Given the economic slowdown we are facing today, it is very common for our suppliers to increase their prices in order to stay afloat. In this situation, most entrepreneurs are compelled to pass this cost to their customers by increasing the selling price.

But do you know that there is a way to maintain your selling price despite the increase in your cost? It is called downsizing or reducing the quantity of the product.

Although this is not a common strategy even among big companies, an interesting study by Harvard University shows that consumers are more sensitive to price increase over quantity decrease. If the ingredients of Starbucks’ Mocha Frappuccino have increased for instance, it is better to maintain the current $4.60 price of venti size but reduce the quantity from 24 fl. Oz to about 22.

The downside of downsizing is the perception that you are cheating on your customers. Knowing this, you should inform your valued customers about this plan to avoid any misunderstanding.

On the other hand, you might also be interested to know why Drew’s Marketing Minute believes dropping your price to keep a customer is never a good strategy.