dominatedtheInternet.Nevertheless,researchdonein
New Zealand (Deans and McKinney, 1997) showed
that these companies rarely approached an Internet
presence strategically,had few if any objectives,and
had no clear system of evaluatingthe costs of main-122 March 2000 Journal of Food Distribution Research
taining apresence.Whilethe InternetandWorldWide
Web in general offer many possibilities, too many
companies seeit as a panacea for ftig salesfigures
and embrace the technology with little foresight and
planning. What is appropriate for one company or
product may be completely inappropriatefor another.
Marketingprofessionalsneedto realizethattheInternet
involvesmorethan sellingasitis alsoaveryimportant
tool for communicating,building relationships,creat-
ing dialogue, and building brands.
Packaging Challenges for Electronic Commerce
Ifthe Internetbecomesamajorchannelforselling
FMCG products to the consumer,packagedesignand
package-basedcommunicationsarelikelytopresentan
acute challengeto the marketer.Humans areforaging
people, and the way that the sensesareusedto forage
for a cheesesoufflein amodem supermadcetis similar
to the means usedby our ancestorsto foragefor food.
Modern package design and communications are
essentially only marginally influencing this ancient
process in which an immediate, superficial, three-
dimensio~ and largely visual iconical environment
is inteqxeted by the consumer,on arezd-timebasis,as
they forage fortheir packaged “prey.”
The Internet presents a radically different envi-
ronment to the consumer.To beginwi@ the sensesof
touch taste, and smell are not available. Vision is
restricted to the resolution of the screenused and to
two dimension$ unless avirtualrcdity environmentis
setup. Peripheralvision is lost completely.However,
the environment does have “depth.”If onepoints and
clicks at the healthy eatinglogo on arealtin of baked
beans, nothing will happen. However, pointing and
clickingat the logo on theInternetmay reveal“depth”
in the form of further information. The action of
browsing so important to the incremental sale in
FMCG mtiketing, is changed completely. Unless a
total three-dimensional interactive environment is
available, browsing in its ancient and natural form is
impossible.Browsingintwo dimensionsrequiressome
minimal knowledge of iconsto move easilyfrom one
product to the ne~ therebymakingthe wholeprocess
more difficult. The widespread use of the Internetto
sell J?MCGproducts also brings up the issue of the
illiterate or semi-literateconsumer, which constitutes
up to one-fourth of the population in many countries.
The current web page standard of the Internet
makes it ahnost impossible for the consumer to
review the alternatives simultaneously. A sequential
examination involving manipulations and memor-
izationis required if all the information that is cur-
rently carried on packages is to be available to the
consumer. This raisesthe possibility that atrip to the
virtual supermarket could be considerably more
time-consuming and exasperating than a trip to its
real equivalent unless the environment and its pack-
ages are designed with care and understanding.
Impulse purchasing and the strategies that are cur-
rently used to promote it are currently an impossi-
bility on the Internet.The whole concept of products
and packages being designed for a certainpart of the
three-dimensional environment that a supermarket
represents cannot exist, and this eliminates many
category-based positioning strategies. All of these
problems occur before the major logistical problem
occurs while getting from the Wber product that the
consumer purchases to the real product that they
consume at a time and place of their own choosing.
Beyond the Web Page to the Virtual Package
During the past 40 years, the package has ad-
vancedto the point atwhichit is the primzayinterfhce
withthe consumeratthepointof purchase.Consumers
hardly evertest and rarely even seethe product atthe
time of purchase and thus are purchasing packages.
Therefore,the ideathatthe packagecanexistin cybm-
space as a separate entity from the product that it is
sellingis not averylargestepto take.What is amajor
step is the totally diffkmntenvironment in which the
consumer will encounterpackages. The Internet has
beenextensivelyusedasa salestool butthe sellinghas
so far been largely limited to the consumer who is
planning the purchaseof durable or specialty goods.
Note the prolifbmtion of coun~-specific sites for
automobilemanufacturers(BMW, Toyo@ and Ford);
white good mauuf%turers (Whirlpool, Fisher, and
Paykel);and bankingproductskrvices (Bank Dim@
ASB, and Bank of Scotland).The current standard of
the web-the web page-is very effectivein present-
ing information in a mannerthat assists such planned
purchases and is an effective emulation of the @di-
tional paper-based brochures, pamphlets, catalogues,
and order forms that support such sales. This is
achievedas a result of the multimedia capabilities of
web-basedtechnologythat allow seamlessinteraction
betweentext andimagesand beyond the paper-based
systemto soundandvision.However,thereis a differ-
ent behavior for the browsing FMCG consumer, and
this will require an emulation of a three-dimensional
product and itsimmediatethree-dimensionalenviron-
ment not a two-dimensionalbrochure.Hamlin, R., K.R Deans, and R. Welsh Virtual Packaging: A Challenge for the Twenty-First Century 123
What would this emulation look like? Would it
be based on the standard web page/web site format,
or would it use an entirely different platform, such
as an interactive, three-dimensional, virtual retail
environment? The advance in interactivity that is
required is analogous to the advances that Windows
presented in the development of the personal com-
puter, and it is just as important to the widespread
acceptance of the concept of shopping for the
FMCG goods on the net. Retailers in the United
States (Netgrocer, Peapod) and in New Zealand
(Woolworth) offer such goods through Internet
shopping. A corollary to this would be that such
purchases normally represent “standard items” with
which consumers are failiar and therefore, repre-
sent low-level involvement and decision-making.
The challenge is to present new products and prod-
uct enhancements on the Internet.
The quick answerto the technology issue is that
we do not know. The construction of an effective
emulation requires an in-depth knowledge of how
the object that is being emulated actuallyworks, and
we simply do not have this knowledge. What makes
one package sell and another not sell is still some-
what of a mystery, as are the processes that go on
inside consumers’ heads as they make their selec-
tions. However, the same technology that spawned
the challenge of the Internet has also given the mar-
ket researcherthe tools to study the package and the
consumer in more detail than has previously been
possible. The ability to produce commercial-quality
one-of-a-kind versions of packages at a reasonable
cost and the rise of technologies, such as scanner
analysis and eye tracking, will allow the “real”
package to be studied as an integrated entity for the
first time. This knowledge would then be available
for the development of its virtual emulation.
Conclusion
The Internet offers a major challenge to
FMCG retailing. It threatens to change the struc-
ture of the industry as the traditional industry
structure-based on retail intiastructure, access to
consumers, and market power—are put under
pressure. There is considerable discussion about
disintermediation, but perhaps the focus should be
shifted to reintermediation. However, all of these
macro-developments will not take place unless the
microstructure of the FMCG purchase and its
participants are first put under the microscope.
The foraging process by which humans choose
FMCG goods is an ancient behavioral pattern to
which the human psyche has highly adapted. The
challenge facing the FMCG industry is to develop
a virtual emulation of the environment, which
realizes the advantages of the net but also allows
this “foraging” pattern to continue for the comfort
and benefit of both retailers and consumers. This
emulation is likely to be based on a system of
virtual packages—three-dimensional objects—
rather than on their two-dimensional web-page
equivalents. The advance to an effective virtual
emulation of existing FMCG packaging will be
greatly facilitated if those attempting it have
knowledge that is based on understanding as well
as experience. When using the new computer-
driven tools available, academic marketing may
have a significant role to play in acquiring such
knowledge and in fitting it together into a frame-
work that will complement what the FMCG in-
dustry already knows as they face this significant,
and most interesting, challenge.
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VIRTUAL PACKAGING: A CHALLENGE FOR THE TWENTY-FIRST CENTURY

VIRTUAL PACKAGING: A CHALLENGE FOR THE TWENTY-FIRST CENTURY

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Research Papers in Economics