Explaining what it costs to produce a product can potentially increase its sales

As a buyer one always wonders the reason behind pricing. Why does a product cost x? What goes behind this x? What are the costs for making the product and so on?

Research by  Bhavya Mohan, Ryan Buell, and Leslie John shows that if a company explains the costs of various things on the price tags, people are more favorable towards buying the same.

When a company sets a price for a product, shoppers typically have no idea what it costs to produce that item. But it turns out that consumers reward efforts to lay out these figures—to deconstruct the price tag.

In fact, new research shows that when a company selling T-shirts, for example, itemizes what it spends on cotton, cutting, sewing, dyeing, finishing, and transporting each shirt, consumers become more attracted to the brand and more likely to purchase.

“By unpacking the costs, you have the opportunity to explain everything you did for the customer in putting that product or service together,” saysBhavya Mohan, a Harvard Business School doctoral student in marketing. “When firms communicate the effort that went into making a good, consumers tend to value the product more.”

Quite intuitive..

 

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