Posted in Marketing and Strategy Terms, Total Reads: 595
Definition: Hidden Price Increase
It is a way to increase the per unit price of a product by reducing the quantity or content rather than increasing the price of the same size or content. In short the packets get smaller but the price remains the same. The amount of reduction is generally very less so the customers are not able to identify the difference and form a perception that it is the exact same old product with the same price. Thus the companies are able to camouflage the price increase.
This is a common practice in most of the FMCG products since the customers are very much price sensitive when buying these products. Take the example of Maggi which has reduced its quantity to 95 gm from 100 gm for the Rs 10 pack. Lays has reduced its quantity from 35 gm to 26 gm for the Rs 10 packet.
All this became possible in Indian market when Govt of India, from 2004, allowed the Consumer Goods companies to sell in non-standard sizes. Earlier these companies could only sell in standard sizes like 50 gm, 100 gm, 150 gm. But now we see products with weights like 136 gm, 63.9 gm and so on.
With the increasing raw material costs companies use this tool of hidden price increase to cover their increased costs.