Do you remember good old days when you could buy a 100 gm Parle G biscuit for ₹ 4 in 1990s. You must be wondering that today one can still buy a small pack of Parle G for just of ₹ 5, just ₹ 1 (25%) increase in more than 30 years. However, beauty lies in details. Although price has increased by just ₹ 1 in 30 years, the packet weight has been reduced to half at 50 gm.
The Parle G example is a fascinating case of “shrinkflation,” where companies keep the price of a product relatively stable but reduce the quantity or size. By reducing the weight but keeping the price almost the same, they have managed to preserve a nostalgic appeal for generations of customers who remember it as an affordable, everyday treat.
How shrinkflation helps companies manage inflation and customer perception:
Shrinkflation also allows companies to adapt to rising input costs while minimizing the shock for consumers. It’s a clever balancing act, ensuring that the brand remains affordable and accessible without significantly altering the perceived value. Over time, though, it does affect value for money, and observant consumers might feel a shift in their purchasing power even without clear price hikes.
By keeping the price stable but reducing quantity, brands like Parle G can maintain their presence as a staple in the market. Consumers don’t immediately notice the change in weight, so the brand retains its “low-cost” identity. However, for those who keep track, it’s clear that while the product is still inexpensive, the value per gram has subtly shifted over the years.
Ethical considerations:
When companies quietly reduce product sizes, they risk eroding trust among consumers who recognize that the price per gram is increasing. However, the gradual reduction in quantity can feel misleading, especially for observant consumers who realize that the value per gram has decreased. This can give the impression of manipulation, as customers end up paying more per unit over time without the transparency of a straightforward price hike.
In essence, shrinkflation may be a practical response to inflationary pressures, but its ethical standing depends on how transparent brands are about these changes. When done subtly and without clear communication, it risks creating distrust among loyal customers who may feel that they’re receiving less value than they used to. However, it is effective in keeping products accessible and in avoiding the “sticker shock” of a direct price increase, especially for those who may prioritize price over quantity.
Conclusion:
In the end, shrinkflation works as a business strategy but must be approached with sensitivity to customer perception. Balancing strategic pricing with honest communication can help companies navigate economic pressures without compromising trust.
Learn-Do Finance 