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?
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Hi Chris,
I read your recent article, “Raw Honesty”, and in general my observations would confirm your findings.
However, in frequent cases when I do such a breakdown of a proposal, to remodel a kitchen for example, some clients will start cherry picking categories.
“That’s too expensive, my brother can do it cheaper, your markup is too much, my neighbor bought one of those for half the cost, etc. It can go on and on.
Now we are verifying that they are typically not comparing apple to apples, the specified stove has more features than the one they are thinking of (which by the way won’t fit the opening).
Not only can this become confrontational over a number of issues, my overhead doesn’t allow for the time sent in all the research, conferencing, time frame delays, etc.
I know the clients want to be involved and we do our best to make them a “partner” in the project with lots of communication, explanation, etc.
I could go on. People really are more picky about prices these days.
I also think the internet is misleading in the promises made for a product. It fails to convey many connecting components needed, lack of code compliance, and in a lot of cases it’s just a cheap piece of junk
and I’m expected to warrantee performance after installation.
Client education takes a lot of time and energy. And then I’m wanting put a higher markup into the project somehow.
Do you have any advice for a “happy medium” to opening up all the costs for this kind of scrutiny?
I do enjoy your insights that you pass on in the newsletter.
Thanks,
Dustin
D. Cook Construction
831-899-2532 & 831-899-2808 fax
to learn more about our company and see how we earned Diamond Certified, please click here
http://www.diamondcertified.org/report/d-cook-construction
Thanks for writing, Dustin. You offer some good insights from the contractor’s point of view. I would think that most contractors build in some kind of markup or fee for extra time educating clients. I also wonder if this all averages out in the long-run. Some clients aren’t as demanding and price-sensitive as others. Also, if you spend the time on the first project for a client, you might get the next job easily, and because they now trust you, they aren’t questioning every little thing. My favorite contractor does take extra time to educate me and advises me how to make my remodeling budget stretch a little further. I’ve hired him for three large modeling jobs as a result of both his expertise and patience.