When you’re looking to budget out your packaging, you should also look at the options that you have. Custom packaging is something that’s become super popular, but that doesn’t mean that it has to completely destroy your wallet.
It’s important to make sure that this is part of the costs of your product. With about 10-40% of the price of packaging being what people spend on this, it can definitely cost a lot. Here are some factors that you may want to consider when you’re choosing packaging, and how you can prevent this from totally wrecking your budget down the road.
Fixed Vs. Varied Costs
Fixed costs are going to be what the manufacturer will charge no matter how much you’re going to be printing.
- The setup of the machinery
- The printing plate costs for flexo and litho printing
- The mound costs for foil stamping, die cutting, embossing, and other types of means
- The costs for renting if you don’t have the equipment
This ratio is usually based on the units that are produced, based on the type of options and the volume that’s there.
Now the varied costs include those that change over a period of time. larger volumes tend to have a larger cost of variation.
These costs include:
- The costs of the materials
- The production wages for those making it.
- The lamination and ink.
- The shipping costs
The costs that are fixed and the costs that are varied are what come together to make the packaging.
While there are simplistic ways that come with this, most of the time, fixed costs can definitely make up a lot of the costs, especially if you don’t have too much variation.
Have you ever noticed that suppliers give you prices that are lower when you have more items, and a lower volume means a higher cost. This is because of the scale economy that goes with this.
The scale reduces the costs of this, since the fixed cost is spread through more and more units that are there.
So let’s say that you are going to have 100 different units printed. Maybe your cost is $1 for every unit. But let’s say you 10X that, and then, it’s 1000 units. This will then cost about 10 cents for every single one.
If you ignore the variable costs, you will see that the 1000 units does mean that it costs lower.
Now, let’s say that we take this, and you also factor in the variable costs too, which may still be the same, but the fixed cost is lower, as it’s spread out.
While it may seem a little bit textbook, the variable costs do change, as the more production means that it’s more efficient. Yes, you’re saving money if you purchase more.
This also allows for your brand to use the cost that’s reduced into other types of functions, or even step this up, with the way that the printing is included, or the other packaging materials that offer a competitive advantage for the business.
There is also the factor of the returns that are there, which means that when you increase the volume within the short run, it gets the optimal capacity. Before this, it meant smaller price increases. However, when it’s done optimally, it starts to even out.
This is helpful for you to learn, because it can play a major part in the packaging that you put together, the state of your packaging needs, and also lets you get a full feel for the type of result that you want to get from this.