Will shrinkflation affect branding?
AS high costs continue to drain the wallets of Americans, companies are now under fire for shrinking the size of their products. The process, known as shrinkflation, s when brands charge the same for smaller packages. The question is, will consumers notice, and what effect will it have on branding & marketing?
As companies grapple with the highest inflation in 40 years, consumers are feeling the impacts financially. Prices on everything from gasoline to groceries continue to soar, but some brands are trying to cut costs by giving customers less product at the same price.
While consumers are aware of the price of goods, they may be less aware of a slight change in the size or volume of the product. Shrinkflation might sneak by shoppers, but the tactic has become increasingly noticeable to consumers. In a new subreddit on shrinkflation, people have been chiming in and documenting their shrinking groceries. One user on Reddit wrote, “This pack of chicken strips lost 0.31kg since the last time I bought them.” Another user shared a photo of their celery bag, writing, “These celery stalks used to fill the bag, and this one is half the bag.
While shrinkflation allows CPG companies to maintain margins without visibly increasing prices, such moves do not always go unnoticed by shoppers. They have, in some instances, led to significant blowback beyond just public relations damage.
Why are product sizes getting smaller? Companies are grappling with rising costs for ingredients, packaging, labor, and transportation. Global consumer price inflation was up an estimated 7% in May, a pace that will likely continue through September, according to S&P Global.
Shrinkflation appeals to manufacturers because they know customers will notice price increases but won’t keep track of net weights or details like the number of sheets on a roll of toilet paper. Companies can also employ tricks to draw attention away from downsizing, like marking smaller packages with bright new labels that draw shoppers’ eyes.
So will this affect brand equity?
That depends. Someone who loves Gatorade might not care that they are getting a smaller size at the same price, but brands with a lot of competition may lose customers. Talking with some brokers recently, I heard that some of the brands they represent are losing market share as the shrink package sizes, and some competitors are now promoting “same size and price” on labels.
The increase in the cost of living is making Americans nervous. Inflation rose 8.6% through May, the highest since 1981. A survey of U.S. consumer confidence fell in May to a three-month low of 106.4. That’s one of many surveys pointing to a pessimistic outlook by people both for their finances and the U.S. economy. This means a recession and consumers cutting back on products they usually like because their wallets are getting thinner.
It’s a part brand image and part moral issue, with companies having to decide how obvious they want to make new changes when they are not currently obliged to advertise them.
Some brands argue that as prices and sizes of items are clearly labeled, buyers make informed decisions about their purchases. But with today’s fast-paced lifestyles, how many consumers have the time to check the grammage of every item they are buying?
The consumer must check the pack before they buy, but communication with buyers from brands is critical. If you’ve made changes to a product, you must tell consumers you’ve done it. If you’re not defining an item fairly or accurately for what it is today, that’s misleading.
Companies usually want to keep their customers happy without direct increases in a product’s price. They also want to keep their prices competitive with companies selling similar products. Not all size changes are born from profit-seeking, but with stories about “record company profits” circulating in the media, some brands are playing a dangerous game.
Originally published at https://www.newmediaandmarketing.com on June 14, 2022.