Learning from Japan’s "Stealth Price Increases": A Reflection on the Importance of Pricing Strategy

Lately, you might have come across headlines that blend Japanese and English, such as "ステルス値上げ" (stealth price increases). In English, this phenomenon is often referred to as "shrinkflation." Let’s take a moment to reflect on this quietly growing trend in Japan from the perspective of pricing strategy—an essential aspect for those of us working in marketing.

In Japan, "ステルス値上げ" (stealth price increases) has become widespread. This refers to the practice of keeping product prices the same while reducing the quantity or size, effectively raising the price. This shift is driven by several factors, including the rising cost of raw materials due to a weak yen, labor shortages, and the country’s transition from deflation to inflation.

From an economic standpoint, a weak yen may reduce the cost of imports but could also hinder export competitiveness. Additionally, the rising cost of raw materials leads to cost-push inflation. Faced with price-sensitive consumers, companies are finding it challenging to raise prices directly, so they are shrinking product sizes instead to absorb these cost increases.

During Japan's deflationary era, businesses were cautious with pricing, always mindful of consumers’ sensitivity to price increases. Now, however, companies must shift from "defensive" pricing to exploring more strategic pricing models.

On October 1st, many products and services, including postal rates, will see price hikes. For example, the cost of sending a standard letter will increase from 84 yen to 110 yen, while the price of a postcard will rise from 63 yen to 85 yen. These increases are largely driven by declining demand for postal services, thanks to the internet and social media, and rising logistics costs.

In marketing, pricing is a crucial process for determining the value of products and services, forming an integral part of any business strategy. There are various pricing models, including cost-based, demand-based, competition-based, value-based, and dynamic pricing. The choice of strategy depends on market conditions, customer behavior, and competitive factors.

Rather than simply criticizing practices like "stealth price increases" or "opportunistic price hikes," we as marketers should delve deeper into pricing as a core component of marketing strategy.

Appropriate pricing is not just about covering costs—it’s also essential for building trust with customers and enhancing brand value. Let’s use this opportunity to deepen our understanding and apply these insights to our work.

*The header background image was captured from the website ofJapan Post Holdings