It’s no surprise that manufacturers like to raise the price of products whenever they can, with one of the most common ways as of late being to shrink the amount of product you receive, all while keeping the price the same.
This effectively raises the price of the product by allowing them to receive more for a ‘batch of product’ than they would have otherwise.
Ice cream. Use ice cream as an example. I love ice cream so I will take any opportunity that I can to talk about it. And eat it! Anyway. A few years ago, you used to be able to get what was commonly known as a ‘half gallon’ for around $3.00. Since there are four quarts to a gallon, this meant that a half gallon container consisted of two quarts of ice cream.
While many people still refer to the most commonly sold size of ice cream as a ‘half gallon’, it’s no longer true in most cases. If you have a carton in your freezer, go look at it. Now, the most common size of a ‘large’ container of ice cream is 1.5 quarts. If you still paid $3.00, you’re still paying the same for a container of ice cream, but you’re getting less. Even a pint is no longer a pint, as most in this size range have shrunk from 16 ounces (an actual pint) to 14 ounce sizes.
To keep it in whole numbers, let’s pretend that you had a party coming up and you knew you needed six quarts of ice cream to satisfy everybody. In the old days, you would need three half-gallon containers, so your total cost would be $9.00.
Now, however, you would need to buy four of the 1.5Q containers, so your overall cost is now $12.00.
This represents a full 33% price hike in the per-unit cost of ice cream. Pretty sneaky!
Why Do They Do This? The first question that comes to mind is ‘Why not just raise the price?’ This would save the hassle of having to come up with new packaging (a ploy that they use to ‘hide’ the smaller sizes), and would also save them having to reprogram the machines. In the case of ice cream, they could have just raised the price of the two quart (real half gallon) to $4.00.
But the problem is that people don’t want to pay more. People get conditioned to paying the same price for an item, and if it goes up, they will look harder at finding a better deal, or in the case of ice cream (and other discretionary items) they may just avoid the purchase altogether. Companies obviously don’t want to risk this, so instead of size being the constant unit, they use price as the constant unit, and adjust the amount you receive to fall into where they want the ‘price per unit’ cost to be.
How Often Does This Happen? It happens more often than you probably think. I’ve been pointing out this trend for a long time, with Kirkland Baby Formula as one of the more sneaky maneuvers I’ve ever seen. The Consumerist recently pointed out that Walmart changed their packaging on instant mashed potatoes, and got rid of over 5 ounces of product at the same time. Even CNN got in the game recently, finding ten products which have recently shrunk in terms of what you get.
Will Sizes Shrink Forever? One of the more common areas where they’ve done this is with boxes of cereal. A box of cereal has always remained roughly the same price for quite a number of years, but the amount you get has been whittled down to where they *had* to shrink the size of the box to avoid being absolutely absurd. I’ve always joked that if they keep doing this, eventually the cereal aisle will be filled with small boxes, like the kind you see at hotels or on airplanes, as this will be the ‘standard’ size.
That’s funny to think about, but it really doesn’t work out that way. I’ve watched how companies handle this and they will shrink the size a couple of times, but then they’ll introduce a ‘newer’ bigger size (which is often the same size as they used to give you for the lower price point) and will charge more. They’ll offer it as the ‘Jumbo Pack’ or ‘Family Size’.
With multiple sizes, some people will choose the larger box at the higher price point, especially if they offer it at a good price point per unit, or if the stores position it at the most commonly selected area on store shelves. At a certain point, they will start to get people used to the idea of paying more at which point they can phase out the smaller size packaging, then start the whole process over again.
Seems like a lot of trouble, but look what that does. It does eventually get people to pay more for the product (which as I said is a big off-putter), but the fact is, people will pay more for products as time goes on, they just don’t want to do it that often. The reduce->reduce->repackage->repeat cycle allows for companies to raise their revenues multiple times before actually raising prices. So, to go back to my joke, cereal shelves will never be filled with mini boxes (though that is fun to think about).
What Do You Do? One of these is what I happened to notice: Kirkland Paper Towels. On a recent shopping trip to Costco, we grabbed a package of twelve rolls, which was priced, as it normally seems to be, right around $15.00. This meant it was $1.25 per roll. When I got home and started unloading the paper towel on the storage shelf, the new design of the plastic sleeves surrounding each roll caught my eye. This was an immediate flag, and sure enough, the old rolls that we hadn’t used up contained 90 sheets, and the new rolls now contained 80 sheets. That cuts out a full 11% of the product that you receive, all for the same price you were paying before.
What a deal, right?
I was pretty annoyed by the whole thing, and it instantly prompted the idea of writing an article, but I started thinking that maybe instead of just pointing out the increase, I would give a little background about how the process works (which I did up above), point out this increase, and then spend a few moments thinking about ways I could combat this particular increase, points which I believe can be used not just for paper towels at Costco, but for any product which may fall prey to these types of hidden price increases.
- Become aware – As I mentioned, I was able to spot the paper towel size decrease because I’ve trained myself to notice changes to packaging. When a company introduces a new design, or revamps a logo, puts a new picture on the box, or changes the shape of a bottle, these are all red flags that they’ve changed what’s inside the packaging. As you start becoming more aware of these changes, you’ll automatically start looking at the sizes.
- Take advantage of the transition – This is only a temporary solution, because one of the things I’ve found is that if one company does this for a product, their competitiors will take notice if they ‘get away with it’ and if so, they’ll copy the strategy. Going back to the original example of ice cream, it took a couple of years before all of the ice cream companies made the switch from two quart containers to their smaller replacements, but in the meantime you could often search out a company that hadn’t yet made the switch, and get more bang for your buck.
- Don’t be automatic – Companies brazenly undertake this strategy because they know that people are creatures of habits, and therefore will often reach for the same product on the same shelf, not paying much attention (at least in the store) as to what’s inside the package. This means that they get away with it. If you notice this, maybe it’s time to start looking around. In our case of paper towels, maybe it means that we start looking for sales that we can stack with coupons at different stores. It’s always been nice to just go to Costco, hit up the back of the store, and know that we have enough paper towel for a few months, but you can often get that better price back by shopping around.
- Reduce your consumption if possible – If you notice yourself getting less of something, see if it’s possible to use less to offset the difference in what you receive. Sometimes, like in the case of when we first noticed this with baby formula, there’s no way you can reduce the amount of formula you give to your baby to offset the cost. Other things, you can. Paper towels are probably one of the more wasteful things that we as human beings use. I’ve read stories where some people don’t even have paper towels in the house. I couldn’t imagine this, but is it possible to offset the 11% reduction in what we bring home with a reduction in what we use? When we wipe Baby Girl Beagle off after a meal, maybe we could use half a sheet instead of a full sheet. Instead of some of the cleaning we do with paper towels, grab a rag from the closet instead. If you start to focus on what you use, you’ll often see that you can easily reduce consumption just by putting a little extra effort into thinking about what you need versus what’s right there.
Overall, I was disappointed by Costco’s decision to reduce the size of the paper towel rolls. But, I wasn’t surprised. It’s a strategy that product manufacturers have used and will continue to use. The best thing you will have to combat this is awareness. Simply noticing that you’re now getting less and paying the same will often trigger action.
Readers, how often do you notice these hidden price increases? Would you rather see the product sizes shrink and prices stay the same or would you be OK with more frequent price increases than we have today but with less frequent product size changes?Copyright 2013 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.