Pricing
Tactic
Describe the Costs of Your Product
Customers prefer prices that are determined by material costs, rather than supply and demand.
Overview
Customers want to pay a "fair" price.
Therefore, describe your costs:
...consumers have little knowledge of a seller’s actual costs and profit margins... Therefore, sellers making the relevant cost and quality information transparent helps (Xia, Monroe, & Cox, 2004, pp. 9).
Update (2020): Researchers at Harvard tested this claim. And, indeed, it works (Mohan, Buell, & John, 2020). A retailer boosted sales in an email blast by describing the costs for their wallet (e.g., leather - $14.68, construction - $38.56, duties - $4.26).
- Mohan, B., Buell, R. W., & John, L. K. (2020). Lifting the veil: The benefits of cost transparency. Marketing Science, 39(6), 1105-1121.
- Xia, L., Monroe, K. B., & Cox, J. L. (2004). The price is unfair! A conceptual framework of price fairness perceptions. Journal of marketing, 68(4), 1-15.