Is Shrinkflation a Good Business Strategy?

[Mika]

To cope with inflation, recession or just to make more profits, many businesses use a technique called shrinkflation. This is a technique where businesses, instead of raising the price of the product, maintain the same price with the reduced quantity or weight.Imagine you used to buy a2 kg packet rice for $5. You've been buying it for a while, so you don't always pay attention to the weigh. But without you realizing it, the company might shrinked the bag from 2 kg to 1.8 kg. Do you think this is a good business strategy? Would you do the same thing for profit?

 

[Phantasm]

There is a business strategy called shrinkflation which is controversial; it means that the amount of a product being reduced while its price remains the same. It enables businesses to keep their profit margins intact in times of increasing costs without raising prices but may lead loss of trust and loyalty by clients. Shrinkflation could be used as a response to inflation, however there are chances for dissatisfaction among customers resulting in losses to rivals who offer better value. Regulatory scrutiny can result from consumer feelings of having been deceived. In order for lasting sustainability, customer’s trust must be maintained. Success depends on nature of products, consumer demands, competitors, legal frameworks and economic environment. Besides customer satisfaction and reputational management priorities, shrinkflation requires rational weighing up of its strengths and weaknesses against alternative cost-cutting measures.