What's with all the tiny soda cans? And other grocery store mysteries, solved.
14Digest
This episode of Planet Money delves into the fascinating world of "price pack architecture" in the grocery industry. The episode begins by discussing the phenomenon of shrinkflation, where companies reduce the size of their products while maintaining the same price. The episode then explores how Coca-Cola pioneered a strategy of offering various package sizes to target different customer segments, a strategy that has since been adopted by many other companies. The episode highlights how companies use data to understand consumer behavior and create package sizes that cater to specific scenarios, such as on-the-go consumption or family meals. The episode also discusses the "cookie jar effect," where larger package sizes encourage consumers to consume more of a product. The episode concludes by examining the relationship between shrinkflation and price pack architecture, suggesting that shrinkflation is often used to maintain a specific price point for a product. The episode highlights the complex interplay between consumer behavior, pricing strategies, and package sizes in the grocery industry.
Outlines
Introduction
This Chapter introduces the topic of shrink-flation and how it has become a common topic of conversation. It also mentions Cookie Monster's dislike of shrink-flation.
The Rise of Price Pack Architecture
This Chapter explores the concept of "price pack architecture," a strategy where companies offer various package sizes to target different customer segments and consumption scenarios. The episode highlights how Coca-Cola pioneered this strategy in Latin America and later adapted it to the US market. It also discusses the role of data in understanding consumer behavior and creating package sizes that cater to specific needs.
The Impact of Price Pack Architecture
This Chapter examines the impact of price pack architecture on the grocery industry. It discusses how companies use different package sizes to target specific customer segments, such as families, individuals, and on-the-go consumers. The episode also explores the "cookie jar effect," where larger package sizes encourage consumers to consume more of a product. The episode concludes by discussing the relationship between shrinkflation and price pack architecture, suggesting that shrinkflation is often used to maintain a specific price point for a product.
Keywords
Shrinkflation
Shrinkflation is a term used to describe the practice of reducing the size or quantity of a product while maintaining the same price. This can be done by reducing the amount of product in a package, using smaller containers, or changing the ingredients to reduce costs. Shrinkflation is often seen as a way for companies to increase their profits without raising prices, but it can also be seen as a deceptive practice that can mislead consumers.
Price Pack Architecture
Price pack architecture is a strategy used by companies to offer a variety of package sizes for their products, targeting different customer segments and consumption scenarios. This strategy allows companies to reach a wider range of consumers and increase their sales. Price pack architecture is often used in conjunction with other marketing strategies, such as price discrimination, to maximize profits.
Coca-Cola
Coca-Cola is a multinational beverage corporation and one of the world's largest beverage companies. The company is best known for its flagship product, Coca-Cola, a carbonated soft drink. Coca-Cola has a long history of innovation and marketing, and it has been a pioneer in the use of price pack architecture to target different customer segments.
Cookie Monster
Cookie Monster is a fictional character from the children's television show Sesame Street. He is a blue, furry monster who is known for his love of cookies. Cookie Monster has become a popular cultural icon, and he has been used in various marketing campaigns, including those related to shrinkflation.
Consumer Goods
Consumer goods are products that are purchased by individuals for personal use. These goods can be durable, such as appliances and furniture, or non-durable, such as food and clothing. The consumer goods industry is a major sector of the global economy, and it is constantly evolving to meet the changing needs and preferences of consumers.
Data
Data is information that is collected, processed, and analyzed to gain insights and make decisions. In the context of price pack architecture, data is used to understand consumer behavior, such as purchasing habits, consumption patterns, and price sensitivity. This data is then used to create package sizes that are tailored to specific customer segments and consumption scenarios.
Grocery Industry
The grocery industry is a major sector of the global economy, encompassing the production, distribution, and sale of food and other household goods. The industry is highly competitive, and companies are constantly seeking ways to differentiate themselves and attract customers. Price pack architecture is one of the many strategies that companies use to compete in the grocery industry.
Marketing
Marketing is the process of creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization. Marketing strategies can include a variety of tactics, such as advertising, public relations, sales promotion, and direct marketing. Price pack architecture is a marketing strategy that focuses on the packaging and pricing of products to attract different customer segments.
Packaging
Packaging is the process of designing, producing, and filling containers for products. Packaging plays a vital role in the marketing and sale of products, as it can influence consumer perceptions and purchasing decisions. Price pack architecture is a strategy that focuses on the packaging of products to target different customer segments and consumption scenarios.
Price Discrimination
Price discrimination is a pricing strategy where companies charge different prices for the same product to different customer segments. This strategy can be used to maximize profits by charging higher prices to customers who are willing to pay more and lower prices to customers who are price-sensitive. Price pack architecture can be used in conjunction with price discrimination to target different customer segments with different price points.
Q&A
What is "price pack architecture" and how does it work?
Price pack architecture is a strategy where companies offer a variety of package sizes for their products, targeting different customer segments and consumption scenarios. This strategy allows companies to reach a wider range of consumers and increase their sales. For example, a company might offer a large family-size package of cereal, a smaller individual-size package, and a travel-size package. This allows the company to cater to the needs of different consumers and maximize their sales.
How does shrinkflation relate to price pack architecture?
Shrinkflation is often used as part of price pack architecture to maintain a specific price point for a product. Companies may reduce the size of a product while maintaining the same price, allowing them to offer a lower price point to price-sensitive consumers. This can be seen as a way for companies to increase their profits without raising prices, but it can also be seen as a deceptive practice that can mislead consumers.
What are some of the strategies that companies use to create different package sizes?
Companies use a variety of strategies to create different package sizes, including targeting different customer segments, such as families, individuals, and on-the-go consumers. They also consider the consumption scenario, such as meal occasions, snacks, and travel. Companies may also use the "cookie jar effect," where larger package sizes encourage consumers to consume more of a product. The goal is to create package sizes that are tailored to specific needs and preferences, maximizing sales and profits.
What are some of the economic implications of price pack architecture?
Price pack architecture has significant economic implications, as it allows companies to reach a wider range of consumers and increase their sales. It also allows companies to use price discrimination to charge different prices to different customer segments. However, price pack architecture can also lead to consumer confusion and frustration, as it can be difficult to compare prices and values across different package sizes. Additionally, shrinkflation can be seen as a deceptive practice that can mislead consumers.
Show Notes
From Cookie Monster to President Biden, everybody is complaining about shrinkflation these days. But when we asked the packaging and pricing experts, they told us that shrinkflation is just one move in a much larger, much weirder 4-D chess game.
The name of that game is "price pack architecture." This is the idea that you shouldn't just sell your product in one or two sizes. You should sell your product in a whole range of different sizes, at a whole range of different price points. Over the past 15 years, price pack architecture has completely changed how products are marketed and sold in the United States.
Today, we are going on a shopping cart ride-along with one of those price pack architects. She's going to pull back the curtain and show us why some products are getting larger while others are getting smaller, and tell us about the adorable little soda can that started it all.
By the end of the episode, you'll never look at a grocery store the same way again.
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