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Marketing Viewpoint by Ruth Winett

Has Free Restaurant Bread Disappeared?
Shrinkflation and Skimpflation

First it was inflation, and now it is shrinkflation (fewer products) and skimpflation (skimpy services). Both cause customers to feel "I am 'Getting less for my money.'" For businesses, the challenge is to protect the bottom line while preserving customer loyalty.

Shrinkflation means that a smaller array of products is available to customers, largely because of a shortage of materials and labor. Sixty percent of restaurants are reducing their menu size, according to a Datassential study. One restaurant is eliminating free bread. Others are eliminating desserts, appetizers, and "pricey proteins," such as "tuna, steak, and salmon," which can cost 30+% more than previously. Restaurants that used to offer 30 dishes may now only offer 15 dishes in order to survive. Meanwhile, the challenge is to "keep the quality, but not the quantity" as conditions may not improve for some time.

The shortages are also causing vendors to increase prices. In 86% of car sales, new car buyers pay full price or over market price, compared with 36% pre-pandemic. Some car dealers "upcharge" customers who come from a distance and are unlikely to return for service. However, charging inflated prices because of shortages, not costs, will drive customers to competitors.

Skimpflation refers to cutbacks in service—longer times on hold, fewer clerks in stores, and fewer tech support people to help you online or on the phone. Airlines have cancelled flights, and public transportation companies have cut evening and weekend service. In addition, distribution companies have stretched out delivery schedules. The result is customer dissatisfaction, reckless driving, and even air rage.

For companies that have had to cut back, the challenge is to keep customers happy by keeping the quality even if the quantity has shrunk. Some have developed new sources of vital supplies. Others have found satisfactory substitutes. Some businesses have worked hard to increase customer loyalty by providing an exceptional purchasing experience and exceptional post-sales service. Most of all, they are truthful about delays and cut backs.

"One Restaurant Battles Inflation: No Free Bread," The Wall Street Journal, 12/21/21.

'"Skimpflation': frustration as US firms skimp on service as prices rise," The Guardian, 11/6/21.

"Restaurant Menus Are Shrinking," The Wall Street Journal, 12/15/21.

"Why a Car Deal Will Be Hard to Find This Holiday Season," The Wall Street Journal, 12/14/21.

Best Wishes for a Happy and Healthy New Year

 

Actionable Business Insights

Copyright © 1/22 Ruth Winett. All rights reserved.

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