How Can Your Company Resist Shrinkflation?
While shrinkflation is commonly associated with consumer goods, it also occurs in professional services.

How Can Your Company Resist Shrinkflation?

June 2023

Shrinkflation refers to a practice where the size or quantity of a product or service is reduced while its price remains the same or even increases. This can be a strategy to offset rising costs or maintain profit margins. While shrinkflation is commonly associated with consumer goods, it also occurs in professional services.

In the context of professional services, shrinkflation typically involves a reduction in the scope or quality of the service being provided, while the fees charged for the service remain unchanged or may even rise. This can be seen in various industries where service providers offer less to their clients without a corresponding decrease in price.

There are many ways shrinkflation can manifest in professional services including:

  • Reduced consultation time: Professionals, such as lawyers, consultants, or financial advisors, may shorten the duration of their client meetings or consultations. They might provide less comprehensive advice or limit the number of topics covered, effectively reducing the value or depth of the service.
  • Decreased support or follow-up: Service providers may reduce the level of ongoing support or follow-up provided to clients. This can involve fewer check-ins, limited availability for questions or concerns, or slower response times, ultimately diminishing the overall level of service received.
  • Streamlined deliverables: In some cases, professionals might reduce the complexity or thoroughness of their deliverables. For example, a market research firm might provide a condensed report with less detailed analysis, or a design agency might offer fewer design options for a project.
  • Outsourcing or automation: To cut costs, professional service firms may outsource certain tasks to lower-cost providers or leverage automation and technology to streamline their processes. While this can lead to increased efficiency, it may also result in a decrease in the personal touch or customization previously offered to clients.

So, how does a service company resist resorting to shrinkflation? Let me count the ways:

  • Transparency: Be open and honest with your clients about any changes in product sizes or quantities. Clearly communicate any adjustments and the reasons behind them. Honesty builds trust and fosters customer loyalty.
  • Value-oriented pricing: Provide more value to your clients through competitive pricing. Evaluate costs carefully and find alternative ways to manage expenses without compromising the quality or quantity of your services.
  • Innovate and differentiate: Look for innovative ways to maintain or improve service quality and value while controlling costs by using new technologies. Differentiating your service from your competitors can also help justify your fees and reduce the need for shrinkflation.
  • Customer feedback and involvement: Actively engage with your client base and listen to their opinions. Conduct surveys or seek feedback to understand their preferences, concerns, and willingness to accept changes. Involving clients in the decision-making process can help minimize backlash and make them feel valued.
  • Efficient cost management: Explore ways to optimize costs without compromising product quality. This can involve improving supply chain efficiency, negotiating better deals with suppliers, or finding cost-saving opportunities in various areas of operations. An effective cost management strategy can help maintain profit margins without resorting to shrinkflation.
  • Enhance customer experience: Invest in providing exceptional customer service and experiences. Focus on creating a positive emotional connection with your customers. A strong customer relationship can mitigate the impact of product changes and make customers more loyal to your brand.
  • Educate customers: Help customers understand the economic factors that may necessitate price adjustments. Educate them about industry trends, inflation, or rising raw material costs. Transparently sharing this information can help customers see the bigger picture and appreciate the challenges businesses face.

It's important to note that shrinkflation in professional services is not universal, and many service providers maintain high standards and continue to deliver exceptional value to their clients. However, clients must remain vigilant and ensure they are receiving the level of service they expect and pay for. Communication and clarity between service providers and clients can help mitigate the potential for shrinkflation and maintain a mutually beneficial relationship.

The strategies to resist shrinkflation may vary depending on your industry, service, and target market. It's essential to carefully assess the situation, balance the needs of your business with those of your clients, and maintain open lines of communication to build trust and loyalty.

**The writer is James Kallman is the CEO of Moores Rowland Indonesia