Podcast Summary
Price pack architecture: Companies use strategic packaging to manipulate consumer behavior and maximize profits through various package sizes and prices, leading to the proliferation of new sizes in grocery stores, while shrinkflation is just one aspect of this larger trend
Companies are increasingly using strategic packaging, known as price pack architecture, to manipulate consumer behavior and maximize profits. This involves offering the same product in various sizes and prices, leading to the proliferation of new package sizes in grocery stores. While some packages are getting smaller, others are getting larger, and this trend has been profitable for companies, transforming the way products are displayed on shelves. The discussion also touched upon the concept of shrinkflation, where companies reduce the size of their products while maintaining the same price, which is a common frustration for consumers. However, the data reveals that this phenomenon is just one aspect of a larger, more complex revolution in the packaging industry.
Grocery packaging trend: Grocery companies are offering various package sizes to cater to consumers' needs and preferences, allowing for price differentiation and increased sales volume.
There has been a quiet revolution in the grocery industry, particularly in the realm of packaging and product sizes. Ellen Kahn, a pricing and packaging consultant at Simon Kuchar, took us behind the scenes of a typical grocery store to show us the trend in action. Gone are the days of one or two sizes for common household items. Instead, companies like Coca-Cola have led the way in offering an explosion of different package sizes, from jumbo jars of peanut butter to various sizes of queso. This strategy, which began in the soda aisle, aims to cater to consumers' varying needs and preferences. As Dwayne Stanford, editor and publisher of Beverage Digest, noted, the soft drink industry, with its complex business dynamics, has been a trailblazer in this area. This trend not only offers convenience but also allows for price differentiation and increased sales volume. It's a strategic move that continues to evolve as consumer demands shift.
Product Differentiation Strategy using OBPPC: Coca-Cola's success in increasing sales during a crisis came from adopting a product differentiation strategy using various package sizes, known as OBPPC, which reached new consumers, unlocked new markets, and charged premium prices for convenience.
Coca-Cola's success in increasing sales during a crisis in the mid-2000s came from adopting a product differentiation strategy used by their bottlers in Latin America. Instead of creating new products, they used different package sizes to cater to various market segments and price points. This strategy, known as OBPPC (Optimized Bottle and Package Portfolio), allowed Coca-Cola to reach more consumers, unlock new markets, and charge premium prices for convenience. The mini can, for example, appealed to health-conscious consumers, parents, and millennials, and sparked a revolution in the US market. Today, Coca-Cola offers a wide range of bottle and can sizes, continuing to cater to diverse consumer preferences and demands.
Price pack architecture: Companies use price pack architecture to cater to different consumer desires and scenarios, reaching consumers in various situations and expanding their customer base beyond population growth.
Companies have adopted a pricing and packaging strategy known as price pack architecture to grow their businesses as the US population growth rate has slowed down. This strategy involves offering a range of packages and prices to cater to different consumer desires and scenarios. Price pack architecture is not a cheap endeavor, but with advances in manufacturing flexibility and data collection, companies can now target consumers more effectively. For instance, companies have identified the on-the-go or travel scenario as a profitable market segment and have seen significant growth in related products. This strategy allows companies to reach consumers in various situations and expand their customer base beyond population growth alone.
Package sizes strategy: Companies strategically use different package sizes to cater to various consumer scenarios and change consumer behavior, increasing sales and loyalty through the 'cookie jar effect'.
Companies strategically use various package sizes to cater to different consumer scenarios and change consumer behavior. By offering smaller sizes for on-the-go consumers and larger sizes to encourage frequent usage, companies can increase sales and consumer loyalty. This is known as the cookie jar effect. However, not all products follow this trend, and some, like paper towels, rely on offering jumbo sizes to keep consumers from buying from competitors. Ultimately, the goal is to understand consumer behavior and tailor packaging to meet their specific needs and preferences.
Price pack architecture: Price pack architecture allows companies to attract various customer segments with different package sizes and price points, but can also involve shrinkflation where product size is reduced while price remains the same.
Price pack architecture is a strategic approach used by companies to attract various customer segments by offering different package sizes and price points. This strategy allows companies to expand their consumer base by catering to those who prefer smaller, low-cost packages, as well as those who are willing to pay more for premium or larger offerings. However, it's important to note that price pack architecture can also involve shrinkflation, where companies reduce the size of a product while maintaining the same price to keep it accessible to consumers. Although some consumers may feel tricked by this practice, data suggests that many others prefer smaller, more affordable packages. Ultimately, price pack architecture is a complex issue, with potential benefits and drawbacks for both consumers and companies.
Product packaging economics: Product packaging influences consumer purchasing decisions and results in companies offering exact portion sizes, leading to economic implications
The way products are packaged at the grocery store has significant economic implications. You can't buy arbitrary quantities of items, and companies compete to offer exact portion sizes desired by customers. This simple fact leads to deeper economic consequences. Meanwhile, in the news, India's democracy faces challenges, and NPR's Consider This News Letter offers a daily deep dive into a major news story for those who want to stay informed. NPR's State of the World podcast transports listeners to different parts of the globe and introduces them to the people behind world events.