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Better Box Costs Too Much...Or Does It? A typical scenario: Shelia wanted to purchase the cheapest box for her products. "It only gets thrown away at the end of the day and that costs too much," said Shelia. She wanted to put her money into a quality product not a quality shipping box. Don't you believe that a quality box and package is part of the overall quality of your product? Shelia was focused solely on the price of the box, not the cost of the box as it relates to other aspects of her business. Shelia insisted that her business model didn't work with the better box and so Shelia felt she had what was needed ... or did she? What Shelia wanted was to become more profitable and have better results by keeping down her costs. You can understand her concerns and keep them in mind when we look at the bigger picture. After the first few weeks of shipping the damages started rolling in. "Not many", claimed Shelia. The actual number was 1.5% per a month on average. Let's look at the cost of the damages as it related to Shelia's company: The
Parcel Delivery Company The
Sales Team The company policy is to get a new item out right away, but right away meant filling out new paperwork, writing up a damage claim, and getting an expedited delivery to replace what was lost. It frequently meant taking the time to call back and relay tracking numbers, and in some cases offer a discount as a way to make up for the loss. The
Shipping and Receiving Manager A receiving manager was getting the damaged product back into the warehouse and had to deal with paperwork associated with the whole process. YOUR BOX GUY TIP: Customer satisfaction is delivering on what you say you will do, not making up for what didn't happen in the first place. Your box is typically less than 5% of your products makeup and a smaller part of the sales percentage. It is, however, the largest part of the first impression and contact your customers will have with the product you have sold them. The costs of the damages added up real fast: Cost of Shelia's goods before handling and packing were $25. The labor to pack and fill paperwork for shipping was $2.00. Actual shipping varied but averaged $6.00 per parcel for our purposes.(Really it was more as the greatest damage came to items that spent the longest in transit due to distance shipped and therefore cost the most.) When a "damage call" came in the sales staff did everything except find new customers, sell more products or improve customer satisfaction. A sale is where the real profits for Shelia's company were. Unfortunately the sales team was busy doing everything but selling in this circumstance. In fact their 15 minutes of handling each damage complaint could have been used to call on prospects, or answer the phone of a customer who wanted to place an order but instead was put on hold or into a voicemail. Let's put the cost at a very low $5.00. The customers' were unsatisfied and stressed at dealing with the problem. (You name the cost!) Fulfillment had to repack another order for $2.00 in labor again. Expedited shipping service to make up for the lost time was $12.00 because customer satisfaction was the company goal. Getting the damaged item back (if you even choose to do so) $6.00 again. The possibility of disappointing other customers because shipping did not have time to get everything out for the day..........you see where this is going. Packages shipped per month were 1000. 1.5% damages equals 15 packages. All told the replacement costs totaled $52.00 per package. Shelia really spent $780.00 per month trying to save money! The additional investment of an upgraded box was 12%. It amounted to $70.00 per thousand boxes. This against $780 in replacement costs. Imagine if Shelia starts to sell twice as many packages a month? We went over the findings and Shelia immediately upgraded to the heavier boxes. She even decided to upgrade the boxes to white from brown. They were "handled" better, looked more valuable, and the printing really stood out. (See Len Oppenheimer's article on using graphics to increase your sales and profits) Len Oppenheimer's article on using graphics to increase your sales and profits) Packaging problem solved. Profits are up. If you don't invest the funds to do it right, where will you get the funds to do it over?
REPRINT PERMISSION ~~~~~~~~~~~~~~~~~~~~ Reprint permission granted in part or whole when the following credit appears: "Reprinted with permission from "Len Oppenheimer's Packaging Success Newsletter. (Copyright, 2003, Len Oppenheimer, YourBoxGuy.com) |