Massey University marketing professor Bodo Lang told The Front Page it’s become more frequent as retailers and manufacturers have more data about how customers respond to increasing prices.
“They have cottoned on to the fact that consumers are very sensitive to price changes because the price is often advertised very heavily and at the point of sales, and it’s generally the most important attribute that people look at when they make a purchase.
“Whether there’s 100 nails or 90 nails in a box at a DIY store, or whether I get 1kg or 900g of cheese, those are things that are pretty well hidden.”
Lang said the best example of how not to do it was when Cadbury made three changes to its milk chocolate bars in 2009: it switched to palm oil, changed the packaging and decreased the size.
“Then they made these three changes in quick succession. And to put it loosely, they got absolutely hammered by the market. Their market share just shrunk away.
“I don’t think Cadbury is anywhere close to where they were back then in market share. So they’re still suffering from those consequences.”
On the other hand, New Zealand chocolate brand Whittaker’s made a similar change but it was transparent, Lang said.
“Just in the last few months, the company said, ‘The cost of our raw ingredients is increasing, we don’t want to sacrifice the quality of our chocolate because we’re proud of it, therefore, we’re really sorry, but we have to put up the price.’
“Their price increase was pretty hefty but I think they’ve just done a really textbook marketing job of being transparent, maintaining trust with consumers and explaining why they’re doing it.
“They could have hidden this, instead of 250g, maybe you’re only getting 225g. But people would have gotten on to this.”
So, how can we make sure we get the most bang for our buck? Lang said paying attention to unit pricing was a good start.
“Certainly stockpile products when they’re available at a particularly low price, particularly for products that you may not consume more of just because we happen to have them at home like dishwashing liquid, table salt or toilet paper.
“An example of where this could backfire would be products that we might consume more of when we have more at home, like chocolate.”
Listen to the full episode to hear more about how to spot “shrinkflation”.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts.
