Hidden price hikes: how do consumers react?

We are currently witnessing a generalized surge in consumer prices, which is of concern to citizens and governments alike (Pouvoir d'achat : la hausse des prix se propagage August 25, 2022, Que Choisir magazine); French purchasing power in five key facts September 2, 2022 by RayonBoissons).

Gilles Séré de Lanauze, University of Montpellier and Béatrice Siadou-Martin, University of Montpellier

AdobeStock_452718092 © wifesun - stock.adobe.com

Currentinflation (measured by the consumer price index), recorded at an annual rate of 5.8% in August 2022, can be explained by multiple factors: rising raw materials prices, shortages of certain components, the energy crisis, and supply difficulties.

With the return of soaring prices, the question of purchasing power takes on a new face. Most consumers have never experienced this phenomenon, and only those who lived through the decade of oil shocks (1973-1983) can remember what an average double-digit inflation rate was like.

Companies' inflation dilemma

Today, the return of inflation has led the government to intervene, deciding and implementing measures to support purchasing power. For companies, the problem is equally daunting. How to respond to consumer concerns about purchasing power, and thus limit sales price increases, without sacrificing margins in a general context of rising costs? Manufacturers and distributors are therefore tempted to revive certain practices designed to conceal price increases.

These often long-standing techniques take a variety of forms. Some are purely commercial, based on promotional offers and visual price codes, with no real price cuts. These tend to be adopted by retailers.

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Others are linked to product modification, aimed at reducing the cost of the product without affecting the selling price. A change of format, a reduction in volume or in the number of units packaged, a simplification of the recipe or formula, a reduction in ingredients or a drop in quality are all ways of regaining a margin without touching the advertised price or the appearance of the offer. This "shrinkflation " strategy is often favored by manufacturers.

Heterogeneous reactions

Already during the crisis of 2008, the practices of concealing price increases were strongly questioned in the press (for example, the survey published by the magazine 60 millions de consommateurs entitled Comment les marques rusent pour augmenter les prix? published in October 2008). These practices gave rise to numerous reactions from consumers.

We then carried out a study of these reactions on the web, the findings of which may shed some light on the current issue. The results highlighted three types of consumer reaction to hidden price increases on products:

  • Responses based on understanding: almost a third of those who reacted understood and justified these commercial practices, citing corporate management imperatives (rising raw material costs, a strategy of genuine product improvement, or even the quest for profit), or criticizing consumers for not paying enough attention to the information and conditions relating to their purchases.
  • Conciliatory responses: almost 40% of responses acknowledged the deception and shortcomings of the system, while at the same time proposing to reduce its negative effects through better adapted consumption choices: consume better, consume less, consume the essentials, consume differently (substitute products), adopt other distribution channels (hard discount, local sourcing) or develop consumer substitutes and DIY(do it yourself) such as cooking, sewing, DIY, gardening, etc.
  • Confrontational responses: nearly 30% of those who reacted called for some form of refusal and confrontation in the face of the phenomenon. Some called for structural changes to the system (government intervention, market regulation by competent bodies, standards, price controls). Others called for action and consumer empowerment through negative word-of-mouth campaigns or boycotts.

Double injustice...

Faced with inflation and such commercial practices, questions of justice and trust are not far off. Consumers may feel a double injustice: a distributive injustice, which characterizes the modification of the terms of trade in terms of retribution/contribution, and which can only be suffered by the consumer, but also, often, by the other players themselves.

But another form of injustice can also exist, procedural injustice, which stems from the consumer's perception of a dishonest, opaque and malicious system, defending individual and selfish interests on the part of the manufacturer or distributor.

The study mentioned above indicates that consumer reactions to this procedural injustice will be far more aggressive and virulent towards the manufacturer, brand or distributor associated with the hidden price increase than their reactions to distributive injustice. Once again, transparency could pay off, especially in a context where social networks can quickly make the discovery of concealment flammable.The Conversation

Gilles Séré de Lanauze, Senior Lecturer in Marketing, University of Montpellier and Béatrice Siadou-Martin, Professor of Management Sciences, University of Montpellier

This article is republished from The Conversation under a Creative Commons license. Read theoriginal article.