The statement ‘Honey, they’ve shrunk the kid’s chocolate bar’ was the headline of a news item that appeared in TOI on Nov 20, 2011. This news item reported that many brands in so called fast moving consumer goods/ impulse category have reduced unit quantity/weight subtly without catching consumer attention. Consider the following cases:
Product Price (Rs) Weight then (gms) Weight now
Lays chips 20- 68- 61
Good Day 10- 100- 84.5
Dairy Milk 20- 40- 38
Britannia bread 12- 100 -80
Hadiram sancks 10- 52- 48
Lux soap 10- 75- 65
Brands operate in a dynamic environment. Currently most of the marketers have been facing pressures of inflation on demand/ revenue and supply/ cost side. On the demand side consumer purchasing power has been adversely affected because of inflation. And on the supply side the input costs have been moving north. The upward movements in input costs make a case for a price adjustment in order to maintain profitability. However if price is maintained in the wake of rising input costs the profitability comes under pressure. However if income is also on the rise, it may not be difficult to pass on burden to consumers by adjusting price upwards.
Tinkering with the price that consumers get used to is not an easy decision. In some cases customers tend to be sensitive to price and even a small price change can upset value equation. Price is often under consumer and media gaze. An insignificant price change can potentially upset the position of a brand on the value spectrum in consumer’s mind. For instance price points for low ticket items could be Rs 2, Rs 5, Rs10, Rs 15 and Rs 20. A minor price increase can create perception of price hike far more than what it actually has been. Price changes sought to offset input costs may also be resisted by trade partners because of currency denomination issues.
It is therefore makes more sense to pass on cost increases by those means that customers are likely to be less sensitive about. The product quantity or grammage in this context makes a right case for neutralizing cost escalation. Although consumers do develop notions about sizes or quantity as a result to repeat previous exposures in the form of reference sizes but these are likely to be vaguer than prices. Unless sizes are radically changed they are unlikely to be noticed by people. People are less likely to be sensitive to product quantity rather than price because price is a more involving issue (price is marked, discussed, displayed, compared and paid for).
The lack of concrete grammage/ quantity benchmarks along with less consumer involvement provides marketers with an option to offset cost escalation by quantity reduction. But the crucial issue here is to decide an appropriate quantity of shrinkage that it goes undetected by consumers. The idea is to not to execute a change which would upset/disrupt the ‘consumer routine’ and bring him or her back into ‘problem solving’ frame. So what is the maximum quantity reduction which is likely to go unnoticed?
Let us take a look at the grams by which the brands mentioned in the table have been shrunk: Lays chips (7 gms), Good Day (15.5 gms), Dairy Milk (12 gms), Britannia bread (25 gms), Haldiram snacks (4 gms) and Lux soap (10 gms). Can the quantity reduction decisions be taken randomly? The answer to this question is negative. Here one of the behavior concepts that comes to the rescue of brand managers is ‘differential threshold level’ or ‘justice noticeable difference’. It is the minimum difference between two stimuli (quantity before change and after change) which is noticeable by a prospect. Therefore safe strategy is to reduce grammage or product quantity by an amount which is below JND or differential threshold level. This ensures that consumer gets less quantity at a given price and this also goes unnoticed or unperceived. The quantity so saved can be utilized to compensate for increase input cost. Look at the quantity by which brands in question have shrunk. These are too insignificant (probably below JND) to be noticed by an average buyer.
How do we arrive at specific quantity of reduction? This would largely depend upon the initial level. Weber’s law states that stronger the initial stimulus, the greater the additional intensity needed for the second stimulus to be perceived as different. It is essential for marketers to determine the differential threshold level and then carry out negative changes (like quality or quantity reduction) by an amount that is likely to unperceived (below JND) and for positive changes (quality improvement) the improvement must be above differential threshold in order to be noticed by people.