Friday, April 1, 2011

Beating inflation by downsizing packages!

As input costs rise and inflationary pressures take hold, in order to keep sale prices unchanged, consumer products businesses have sought to subtly reduce quantities in their standard packages. The high unemployment rates and weak demand in the US means that businesses cannot afford to pass on price increases to consumers. A NYT article writes,

"As an expected increase in the cost of raw materials looms for late summer, consumers are beginning to encounter shrinking food packages... companies in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most visible at the grocery store, where shoppers are paying the same amount, but getting less...

In every economic downturn in the last few decades, companies have reduced the size of some products, disguising price increases and avoiding comparisons on same-size packages, before and after an increase. Each time, the marketing campaigns are coy; this time, the smaller versions are 'greener' (packages good for the environment) or more 'portable' (little carry bags for the takeout lifestyle) or 'healthier' (fewer calories)."

The size of the packages, atleast the width and height, are kept the same. Or marketers design a new shape and size altogether, complicating any effort to comparison shop. Businesses seek to capitalize on the fact that consumers are generally more sensitive to changes in prices than to changes in quantity. In any case, a very small number of shoppers take the trouble of reading quantity labels on packages while making their purchases.

See this fascinating advertisement (via Economix) by Blue Bell Ice Creams that it has not been trying to reduce the size of its packets!

No comments: