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Can you reduce your package size without damaging sales?
86
Long Range Planning, Vol. 24, No. 4, pp. 86 to 96, 1991 Printed in Great Britain
0024-6301/91 $3.00 + .OO Pergamon Press plc
Can you Reduce your Package Size Without Damaging Sales? Anthony
Adams,
C. Anthony
di Benedetto
Reducing the package size is a common and increasingly frequent practice. However, little published work has examined *downsizing’ as part of a pricing strategy. This article reports the results of an exploratory study. Interviews with industry executives and store managers, and secondary data sources, provided information on 25 recent cases. The objectives of the study were: to investigate the impact of downsizing; to discover the reasons for the impact on sales; to recommend strategies for making downsizing more effective and minimizing its disadvantages; and to assess other implica tions for marketing strategy.
and Rajan
Chandvan
Downsizing is a common occurrence among consumer branded items, because it is often an important part of a pricing strategy for such products. It can also be risky, in that a poorly executed downsizing can lead to consumer hostility and loss of the customer franchise. Yet, despite its strategic importance and potential risks, very little published research exists on the effects of downsizing. The objectives
of this paper are:
(1) To
analyse recent cases and assess the shortrange and, in particular, the long-range impacts of downsizing.
In today’s hotly-contested consumer product markets, there is increasing pressure on brand managers and planners to improve the ‘bottom line’. Because of probable competitive response and possible consumer resistance, it is not always possible to implement a price increase to improve a brand’s profit margin. Caught in this situation, many managers have opted for reducing the size of their products while maintaining or increasing their price. Although this may not be an ideal strategic one must acknowledge that product weapon, downsizing is indeed part of the brand manager’s arsenal, much as corporate downsizing is a topmanagement strategic option.
Today more than ever, supermarket shoppers are likely to encounter downsizing of one form or another. Some product downsizing appeals to certain customer segments: single-serving or smallhousehold sizes, for example, are popular with singles and young families, just as smaller cars and apartments have been attractive in their market segments. Other instances are not always well received: recent downsizing of coffee and some paper products has attracted some negative attention among consumers. Anthony Adams is Vice President, Research, Campbell Soup Company. Professor C. Anthony di Benedettoand Rajan Chandran are at the School of Business and Management, Temple University, Philadelphia.
(2) To
assess how the impact across product categories consistent patterns.
of downsizing varies and to identify any
for strategic and (3) To make recommendations judicious implementation of downsizing so as to minimize possible negative impacts. managerial implications and (4) To determine considerations for determining whether downsizing or a price increase is more appropriate. (5) To suggest some directions tive and empirical testing.
The ‘Just Noticeable
for future
descrip-
Difference’
A brand manager contemplating a downsizing strategy must decide by what amount the contents ought to be reduced. According to Weber’s Law, the larger the intensity of an initial stimulus, the greater is the amount of change necessary for the resulting stimulus to be perceived to be different.’ Thus, an important concept to consider is the just noticeable di$erence or JND, defined as the minimal change in an object required to cause a perceptual change (Ref. 2, p. 152). As an example, a price increase of $300 on a new Yugo automobile is probably more noticeable to prospective buyers than a $300 price increase on a Mercedes-Benz
Can you Reduce of (Ref. 3, p. 60). Th ere are clear implications Weber’s Law and the JND for many marketing decisions: product pricing, advertising, and packaging, and others.4.5 In packaging, Procter & Gamble has used the JND concept by making well over a dozen practically imperceptible changes to Ivory Soap packaging since its introduction in 1898, and ending up with a substantially different design. Weber’s Law, as applied to downsizing, would suggest that the ratio between the change in content amount and the original amount, and not the absolufe difference in amount, is critical to perceptual discrimination by consumers. (Weber’s Law can be stated mathematically as dC/C = K, where K is a constant, C is the initial content measure, and dC is the change in the content measure.) The key task for the product manager considering downsizing would then be to determine the value of K for the product in question. This is likely to vary depending on competitive packaging as well as on traditional package sizes for that product line. Britt” suggested that controlled experiments bc used for determining the value of K. Once K is established, Webcr’s Law might be profitably used to determine the optimal volume reduction. The task will be complicated by the fact that K is likely to be constant only over a certain range of package sizes. At the extremes (very small or very large packages), threshold effects may exist, changing the value of K. Weber’s Law thus should only be applied with caution to packaging decisions on extreme package sizes. In the same article, Britt states: ‘So long as the change is not perceived as “just noticeably may continue to reduce the size different”, the manufacturer of the candy bar and charge the same price without losing sales . . A manufacturer may choose to lower price and cut the size proportionately. If accurately done, consumers may perceive that they are getting more for their money.’
However, as a later section will note, in very few of the cases studied was the price decreased at the same time the package was downsized. The following recent quotes from consumers commenting on recent downsizing strategies suggest that the JND must be taken into account, to avoid losing customer franchise: ‘I’ve noticed that certain canned goods are in the same size can but the net weight is ounces less and sometimes the price has gone up as well.” ‘Many
bacon
brands
have dropped
from
16 ounces
to 12
your Package
Size Without
Damaging
87
Sales?
are discussed later appeared to have had little effect upon brand sales or share, the consumers quoted above had no difficulty observing instances of relatively large downsizing. Because ofthe potential value of brands, such consumer concerns should not be casually disregarded.” This suggests that the JND is operative in downsizing, and should be a consideration in planning a downsizing strategy.
The Reasons
for Downsizing
There are several factors which can make downsizing an attractive marketing strategy for a consumer non-durable. (1) To Maintain a ‘Price Point’ Kotler’* recommends that managers consider Weber’s Law in making product line decisions. Each item in a firm’s product line should be differentiable to the consumer, so differences across products in a product line should be, at least, just noticeable. Price differences across the line should reflect these product benefit or attribute differences. A research manager for a large consumer snack food manufacturer, at a recent American Marketing Association Attitude Conference, revealed why downsizing is often undertaken to maintain a price point. ‘Our research shows that consumers are aware of price points, but not of contents, so we downsize . until we have to upgrade to a larger size and a new, higher price point.’
However, according to the president of a large candy manufacturer, downsizing which is undertaken to hold a price point is ‘risky’ because ‘inevitably you have to pass (the price point) anyway’. (Note: All quotes from business executives cited in this paper wcrc obtained via personal communication with an executive from a major food manufacturing company. All quotes from store managers were personal communications with the authors of this study.) (2) To Increase Margin and Projitubility Downsizing can increase the profitability of a brand or product line if consumers either do not perceive the change, or forget that downsizing occurred. A local store manager noted: ‘Short-term sales may drop, but in the long run if the brand is strong, consumers tend to forget and the brand picks up strength again.’
ounces. Most coffees have gone to 13-ounce cans that look just the same as the lbounce
cans.’ *
‘Coffee weighing 13 ounces is put into the same can that used to hold 16 ounces-a not-too-subtle price increase (even though the price is shelf-marked . .).” ‘The cardboard core (is) larger (on rolls of toilet paper) . . Now the consumer is getting less paper for the same . price.’ ‘”
While several of the examples
of downsizing
which
Downsizing to increase margin and profitability is often accompanied by a price increase. As another store manager observed: ‘Everybody is now downsizing. The cereal managers are doing a “double bang” right now, downsizing package and taking price increases. In fact they have done it twice within the past few months.’
Kotler
also notes
that
manufacturers
have
used
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downsizing as an alternative to increasing price in the face of high costs. Hershey, for example, reduced the size of its 15-cent candy bar at about the same time that Nestle increased the price to 20 cents while leaving size unchanged. (3) To Increase the Frequency of Purchase A well cxccuted downsizing strategy can increase the frcqucncy or volume of purchase to certain market scgmcnts. For cxamplc, if the small container of yogurt is downsized by 30 per cent, some consumers will perceive the new size to be too small to be a satisfying snack, and will consume two containcrfuls at one sitting. Thus, the familiar ‘sixpack’ of yogurt is, for these consumers at least, cffcctivcly a ‘three-pack’, leading to more frequent purchases. (4) To Offset Raw Material Cost Increases The downsizing of candy bars in response to increasing cocoa prices is well known. Some manufacturers replaced chocolate made from cocoa with synthetic chocolate in an attempt to keep retail prices competitive; car manufacturers have substituted plastic automobile parts in place of many metal ones. But downsizing can occur simultaneously with a packaging change, to offset increased prices in packaging materials. For example, a company may switch from a 1Qounce glass container to a 16-ounce plastic container without reducing the cffcctive retail price to the consumer. (5) To Respond to Demographic Changes ‘Desirable downsizing’ often is undertaken in response to changing demographic trends. As families get smaller, the optimal ‘family size’ package must also decrease to prevent waste. Also, the growth of the singles market has led to singlcserving packages of soups, cntrecs, and many other product categories. Not all have been successful, as Gerber’s Singles for Adults illustrates.” Consumers were apparently not impressed by the packaging (baby-food-like gl ass J‘ars ) nor by the reminder that they were eating alone. The failure of this product suggests that blindly following the demographic trends in downsizing can be very risky. (6) To Respond to Lifestyle Changes Emphasis on eating right and staying fit has downsizing implications. Many bakeries sell bread in smaller loaves, cut into thinner slices, for the dietconscious segment. Interestingly, some consumers did not respond negatively to downsizing of candy bars. According to store manager interviews, some consumers assuage their sense of guilt this way: ‘Since I should not bc eating this, I am glad I am eating less of it.’ (7) To Introduce Packagirzg Changes Innovative packaging that managers believe will provide a new benefit to consumers (such as squeezable plastic ketchup bottles or salad dressing
1991 in a pump dispenser bottle) panied by downsizing.
is likely to be accom-
(8) To Raise the Price Per Unit of Volume Finally, downsizing may be used by the manufacturer attempting to bring price levels in line with their (the manufacturers’) perceived product value, as an alternative to increasing price. Such decisions should be influenced by the product standards against which any ‘benchmarking’ is to be done.14 Research
and Data Collection
Procedures
In order to obtain as many downsizing case histories and to gain as much background information on downsizing as possible, several information sources were used. A large-scale secondary literature search was carried out. Through the Dialog Information Services computerized literature search facilities, approximately 5000 publications were scanned for stories and articles on downsizing. These included business/management, food, packaging, health/fitness, and general news publications as well as other categories. In addition, CD-ROM databases (ABI/INFORM, INFOTRAC and PSYCHLIT) were consulted and Consumer Reports between 1985 and 1990 were searched manually. Large supermarkets and discount drug chain stores in a large metropolitan area were visited to inspect shelves for downsized products. Store managers and grocery managers of several of these chains were contacted and interviewed. Many valuable insights on the short-run and long-run effects of downsizing were gained from these interviews. Leading consumer goods practitioners and authorities were interviewed regarding the impact of downsizing from both a consumer and a company perspective. Several consumer and industry associations and organizations were contacted, including local bureaus of Weights and Measures, the Grocery Manufacturers Association and Public Citizen, both of Washington, DC, and the Dollars and Sense consumer newsletter from Somerville, Massachusetts. Federal government agencies, including the National Institute of Standards and Technology, the Food and Drug Administration, and the Federal Trade Commission, were also contacted. Finally, some SAMI data on product category sales through time were made available by industry practitioners and were also analysed.
Recent
Case Histories
We identified a sample of 25 product categories in which downsizing has recently occurred. In many cases, several brands within each product category were downsized at about the same time, indicating that smaller brands often follow downsizing moves initiated by leading brands. Further, in most cases, no long-term effects were reported, and systematic comparison of effects on market shares or sales volumes was not possible as only anecdotal evidence was available in some cases. Table
1 lists the product
categories
and brands,
as
Can you Reduce Table
your Package
Size Without
Damaging
89
Sales?
1. Some cases of downsizing Downsizing particulars and short-term impacts
Product category and brands
(1) Bacon (Oscar Meyer)
Downsized package from 16 to 12 OZ. Reduced number of slices per package. Labelled ‘Center Cut’. Price unchanged. Category is declining due to health concerns. Some negative
(2) Bathroom Tissue (Charmin, generic and store brands)
impact
on brand.
Charmin: Downsized roll from 500 to 380 sheets in early 1987, and later to 350 sheets. Package price unchanged. (Effective price increase of 8%.) Paper sheets fluffed up to reduce visible effect of downsizing. Packaging communication focused on ‘fluffiness/softness’. No impact on Charmin brand. Generic/store brands: Downsized dimensions of contents from 9,6” x 7.3” to 9” x 7.5”. (Effective price increase of 4%.) Increased couponing. No impact on brands examined.’
(3) Bread (Wonder, Stroehmann)
Downsized loaf from 24 to 20-22 oz. Sliced bread thinner. Packaging communications focused attention away from downsizing. Increased price. No impact on brands examined.
(4) Candy Bars (Hershey, Mars)
Altered package weight, number of pieces per package and size of pieces twice during Spring 1988. Downsized package from I.76 to I.69 oz. No impact on brands examined: possibly the impulse nature of the item lessened the impact.
(5) Cereals (Kellogg’s Bran Buds, Corn Flakes, Cocoa Krispies)
All three brands downsized between 1980 and 1982 by l-2 oz. per package. Outer box size maintained while contents were downsized. Communications stressed health and other benefits. Increased couponing. No impact on brands examined.
(6) Chili (Hormel)
Downsized package from 16 to 15 oz. Price unchanged. No impact on brand.
(7) Coffee: Ground (Maxwell House, Yuban, Taster’s Choice, Folgers, Chock Full O’Nuts)
First four brands downsized summer/fall 1988 from 16 to 13 oz. can. Last brand followed with same move in early 1989. In all cases, coffee ‘fluffed’ to fill same size can. Some negative
impact
due to health concerns.
Coffee drinking trend is generally negative.
(8) Diapers (Pampers, Luvs, Huggies)
(9) Fried Chicken: In Bulk (Banquet)
Downsized number of units per package from 48 to 44, and 32-27. Increased prices. Communication focused on new materials, slimness of diapers, absorbency and other benefits. No impact on brands examined. Downsized package from 32 to 28 oz. in early 1989. Heavy dealing since downsizing. Impact:
(10) Fried Chicken Dinner (Swanson)
Sales volume up by 72.5% by end of 1989. 2
Downsized from three to two pieces per package. Consumers apparently felt they were receiving less product. Impact:
volume loss of 7920%,
and brand more vulnerable
to competition.
3
(11) Fruit Juice (Libby’s)
Downsized package from 6 to 5.5 oz. Price unchanged. No impact on brand.
(12) Ketchup (Heinz, Hunt’s)
Heinz downsized bottle from 32 to 20 oz. and 16-I 4 oz. Heinz also changed package to plastic squeezable bottle. Hunt’s downsized from 1 B to 17 oz. Impact on brands examined: the downsizing introduced excitement to product category, but only Heinz showed volume gain.
(13)
Mineral Water (Perrier, Evian)
Downsized bottle from 10 to 6-7 oz. New size better matched optimum serving size requirements. Price increased. Communications emphasized ‘natural’ product, other benefits. Impact: generally positive. (Note: This occurred before the Perrier benzene scare of 1990.)
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1991
1. cont. Product
(14)
category
Paper Towels Cottonnelle)
and brands (Bounty,
(15)
Pot Pies (Banquet)
(16)
Potato Chips (Wise,
Scott
Downsizing
particulars
Downsized roll from 100 to 80 sheets. Paper ‘fluffed up’ for appearance. Price unchanged. Communication focused on absorbency, No impact on brands examined.
and short-term
impacts
other benefits.
Downsized from 8 to 7 oz. in August 1976 in Seattle and Portland. Price unchanged. Impact: volume actually increased in these cities by 1.6 and 18.2% respectively. Shares also increased by 0.7 and 1.5% respectively. Herr’s, Frito
Lay)
Ben’s, Near
Downsized package from 12 to 10 oz. in three stages. Prices unchanged until a move to a new package and price point. Increased air space in bags. Communication focused on health issues: ‘cholesterol free’. Some negative impact reported on brands examined.
(17)
Rice Pilaf (Uncle East)
(18)
Salad Dressing Simmons)
(19)
Sanitary Napkins (Stayfree, Maxithins, Always Plus Thin Super, Always Plus Night Super)
All brands downsized between February and March Contents of box reduced from 30 to 27, and 26-24. Prices unchanged. Communication emphasized other benefits. No impact on brands examined.
(20)
Soap (Caress,
Downsized bar from 4.7 to 3.5 oz. Prices unchanged. Packed in two and three packs. No impact on brands examined.
(21)
Soup:
(22)
Steak Sauce (A.1
(23)
Vegetables:
Canned
(24)
Vegetables: Brands)
Frozen (Store
(25)
Yogurt (Breyer’s, Dannon)
(Richard
Dove)
Dry (Lipton)
Downsized package from 7 to 6 oz. in late 1989. Prices unchanged. No impact on brands examined. Downsized package from 8 to 6 oz. Introduced pump dispenser bottle. Prices unchanged. Pump was unsuccessful and was discontinued. 1990.
Downsized from 4 to 3 packets per box. No impact on brand.
)
Downsized bottle from 16 to 15 oz., and 6-5 Price unchanged. No impact on brand. (Del Monte)
Light N Lively,
oz.
Downsized standard can sizes. Some downward impact on brand. Downsized package from 18 to 16 oz. Price unchanged. No impact on brand. Downsized package from 6 to 5 oz., then 5-4.4 Some negative impact on sales.
oz.
The information in this table was obtained from interviews with store and grocery managers and company executives, and the following publications: (1) Consumer Reports, August 1988, p. 535. (2) IRI. (3) SAMVNielsen.
well as particulars on each downsizing effort. As Table 1 indicates, downsizing has been implemented in many ways. Bacon, diapers, fried chicken dinners, sanitary napkins and dry soup were repackaged with less units per package. In many cases (canned vegetables, cereals, potato chips and several others), the package contents were reduced, yet the same size packages were employed: there was simply more slack fill (air or water) in the container. In fact, in some cases, steps were taken to decrease the perception of downsizing. The number of sheets per roll was reduced for both bathroom
tissue and paper towels, but in both cases the paper was fluffed up inside the package to take up more space. During this period, Charmin bathroom tissue bore a message on its packaging stressing fluffiness and softness-thus turning the downsizing into a consumer benefit. Coffee makers applied much the same strategy, filling a 16-ounce can with 13 ounces of coffee, which was ‘fluffed’ to take up more volume. At the same time, they announced to consumers that coffee was now ‘more concentrated’ and in ‘new fluffed flakes’. General Foods (Maxwell House), Procter & Gamble (Folgcr’s), and Nestle
Can you Reduce
your Package
Tables 2(a)-(c) categorize the cases according to the variables which, seemed likely to have an impact upon the success of a downsizing strategy: whether the downsizing is visually obvious to the consumer (that is, the manufacturer considered the concept of the JND) ; whether the product is sold as a single or multiple serving; whether it is consumed by single or multiple individuals; and whether the packaging or communication focus was altered at the same time as downsizing occurred. Table 2(a) contains downsizing
Product Bread Bathroom Tissue Candy Bars Cereals Chili Diapers Fruit Juice Paper Towels Rice Pilaf Sanitary Napkins Soap Soup: Dry Steak Sauce Vegetables: Frozen
Were there single or multiple servings?
Was the brand consumed by single or multiple person(s)?
Multiple
Single/Multiple
No Yes
Single
Single
Single/Multiple
Single/Multiple
Single
Single
No Yes
No Yes No
Yes No
Multiple
Multiple
Single
Multiple
Single/Multiple
had a positive
Product
Was it visually obvious?
Were there single or multiple servings?
The product Bacon Coffee Fried Chicken Dinner Potato Chips Salad Dressing Vegetables: Canned Yoghurt
Yes Yes No Yes
No Yes No
Multiple
downsizing
Table 2(c). Cases where
Was the packaging or communications focus altered?
Yes
Table 2(b). Cases where
Fried Chicken (Bulk) Ketchup Mineral Water Pot Pies
impact
Yes
No
Sales?
Examining Tables 2(a)-(c) provides very little in the way of reliable indicators of downsizing success. An interesting observation from Table 2(a) is that in 14 of the 25 cases studied, no appreciable short-term effects of downsizing occurred, although there appears to be no pattern common to these cases. That is, they were not marked by a large number of visually subtle downsizings, or single serving containers; nor were trade or consumer promotions
had no short-term
Was it visually obvious?
Damaging
this information for product categories for which downsizing did not have an appreciable effect in the short run upon dollar sales volumes or market shares of affected brands, to the best of our knowledge. for Table 2(b) and (c) p rovide the same information cases where the involved brands experienced positive and negative impacts respectively.
(Taster’s Choice) all downsized to 13 ounces between summer and fall of 1988. Small brands such as Chock Full O’Nuts, originally resisting the move to 13 ounce cans, fell into line by early 1989. For details on other case histories, the reader is referred to Table 1.
Table 2(a). Cases where
Size Without
No No Yes No
downsizing
Was the change visually obvious? No No Yes Yes No No Yes
Multiple Single/Multiple Single Single
short-term
Were there single or multiple servings? Multiple Multiple Single Multiple Multiple Multiple Single
impact
Was the brand consumed by single or multiple person(s)?
Multiple Multiple Single Single
had a negative
short-term
No No Yes Yes Yes No
Was the packaging or communications focus altered? No Yes Yes No
impact Was the brand consumed by single or multiple person(s)?
Single/Multiple Multiple Single Single/Multiple Multiple Single/Multiple Single
Was the packaging or communications focus altered? Yes Yes Yes No Yes No No
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necessarily different from the other cases. One can note that in two of the four cases with positive downsizing impacts (Table 2b), a substantial packaging improvement was implemented: squeezable ketchup bottles, and a more convenient singleserving-size bottle of mineral water. Yet salad dressing, downsized and equipped with a pump dispenser, showed negative effects. Also, in three of the four positive impact cases, the downsizing was not visually obvious to the consumer; this provides partial support for the concept of the JND. Slightly more can be read into Table 2(c). In all cases where downsizing had a negative impact (except salad dressing and yogurt), the product category has been facing a downward trend in demand. One of the two canned goods that were downsized (vegctables) fit this category; the other canned good, chili, exhibited no impact from downsizing. Canned food products are declining in salts and popularity due to competition from fresh and frozen alternatives, and apparently downsizing in canned vegetables was looked upon more ncgatively as a result. Bacon, chips, coffee, and fried chicken dinners also experienced negative impacts. Sales in these product categories are likely to be responsive to changes in consumer health consciousness: consumers increasingly avoid the fats and nitrates in bacon, the caffeine in coffee, the salt in potato chips, and fried meat. The fried chicken dinner example is unusual in that the downsizing was more pcrccptual than actual. Swanson replaced three small pieces of chicken with two large pieces, and the actual meat content of the package was not affected much, if at all. But, consumers believed that, with the change from three to two pieces, they were receiving much less product. (We speculate that this may bc because Kentucky Fried Chicken and other chicken fastfood outlets stress the number of pieces in their advertising and promotion.) SAMI-Neilsen data indicate a volume loss of almost 20 per cent after this downsizing. It should be noted that, based on the cases prcsentcd above, there is not enough information to dctermine the causal relationships involved in downsizing. Volume, share, and profitability are very difficult to analyse, given that there arc several factors which will confound the main effects of the downsizing : new products in the line, new competitive products in the category, cross-elasticity effects, trade deals and consumer coupon promotions, increased advertising, and so on.
Minimizing
the Effects
Management must consider both the short-term and long-term effects of a downsizing strategy. As the case histories indicated, manufacturers often run
1991 consumer or trade promotions downsizing. A store manager
to offset the effects of agreed:
‘You have to see both short-term and long-term effects. Short-term sales may drop, but in the long run if the brand is strong, consumers tend to forget and the brand picks up strength again. That is why you see a pickup in deals in the short run.’
To be specific, product managers often accompany downsizing with consumer couponing and advertising and promotion that focuses on advantageous packaging changes or lifestyle benefits that are tied to downsizing, as well as trade deals. These programmes are implemented to minimize the negative impacts of downsizing in the short run. The net effect, therefore, is that the short-term salts figures are distorted, since the promotions will offset at least some of the sales decrease which might be experienced as a result of the downsizing. Consider the downsizing efforts leading to negative impacts (Table 2~). In most cases, couponing and other sales promotions designed for quick action were not employed extensively. In the case of fried chicken dinners, increased trade dealing did not offset the negative short-term effects. On the other hand, heavy trade dealing was also used for bulk fried chicken, which showed a positive impact of downsizing. Again, the results are not definitive. In the long run, the new package becomes the norm, as it is often the case that competing brands fall in line. Thus, Iong-run sales and market shares appear to be driven mostly by. the usual factors (brand loyalties, product quality, price-value perceptions relative to competition) and not by downsizing. So, as long as brand loyalties and price-value perccptions are not irretrievably compromised (by, for example, overly obvious or drastic downsizing), the long-run effects may be minimized. As an example of this, the dollar sales volumes for three popular brands of cereals (as obtained from SAM1 data), before and after downsizing, were compared. The first of these, Brand A, is an established bran cereal. Its annual dollar sales volume temporarily declined immediately after downsizing in 1983, but by 1985 had surpassed predownsizing levels. Declines in dollar volume from 1987 on appear to be related to steep price increases and, simultaneously, much greater competition in the bran cereal category as bran became a trendy ingredient for health-conscious shoppers. Brand B, an extremely popular established brand, showed dramatic increases in dollar sales volumes by 1985, after a slippage in 1982 due to downsizing. In this case, average shelf prices only increased modestly. Brand C (a children’s cereal) is an interesting case in that, unlike most of the other examples considered, its downsizing in 1982 was accompanied by a decrease in average shelf price. However, a con-
Can you Reduce sumer with a good memory and a pocket calculator could have easily discovered that the average retail unit cost was higher after downsizing (13 ounces for $1.52 is a better deal than 11 ounces for $1.35). were almost Despite this fact, dollar volumes unaffected by the downsizing effort.
Planning and Implementation Drawing on these case histories and from the theoretical perspectives, some important strategic implications regarding downsizing are apparent. This section provides a list of important considerations in planning and implementing downsizing strategies that will minimize long-run negative impacts and improve the likelihood of desirable outcomes for the companies seeking to improve their retailing strategies.” (1) Brand loyalty. There may be a core of loyal consumers who will not react at all to downsizing changes; alternatively, ifstrong loyalties do not exist and/or consumers are more perceptually sensitive, they may react negatively to downsizing and switch to a substitute brand. (2) Serving size and usage occasions. Size-conscious consumers may react differently to downsizing than price-conscious consumers. There are also likely to be different serving-size or usage-occasion segments, and the elasticities of these individual segments to downsizing ought to be taken into account. (3) Meeting changing consumer needs. Smaller packages may appeal to singles and small families that do not want any leftovers. (4) Downsizing in gradual steps. In several of the case histories presented (potato chips, candy bars, and cereals), manufacturers applied downsizing in gradual steps to minimize the negative impact. (5) Package sizes ofcompetitive products. For example, many brands of ready-to-eat stew traditionally come in bulky 19- or 24-ounce cans. A cannedgoods manufacturer must consider that, in switching to a much smaller can, they may exclude their brand from this market.
your Package
Size Without
Damaging
Sales?
93
the case for an impulse good, where the package serves as a kind of in-store ‘billboard’. However, caution must be applied. In a recent panel study mentioned in Mona Doyle’s Consumer Network, 94 per cent of panelists stated that they ‘hate paying for and disposing of large boxes that are half full of product’ and 89 per cent agreed that ‘as the quantities in packages go down, it is getting harder to figure value’. (8) Focus promotional attention on other productfeatures other importantproduct attributes, such as new benefits, improvements, or user-convenient packaging environmentally responsible packaging (consider the cases in Table 2b). A s noted earlier, consumer couponing and other promotional strategies may also be necessary to focus attention away from downsizing. (9) Packaging material changes. The properties of the package material used and the packaging materials cost may necessitate a change in the package size. For example, different container sizes may be optimal depending on whether paper, metal, glass, or plastic is used for packaging. (10) Two or three dominant brands acting together. As noted, in many of the downsizing case histories, several brands downsized at approximately the same time, indicating a follow-the-leader bchavioural As a coffee industry exccutivc stated: pattern. ‘P & G’s switch to fast roast forced other manufacturers to convert because they could not match Folger’s 13-ounce price packaged in one pound cans. If you look at trends in the industry, sooner or later most competitors fall in line.’ (11) Trade sensitivities and deals. If downsizing is accompanied by packaging changes, retailer shelf space constraints must also be considered. (12) Home inventory refrigerator space.
constraints
such
as pantry
or
(13) Physical distribution savings and costs. Depending on the type and extent of downsizing and packaging changes, physical distribution costs may bc favourably or unfavourably affected. Switching from flexible to rigid containers will lessen breakage costs and returns; switching to smaller volumes per unit or per case may increase handling costs.
(6) The manager should consider the potential impact of shape changes on consumer perception. Considering the stout, bulky cans used by competitors, it might be wise for a canned stew manufacturer to downsize, for example, to a stout 15-ounce can rather than a tall, slim 15-ounce can in order to create the desired illusionary effect.
(14) The impart on vending machine sales. For example, a potato chip manufacturer ought to be aware of any consumer dissatisfaction encountered as a result of downsizing the vending-machine chip package, as this may result in switchout to competing brands or to other snack alternatives.
(7) Management must distinguish between content and package downsizing. In many cases (cereals and candy bars, for example), companies downsize the contents, but not the package. This is more likely to be
(15) Just as couponing, two-for-one promotions, and price cutting will not rcvcrsc an overall declining market trend, downsizing will not help if the brand or product category is in decline because
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of fundamental product problems (e.g. concern about health risks) or market changes (e.g. canned vegetables becoming less popular relative to frozen or fresh).
the amount of almonds and raisins used, replacing them with cheaper ingredients.
(16) There are several situations in which taking a price increase is preferred to downsizing. If opportunities for skimming the market exist, it is probably better to take the price increase. Company earnings or profit contribution objectives may require price increases, especially in the case where selective demand for the brand in question tends to be inelastic (price increases will lead to only minor unit sales declines and increased contribution). Finally, product line or portfolio considerations may make a price increase more attractive. Table 3 describes some situations where downsizing or price-increasing strategies are likely to be preferred. However, note that it is not always clear which strategy it is better to implement. In an example provided by Kotler, ingredient costs for Quaker Oats Natural cereal increased sharply due to inflation. Quaker Oats deliberately avoided downsizing at first, choosing instead to raise the price. They soon learned that price elasticity of demand was high, as sales decreased. Quaker Oats subsequently had to cost-reduce the contents by cutting
Table 3. Selecting
downsizing
vs a price increase
Take price increases when: (1) Portfolio or product line strategy dictates (2)
Overall earnings pricing strategy.
(3)
Skimming
or profit contribution
opportunities
Downsize when: (1) Price point maintenance
it.
goals impact
exist.
is desired.
(2)
Competitive
(3)
Frequency
(4)
Cost increases in packaging margins.
(5)
Demographic or lifestyle changes tunities for ‘desirable’ downsizing.
(5)
It is feasible volume.
pressures will not allow price increases. of purchase
will increase as a result.
perceptually
or raw materials squeeze
indicate
without
oppor-
hurting
Table 4. Performance
sales
measures
1991
Table 4 summarizes the main downsizing scenarios presented in the preceding text and discusses implications for performance objective setting. Most downsizing case histories in Table 1 were accompanied by either price maintenance (coffee and paper products) or price increases (cereals and bacon). In other cases of ‘desirable downsizing’, substantial reductions in both size and price may occur (single-serving soup or canned vegetables). In order to evaluate the long-term effects of implementing a downsizing strategy, certain performance measures ought to be set as benchmarks by management, and one can speculate that the choice of performance measure will depend upon the nature of the downsizing. As Table 4 indicates, a firm which downsizes and increases price will particularly need to monitor the long-run sales revenue and profit contribution consequences of this strategy. The price increase alone may result in lost unit sales, even if the extent of downsizing is very small. This is an elasticity issue. If the demand for Cereal Brand B discussed earlier is inelastic, the price increase will result in little loss of sales and an increase in sales revenue. The cereal manufacturer will need to monitor sales revenue levels to ascertain that brand demand is sufficiently inelastic to withstand the price increase. If additional promotion and distribution expenditures are incurred to offset the effects of downsizing, the net impact on profit contribution must be tracked as well. In the case of downsizing with price maintenance, the firm must monitor unit volume levels to determine if there were any detrimental effects due to downsizing. When a firm downsizes by launching a singleserving line extension, the key performance measures may be very different. After downsizing, a canned-goods manufacturer will need to measure cannibalization of their existing regular-size lines, as well as market share drawn from competitive sales, in order to get a full picture of the net impact of the new size. Frequency of purchase (particularly among targeted market segments) may also be tracked. There may be instances where dollar
for different
downsizing
Performance
Strategy Downsize
and increase price
Unit sales Dollar sales revenues Profit contribution
Downsize
and maintain
Unit sales Profit contribution
price
Downsize to smaller-serving sizes with corresponding price cut
strategies
measures
Market shares Cannibalization of own-brand share Draw of competing-brand share Frequency of purchase
Can you Reduce revenues or profits may be comparatively less important, at least in the short-term, acting as constraints rather than performance measures. For example, if the canned-goods producer launches the single-serving brand in order to match a successful similar competitive brand, the downsizing strategy may be necessary to halt market share erosion. In such a case, if market share was maintained at a stable level, and as long as profit contribution did not fall below some pre-specified amount, the downsizing may be judged a success.
Conclusions
and Recommendations
your Package
Size Without
Damaging
Sales?
95
(1) Downsize to the point where (2) Focus consumers’ attention
it is not noticeable.
(3) Increase consumer couponing offset short-term resistance.
temporarily,
away from downsizing by highlighting other benefits (such as a more convenient package). In some of the successful cases, the new advantage or benefit was flagged right on the package. to
downsizing strategies before this (4) Implement becomes a hot consumer issue and starts to receive greater attention from consumer groups and the media.
Downsizing is a common practice, and is now being practiced on a wide range of products. Despite its growing importance in consumer products marketing, there is little published literature on the subject. Its use as a tactic and its long-term effects on sales and profits should be more closely considered.
However, the inconclusive nature of the evidence on the effects of downsizing suggests that a more fundamental strategic approach should guide It is recommended that downsizing decisions. several strategic questions and issues be considered by consumer goods manufacturers. These questions include :
Consumers seem generally unaware of or unresponsive to downsizing when it occurs, provided that the package size does not change in an obvious manner. This is clear from the number of case histories described here in which downsizing had no impact (or even a positive impact) on market shares and volumes. Consumer awareness of downsizing appears to be greater in certain product categories where downsizing has been a very frequent occurrence: candy bars and cereals, for instance.
(1) Is
It was interesting to note that in many cases where the product category was already declining in popularity or associated with health concerns (canned goods, fried foods, bacon, potato chips, coffee), downsizing was more likely to be viewed negatively. By contrast, in two of the cases where market shares and volumes increased after downsizing (ketchup and bottled water), a real packaging benefit was delivered to consumers. There were several exceptions to these ‘rules’, however, and no consistent patterns emerged that reliably distinguished successful from unsuccessful downsizing. Within small ranges, size generally does not seem to be a very compelling attribute in consumer decision making. Consumer groups have, in general, not systematically catalogued downsizing and other packaging changes, and media coverage to date has been minimal. Given the increasing incidence of downsizing, it is probable that systematic attention from interested consumer groups and more extensive media coverage will occur in the future. Although the results of this research are necessarily preliminary, it is perhaps not too early to provide tentative strategic recommendations to managers regarding downsizing. Hence, it is probably wise for managers to heed the following recommendations:
the package size consistent with the requirements suggested by the target consumer’s lifestyle and demographics?
(2) How
will the various segments and subsegments react to a downsizing strategy? Are sales to one segment jeopardized by a downsizing strategy designed to attract customers in another segment? Are the elasticities of response different across segments?
(3) Is a packaging contrast between the manufacturer’s brand and competing brands desirable? If package size is changed, will the new package size provide a favourable or unfavourable contrast against competing brands with respect to consumer perceptions? initiates a downsizing (4) When a manufacturer strategy, what are the likely competitive reactions? Is it an easy strategy to copy (e.g. changing from standard 16-ounce to standard 15-ounce cans)? Does the initiating manufacturer gain a sustainable brand advantage since it will take some time for competitors to react (e.g. a new pump dispenser or squeezable plastic container) ? (5) In very general terms, what are the likely longrun consequences of downsizing? Any decision that potentially harms the long-run health of the brand should be undertaken with caution. (6) Also, what is the cumulative effect of repeated downsizing? If a brand is downsized several times in succession over a few months or years, yet each individual occurrence was less than the JND, the overall perception of consumers may still be negative, possibly as negative as if a single, large downsizing occurred. Finally, because of the potential importance of downsizing as part of a price management strategy,
Long Range
96
Planning
Vol. 24
August
WC would like to suggest some directions for further research. We believe that further work should focus on better statistical analysis of downsizing cases, with fuller data on sales trends for several product categories, the short-run and long-run effects of downsizing on both sales volumes and market shares could be quantified and compared. Given the limitations of interviews it was difficult to present more than a basic descriptive analysis of the identified instances of downsizing in this study. A more complete empirical analysis would analyse the extent of the impact of downsizing on company sales and shares, relative to other external and internal variables. As a guideline, most of the implications for strategic decision making listed earlier in this paper are potential propositions for further descriptive study and empirical testing.
1991 (2)
Paul S. Busch and Michael J. Houston, Marketing: Strategic Richard D. Irwin, Homewood, IL (1985).
Foundations,
(3)
D. L. Kurtz and L. E. Boone, Marketing, (1981).
Dtyden Press, New York
(4)
Steuart Henderson Britt, How Weber’s Law can be applied to marketing, Business Horizons, 18 (1). 21-29, February (1975).
(5) Thomas T. Nagle, The Strategy and Tactics of Pricing, Hall, Englewood Cliffs, NJ (1987). (6)
See Ref. (4).
(7)
Mona
Prentice-
Doyle’s Consumer Network, 19 March 1990, ‘Spotty Price Inflation Brings Some Jitters’, p. 2.
(8) See Ref. (7). (9) New York Times (27 March 1990). Letter to the Editor, written by Joseph Wolf, p. A26. (10)
Philadelphia
inquirer
(25 April 1990).
Letter to Ann Landers,
p. 2-D. (11) (12)
J. Murphy, Assessing thevalue of brands, Long Range Planning, June (1990). Philip
Kotler, Marketing
implementation,
and
Management: Analysis. Planning. Control. Sixth Edition, Prentice-Hall,
Englewood Cliffs, NJ (1988).
References (1)
Steuart Henderson Britt and Victoria IM. Nelson, The marketing importance of the ‘Just Noticeable Difference’, Business Horizons, 19 (4). 38-40. August (1976).
(13)
Bruce Nash and Allan Zullo, The Mis-Fortune Books, New York (1988).
(14)
F. G. Tucker, S. M. Zivan and A. C. Camp, How to measure yourself against the best, Harvard Business Review, January /Februan/ (1987).
(15)
500,
Pocket
D. Walters and D. Knee, Competitive strategies in retailing, Long December (1989).
Range Planning,
Long Range Planning, Vol. 24, No. 4, pp. 86 to 96, 1991 Printed in Great Britain
0024-6301/91 $3.00 + .OO Pergamon Press plc
Can you Reduce your Package Size Without Damaging Sales? Anthony
Adams,
C. Anthony
di Benedetto
Reducing the package size is a common and increasingly frequent practice. However, little published work has examined *downsizing’ as part of a pricing strategy. This article reports the results of an exploratory study. Interviews with industry executives and store managers, and secondary data sources, provided information on 25 recent cases. The objectives of the study were: to investigate the impact of downsizing; to discover the reasons for the impact on sales; to recommend strategies for making downsizing more effective and minimizing its disadvantages; and to assess other implica tions for marketing strategy.
and Rajan
Chandvan
Downsizing is a common occurrence among consumer branded items, because it is often an important part of a pricing strategy for such products. It can also be risky, in that a poorly executed downsizing can lead to consumer hostility and loss of the customer franchise. Yet, despite its strategic importance and potential risks, very little published research exists on the effects of downsizing. The objectives
of this paper are:
(1) To
analyse recent cases and assess the shortrange and, in particular, the long-range impacts of downsizing.
In today’s hotly-contested consumer product markets, there is increasing pressure on brand managers and planners to improve the ‘bottom line’. Because of probable competitive response and possible consumer resistance, it is not always possible to implement a price increase to improve a brand’s profit margin. Caught in this situation, many managers have opted for reducing the size of their products while maintaining or increasing their price. Although this may not be an ideal strategic one must acknowledge that product weapon, downsizing is indeed part of the brand manager’s arsenal, much as corporate downsizing is a topmanagement strategic option.
Today more than ever, supermarket shoppers are likely to encounter downsizing of one form or another. Some product downsizing appeals to certain customer segments: single-serving or smallhousehold sizes, for example, are popular with singles and young families, just as smaller cars and apartments have been attractive in their market segments. Other instances are not always well received: recent downsizing of coffee and some paper products has attracted some negative attention among consumers. Anthony Adams is Vice President, Research, Campbell Soup Company. Professor C. Anthony di Benedettoand Rajan Chandran are at the School of Business and Management, Temple University, Philadelphia.
(2) To
assess how the impact across product categories consistent patterns.
of downsizing varies and to identify any
for strategic and (3) To make recommendations judicious implementation of downsizing so as to minimize possible negative impacts. managerial implications and (4) To determine considerations for determining whether downsizing or a price increase is more appropriate. (5) To suggest some directions tive and empirical testing.
The ‘Just Noticeable
for future
descrip-
Difference’
A brand manager contemplating a downsizing strategy must decide by what amount the contents ought to be reduced. According to Weber’s Law, the larger the intensity of an initial stimulus, the greater is the amount of change necessary for the resulting stimulus to be perceived to be different.’ Thus, an important concept to consider is the just noticeable di$erence or JND, defined as the minimal change in an object required to cause a perceptual change (Ref. 2, p. 152). As an example, a price increase of $300 on a new Yugo automobile is probably more noticeable to prospective buyers than a $300 price increase on a Mercedes-Benz
Can you Reduce of (Ref. 3, p. 60). Th ere are clear implications Weber’s Law and the JND for many marketing decisions: product pricing, advertising, and packaging, and others.4.5 In packaging, Procter & Gamble has used the JND concept by making well over a dozen practically imperceptible changes to Ivory Soap packaging since its introduction in 1898, and ending up with a substantially different design. Weber’s Law, as applied to downsizing, would suggest that the ratio between the change in content amount and the original amount, and not the absolufe difference in amount, is critical to perceptual discrimination by consumers. (Weber’s Law can be stated mathematically as dC/C = K, where K is a constant, C is the initial content measure, and dC is the change in the content measure.) The key task for the product manager considering downsizing would then be to determine the value of K for the product in question. This is likely to vary depending on competitive packaging as well as on traditional package sizes for that product line. Britt” suggested that controlled experiments bc used for determining the value of K. Once K is established, Webcr’s Law might be profitably used to determine the optimal volume reduction. The task will be complicated by the fact that K is likely to be constant only over a certain range of package sizes. At the extremes (very small or very large packages), threshold effects may exist, changing the value of K. Weber’s Law thus should only be applied with caution to packaging decisions on extreme package sizes. In the same article, Britt states: ‘So long as the change is not perceived as “just noticeably may continue to reduce the size different”, the manufacturer of the candy bar and charge the same price without losing sales . . A manufacturer may choose to lower price and cut the size proportionately. If accurately done, consumers may perceive that they are getting more for their money.’
However, as a later section will note, in very few of the cases studied was the price decreased at the same time the package was downsized. The following recent quotes from consumers commenting on recent downsizing strategies suggest that the JND must be taken into account, to avoid losing customer franchise: ‘I’ve noticed that certain canned goods are in the same size can but the net weight is ounces less and sometimes the price has gone up as well.” ‘Many
bacon
brands
have dropped
from
16 ounces
to 12
your Package
Size Without
Damaging
87
Sales?
are discussed later appeared to have had little effect upon brand sales or share, the consumers quoted above had no difficulty observing instances of relatively large downsizing. Because ofthe potential value of brands, such consumer concerns should not be casually disregarded.” This suggests that the JND is operative in downsizing, and should be a consideration in planning a downsizing strategy.
The Reasons
for Downsizing
There are several factors which can make downsizing an attractive marketing strategy for a consumer non-durable. (1) To Maintain a ‘Price Point’ Kotler’* recommends that managers consider Weber’s Law in making product line decisions. Each item in a firm’s product line should be differentiable to the consumer, so differences across products in a product line should be, at least, just noticeable. Price differences across the line should reflect these product benefit or attribute differences. A research manager for a large consumer snack food manufacturer, at a recent American Marketing Association Attitude Conference, revealed why downsizing is often undertaken to maintain a price point. ‘Our research shows that consumers are aware of price points, but not of contents, so we downsize . until we have to upgrade to a larger size and a new, higher price point.’
However, according to the president of a large candy manufacturer, downsizing which is undertaken to hold a price point is ‘risky’ because ‘inevitably you have to pass (the price point) anyway’. (Note: All quotes from business executives cited in this paper wcrc obtained via personal communication with an executive from a major food manufacturing company. All quotes from store managers were personal communications with the authors of this study.) (2) To Increase Margin and Projitubility Downsizing can increase the profitability of a brand or product line if consumers either do not perceive the change, or forget that downsizing occurred. A local store manager noted: ‘Short-term sales may drop, but in the long run if the brand is strong, consumers tend to forget and the brand picks up strength again.’
ounces. Most coffees have gone to 13-ounce cans that look just the same as the lbounce
cans.’ *
‘Coffee weighing 13 ounces is put into the same can that used to hold 16 ounces-a not-too-subtle price increase (even though the price is shelf-marked . .).” ‘The cardboard core (is) larger (on rolls of toilet paper) . . Now the consumer is getting less paper for the same . price.’ ‘”
While several of the examples
of downsizing
which
Downsizing to increase margin and profitability is often accompanied by a price increase. As another store manager observed: ‘Everybody is now downsizing. The cereal managers are doing a “double bang” right now, downsizing package and taking price increases. In fact they have done it twice within the past few months.’
Kotler
also notes
that
manufacturers
have
used
88
Long Range
Planning
Vol. 24
August
downsizing as an alternative to increasing price in the face of high costs. Hershey, for example, reduced the size of its 15-cent candy bar at about the same time that Nestle increased the price to 20 cents while leaving size unchanged. (3) To Increase the Frequency of Purchase A well cxccuted downsizing strategy can increase the frcqucncy or volume of purchase to certain market scgmcnts. For cxamplc, if the small container of yogurt is downsized by 30 per cent, some consumers will perceive the new size to be too small to be a satisfying snack, and will consume two containcrfuls at one sitting. Thus, the familiar ‘sixpack’ of yogurt is, for these consumers at least, cffcctivcly a ‘three-pack’, leading to more frequent purchases. (4) To Offset Raw Material Cost Increases The downsizing of candy bars in response to increasing cocoa prices is well known. Some manufacturers replaced chocolate made from cocoa with synthetic chocolate in an attempt to keep retail prices competitive; car manufacturers have substituted plastic automobile parts in place of many metal ones. But downsizing can occur simultaneously with a packaging change, to offset increased prices in packaging materials. For example, a company may switch from a 1Qounce glass container to a 16-ounce plastic container without reducing the cffcctive retail price to the consumer. (5) To Respond to Demographic Changes ‘Desirable downsizing’ often is undertaken in response to changing demographic trends. As families get smaller, the optimal ‘family size’ package must also decrease to prevent waste. Also, the growth of the singles market has led to singlcserving packages of soups, cntrecs, and many other product categories. Not all have been successful, as Gerber’s Singles for Adults illustrates.” Consumers were apparently not impressed by the packaging (baby-food-like gl ass J‘ars ) nor by the reminder that they were eating alone. The failure of this product suggests that blindly following the demographic trends in downsizing can be very risky. (6) To Respond to Lifestyle Changes Emphasis on eating right and staying fit has downsizing implications. Many bakeries sell bread in smaller loaves, cut into thinner slices, for the dietconscious segment. Interestingly, some consumers did not respond negatively to downsizing of candy bars. According to store manager interviews, some consumers assuage their sense of guilt this way: ‘Since I should not bc eating this, I am glad I am eating less of it.’ (7) To Introduce Packagirzg Changes Innovative packaging that managers believe will provide a new benefit to consumers (such as squeezable plastic ketchup bottles or salad dressing
1991 in a pump dispenser bottle) panied by downsizing.
is likely to be accom-
(8) To Raise the Price Per Unit of Volume Finally, downsizing may be used by the manufacturer attempting to bring price levels in line with their (the manufacturers’) perceived product value, as an alternative to increasing price. Such decisions should be influenced by the product standards against which any ‘benchmarking’ is to be done.14 Research
and Data Collection
Procedures
In order to obtain as many downsizing case histories and to gain as much background information on downsizing as possible, several information sources were used. A large-scale secondary literature search was carried out. Through the Dialog Information Services computerized literature search facilities, approximately 5000 publications were scanned for stories and articles on downsizing. These included business/management, food, packaging, health/fitness, and general news publications as well as other categories. In addition, CD-ROM databases (ABI/INFORM, INFOTRAC and PSYCHLIT) were consulted and Consumer Reports between 1985 and 1990 were searched manually. Large supermarkets and discount drug chain stores in a large metropolitan area were visited to inspect shelves for downsized products. Store managers and grocery managers of several of these chains were contacted and interviewed. Many valuable insights on the short-run and long-run effects of downsizing were gained from these interviews. Leading consumer goods practitioners and authorities were interviewed regarding the impact of downsizing from both a consumer and a company perspective. Several consumer and industry associations and organizations were contacted, including local bureaus of Weights and Measures, the Grocery Manufacturers Association and Public Citizen, both of Washington, DC, and the Dollars and Sense consumer newsletter from Somerville, Massachusetts. Federal government agencies, including the National Institute of Standards and Technology, the Food and Drug Administration, and the Federal Trade Commission, were also contacted. Finally, some SAMI data on product category sales through time were made available by industry practitioners and were also analysed.
Recent
Case Histories
We identified a sample of 25 product categories in which downsizing has recently occurred. In many cases, several brands within each product category were downsized at about the same time, indicating that smaller brands often follow downsizing moves initiated by leading brands. Further, in most cases, no long-term effects were reported, and systematic comparison of effects on market shares or sales volumes was not possible as only anecdotal evidence was available in some cases. Table
1 lists the product
categories
and brands,
as
Can you Reduce Table
your Package
Size Without
Damaging
89
Sales?
1. Some cases of downsizing Downsizing particulars and short-term impacts
Product category and brands
(1) Bacon (Oscar Meyer)
Downsized package from 16 to 12 OZ. Reduced number of slices per package. Labelled ‘Center Cut’. Price unchanged. Category is declining due to health concerns. Some negative
(2) Bathroom Tissue (Charmin, generic and store brands)
impact
on brand.
Charmin: Downsized roll from 500 to 380 sheets in early 1987, and later to 350 sheets. Package price unchanged. (Effective price increase of 8%.) Paper sheets fluffed up to reduce visible effect of downsizing. Packaging communication focused on ‘fluffiness/softness’. No impact on Charmin brand. Generic/store brands: Downsized dimensions of contents from 9,6” x 7.3” to 9” x 7.5”. (Effective price increase of 4%.) Increased couponing. No impact on brands examined.’
(3) Bread (Wonder, Stroehmann)
Downsized loaf from 24 to 20-22 oz. Sliced bread thinner. Packaging communications focused attention away from downsizing. Increased price. No impact on brands examined.
(4) Candy Bars (Hershey, Mars)
Altered package weight, number of pieces per package and size of pieces twice during Spring 1988. Downsized package from I.76 to I.69 oz. No impact on brands examined: possibly the impulse nature of the item lessened the impact.
(5) Cereals (Kellogg’s Bran Buds, Corn Flakes, Cocoa Krispies)
All three brands downsized between 1980 and 1982 by l-2 oz. per package. Outer box size maintained while contents were downsized. Communications stressed health and other benefits. Increased couponing. No impact on brands examined.
(6) Chili (Hormel)
Downsized package from 16 to 15 oz. Price unchanged. No impact on brand.
(7) Coffee: Ground (Maxwell House, Yuban, Taster’s Choice, Folgers, Chock Full O’Nuts)
First four brands downsized summer/fall 1988 from 16 to 13 oz. can. Last brand followed with same move in early 1989. In all cases, coffee ‘fluffed’ to fill same size can. Some negative
impact
due to health concerns.
Coffee drinking trend is generally negative.
(8) Diapers (Pampers, Luvs, Huggies)
(9) Fried Chicken: In Bulk (Banquet)
Downsized number of units per package from 48 to 44, and 32-27. Increased prices. Communication focused on new materials, slimness of diapers, absorbency and other benefits. No impact on brands examined. Downsized package from 32 to 28 oz. in early 1989. Heavy dealing since downsizing. Impact:
(10) Fried Chicken Dinner (Swanson)
Sales volume up by 72.5% by end of 1989. 2
Downsized from three to two pieces per package. Consumers apparently felt they were receiving less product. Impact:
volume loss of 7920%,
and brand more vulnerable
to competition.
3
(11) Fruit Juice (Libby’s)
Downsized package from 6 to 5.5 oz. Price unchanged. No impact on brand.
(12) Ketchup (Heinz, Hunt’s)
Heinz downsized bottle from 32 to 20 oz. and 16-I 4 oz. Heinz also changed package to plastic squeezable bottle. Hunt’s downsized from 1 B to 17 oz. Impact on brands examined: the downsizing introduced excitement to product category, but only Heinz showed volume gain.
(13)
Mineral Water (Perrier, Evian)
Downsized bottle from 10 to 6-7 oz. New size better matched optimum serving size requirements. Price increased. Communications emphasized ‘natural’ product, other benefits. Impact: generally positive. (Note: This occurred before the Perrier benzene scare of 1990.)
90
Long Range
Table
Planning
Vol. 24
August
1991
1. cont. Product
(14)
category
Paper Towels Cottonnelle)
and brands (Bounty,
(15)
Pot Pies (Banquet)
(16)
Potato Chips (Wise,
Scott
Downsizing
particulars
Downsized roll from 100 to 80 sheets. Paper ‘fluffed up’ for appearance. Price unchanged. Communication focused on absorbency, No impact on brands examined.
and short-term
impacts
other benefits.
Downsized from 8 to 7 oz. in August 1976 in Seattle and Portland. Price unchanged. Impact: volume actually increased in these cities by 1.6 and 18.2% respectively. Shares also increased by 0.7 and 1.5% respectively. Herr’s, Frito
Lay)
Ben’s, Near
Downsized package from 12 to 10 oz. in three stages. Prices unchanged until a move to a new package and price point. Increased air space in bags. Communication focused on health issues: ‘cholesterol free’. Some negative impact reported on brands examined.
(17)
Rice Pilaf (Uncle East)
(18)
Salad Dressing Simmons)
(19)
Sanitary Napkins (Stayfree, Maxithins, Always Plus Thin Super, Always Plus Night Super)
All brands downsized between February and March Contents of box reduced from 30 to 27, and 26-24. Prices unchanged. Communication emphasized other benefits. No impact on brands examined.
(20)
Soap (Caress,
Downsized bar from 4.7 to 3.5 oz. Prices unchanged. Packed in two and three packs. No impact on brands examined.
(21)
Soup:
(22)
Steak Sauce (A.1
(23)
Vegetables:
Canned
(24)
Vegetables: Brands)
Frozen (Store
(25)
Yogurt (Breyer’s, Dannon)
(Richard
Dove)
Dry (Lipton)
Downsized package from 7 to 6 oz. in late 1989. Prices unchanged. No impact on brands examined. Downsized package from 8 to 6 oz. Introduced pump dispenser bottle. Prices unchanged. Pump was unsuccessful and was discontinued. 1990.
Downsized from 4 to 3 packets per box. No impact on brand.
)
Downsized bottle from 16 to 15 oz., and 6-5 Price unchanged. No impact on brand. (Del Monte)
Light N Lively,
oz.
Downsized standard can sizes. Some downward impact on brand. Downsized package from 18 to 16 oz. Price unchanged. No impact on brand. Downsized package from 6 to 5 oz., then 5-4.4 Some negative impact on sales.
oz.
The information in this table was obtained from interviews with store and grocery managers and company executives, and the following publications: (1) Consumer Reports, August 1988, p. 535. (2) IRI. (3) SAMVNielsen.
well as particulars on each downsizing effort. As Table 1 indicates, downsizing has been implemented in many ways. Bacon, diapers, fried chicken dinners, sanitary napkins and dry soup were repackaged with less units per package. In many cases (canned vegetables, cereals, potato chips and several others), the package contents were reduced, yet the same size packages were employed: there was simply more slack fill (air or water) in the container. In fact, in some cases, steps were taken to decrease the perception of downsizing. The number of sheets per roll was reduced for both bathroom
tissue and paper towels, but in both cases the paper was fluffed up inside the package to take up more space. During this period, Charmin bathroom tissue bore a message on its packaging stressing fluffiness and softness-thus turning the downsizing into a consumer benefit. Coffee makers applied much the same strategy, filling a 16-ounce can with 13 ounces of coffee, which was ‘fluffed’ to take up more volume. At the same time, they announced to consumers that coffee was now ‘more concentrated’ and in ‘new fluffed flakes’. General Foods (Maxwell House), Procter & Gamble (Folgcr’s), and Nestle
Can you Reduce
your Package
Tables 2(a)-(c) categorize the cases according to the variables which, seemed likely to have an impact upon the success of a downsizing strategy: whether the downsizing is visually obvious to the consumer (that is, the manufacturer considered the concept of the JND) ; whether the product is sold as a single or multiple serving; whether it is consumed by single or multiple individuals; and whether the packaging or communication focus was altered at the same time as downsizing occurred. Table 2(a) contains downsizing
Product Bread Bathroom Tissue Candy Bars Cereals Chili Diapers Fruit Juice Paper Towels Rice Pilaf Sanitary Napkins Soap Soup: Dry Steak Sauce Vegetables: Frozen
Were there single or multiple servings?
Was the brand consumed by single or multiple person(s)?
Multiple
Single/Multiple
No Yes
Single
Single
Single/Multiple
Single/Multiple
Single
Single
No Yes
No Yes No
Yes No
Multiple
Multiple
Single
Multiple
Single/Multiple
had a positive
Product
Was it visually obvious?
Were there single or multiple servings?
The product Bacon Coffee Fried Chicken Dinner Potato Chips Salad Dressing Vegetables: Canned Yoghurt
Yes Yes No Yes
No Yes No
Multiple
downsizing
Table 2(c). Cases where
Was the packaging or communications focus altered?
Yes
Table 2(b). Cases where
Fried Chicken (Bulk) Ketchup Mineral Water Pot Pies
impact
Yes
No
Sales?
Examining Tables 2(a)-(c) provides very little in the way of reliable indicators of downsizing success. An interesting observation from Table 2(a) is that in 14 of the 25 cases studied, no appreciable short-term effects of downsizing occurred, although there appears to be no pattern common to these cases. That is, they were not marked by a large number of visually subtle downsizings, or single serving containers; nor were trade or consumer promotions
had no short-term
Was it visually obvious?
Damaging
this information for product categories for which downsizing did not have an appreciable effect in the short run upon dollar sales volumes or market shares of affected brands, to the best of our knowledge. for Table 2(b) and (c) p rovide the same information cases where the involved brands experienced positive and negative impacts respectively.
(Taster’s Choice) all downsized to 13 ounces between summer and fall of 1988. Small brands such as Chock Full O’Nuts, originally resisting the move to 13 ounce cans, fell into line by early 1989. For details on other case histories, the reader is referred to Table 1.
Table 2(a). Cases where
Size Without
No No Yes No
downsizing
Was the change visually obvious? No No Yes Yes No No Yes
Multiple Single/Multiple Single Single
short-term
Were there single or multiple servings? Multiple Multiple Single Multiple Multiple Multiple Single
impact
Was the brand consumed by single or multiple person(s)?
Multiple Multiple Single Single
had a negative
short-term
No No Yes Yes Yes No
Was the packaging or communications focus altered? No Yes Yes No
impact Was the brand consumed by single or multiple person(s)?
Single/Multiple Multiple Single Single/Multiple Multiple Single/Multiple Single
Was the packaging or communications focus altered? Yes Yes Yes No Yes No No
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necessarily different from the other cases. One can note that in two of the four cases with positive downsizing impacts (Table 2b), a substantial packaging improvement was implemented: squeezable ketchup bottles, and a more convenient singleserving-size bottle of mineral water. Yet salad dressing, downsized and equipped with a pump dispenser, showed negative effects. Also, in three of the four positive impact cases, the downsizing was not visually obvious to the consumer; this provides partial support for the concept of the JND. Slightly more can be read into Table 2(c). In all cases where downsizing had a negative impact (except salad dressing and yogurt), the product category has been facing a downward trend in demand. One of the two canned goods that were downsized (vegctables) fit this category; the other canned good, chili, exhibited no impact from downsizing. Canned food products are declining in salts and popularity due to competition from fresh and frozen alternatives, and apparently downsizing in canned vegetables was looked upon more ncgatively as a result. Bacon, chips, coffee, and fried chicken dinners also experienced negative impacts. Sales in these product categories are likely to be responsive to changes in consumer health consciousness: consumers increasingly avoid the fats and nitrates in bacon, the caffeine in coffee, the salt in potato chips, and fried meat. The fried chicken dinner example is unusual in that the downsizing was more pcrccptual than actual. Swanson replaced three small pieces of chicken with two large pieces, and the actual meat content of the package was not affected much, if at all. But, consumers believed that, with the change from three to two pieces, they were receiving much less product. (We speculate that this may bc because Kentucky Fried Chicken and other chicken fastfood outlets stress the number of pieces in their advertising and promotion.) SAMI-Neilsen data indicate a volume loss of almost 20 per cent after this downsizing. It should be noted that, based on the cases prcsentcd above, there is not enough information to dctermine the causal relationships involved in downsizing. Volume, share, and profitability are very difficult to analyse, given that there arc several factors which will confound the main effects of the downsizing : new products in the line, new competitive products in the category, cross-elasticity effects, trade deals and consumer coupon promotions, increased advertising, and so on.
Minimizing
the Effects
Management must consider both the short-term and long-term effects of a downsizing strategy. As the case histories indicated, manufacturers often run
1991 consumer or trade promotions downsizing. A store manager
to offset the effects of agreed:
‘You have to see both short-term and long-term effects. Short-term sales may drop, but in the long run if the brand is strong, consumers tend to forget and the brand picks up strength again. That is why you see a pickup in deals in the short run.’
To be specific, product managers often accompany downsizing with consumer couponing and advertising and promotion that focuses on advantageous packaging changes or lifestyle benefits that are tied to downsizing, as well as trade deals. These programmes are implemented to minimize the negative impacts of downsizing in the short run. The net effect, therefore, is that the short-term salts figures are distorted, since the promotions will offset at least some of the sales decrease which might be experienced as a result of the downsizing. Consider the downsizing efforts leading to negative impacts (Table 2~). In most cases, couponing and other sales promotions designed for quick action were not employed extensively. In the case of fried chicken dinners, increased trade dealing did not offset the negative short-term effects. On the other hand, heavy trade dealing was also used for bulk fried chicken, which showed a positive impact of downsizing. Again, the results are not definitive. In the long run, the new package becomes the norm, as it is often the case that competing brands fall in line. Thus, Iong-run sales and market shares appear to be driven mostly by. the usual factors (brand loyalties, product quality, price-value perceptions relative to competition) and not by downsizing. So, as long as brand loyalties and price-value perccptions are not irretrievably compromised (by, for example, overly obvious or drastic downsizing), the long-run effects may be minimized. As an example of this, the dollar sales volumes for three popular brands of cereals (as obtained from SAM1 data), before and after downsizing, were compared. The first of these, Brand A, is an established bran cereal. Its annual dollar sales volume temporarily declined immediately after downsizing in 1983, but by 1985 had surpassed predownsizing levels. Declines in dollar volume from 1987 on appear to be related to steep price increases and, simultaneously, much greater competition in the bran cereal category as bran became a trendy ingredient for health-conscious shoppers. Brand B, an extremely popular established brand, showed dramatic increases in dollar sales volumes by 1985, after a slippage in 1982 due to downsizing. In this case, average shelf prices only increased modestly. Brand C (a children’s cereal) is an interesting case in that, unlike most of the other examples considered, its downsizing in 1982 was accompanied by a decrease in average shelf price. However, a con-
Can you Reduce sumer with a good memory and a pocket calculator could have easily discovered that the average retail unit cost was higher after downsizing (13 ounces for $1.52 is a better deal than 11 ounces for $1.35). were almost Despite this fact, dollar volumes unaffected by the downsizing effort.
Planning and Implementation Drawing on these case histories and from the theoretical perspectives, some important strategic implications regarding downsizing are apparent. This section provides a list of important considerations in planning and implementing downsizing strategies that will minimize long-run negative impacts and improve the likelihood of desirable outcomes for the companies seeking to improve their retailing strategies.” (1) Brand loyalty. There may be a core of loyal consumers who will not react at all to downsizing changes; alternatively, ifstrong loyalties do not exist and/or consumers are more perceptually sensitive, they may react negatively to downsizing and switch to a substitute brand. (2) Serving size and usage occasions. Size-conscious consumers may react differently to downsizing than price-conscious consumers. There are also likely to be different serving-size or usage-occasion segments, and the elasticities of these individual segments to downsizing ought to be taken into account. (3) Meeting changing consumer needs. Smaller packages may appeal to singles and small families that do not want any leftovers. (4) Downsizing in gradual steps. In several of the case histories presented (potato chips, candy bars, and cereals), manufacturers applied downsizing in gradual steps to minimize the negative impact. (5) Package sizes ofcompetitive products. For example, many brands of ready-to-eat stew traditionally come in bulky 19- or 24-ounce cans. A cannedgoods manufacturer must consider that, in switching to a much smaller can, they may exclude their brand from this market.
your Package
Size Without
Damaging
Sales?
93
the case for an impulse good, where the package serves as a kind of in-store ‘billboard’. However, caution must be applied. In a recent panel study mentioned in Mona Doyle’s Consumer Network, 94 per cent of panelists stated that they ‘hate paying for and disposing of large boxes that are half full of product’ and 89 per cent agreed that ‘as the quantities in packages go down, it is getting harder to figure value’. (8) Focus promotional attention on other productfeatures other importantproduct attributes, such as new benefits, improvements, or user-convenient packaging environmentally responsible packaging (consider the cases in Table 2b). A s noted earlier, consumer couponing and other promotional strategies may also be necessary to focus attention away from downsizing. (9) Packaging material changes. The properties of the package material used and the packaging materials cost may necessitate a change in the package size. For example, different container sizes may be optimal depending on whether paper, metal, glass, or plastic is used for packaging. (10) Two or three dominant brands acting together. As noted, in many of the downsizing case histories, several brands downsized at approximately the same time, indicating a follow-the-leader bchavioural As a coffee industry exccutivc stated: pattern. ‘P & G’s switch to fast roast forced other manufacturers to convert because they could not match Folger’s 13-ounce price packaged in one pound cans. If you look at trends in the industry, sooner or later most competitors fall in line.’ (11) Trade sensitivities and deals. If downsizing is accompanied by packaging changes, retailer shelf space constraints must also be considered. (12) Home inventory refrigerator space.
constraints
such
as pantry
or
(13) Physical distribution savings and costs. Depending on the type and extent of downsizing and packaging changes, physical distribution costs may bc favourably or unfavourably affected. Switching from flexible to rigid containers will lessen breakage costs and returns; switching to smaller volumes per unit or per case may increase handling costs.
(6) The manager should consider the potential impact of shape changes on consumer perception. Considering the stout, bulky cans used by competitors, it might be wise for a canned stew manufacturer to downsize, for example, to a stout 15-ounce can rather than a tall, slim 15-ounce can in order to create the desired illusionary effect.
(14) The impart on vending machine sales. For example, a potato chip manufacturer ought to be aware of any consumer dissatisfaction encountered as a result of downsizing the vending-machine chip package, as this may result in switchout to competing brands or to other snack alternatives.
(7) Management must distinguish between content and package downsizing. In many cases (cereals and candy bars, for example), companies downsize the contents, but not the package. This is more likely to be
(15) Just as couponing, two-for-one promotions, and price cutting will not rcvcrsc an overall declining market trend, downsizing will not help if the brand or product category is in decline because
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of fundamental product problems (e.g. concern about health risks) or market changes (e.g. canned vegetables becoming less popular relative to frozen or fresh).
the amount of almonds and raisins used, replacing them with cheaper ingredients.
(16) There are several situations in which taking a price increase is preferred to downsizing. If opportunities for skimming the market exist, it is probably better to take the price increase. Company earnings or profit contribution objectives may require price increases, especially in the case where selective demand for the brand in question tends to be inelastic (price increases will lead to only minor unit sales declines and increased contribution). Finally, product line or portfolio considerations may make a price increase more attractive. Table 3 describes some situations where downsizing or price-increasing strategies are likely to be preferred. However, note that it is not always clear which strategy it is better to implement. In an example provided by Kotler, ingredient costs for Quaker Oats Natural cereal increased sharply due to inflation. Quaker Oats deliberately avoided downsizing at first, choosing instead to raise the price. They soon learned that price elasticity of demand was high, as sales decreased. Quaker Oats subsequently had to cost-reduce the contents by cutting
Table 3. Selecting
downsizing
vs a price increase
Take price increases when: (1) Portfolio or product line strategy dictates (2)
Overall earnings pricing strategy.
(3)
Skimming
or profit contribution
opportunities
Downsize when: (1) Price point maintenance
it.
goals impact
exist.
is desired.
(2)
Competitive
(3)
Frequency
(4)
Cost increases in packaging margins.
(5)
Demographic or lifestyle changes tunities for ‘desirable’ downsizing.
(5)
It is feasible volume.
pressures will not allow price increases. of purchase
will increase as a result.
perceptually
or raw materials squeeze
indicate
without
oppor-
hurting
Table 4. Performance
sales
measures
1991
Table 4 summarizes the main downsizing scenarios presented in the preceding text and discusses implications for performance objective setting. Most downsizing case histories in Table 1 were accompanied by either price maintenance (coffee and paper products) or price increases (cereals and bacon). In other cases of ‘desirable downsizing’, substantial reductions in both size and price may occur (single-serving soup or canned vegetables). In order to evaluate the long-term effects of implementing a downsizing strategy, certain performance measures ought to be set as benchmarks by management, and one can speculate that the choice of performance measure will depend upon the nature of the downsizing. As Table 4 indicates, a firm which downsizes and increases price will particularly need to monitor the long-run sales revenue and profit contribution consequences of this strategy. The price increase alone may result in lost unit sales, even if the extent of downsizing is very small. This is an elasticity issue. If the demand for Cereal Brand B discussed earlier is inelastic, the price increase will result in little loss of sales and an increase in sales revenue. The cereal manufacturer will need to monitor sales revenue levels to ascertain that brand demand is sufficiently inelastic to withstand the price increase. If additional promotion and distribution expenditures are incurred to offset the effects of downsizing, the net impact on profit contribution must be tracked as well. In the case of downsizing with price maintenance, the firm must monitor unit volume levels to determine if there were any detrimental effects due to downsizing. When a firm downsizes by launching a singleserving line extension, the key performance measures may be very different. After downsizing, a canned-goods manufacturer will need to measure cannibalization of their existing regular-size lines, as well as market share drawn from competitive sales, in order to get a full picture of the net impact of the new size. Frequency of purchase (particularly among targeted market segments) may also be tracked. There may be instances where dollar
for different
downsizing
Performance
Strategy Downsize
and increase price
Unit sales Dollar sales revenues Profit contribution
Downsize
and maintain
Unit sales Profit contribution
price
Downsize to smaller-serving sizes with corresponding price cut
strategies
measures
Market shares Cannibalization of own-brand share Draw of competing-brand share Frequency of purchase
Can you Reduce revenues or profits may be comparatively less important, at least in the short-term, acting as constraints rather than performance measures. For example, if the canned-goods producer launches the single-serving brand in order to match a successful similar competitive brand, the downsizing strategy may be necessary to halt market share erosion. In such a case, if market share was maintained at a stable level, and as long as profit contribution did not fall below some pre-specified amount, the downsizing may be judged a success.
Conclusions
and Recommendations
your Package
Size Without
Damaging
Sales?
95
(1) Downsize to the point where (2) Focus consumers’ attention
it is not noticeable.
(3) Increase consumer couponing offset short-term resistance.
temporarily,
away from downsizing by highlighting other benefits (such as a more convenient package). In some of the successful cases, the new advantage or benefit was flagged right on the package. to
downsizing strategies before this (4) Implement becomes a hot consumer issue and starts to receive greater attention from consumer groups and the media.
Downsizing is a common practice, and is now being practiced on a wide range of products. Despite its growing importance in consumer products marketing, there is little published literature on the subject. Its use as a tactic and its long-term effects on sales and profits should be more closely considered.
However, the inconclusive nature of the evidence on the effects of downsizing suggests that a more fundamental strategic approach should guide It is recommended that downsizing decisions. several strategic questions and issues be considered by consumer goods manufacturers. These questions include :
Consumers seem generally unaware of or unresponsive to downsizing when it occurs, provided that the package size does not change in an obvious manner. This is clear from the number of case histories described here in which downsizing had no impact (or even a positive impact) on market shares and volumes. Consumer awareness of downsizing appears to be greater in certain product categories where downsizing has been a very frequent occurrence: candy bars and cereals, for instance.
(1) Is
It was interesting to note that in many cases where the product category was already declining in popularity or associated with health concerns (canned goods, fried foods, bacon, potato chips, coffee), downsizing was more likely to be viewed negatively. By contrast, in two of the cases where market shares and volumes increased after downsizing (ketchup and bottled water), a real packaging benefit was delivered to consumers. There were several exceptions to these ‘rules’, however, and no consistent patterns emerged that reliably distinguished successful from unsuccessful downsizing. Within small ranges, size generally does not seem to be a very compelling attribute in consumer decision making. Consumer groups have, in general, not systematically catalogued downsizing and other packaging changes, and media coverage to date has been minimal. Given the increasing incidence of downsizing, it is probable that systematic attention from interested consumer groups and more extensive media coverage will occur in the future. Although the results of this research are necessarily preliminary, it is perhaps not too early to provide tentative strategic recommendations to managers regarding downsizing. Hence, it is probably wise for managers to heed the following recommendations:
the package size consistent with the requirements suggested by the target consumer’s lifestyle and demographics?
(2) How
will the various segments and subsegments react to a downsizing strategy? Are sales to one segment jeopardized by a downsizing strategy designed to attract customers in another segment? Are the elasticities of response different across segments?
(3) Is a packaging contrast between the manufacturer’s brand and competing brands desirable? If package size is changed, will the new package size provide a favourable or unfavourable contrast against competing brands with respect to consumer perceptions? initiates a downsizing (4) When a manufacturer strategy, what are the likely competitive reactions? Is it an easy strategy to copy (e.g. changing from standard 16-ounce to standard 15-ounce cans)? Does the initiating manufacturer gain a sustainable brand advantage since it will take some time for competitors to react (e.g. a new pump dispenser or squeezable plastic container) ? (5) In very general terms, what are the likely longrun consequences of downsizing? Any decision that potentially harms the long-run health of the brand should be undertaken with caution. (6) Also, what is the cumulative effect of repeated downsizing? If a brand is downsized several times in succession over a few months or years, yet each individual occurrence was less than the JND, the overall perception of consumers may still be negative, possibly as negative as if a single, large downsizing occurred. Finally, because of the potential importance of downsizing as part of a price management strategy,
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WC would like to suggest some directions for further research. We believe that further work should focus on better statistical analysis of downsizing cases, with fuller data on sales trends for several product categories, the short-run and long-run effects of downsizing on both sales volumes and market shares could be quantified and compared. Given the limitations of interviews it was difficult to present more than a basic descriptive analysis of the identified instances of downsizing in this study. A more complete empirical analysis would analyse the extent of the impact of downsizing on company sales and shares, relative to other external and internal variables. As a guideline, most of the implications for strategic decision making listed earlier in this paper are potential propositions for further descriptive study and empirical testing.
1991 (2)
Paul S. Busch and Michael J. Houston, Marketing: Strategic Richard D. Irwin, Homewood, IL (1985).
Foundations,
(3)
D. L. Kurtz and L. E. Boone, Marketing, (1981).
Dtyden Press, New York
(4)
Steuart Henderson Britt, How Weber’s Law can be applied to marketing, Business Horizons, 18 (1). 21-29, February (1975).
(5) Thomas T. Nagle, The Strategy and Tactics of Pricing, Hall, Englewood Cliffs, NJ (1987). (6)
See Ref. (4).
(7)
Mona
Prentice-
Doyle’s Consumer Network, 19 March 1990, ‘Spotty Price Inflation Brings Some Jitters’, p. 2.
(8) See Ref. (7). (9) New York Times (27 March 1990). Letter to the Editor, written by Joseph Wolf, p. A26. (10)
Philadelphia
inquirer
(25 April 1990).
Letter to Ann Landers,
p. 2-D. (11) (12)
J. Murphy, Assessing thevalue of brands, Long Range Planning, June (1990). Philip
Kotler, Marketing
implementation,
and
Management: Analysis. Planning. Control. Sixth Edition, Prentice-Hall,
Englewood Cliffs, NJ (1988).
References (1)
Steuart Henderson Britt and Victoria IM. Nelson, The marketing importance of the ‘Just Noticeable Difference’, Business Horizons, 19 (4). 38-40. August (1976).
(13)
Bruce Nash and Allan Zullo, The Mis-Fortune Books, New York (1988).
(14)
F. G. Tucker, S. M. Zivan and A. C. Camp, How to measure yourself against the best, Harvard Business Review, January /Februan/ (1987).
(15)
500,
D. Walters and D. Knee, Competitive strategies in retailing, Long December (1989).
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