Three Tricks Companies Use to Hide Inflation

Three Tricks Companies Use to Hide Inflation

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Inflation is hitting record highs in several countries – and companies are employing various subtle marketing strategies to hide price increases.

Value of products

It is not surprising that the sale of “private label” or “white labeltend to rise when yields fall. In line with this, shops and supermarkets have responded to recent inflation by promoting ‘basic’ or ‘essential’ products at low prices. This also happened in the 1970s.

Private label products are often more profitable for merchants than selling branded products from manufacturers. But the very low price is going away little profit margin and so supermarkets face the dilemma that these products can cannibalize the sales of others with higher margins.

On the other hand, promoting individual products at low prices helps merchants to accessibility perception and a good price.

As inflation has risen sharply recently, Aldi and Lidl together gained 1.8% of UK supermarket sales in the 12 weeks to 7 August 2022, representing an annual change of 2.3 billion pounds at expenses. Aldi also recently overtook Morrisons to become Britain’s fourth largest supermarket.

The willingness of traders to prove themselves as consumer champions in fighting inflation has also recently emerged during what are normally routine negotiations. In July, a dispute over rising prices for products such as canned baked beans caused the Tesco supermarket to freeze orders from food company Heinz.

The prospect of one of the UK’s largest supermarkets stopping selling Heinz products quickly made headlines and the resulting publicity was undoubtedly a win-win result: Tesco was seen as a consumer advocate, while Heinz emphasized the premium value of its products.

Reduce the amount of product

In times of inflationary cost pressures, a common strategy for manufacturers of fast-moving consumer goods such as packaged foods, beverages and cosmetics was to keep the price of a product low, but reduce your content.

Often called “shrinkage”, this silent process can be reversed if production costs fall again. This is when the manufacturer loudly promotes a new, larger product with an “extra free” percentage.

While this strategy can work even when consumer knowledge of prices is high and changing in small increments, this is another area where times have changed since the 1970s. consumer knowledge about prices declined since the 1970s.

Reference prices (which allow different products to be compared on a cost per value basis) are now less visiblepartly because the barcode has replaced individual labels that continue to remind consumers of the price after purchase, each time a product is used.

However, the rise of online shopping has allowed consumers to make their own comparisons. A simple search can easily reveal the contraction, making direct price comparisons per unit of weight/volume.

do it alone

It is too simplistic to say that companies make things and consumers consume them. In fact, many of the products we consume are the result of the combined efforts of producer and consumer.

Inflationary pressures may push consumers to further replace their own costs with expensive manufacturer costs. Flatpack furniture, for example, has reduced and allowed cost pressures on manufacturers consumers save carrying out parts of the assembly process yourself.

This tendency towards “co-production” is even more pronounced in services that are now more dominant in national economies than in the 1970s, for example banking, which moved from desks to online. Self-service, whether voluntary or not, is another way to mitigate the effects of inflation.

Permanent changes?

Long-term changes in consumer behavior are the result of multiple factors rather than a single problem. And so the impact of inflation will be different this time around due to other factors, most notably climate change and the effects of the pandemic.

An intriguing question is whether we will evolve into a dominant culture that less focused on consumption. Societies have always had subcultures that espouse minimalist consumer values, but in recent years there has been an emerging trend for people to re-evaluate their life choices and priorities.

Rising inflation, climate change (and climate shame) could give new impetus to: bring these poses marginal for the mainstream.