Tag Archives: pricing

“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.

Are your foods shrinking?

Group Activities and Discussion Questions:

  1. Poll students: What have they observed in their purchases? Are the sizes or prices the same?
  2. Show video about shrinkflation: https://youtu.be/q13_06F4_HI
  3. Discuss why manufacturers are making these changes. What are the reasons?
  4. How is shrinkflation accounted for in pricing?
  5. Discuss various pricing models: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  6. Which pricing model is being used with shrinkflation?
  7. Offer an outside assignment for teams of students. Have them visit a local store and examine products that illustrate shrinkflation.

Sources:  Patton, L. (12 May 2022). Fewer nuggets, smaller salads: Shr9inkflation hits U.S. Restaurant Diners. Bloomberg.; Skores, A. (16 May 2022). Inflation up, product size down. Dallas Morning News.; other news sources.

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How Much is it Worth? $1.9 million!

Determining the right price for a product or service is complicated. Marketers need to first determine the strategy that is best for meeting the objectives. Does the organization want to establish a beach-head and gain market share (at a low price), or does it want to reach the elite purchasers (at a higher price)?

Pricing strategies include demand-oriented, cost-oriented, profit-oriented, and competition-oriented approaches. Within these various approaches are price models that include skimming, penetration, luxury, bundling, price-lining, return-on-investment, and more. But finally, and perhaps most importantly, do not discount the strong appeal used with psychological pricing.

All these strategies are interesting, but how does one apply them to a unique product such as a champion racing pigeon? In many instances, the correct price is the price that someone will pay for the item. This is different than what the item might be worth in general – it is what the item is worth to that one particular buyer.

Take pets as an example. How much are people willing to pay for a pet? Or consider an animal that brings prestige, and perhaps even monetary gains, to a buyer – animals such as thoroughbred horses, or racing pigeons – that bring prestige and monetary gains to owners. What are they worth?

Recently, ‘New Kim’, a champion racing pigeon, recently fetched the amount of $1.9 million, breaking sales records for such a bird! Two bidders (operating under the names of ‘Super Duper’ and ‘Hitman’) drove up the purchase price to the record amount, surpassing the $1.6 million spent last year on another champion racing pigeon named ‘Armando’. The same Chinese owner is thought to have bought both pigeons.

How much are you willing to pay?

Group Activities and Discussion Questions:

  1. As class begins, poll students about pets and pricing. Ask who has a pet and how much they paid. Ask other students if they were going to buy an animal, how much would they consider spending?
  2. Show a video about the Belgian pigeon: https://youtu.be/kNmk5Jw5rbY
  3. Discuss pricing strategies (e.g., demand-oriented, cost-oriented, profit-oriented, competition-oriented, etc.).
  4. Divide students into teams. Have each team select a different price approach and determine a SMART objective for the approach.
  5. Next, have students use their selected price model to determine prices for the ordinary products (e.g., milk, gas, eggs, etc.), shopping products (such as clothing.), and luxury items (such as Louis Vuitton handbags), and rare (such as racing pigeons).

Source:  Associated Press; other news sources

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LG’s New Rollable TV costs $87,000

It’s finally here and it is incredible! Last year at the Consumer Electronics Show in Las Vegas, LG Electronics showcased an innovative, rollable screen TV. Now, the TV is in production and will be available next year in South Korea for the price of…. (Insert drum roll)… $87,000!

Did that price surprise you? Yeah, we thought so.

The screen is 65-inches and is built around a flexible OLED panel that uses self-lighting pixel technology and dimming control to delivery an amazing picture. Since the screen is flexible, it can retract partially or fully into its base, adapting to different aspect ratios. When fully retracted, no screen shows.

The base does come in four different colors, plus the aluminum base can be inscribed with words of wisdom (such as “you paid what for this?!”). The base also includes a sound bar for premium listening.

Regardless of price, the rollable TV is truly revolutionary. Instead of owners setting up a large black screen that always is in place, even when off, LG’s unit liberates the TV from the wall.

Ready for a new TV?

Group Activities and Discussion Questions:

  1. Pricing is a complex topic. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  2. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  3. Show a video of LG’s rollable $87,000 TV: https://www.impomag.com/home/video/21199409/lg-reveals-jawdropping-price-on-rollable-tv?lt.lid=5f90574cfed1277042925d3d&lt.ack=ryRUDA6PD&lt.usr=71617211&utm_source=IMPO_10212020&utm_medium=email&utm_campaign=124311&utm_term=643230
  4. For specifications, view the news release from LG: http://www.lgnewsroom.com/2020/10/commercial-launch-of-lgs-long-awaited-rollable-oled-tv-marks-turning-point-in-tv-history/
  5. For LG’s rollable TV, divide students into groups and have each group work on any/all of the six steps.
  6. When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).
  7. Debrief the exercise. Compare the various pricing models and discuss advantages/disadvantages of each.

Source: CNET, Engadget, IMPO Insider, The Verge, other news sources

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