Don't Let Skimpflation Chomp Your Brand Reputation - Do This Instead

It's fitting that the United States officially entered an economic recession (two consecutive quarters of negative GDP growth) during Shark Week.

The Discovery shark marathon has been on people's radars for months, alongside gloomy reports of monetary inflation, global supply chain issues, mass layoffs and geopolitical tension. While some will quibble over the definition of "recession," the primary driver of this economic downturn is months-long, runaway inflation.

Unlike shark attacks (which happen to fewer than 75 people worldwide, annually) inflation affects everyone.

Inflation causes consumers to pay the same for less return, or pay more for the same return. Either way, it's less bang for your buck.

According to recent numbers by the Consumer Price Index (which offers only a limited gauge of inflation), the average American household is spending an extra $500 per month to buy the same goods as a year ago. Nearly two-thirds of Americans live paycheck to paycheck, so inflation has immediate consequences.

Already, consumers are changing their buying habits, trying alternative products, or learning to live without.

For business owners, inflation is a brand-defining opportunity.

When marketers talk about branding, too much of the conversation is on logos, fonts and imagery. Those qualities should reflect the true character of an organization, which is defined through adversity.

Think about any person who has publicly fallen from grace. What makes a scandal intriguing is the difference between someone's reputation and their actions. Faced with adversity, that person was exposed as a fraud.

Your business reputation is an extension of customer relationships. During times of inflation, business owners can balance the books by raising prices or reducing quality.

The difference is often short-term vs. long-term pain.

Price Increase Scenario

When fuel costs increase, gas stations and airlines pass the burden along to consumers. The price goes up and consumption goes down.

This hurts the whole supply chain, including oil companies, gas stations, airlines, airport workers, transportation and logistics companies, and thousands of other associated businesses.

However, Exxon and Delta don't offer subpar gas or jury rigged planes - they maintain quality and raise prices. Their profits decrease but reputation is unaffected. When the cost of fuel goes back down, old buying patterns return.

Quality/Quantity Decrease Scenario

The same cannot be said for businesses that cut corners.

According to a Gartner survey published this week, 62% of consumers stop buying from brands that reduce product size (“shrinkflation”) or quality (“skimpflation”) to cut costs.

Only 7% of respondents said they are OK with purchasing from brands that cut costs through deception. That's a huge risk to your brand.

Consumers have a long memory on brand quality.

Before entering the world of marketing, I paid the bills with lifeguarding. During my years of twirling a whistle on a platform chair, I often ordered takeout.

It was during this time that Domino's Pizza began its race to the bottom.

At the start of the 555 deal, Domino's Pizza was good pizza at a great price. Several years later, the price was the same and the pizza was inedible - even for lifeguards!

How bad did it get for Domino's Pizza? Bad enough that key executives publicly admitted the pizza tasted like "cardboard" and was "the worst excuse for pizza I've ever had."

This is a doomsday "skimpflation" scenario, and required Domino's Pizza to burn their brand to the ground and start over. They even dropped "Pizza" from the name and diversified into pasta and other products. This brand degradation cost tens of millions of dollars and took years to fix.

To this day, I still associate Domino's with cardboard. The lesson for business owners should be clear.

Price increases due to inflation are a market effect. Consumers can see, measure, and understand why the price of a product went up. They can make informed decisions when shopping, knowing what they get for the price.

Shrinkflation and skimpflation are an attempt to deceive, reflecting poor brand character. Consumers may not notice right away, but their satisfaction will erode over time. When a brand stops delivering a quality product, consumers don't come back.

How to protect yourself from the skimpflation temptation.

Consumers know by now that everything costs more. According to numbers from the American Psychiatric Association, 87% of Americans are feeling anxious about inflation, an 8% increase since June.

The best approach to raising prices is to value your relationship with customers and just be honest.

In 2021, restaurants struggled to hire wait staff and cooks, leading to longer wait times and shorter hours. Many restaurants embraced honesty, posting signs asking patrons to understand and be patient when ordering. Consumers understood, with national restaurant sales returning to near pre-pandemic levels.

Businesses that are forced to raise prices on goods and services due to inflation should proactively and empathetically communicate with customers:

1. After careful consideration, prices are increasing;
2. Higher prices allow the business to stay open and support our staff;
3. Prices will return to normal as soon as possible;
4. The quality of our product/service will not diminish.

Remember our friends at Domino's? They turned cardboard into a resurgent business model, fueled by radical customer transparency.

"The old days of trying to spin things simply don't work anymore," then-President?Patrick Doyle told the Associated Press in 2010. "Great brands going forward are going to have a level of honesty and transparency that hasn't been seen before."

No spin. No shrinkflation. No skimpflation. No cutting corners.

This strategy is as relevant for your business in 2022 as it was for "the worst excuse for pizza" in 2010. Your customers may cut back right now, but they'll remember that you trusted them with the truth when they come back later.

Don't throw your business to the sharks - choose quality and quantity over cheap tricks.

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