THE INVISIBLE PRICE HIKE: WHY PRODUCTS SHRINK BUT COSTS STAY THE SAME?
We're used to prices of products and services constantly changing, but one strategy allows companies to increase profits without raising prices. This is how manufacturers adapt to economic realities. But do we always notice these changes? And do they benefit consumers? Let's explore this in more detail.
What Is Shrinkflation?
Shrinkflation is a hidden strategy that has been used in retail for decades, especially during inflation and periods of lower demand. It allows companies to keep prices the same while gradually reducing the quantity or quality of a product—changes that often go unnoticed by customers.
Imagine going to the movie theater and ordering a large popcorn. As the movie begins, you realize your popcorn is gone sooner than expected. The price hasn’t changed, but the portion size has shrunk. This is a prime example of a hidden strategy—where producers reduce product volume while keeping the price unchanged.
Why Do Companies Use This Strategy?
Economic downturns and the need to preserve margins force companies to find cost-cutting strategies without losing competitiveness. Studies show that consumers are more sensitive to direct price increases than to subtle reductions in product size. As a result, companies often shrink portions to minimize the impact on consumer habits.
Additionally, reducing product volume can be part of a broader sustainability-focused approach. Companies may use it to cut packaging or production costs, which in turn reduces environmental impact. For example, smaller product sizes generate less waste, aligning with global sustainability trends.
How Hidden Changes Impact Consumers
1. Frustration and Distrust
When companies fail to communicate product changes transparently, consumers may feel deceived. If they are used to buying a product at a fixed price, discovering a reduced portion can lead to frustration and decreased brand loyalty. This may push them toward competitors or alternative options.
2. Increased Awareness
During inflation, consumers become more price-conscious, comparing options to get the best value. They pay closer attention to packaging, volume, and price per unit—scrutinizing brands that appear to be reducing value without justification.
3. Perceived Loss of Value
When customers feel they are getting less than expected, they may cut back on purchases or abandon certain brands altogether. Companies that lack transparency risk damaging their reputation and losing long-term customer loyalty.
How Brands Can Reduce Negative Consumer Reactions
1. Transparency
Brands should openly communicate any changes in product size or quality. Explaining the reasons behind adjustments—such as rising production costs or sustainability initiatives—helps maintain consumer trust.
2. Offering Choices
Providing a variety of product sizes and price points allows consumers to choose options that fit their needs. A well-diversified product range can help brands retain customers while maintaining profitability.
3. Focusing on Quality
If a product's size is reduced, improving its quality, ingredients, or features (e.g., better packaging) can help offset the perceived loss of value. Enhancing the customer experience can maintain brand loyalty despite changes.
As the market evolves, companies must remain adaptable to economic shifts while meeting consumer expectations. While shrinkflation may provide short-term financial relief, brands must consider its long-term impact on trust and reputation. Finding a balance between profitability and customer satisfaction is key to sustainable growth and competitiveness.