Shrinkflation: 4 strategies for brands to increase their profit margins

The current period of inflation has anchored a word in the minds of all customers: Shrinkflation. Our analysis shows that 4 distinct tactics are followed by brands wanting to increase their prices without losing customers (the 3rd one is incredible). Because the whole point of a shrinkflation strategy is this: leave prices unchanged and give the illusion of status quo so as not to break the loyalty circle.

Summary

• Strategy 1: Reduce the size of the container
• Strategy 2: Make it look like the content has stayed the same
• Strategy 3: Change the calculation rules
• Strategy 4: change the design to save on raw materials

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Shrinkflation strategy #1: reduce the size of the container

When it comes to shrinkflation, the most common strategy is to reduce the quantity of the product and adapt the packaging. The price stays the same, but the quantity of products decreases.

The change is visible on the outside. Social networks are full of examples where people compare the before and after. In India, for example, Polo sweets have undergone a very visible slimming down, as illustrated by @neelyjan on Twitter (see below).

Shrinkflation strategy #2: Make it look like the content stayed the same

Marketing departments can be very imaginative when it comes to confusing the customer. The famous WD-40 lubricant provides a good example. The 300 ml bottle has been reduced to 275 ml, including a 25 ml bonus. There is less product than before (8.3% to be exact). But by the miracle of marketing, the packaging has remained the same. There is less product inside.

The container has remained the same, but there is less product inside despite the advertising messages on the packaging. Credits: courtesy of @BitcoinSouldier via Twitter.

Other manufacturers are less fortunate. Their packaging is transparent. So, when they put less product, it shows. This is the case of the Dawn dishwashing product, which was pinned on Twitter (see screenshot below)

Shrinkflation strategy #3: change the rules of calculation

Here is a shrinkflation technique that very few people have heard of, simply because it is very difficult to detect. So far, we have only seen it in the service industry, specifically in the gym industry.

This shrinkflation technique applies to subscription-based business models and changes the periodicity of the billing. It gets borderline because the billing rhythm makes you think nothing has changed. Before, you were billed monthly (so 12 times a year). Now you are billed every 4 weeks. But 4 weeks is 1 month. Well, no. There are, in fact, 13 times 4 weeks in a year.

In conclusion, before, you paid 12 times a year, and now you pay 13 times. Your annual bill has increased by 8.7% without you realizing it. And since there is little chance that you will check your account statements, this increase will not hurt you, and you will remain a customer. The cycle of customer loyalty will remain intact.

Chez Easy Gym les abonnements se payent désormais toutes les 4 semaines au lieu de tous les mois.

At Easy Gym, memberships are paid every 4 weeks instead of monthly.

Shrinkflation Strategy #4: Change the design to save on raw materials

Here’s another sneaky strategy for brands to engage in shrinkflation. The principle is simple. The product remains the same seen from afar. But something invisible has changed that allows the manufacturer to save on raw materials.

Food manufacturers like to revisit their recipes. One less ingredient here, one cheaper ingredient there, and that’s it. The example of Campbell’s soups is symptomatic. In the past, each tin contained the equivalent of 4 tomatoes; today, it’s 3. Guess what has replaced the space created?

The Campbell’s soup before shrinkflation (right) contains 4 tomatoes. The one on the left (after shrinkflation) contains only 3. Credits: courtesy of @iamgtsmith via Twitter

At Toblerone, the change was more subtle, but the brand had to backtrack when it changed the “design” of its famous chocolate bar in 2016. The customers then went wild on social networks, which must have scared the brand. This case proves that shrinkflation is not a recent phenomenon.

The engineering award goes to Bounty, a manufacturer of paper towels and toilet paper. As @HarrisLue showed on Twitter (see below), the designs were embossed deeper to keep the same outer volume with less material. The result is 4.5% less material and an invisible change for untrained eyes.