Reference no: EM133293887
"Shrinkflation" Takes Hold in Product Sizing
The small things matter. Small in this case meaning the quantity in a package. In case you haven't noticed lately, prices are going up and contents are going down.
If you're not sure about this, consider the new sizes of common household products such as toothpaste and toilet paper. Example: A Crest toothpaste once contained 4.1 ounces of teeth-whitening product, but now contains 3.8 ounces. Gatorade was 32-ounces, but not it is down to 28 ounces. And (in case you are counting sheets) a roll of Cottonelle toilet paper has shrunk to 312 sheets, compared to its former count of 340 sheets.
Meal portions at restaurants have also been impacted. At Subway restaurants, the chicken wraps and sandwiches have less meat now. Domino's Pizza reduced the order size of boneless wings to 8 pieces from the usual 10 pieces. Burger King is also downsizing its nugget meals from 10 to 8 pieces. What is going on?
At first glance none of this seems too alarming, but this movement is called "shrinkflation" and tends to not retreat once implemented. Shrinkflation is when manufacturers cut down on the product size or volume in a package, rather than raising the price on the customary size. This happens during times of increasing raw materials and supply chain cost increases. It's not illegal, but it does seem a little sneaky. And, once the new sizes and prices have been accepted, new standards are in place for consumers and their wallets.
Discuss the following:
Question 1) How is shrinkflation accounted for in pricing and why do manufactures make these changes?
Question 2) What have you observed lately in your purchases? Are the sizes or prices the same? How do you feel about this? Provide examples.
Question 3) Discuss various pricing models: demand-oriented, cost-oriented, profit-oriented, and competition-oriented. Which pricing model is being used with shrinkflation?