Which Is Better: Inflation or Shrinkflation?

Raise your hand if you love inflation!

Yeah, that’s what we thought.

You probably don’t like shrinkflation, either. But chances are good that you prefer it to having to pay higher prices, according to a trio of marketing experts from Australian universities.

Shrinkflation generally involves a manufacturer reducing the size of a product while keeping the price the same. In other words, you are paying the same for less.

Somehow, shoppers appear to prefer shrinkflation to traditional inflation, which is paying more than you did previously for a product that has not changed in size.

Why do shoppers prefer shrinkflation? Three Australian marketing experts — Di Wang and Gary Mortimer of Queensland University of Technology, and Jun Yao of Macquarie University — decided to find out.

After conducting a study, they concluded that shoppers have an innate cognitive bias that makes them focus on price “no matter what.”

Over a six-week period, the trio of experts manipulated shelf labels for five grocery products at a supermarket in Brisbane. The experts did not change the size or price of any of the products, but did alter shelf labels to fool shoppers into thinking the price or size had changed.

In the end, all the changes on the shelf labels indicated the same per-unit price increase across all the products, regardless of whether it was due to shrinkflation or inflation.

Based on sales results, the experts concluded that shoppers were most attracted to a shrinkflation variant that “created the impression the product’s price had been reduced, but also the size had been reduced even more.”

The researchers believe a couple of factors explain why people tend to prefer shrinkflation to inflation. The first is what is known as the “silver lining effect.”

As they describe it, “a small gain (a lower price) and a larger loss (an even smaller size) is more favourable than a net outcome consisting of just a smaller loss (price increasing or package downsizing) alone.”

In addition, shoppers have a bias toward noticing price over size.

So, expect to see the shrinkflation trend continue. As the study authors note, over the past decade, marketers have become fully clued in to shoppers’ preference for shrinkflation over inflation.

To see some recent real-life examples of shrinking package sizes in U.S. stores, check out “Shrinkflation: 6 Products With Smaller Packages in 2022.”