In a business sector where competition is too fierce, businessmen might face a problem in boosting their profit margin. However, there is this key practice in the economy where they could leverage profit without facing loss. The name is shrinkflation. Shrinkflation is a strategy of reducing the size of the product to limit price competition. This kind of strategy mainly works for the food and beverage industries.
The word shrinkflation itself carries two separate meanings. The first is from the word ‘shrink’ and the second is from the word ‘inflation. The word shrink refers to the change of a product size, while the inflation or -flation part of the word reflects the rise of the cost. The key reason why there is shrinkflation is because rather than increasing the price of a product, a company offers a smaller package. So, the price does not change. In other words, the company designs a new package for the customers without having to announce whether the price increases.
Pippa Malmgren is the British economist first coining the word shrinkflation that is now famous. Furthermore, shrinkflation is actually another form or could be a hidden inflation. This is because, most of the time, customers are highly aware that the product size decreases. So, they are mindful that companies might shrink the product to squeeze more money.
However, based on the research, consumers are more sensitive to price increase than product downsizing. In addition, although this means a positive result, the research added that this practice could change consumer’s brand perceptions. Because they could notice the declining unit or size of the product. There are actually many forms of shrinkflation applied in a lot of business. Most consumers might not check or notice the shrinked part of the product. The easiest epitome lies in the potato chips for instance. The reduction could be in the bag size or chips content. So, customers do not know if the price goes up.
