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• Article | Marketing Science | November–December 2020

  Lifting the Veil: The Benefits of Cost Transparency

  Bhavya Mohan, Ryan W. Buell and Leslie K. John

  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. Specifically, building on the psychology of disclosure and trust, we posit that cost transparency, insofar as it represents an act of sensitive disclosure, fosters trust. In turn, this heightened trust enhances consumers’ willingness to purchase from that firm. In support of this account, we present six studies, conducted in the field and in the lab. A pre-registered field experiment indicated that diners were 21.1% more likely to buy a bowl of chicken noodle soup when a sign revealing its ingredients also included the cafeteria’s costs to make it. Five subsequent online experiments replicated and extended this basic effect, providing evidence of when and why it occurs. Taken together, these studies imply that the proactive revelation of costs can improve a firm’s bottom line.

  Keywords: cost transparency; disclosure; field experiment; Cost; Trust; Consumer Behavior;

  Citation:

  Mohan, Bhavya, Ryan W. Buell, and Leslie K. John. "Lifting the Veil: The Benefits of Cost Transparency." Special Issue on Marketing Science and Field Experiments. Marketing Science 39, no. 6 (November–December 2020): 1105–1121.  View Details

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• Case | HBS Case Collection | October 2018 (Revised February 2020)

  Commonwealth Bank of Australia: Unbanklike Experimentation

  Ryan W. Buell and Leslie K. John

  Email mking@hbs.edu for a courtesy copy.
  
  In August 2017, Commonwealth Bank of Australia was looking for ways to differentiate itself from competing banks and was also trying to improve the financial well-being of its customers. One domain where this was particularly relevant was in its bank-issued credit card business, where customers routinely selected cards that although profitable for the bank could be a poor fit for customers’ needs—leading to low satisfaction scores, cancellations, and occasionally, financial distress. To that end, the company’s Behavioral Economics team had developed a provocative experiment dubbed “The Good and the Bad.” Rather than just presenting the strengths of its various credit card offerings, they proposed also promoting each credit card’s less-obvious drawbacks. Being transparent with customers might help them make better choices, but would those choices come at the expense of bank performance? Should a company choose to be in the sales prevention business?

  Keywords: transparency; experimentation; Banks and Banking; Credit Cards; Customer Focus and Relationships; Competitive Strategy; Banking Industry; Australia;

  Citation:

  Buell, Ryan W., and Leslie K. John. "Commonwealth Bank of Australia: Unbanklike Experimentation." Harvard Business School Case 619-018, October 2018. (Revised February 2020.)  View Details

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• Teaching Note | HBS Case Collection | September 2019 (Revised February 2020)

  Commonwealth Bank of Australia: Unbanklike Experimentation

  Ryan W. Buell and Leslie K. John

  Email mking@hbs.edu for a courtesy copy.
  
  This Teaching Note explains the theory of the case and teaching plan for the case: Commonwealth Bank of Australia: Unbanklike Experimentation (619-018). In August 2017, Commonwealth Bank of Australia was looking for ways to differentiate itself from competing banks and was also trying to improve the financial well-being of its customers. One domain where this was particularly relevant was in its bank-issued credit card business, where customers routinely selected cards that although profitable for the bank could be a poor fit for customers’ needs—leading to low satisfaction scores, cancellations, and occasionally, financial distress. To that end, the company’s Behavioral Economics team had developed a provocative experiment dubbed “The Good and the Bad.” Rather than just presenting the strengths of its various credit card offerings, they proposed also promoting each credit card’s less-obvious drawbacks. Being transparent with customers might help them make better choices, but would those choices come at the expense of bank performance? Should a company choose to be in the sales prevention business?

  Keywords: transparency; experimentation; Banks and Banking; Credit Cards; Customer Focus and Relationships; Competitive Strategy; Banking Industry; Australia;

  Citation:

  Buell, Ryan W., and Leslie K. John. "Commonwealth Bank of Australia: Unbanklike Experimentation." Harvard Business School Teaching Note 620-041, September 2019. (Revised February 2020.)  View Details

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