Monday, July 14, 2008

Less is More... More or less.

Coming soon to a retail store near you:  Less.

Confused?  Just wait.  A recent story in the Globe and Mail (the great white north news) reveals how Unilever Canada Ltd. dealt with the skyrocketing price of soybean oil:  reduced package size!

Last Halloween, I saw a bag of Whoppers (or maybe it was a box of Junior Mints...I can't remember) boldly proclaiming 30% fewer calories!  At the time it occurred to me that the bag (or box) was smaller than I remembered it, which would account for the reduced calories.  But then I thought:  Who wants less candy?

["Who's gonna turn down a Junior Mint? It's chocolate, it's peppermint -- it's delicious!"]

According to the G&M, the dilemma of whether to raise price or reduce package is becoming more common as commodity prices soar and inflation accelerates.  And the question is, of course, how to best pass along rising costs to the consumer.

Unilever chose to reduce the size of its mayo jars by 60 ml.  Naturally, this meant they had to create new containers, so they went from glass to plastic, which apparently cut manufacturing costs.  Nonetheless, the price has gone up as the size has gone down.  Less is more.

But don't get too mad too fast at Unilever. The Bank of Canada says that a record 42 percent of companies plan to pass along rising costs to customers. More of less being more.  But instead of raising prices, many companies are reducing sizes.  

As my dad used to say, there's not such thing as a free lunch.  You either pay up or you go home empty-handed.

["Um, excuse me, I - I think you forgot my bread."  "Bread, two dollars extra."  "Two dollars? But everyone in front of me got free bread."  "You want bread?"  "Yes, please."  "Three dollars!"  "What?"  "No soup for you!"]

Anyway, it apparently works.  Shortly after the mayonnaise incident, Unilever pulled the same routine with its Breyer's ice cream.  Now General Mills (the cereal king, not the military guy) is selling smaller boxes of Cheerios and Wheaties.  And Kellogg is doing it too.  Wrigley's even had the audacity to cut the number of pieces of gum in its packs of Juicy Fruit.  More and more of less and less being more and more.

John Gourville [silly name nonsequitor:  the Tampa Bay Rays have a pitcher by the name of Balfour; they may want to trade him for a guy names Strikethree], a marketing professor at Harvard Business School says consumers are more sensitive to changes in price than to changes in quantity.  

"People don't notice the change in package size  very often," he said before offering this caveat: “If people notice the change they're going to feel like the company is being deceptive. That risk is higher now because people are extremely sensitive to price increases given the tough economic times.”

And while it would be nice to point a finger at the kids above the border, consider that those Frito-Lay chips you've been munching on are smaller than they used to be - from one-fourth of an ounce on small bags to two ounces on a family-sized bag.  Then there is the smaller bar of Dial Soap, the smaller tub of Shedd's Spread Country Crock, the smaller jug of Tropicana orange juice and on and on.  But don't be surprised or upset you didn't know it... that was kind of the whole idea.

["Jerry, just remember, it's not a lie if you believe it."]

No comments:

Post a Comment