Adopting Cost Transparency as a Marketing Strategy: Analytical and Experimental Exploration

Lim, Wei Shi; Mak, Vincent; Tang, Christopher S.; Kc, Raghabendra P.

doi:10.2139/ssrn.3252823

Cited by 15 publications

(16 citation statements)

References 27 publications

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“…Goli and Malmir [29] optimize the allocation of resources among individuals. Pahlevan Goli et al [30] design a sustainable closed-loop supply chain network for the aluminum industry. Goli et al [31] and Goli et al [32] study the accurate prediction of demand for dairy products (DDP).…”

Section: Metal Processingmentioning

confidence: 99%

The optimal product-line design and incentive mechanism in a supply chain with customer environmental awareness

Zhang

Kong

et al. 2023

JIMO

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<p style='text-indent:20px;'>Due to the increasing awareness of sustainable development, the manufacturer's product-line design gets wide attention. Nowadays, the traditional manufacturer that produces non-green products is considering whether to introduce upgraded green products. This paper studies the manufacturer's optimal product-line design considering the quality difference between non-green and green products. Besides, our model also investigates the difference in unit production cost, green research and development (R&D) investment, and market segmentation. The results show that, from the manufacturer's perspective, producing green products is a better choice when non-green products are of low quality. In addition, the retailer is always inclined to sell green products. Further, the consumers' preference for non-green and green products is divided. And the consumer surplus under different product-line designs is analysed. Finally, two contracts are proposed and compared to encourage the manufacturer to produce green products.</p>

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Section: Metal Processingmentioning

confidence: 99%

The optimal product-line design and incentive mechanism in a supply chain with customer environmental awareness

Zhang

Kong

et al. 2023

JIMO

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“…In particular, emerging research on transparency suggests that while disclosure of suppliers' information and supply chain standards (i.e., environmental and human labor standards) (Bateman and Bonanni 2009; Egels-Zandén et al 2015) may be more common practice, it is pricing breakdowns and production cost disclosure that are gaining the attention of academics, practitioners, and consumers alike (Mohan et al 2018). This is because disclosure of costs violates the norm of secrecy around pricing and costs in organizations (Lim et al 2018), and thus may offer a key means for differentiation and a new way to highlight 'radical' transparency (Everlane 2020;McKinsey & Company 2019). In turn, 'radical' transparency may communicate and highlight organizational or brand values, such as trust, integrity, and responsibility.…”

Section: The Role Of Authentic (Vs Hubristic) Pride In Leveraging The...mentioning

confidence: 99%

The Role of Authentic (vs. Hubristic) Pride in Leveraging the Effectiveness of Cost Transparency

2020

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In the era of consumer distrust of corporations, transparency is becoming a must rather than an option. While prior research has explored why businesses should disclose their costs and how consumers may react to such cost transparency, it is still unclear how marketers can best communicate cost transparency. The present research offers a practical examination of how and when cost transparency is effective, specifically, by examining the moderating role of authentic and hubristic pride on the effectiveness of cost transparency. Across two experimental studies, the effectiveness of cost transparency is leveraged using authentic pride, whereas hubristic pride decreases it. Further, we empirically demonstrate the mediating role of moral elevation. Overall, the results demonstrate that marketing messages that elicit authentic pride can increase the effectiveness of cost transparency. Hence, the current research highlights how marketers and brands can effectively combine specific emotional appeals with cost transparency to obtain favorable consumer evaluations.

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“…They discover an anchor product effect in quality differentiation. Lim et al (2018) examine the impact of a cost announcement strategy to identify quality differentiation for responsible and irresponsible products. The paper demonstrates that the cost announcement strategy is optimal if and only if products are of low perceived quality and relatively high unit cost, whereas if the quality differentiation is high, no firm would use the cost announcement strategy to sell responsible and irresponsible products.…”

Section: Quality-based Model In Sustainable Supply Chain Managementmentioning

confidence: 99%

“…Consumers' valuations (or willingness to pay (WTP)) for the product equal to v. We consider the fraction θ (θ ∈ [0, 1]) of consumers are socially conscious and obtain an additional homogeneous valuation r if the product is green, and the remaining consumers (1 − θ ) are non-socially conscious (Guo, Lee, and Swinney 2016). We follow the approach of Guo and Zhang (2012) and Lim et al (2018) to incorporate quality into the consumer utility function. The utility for non-socially conscious consumers…”

Section: The Modelmentioning

confidence: 99%

Product line design and quality differentiation for green and non-green products in a supply chain

Shen

Cao

2019

International Journal of Production Research

128

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Motivated by the real practices in the circular economy, this paper aims to identify optimal product line design for green and non-green products in terms of quality differentiation. We develop a price and quality driven consumer choice model in a two-echelon supply chain through using a game-theoretical approach. Our study shows that no matter how high or low the product quality difference is, when the consumers' willingness to pay (WTP) for responsibility is relatively low, a single product line strategy will be prioritised over a two-product line strategy; whereas when the consumers' WTP for responsibility is relatively high, a two-product line strategy is more desirable. Moreover, we find that enhancing product quality could increase consumer welfare and reduce environmental impact. Only when green and non-green product quality difference is large enough, designing and selling green products is beneficial to consumers, brings the slightest pressure on the environment, and generates the highest social welfare. Furthermore, we extend the model by introducing a simplified contract and find that a simplified contract is not able to increase the manufacturer's profit, but may increase the retailer's profit and consumer surplus as well as generate better performance in environmental protection and social welfare.

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Adopting Cost Transparency as a Marketing Strategy: Analytical and Experimental Exploration

Cited by 15 publications

References 27 publications

The optimal product-line design and incentive mechanism in a supply chain with customer environmental awareness

The optimal product-line design and incentive mechanism in a supply chain with customer environmental awareness

The Role of Authentic (vs. Hubristic) Pride in Leveraging the Effectiveness of Cost Transparency

Product line design and quality differentiation for green and non-green products in a supply chain

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