• USA Today, Thursday, June 12, 2008 11 AM

As packaged-goods makers' costs rise, they eventually have two choices: raise prices or put less stuff in the package. While most are trying a price boost first, a growing number are shrinking the contents of their packages -- from Frito Lay's chips to Dial soap to Dreyer's ice cream.

Few understand the science of downsizing products as well as John Gourville, a marketing professor at Harvard Business School, who studied purchasing patterns for 157 cereals and concluded that consumers are far more sensitive to higher prices than to less product. "People are generally unaware they're getting less," he says -- and most who are say they'd rather get less than pay more.

The New England Consulting Group is advising many clients to make product size reductions, but also to slightly lower prices. Most consumers like smaller-portioned packages that cost less, even when they're paying more per ounce. "This isn't mathematical pricing," says CEO Gary Stibel. "It's behavioral."

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