British economist Pippa Malmgren is often credited with coining the word “shrinkflation” to describe brands reducing the size of products without changing the price. The process itself isn’t new. Shrinkflation usually accompanies periods of high inflation as manufacturers offset rising costs for materials, packaging, labour, and transportation.
Understandably, customers can become upset when they notice they’re paying the same price for less product. What can brands do to avoid losing customers?
Global consumer price inflation increased an estimated 7 per cent in May. Experts believe this pace will continue through September.
From April 2021 to 2022, the price of food in Canada rose by nearly 10 per cent. Higher fuel prices and supply chain disruptions are driving up transportation costs. Some experts estimate that the cost of shipping a forty-foot container across the world more than quadrupled between 2020 and 2021.
On top of higher prices, consumers are spending less. Nearly half of Canadians have reported either purchasing cheaper alternatives to their normal brands or delayed making a purchase.
Manufacturers have no choice but to find ways to save money.
When it comes to either raising prices or reducing product size, customers are far more likely to notice the former. A study examining Chicago’s ice cream market found that consumers are four times more sensitive to price than they are to product size.
However, while shrinkflation may be less noticeable customers often catch on eventually. In worst-case scenarios, it can seriously erode a brand’s reputation—or worse.
In 2015, there was a class-action lawsuit against McCormick, a seasoning manufacturer, because the company reduced the amount of black pepper in its containers by 25 per cent without changing the size of the container. A settlement was reached in 2021.
Be Transparent to Avoid Losing Customers
Of course, manufacturers are allowed to alter their offerings so long as they clearly label the contents. However, customers are busy and often don’t have the time to carefully read labels, especially if the packaging hasn’t noticeably changed. Nonetheless, they will feel cheated if they feel brands have tried to sneak this by them.
If brands aren’t proactive with their messaging, they risk irreparable harm to their reputation.
For example, Frito-Lay confirmed Doritos shrunk their bags during the pandemic. “Inflation is hitting everyone…we took just a little bit out of the bag so we can give you the same price and you can keep enjoying your chips,” a representative announced.
You may be surprised how positively customers will respond to honesty.
Stop Losing Customers
If you’re concerned about your brand’s reputation, Marketsupport can help. Our brand ambassadors program will set you up with qualified professionals who can communicate your message directly to consumers. And our nationwide presence will give you coverage across Canada.
To learn more call 1 905 847 6513 or visit our new website.« Back to Blog