Price maintenance via content reduction

Given the difficulties in passing on escalating ingredient and energy cost increases to the consumer because of a combination of trade resistance and breaches of price-points, some brand owners have resorted to pack-content reduction to mask price increases. Whilst they obviously preserve their legal integrity by updating the weight indication on the label, the real issue is consumer perception

To my mind this is one of the fundamental issues in the brand-consumer relationship in the current climate. As we know, a consumer buys a combination of Product, Price, Presentation and Place when choosing a brand. A consumer consciously or unconsciously compares this offering with alternatives available in the market. Good brand management is about maintaining these 4 Ps in harmony, and meeting the expectation of the consumer.

Brand equity is thus about preserving this trust of the consumer in the brand, in effect when they open the pack, the contents meet or even exceed their expectation.

Even being open and honest with the consumer when making changes to the offering may not prevent the consumer’s perception that they have been short-changed, causing them to second-guess all changes to the brand, thus damaging brand equity

When a brand owner changes one element of the package i.e. increases the price, or reduces the amount the consumer receives for the price, this balance is disturbed, and can cause the consumer to ‘re-compare’ the offer with alternatives available.

The real problem is that the consumer may then switch to a competitor brand without complaining to the brand owner, thus resulting in loss of market share…

( It used to be said that a complaining consumer was a loyal user trying to give the brand a second chance! )

As far as price-points are concerned, brand owners need to ask themselves if the savvy consumer is really influenced by ‘5s and 9s’ in this ‘post’ financial-crisis era…?.

Perhaps brand owners should allow cost-price increases to flow through to the retail price, hoping that eventually the same ingredient cost-increases will affect the competitors’ retail prices, given that legislation rightly prevents any price-coordination in the market.

If the brand’s offering is changed without resulting in equivalent changes in competitive offerings, then the result has to be loss of market share until 4P equilibrium is restored in the category..

Perhaps the real answer is to use a price increase as an opportunity to fundamentally re-assess the total offering vs. alternatives available, and update the offering to suit the savvy consumer…?