Three Tricks Companies Use to Hide Inflation

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Inflation is at record highs in several countries and companies are adopting various subtle marketing strategies to hide price hikes.

Value of products

Unsurprisingly, sales of “private label” or “White marktend to rise when yields fall. With this in mind, stores and supermarkets have reacted to recent inflation by promoting low-priced “basic” or “essential” products. This also happened in the 1970s.

Private label products are often more profitable for merchants than selling manufacturer brand products. But the very low price leaves little profit margin and therefore supermarkets face the dilemma that these products can cannibalize the sales of others with higher margins.

On the other hand, the promotion of individual products at low prices helps merchants to convey a perception of accessibility and good value for money.

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

The desire of merchants to prove that they are consumers’ champions in the fight against inflation has also manifested itself recently in normally routine negotiations. In July, a dispute over rising prices for products such as tins of baked beans prompted supermarket Tesco to freeze orders from food company Heinz.

The prospect of one of the UK’s largest supermarkets ceasing to sell Heinz products quickly grabbed the headlines and the resulting publicity was undoubtedly a win-win outcome: Tesco was seen as a consumer advocate, while Heinz emphasized the premium value of its products.

Decrease the quantity 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 has been to keep the price of a product low, but reduce your content.

Often called “narrowingthis silent process can be reversed when production costs drop again. This is when the manufacturer promotes a new, bigger product with an “extra free” percentage.

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

Benchmark prices (which allow different products to be compared on a cost-per-value basis) are now less visiblein part 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 expose the contraction, allowing instant price comparisons per unit weight/volume.

do it all 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 cause consumers to substitute more of their own costs with the high costs of manufacturers. Kit furniture, for example, has reduced cost pressure on manufacturers and enabled consumers save carry out parts of the assembly process themselves.

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

Permanent changes?

Long-term changes in consumer behavior are more likely to be the result of multiple factors rather than a single issue. And so the consequences of inflation this time will be different due to other factors, including climate change and the effects of the pandemic.

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

Rising inflation, climate change (and climate shaming) can give new impetus to bring these attitudes on the sidelines of the main stream.

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