Inflation is now part of consumer lives – at least for the near term. Prices of food, gas and many consumer staple retail items are creeping upward to levels not seen since the early 1980s. As a result, consumers are paying more for what they routinely purchase. What is also occurring more frequently is "shrinkflation." What is shrinkflation? Shrinkflation is when products are downsized to help brands retain profit margins by slightly reducing the quantity of a product in a packaging while simultaneously maintaining or even increasing prices.
Product changes occur all the time without much notice by consumers, but during a period of rising prices because of inflation, consumers are taking notice and are facing choices to stay loyal to routine product purchases or change the brands they buy. Brands must pay more attention to customers now to better understand how they (customers) perceive the packaging, price, and value trade off. So how do brands wanting to remain in good standing with buyers during an inflationary period do to retain customers?
Start Brand Tracking To Be Aware Of What Your Customers Value
Smart brands invest in continuous brand tracking. Brand Tracking provides many different insights. Some brand tracking can be about online awareness or how well the brand is considered against competitors. But during inflation, brand tracking should also focus on consumer preferences and opinions about the brand. As prices move upward and packaging gets lighter, brands need to know if consumers notice and, more importantly, decide to stay or not to buy due to the increased purchase price.
By monitoring buyers' sentiment, brands can be proactive before impacting revenue with incremental changes. Insights gathered by brand tracking can inform future decision-making. Socratic Brand Power Rating with a tracking study provides further guidance on where and why buyers abandon the brand in the sales funnel. Those drivers leading to a lack of consideration can then be used to fix the price, quality, quantity, or competitive options that lead to a decline in sales.
The tumultuous retail landscape over the last few years from COVID and supply chain issues is now hampered by inflation. Consumers are now budget-conscious, causing some purchases to be deemed unnecessary. To stay ahead, brands need to recognize the segments where inflation might create challenges. By tracking their perceptions and opinions, brands can proactively launch advertising campaigns, on and offline, targeting those soft spots to reinforce the value propositions ahead of any revenue erosion.
Packaging Design Matters
During times of inflation, many brands will look to reduce the amount of product while keeping the pricing intact to minimize the risk of losing customers while holding on to their margins. When the cost of making and delivering products cuts into profit margins, brands will tweak a product to shave costs. So instead of 36 cookies, you might get 34 for the same price. This might not seem like much, the packaging and overall experience are the same, but the actual product is slightly less. This is a common and often used strategy by brands, especially in food products, and goes unnoticed by many. As costs become a larger consideration to companies' bottom line, this will be more frequent and done by more brands. It is already becoming a frequent news story and consumers are noticing.
Brands can use this period of rising prices to their advantage by revisiting and redesigning packaging to reset consumer experience. This redesign work could be creating a packaging that’s right size and pop off the shelf. A good example of a package redesign is when a product promotes a "Family Size" quantity yet it is almost the same size and quantity as regular package size. Today, there are already examples of products moving to less and keeping the packaging as similar as possible. Gatorade did a change to their bottle design as they lowered the volume of the sports drink. They were ahead of the current shrinkflation by launching a slimmer bottle design to the market.
Employing design research on the packaging to hone the colors, fonts, and even the overall look of the package will permit a brand to get confirmation on the impact the packaging can have on shopper preference. The upside to performing a package change during inflation will allow your product to be more eye-catching and bring new buyers to your brand who are considering new options. Consumer preferences are changing more during the inflationary period creating an opportunity for brands to retain and attract new shoppers and consumers with the right price and packaging value.
Design, Test, Capture Insights, and Improve Changes
Any change, no matter how small, should be customer validated before launch. Many companies check internally with different stakeholders and executives to get sign-off, which is expected, but this should never substitute the learning process and obtaining feedback from those who buy the product. Putting the updated product in front of potential buyers delivers the needed data on the concept's viability to the targeted audiences. More importantly, the feedback can influence improvement to the concept so the best qualities found by the buyers can be highlighted in the new design.
Two additional reasons concept testing should be utilized during shrinkflation include:
Concept testing can use various research methods to understand consumer interest. Testing any aspect of the product change can be done. Whether it is a new color scheme or the messaging on the package, it can be tested, so the product has the best chance for success.
Brands have to adjust their products at a larger scale during an inflationary period in the economy. Reducing the volume of a product while maintaining or even increasing prices is a straightforward approach that many consumers may not noticed or simply overlook. But as many brands face rising costs of transportation and manufacturing, consumers have begun to notice the number of product changes and they are starting to reconsider their buying options and loyalty to brands.
Brands investing in tracking and packaging research can ensure that price, packaging, and quantity decisions are informed by insights from customers increasing the likelihood of retention and acquisition of buyers. Because inflation can create many unknowns in the economy, brands should prioritize knowing their audiences and how their products are perceived in the field as much as possible. Using brand tracking and packaging design are two effective ways to help for the foreseeable future.