Table of Contents
Introduction
The word “shrinkflation” comprises of two words shrink (meaning reduction in size) + inflation (meaning an increase in price). This concept (coined by British economist Pipa Malmgren) is used by companies to the hike prices of products without increasing the price per item. Now doesn’t that sound contradictory? If the price per item remained the same how can inflation come into picture? The trick lies in unit size or weight being more price.
Understanding Consumer Psychology
The first things consumers notice about any product are its aesthetics and size. And especially for the product which a consumer is familiar with and using it for a significant time, the size of the unit is somehow residing subconsciously inside the mind, and the same with the unit price. According to academic research, consumers are attached to the unit price rather than weight. Altering unit prices has a direct impact on repurchasing.
The term I am focusing on is ‘unit price’. Shrinkflation is all about reducing the weight of the unit of a product without reducing the preset price. Companies used this market psychology of reducing the minimal size of the item that goes unnoticed to inflate the price without actually increasing the price.
How shrinkflation is done
Companies implement this concept sometimes even without altering the size of the product. Now how’s that possible? This is achieved by making voids or cuts of reducing density and even altering shape so as to give a bulkier look but actually reducing the weight.
This concept is implemented more likely in countries with high inflation and more competitive market like food and groceries like soap, toothpaste, etc. According to research, however, in the long run, package, downsizing affects brand value. Thus, companies are putting a lot of effort into research so it keeps the shrinkflation level at an optimum level.
The European market is currently witnessing higher inflation, wage pressure, and increased service charges as confirmed by S&P global market intelligence.
Recent example of shrinkflation
-
- India’s famous Parle-G 4 Rs biscuit has undergone a massive shrinkflation in terms of single biscuit size, density as well as pack size also. However, they cannot sustain it for long and ultimately increase prices and introduce new products to target various economic segments differently.
-
- Toblerone recently faced criticism for larger gaps between chocolate chunks, Tropicana reduced the carton size of fruit juices.