Why shrinking products works better than raising prices

HostI was looking at a bag of chips the other day and saw I could barely find the food in there. It felt like I was paying for a big bag of air, but the price was the same as last year. Why do companies go through the trouble of changing their whole plant setup just to put less food in a box instead of just adding fifty cents to the price tag?

GuestIt's a lot of extra work to change those machines and design new boxes. But the reason they do it's simple. We're much better at spotting a price change than a size change. If you go to the store and your favorite coffee costs a dollar more, you see it the second you look at the shelf. It hits your wallet at the checkout, and it leaves a bad taste in your mouth. But if that same bag of coffee is just two ounces lighter? Most of us never even feel the difference in our hands. We look at the price, see it hasn't moved, and we feel like we're getting the same deal as always. It's all about how we think while we're walking down the aisle.

HostI don't know, though. People aren't just walking around with their eyes closed. If I pick up a box of cereal and it feels like a feather, I'm going to notice. Do they really think we're that easy to trick?

GuestIt's not so much about tricking people as it's about how much change our brains can actually pick up. There's a point where a change is so small that our senses just don't notice it. Think about a big bottle of dish soap. If the maker takes out one spoonful of soap, you'll never know. The bottle looks exactly the same on the shelf. It takes up the same space in your cabinet. Companies spend a lot of money to find that sweet spot. They want to know exactly how much they can trim away before the normal shopper stops and says, hey, this feels light. They might make the plastic a little thinner, or put a bigger curve in the bottom of a jar so it holds less peanut butter but still looks tall on the shelf. It's all about staying under that radar so your brain doesn't set off an alarm.

HostBut even if we don't feel the weight, the math is right there on the shelf. Most stores have those little tags that show the price per ounce. If that number goes up, it's a price hike no matter how they hide it. Don't people look at those?

GuestSome do, but most of us are in a rush. Think about your last trip to the store. You probably had a list, you were thinking about what to make for dinner, and you were trying to get out of there fast. In that state, you use shortcuts. You look for the brand you like, you check to see if the price is still around four dollars, and you toss it in the cart. Doing the math to see if the price per gram went up by a few cents takes a lot of focus. Most of us just don't have the strength to do that for every single item in the cart. Companies count on the fact that we're busy and tired. They know that as long as the big number on the price tag stays the same, we'll keep our habits exactly as they are.

HostIt still feels sneaky. If I eventually find out my favorite candy bar is smaller, I would think that makes people want to buy something else.

GuestYou would think so, but the numbers show something else. When a brand just raises the price, people get mad and switch to a cheaper store brand almost right away. They feel like they're being squeezed. But when the item gets smaller, shoppers tend to stay loyal. They might grumble if they notice, but they don't usually walk away. It's a weird quirk of how we think. Paying more money for the same thing feels like losing. But getting a slightly smaller thing for the same price feels like a neutral move, even though the math is the same. It keeps us from looking for other choices. Even the stores like this move because they don't have to be the ones to tell the shopper that the price went up. They look like the good guys because the number on the shelf stayed the same.

HostBut you can't just keep shrinking things forever. At some point, the box is going to be empty. There has to be a limit to how small a candy bar can get.

GuestThere's a limit, and that's when they pull the big reset. Once a thing gets so small that people really start to get annoyed, the company will launch a new version. They'll call it the Giant Pack or the Family Size. They bring the size back up to where it used to be, but they set a much higher price for it. Then, over the next few years, they slowly start to shrink that one too. It's a big loop that just keeps rolling along. The goal is to keep you moving through the store without making you stop and think about the value. If they can keep the price steady, they keep your habits alive.

GuestChips almost never grow back to their old size, even when the cost of corn and oil goes way down.

HostThat bag of chips stays small while the air inside just keeps taking up more space.