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Deconstructing the Price Tag | HBS Working Knowledge

Shoppers have greater affinity for brands that advertise how much
it costs to make a product.

A new study by Bhavya Mohan, Ryan Buell, and Leslie John has an important conclusion for retailers: Explaining what it costs to produce a product can potentially increase its sales.

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,” says Bhavya 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.”

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Deconstructing the Price Tag.

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