What’s the true value of a brand? For some, it is the authenticity of its individually priced pieces.
Take a black-and-white jacquard skirt at the European company Honest By. The skirt’s fabric cost the company $56. The thread came to about 57 cents, and the care tag, 37 cents. All in, the skirt cost $172 to produce; yet the figure on the price tag is three times that — $516.
What makes up the difference? The bones of the brand itself: “staff, research, design, utility costs, transportation, office supplies, rent, insurance, communications, intellectual property rights, maintenance costs, legal, accounting and marketing costs,” according to Honest By’s website, which breaks down every expense of the items it sells.
It’s called price transparency, and it is one of the latest trends to cater to younger, more socially conscious shoppers. Some retail observers believe it will give merchants, largely online players, a competitive edge over major brands.
But the target market itself presents a challenge for merchants such as Honest By and the baggage maker Oliver Cabell, both recently featured in The New York Times. More truth-seeking consumers may view price transparency with suspicion — as a marketing strategy that is ostensible in and of itself.
Put another way, not all shoppers are convinced the end product is worth the sum of its individually priced parts.
$249 For A $104 Bag
Among the goals of transparent pricing is education — if shoppers understand the reasons for a product markup they will be willing to cover it.
This is an astute effort in a time when nearly year-round retail markdowns have shoppers questioning the real price of any products on the shelf. Take Oliver Cabell. An Italian-made backpack on its website costs $104 to put together, including quality control and duties expenses, but it sells for $240.
The $136 difference is explained, in part, by Oliver Cabell’s partnerships with “the best factories” and artisans, which the company’s representatives visit often. As it states: “This hands-on approach is the most effective way to ensure a factory’s integrity.”
Honest By applies a more Earth-responsible mission to its philosophy, described on its website, in part, as: “Our customers should be able to make the most informed choices possible” and “All of our products should be manufactured in a way that respects life.”
The apparel merchant Everlane offers a slightly different spin on transparency by inviting shoppers to choose the prices they pay. Call up a silk collarless shirt, and Everlane presents three prices. If the shopper chooses the lowest, 10% of that sum will go toward product development and shipping to the warehouse. With the middle price, 20% is earmarked for development, shipping and helping to pay the Everlane team.
At the highest end, 30% of the sum goes toward development, shipping, the team and new product creation.
Make It Worth It: Three Ways
Still, regardless of the model, not all shoppers are sold on the itemization that transparent pricing requires, especially those who can’t afford more expensive products. As The New York Times story put it, referring to Oliver Cabell, “One of his biggest challenges … has been convincing shoppers that the goods he sells are worth the price, particularly when all that people have to go on are the pictures on his website.”
How do retailers convince shoppers they are getting what they pay for? Based on a younger consumer’s proclivity for authenticity, transparency and a satisfying experience, here are a few suggestions.
- Invite participation: Trust is essential to young consumers, and a direct way to get it is by asking them to participate in an organization’s operations. This process, of shoppers collaborating with brands, is often referred to as the Participation Economy. If shoppers take part in the design of a new product, say, they will feel more invested in the brand. This dedication could transform into more purchases as well as positive word of mouth. Such offers can be tailored to specific shopper groups — some to members who shop a lot, for example, and others to those who have not purchased in a while.
- Tell a better story: Retailers can put a face on their brand by sharing the first-person narratives of factory employees and/or artisans. Humanization displays intangible but highly relatable values of a product, namely that the organization provides people with fulfilling livelihoods. Such motivation taps into a charitable area of the mind — shoppers might buy something in hopes of benefiting that employee and even the economy, which makes them feel good about their purchase and about themselves.
- Perk it up: Even if a brand is saving the polar bears, at some point, the expense matters. Nearly 80% of millennials are influenced by price, according to a recent report by CouponFollow, which is detailed in FORBES. Everlane addresses this reality with its three-tiered approach, which gives shoppers the choice of what to pay for a product and what should go to the company. If a shopper is priced out of a brand, she won’t linger. If she is given a choice, or an introductory offer, she will likely spend a few moments considering a purchase. The fact that the product is responsibly made is an added nudge.
Sometimes, convincing shoppers that they are getting what they pay for requires more than basic transparency. Ostensibly, it should be enough, but the first rule of a successful brand is that it really knows its customer. And that customer can be hard to convince.