Raw Honesty: What Consumers Want in Pricing
A few weeks ago, when I called an appliance repair service to fix a problem with my refrigerator, the technician was extremely clear about the cost of his services. The minimum for a house call was $89, and after that, he billed in 15-minute increments for his labor. He would not be charging for his travel time. However, the parts were extra, and at that point he didn’t know if any would be needed to fix a freezer with a layer of ice building up underneath the ice cube trays. I appreciated his direct approach and transparency. Upon arrival, he quickly diagnosed the problem and made the tricky repair. The total bill of $170 didn’t surprise me, and I was thrilled to have the fridge working in time for the holidays.
In the retail sector, I’ve noticed how a few companies (like online retailer Everlane) are taking a novel approach and disclosing variable production costs for individual products. Everlane sometimes posts information and images about their suppliers, too. Sharing cost breakdowns is a form of “intimate disclosure” that’s well-received by consumers, according to a Harvard Business School (HBS) paper titled “Lifting the Veil: The Benefits of Cost Transparency,” by Bhavya Mohan, Ryan Buell and Leslie John. They say transparency only backfires when cost disclosures lead to the perception that prices are out of sync with the norm, so consumers have the perception of being ripped off.
I believe—and research backs this up—that savvy consumers appreciate having costs explained to them. Transparency increases our attraction to a brand and makes us trust it more. In fact, the HBS researchers found that when a business reveals everything that goes into a product or service, we tend to value the product more. I’m all for raw honesty. How about you?