Cost transparency may be a valuable factor for boosting business sales

The study found that cost transparency among firms could improve sales by up to 20 percent when done so voluntarily.

1 min read

New research in the INFORMS journal Marketing Science found that cost transparency among firms could improve sales by up to 20 percent when done so voluntarily.

The results were reached by the initiation of six experiments, one of which involved dining services and the other an online retailer.

Cost transparency was described as the disclosure of sensitive information to consumers on the costs of producing a product.

In the study, researchers noted that the effects of cost transparency are mainly attributed to the psychology of trust between the consumer and the business.

In their assessment of the experiments, researchers determined that a proactive revelation of costs could boost a consumers’ purchase interest by more than 20 percent, despite the cost of the product.

“Cost transparency represents an act of intimate disclosure and fosters trust. Heightened trust enhances consumers’ willingness to purchase from a business,” said Ryan Buell, co-author of the study.

“Even if prices aren’t exactly what the customer might envision, the customer appreciates the act of cost disclosure,” Bhavya Mohan, a researcher at the University of San Francisco, added.

“Firms do not typically disclose information on their costs to produce a good to consumers. However, we provide evidence of when and why doing so can increase consumers’ purchase interest,” Buell and his colleagues concluded.

Image courtesy of Lutine