As prices rise, consumers are leaving brands
Sixty-two percent of consumers say they’ll stop buying from brands that change product size (“shrinkflation”) or quality (“skimpflation”) to cut costs, according to Gartner, Inc. Only 7% said they would continue purchasing from a brand that cut costs in this way.
A Gartner survey of 252 consumers in June 2022 found that shrinkflation- when the size or quantity of packaged goods is reduced without a commensurate price cut — is viewed as more prevalent than skimpflation — erosion in the quality of a product by using cheaper ingredients or components, or a reduction in a service, such as longer delivery times.
In a period of unprecedented inflation, consumers are on high alert, and noticeable changes that impact the value proposition of a brand’s product or service are more likely to harm that brand. CMOScan lead by directing teams to emphasize continuity and value. If needed, they should look to cut services (a form of skimpflation) rather than product amounts,” said Kate Muhl, vice president analyst in the Gartner Marketing practice.
Most consumers (75%) expect prices to continue to increase in the second half of 2022, and 65% of consumers expect to cut back on purchases or stop buying altogether in at least one product category.
Consumers noticed the most significant price changes in the “food and groceries” category (62%). Forty-one percent of consumers noted “household products” suffered from shrinkflation. In comparison, 32% of consumers noted that “personal care” products suffered from it.
Consumers differ on what businesses should do to limit price increases. Still, one suggestion stands out from other ideas: 45% said companies should stop increasing the pay of high-ranking executives. “Executive compensation decisions can harm brands, especially in inflationary periods,” noted Muhl.
CMOS looking to address consumer concerns around price increases, shrinkflation and skimpflation can explore the following near-term actions:
Is this really happening?
Marketers tend to rely too much on data that is weeks old that, in today’s economy, doesn’t tell the whole story. I’ve noticed, for example, that more shopping carts remain unfilled at Costco and that the average purchase at grocers has declined.
Now that the FED has raised interest rates again, increased credit card debt will become more expensive, as are mortgage payments. Anyone brand that thinks it can continue to raise prices is in for a rude awakening as consumers get used to trading down.
Originally published at https://www.newmediaandmarketing.com on July 28, 2022.