FMCG firms’ margin management: consumer trade-offs among product price, quantity and quality

Abstract

Margin management is an important aspect of marketing mix decision-making. We argue that when production costs increase, product managers must eventually choose among three alternatives: raising selling prices, reducing pack quantities, or decreasing product quality. Thus, the purpose of this research is to ascertain consumer trade-off preferences – among product price, pack quantity and product quality – for different types of FMCG products. Adopting a choice-based conjoint analysis research design, the study used three samples of American consumers. It was found that for each of the three FMCG product categories tested, quality is the product attribute most favoured by the respondents. For two of the three products, pack quantity was rated the least important product attribute, suggesting that manufacturers may have a better chance of maximising profit by reducing pack quantity, rather than increasing price or lowering quality. In the context of margin management, this is, to our knowledge, the first study to examine consumers’ preferences related to the trade-off between product price, pack quantity and product quality.