Nielsen looked at more than 100 client engagements over a five year period to develop the four following guiding principles:

• Reducing the package size: a risky move that must be balanced with a conveyance of additional auxiliary benefits such as convenience
• Increasing the package size: A preferable option, but must communicate to consumers something more than value for money
• Changing the packaging materials: a margin-enhancing move that can also leverage consumer goodwill
• Changing the ingredient formulation: a high-risk move that must not compromise consumer experience or perceived quality

At the end of the day, consumers are seeking more value for their limited money.  But value is more than price: it is about a quality product that satisfies a need.  Cost-saving innovations, when done in isolation, tend to lead to declines in perceived value and appeal.  Manufacturers need to know their consumers and communicate the auxiliary benefits gained from these innovations to ensure sales growth.

Read a full analysis of the pitfalls and rewards of the four principals described above and learn how manufacturers can innovate cost-savings in the current edition of Consumer Insight.

So are consumer packaged goods (CPG) manufacturers and retailers, who have struggled in recent months to balance consumer demand for low prices and high value with abnormally high raw materials and transportation costs.

Rather than raising prices, some food manufacturers have reduced the size of their products.  Such strategies may minimize sticker shock at the grocery store, but are unpopular with U.S. consumers.

Instead, according to Nielsen, nearly half (47%) of American consumers would prefer to buy large, economy-sized products with lower price points per serving.

In comparison, only 17% of consumers surveyed by Nielsen said they would prefer CPG manufacturers to introduce new, smaller pack sizes at lower prices.  Another 9% suggested that CPG manufacturers downsize or modestly reduce the packaging size of products, keeping the price of the product the same. 

“CPG manufacturers and retailers have few options to manage rising commodity costs beyond absorbing increased costs, passing on increases to consumers by raising prices, or covering increased costs by downsizing offerings,” Todd Hale, senior vice president, Consumer & Shopper Insights, Nielsen, noted.  “Downsizing, in particular, is not a new option — we’ve seen downsizing over the last few years in a number of categories, including ice cream, cereal, candy bars, salty snacks, and paper products.”

View the media alert.