In her recent Bloomberg article, Leslie Patton provided a great overview of ‘shrinkflation’ – the common practice of down-sizing portions in order to maintain, or even slightly increase, pricing; a practice that many in the consumer goods and food/beverage space are pondering.
And based on our longitudinal, neuroscience-based data, this common practice is exactly the wrong move. As Patton points out:
“Consumers suspect a bit of foul play, assuming that eateries aren’t being straightforward. About 56% of U.S. diners say they would be more willing to pay a little extra if restaurants clearly explain why prices are rising…”
This pricing shell game is a mistake for two reasons:
- Even as prices climb, the majority of consumers will continue to buy the best experience vs. the lowest price.
- Consumers perceive three components of “cost” – and the price of a product is only one element (and often the least important).
What is an ‘Inflationaire’?
We continue to see in our data a phenomenon we’ve dubbed the ‘Inflationaire’ mindset. In short, the compulsion to buy what one wants, when one wants it, to make oneself feel emotionally better, even in the face of climbing prices and potentially shrinking resources.
“[P]rice is only one element of perceived cost.”
In other words, the stress and pressure of inflation (not to mention all the other scaries out there) are compelling many to behave more like millionaires than penny-pinchers (or at least free-spenders in categories where they can afford to be). And for consumers who are buying based on rewarding, emotionally-valuable brand experiences, the bait-and-switch of shrinkflationary tactics is a major betrayal.
Appealing to the Inflationaire mindset
This leads to the other core human truth in these inflationary times: price is only one element of perceived cost.
As many retailers and brands wheel, deal, and otherwise try to manage mounting costs with a purely price-minded approach, winning brands will leverage the other two – and generally more influential – components of perceived cost: simplicity and transparency.
Think of simplicity this way: remember in high school math, those infernal story problems? “Train A leaves from Cleveland going 56 miles per hour. Train B…”
Solving this problem requires a lot of mental effort, concentration, and thought power. And I’ll go out on a limb and say that mental challenges like this are not a lot of fun.
“If a 12 pack of 12-ounce cans is $5.69, and a 2-liter is $3.29…” Yikes. Math-city.
The Inflationaire mindset is less concerned with the contents of their wallet than with the mental work required of managing climbing prices. Make it simple on them, and your brand will win.
This brings us to the third component of perceived cost: transparency. As reported by Kantar’s J. Walker Smith, stress and anxiety are at an all-time high.*
And the perception that once-trusted brands are pulling a fast one via shrinkflation is anything but transparent.For the Inflationaire mindset, fear of getting ripped off is just as salient as the absolute price point. How can your promotions, communication, and digital activation assure consumers that you’re on the up-and-up, and above the sleight of hand being used by competitors?
Yes – consumers are feeling pressure, but most will remain willing to spend on:
- Rewarding experiences that…
- Balance actual price with simplicity and transparency in navigating climbing prices.
*This is based on Walker’s comments/slides from the Insights Association Town Hall Webinar, March 11, 2022, where we co-presented.