Customers are more willing to accept price increases when they know where the money goes

Simply explaining where customers’ money goes could make them more willing to pay higher prices, according to new research from the University of Surrey. 

The study, published in the Journal of Service Research, found that businesses can significantly increase what customers are willing to pay by highlighting the parts of a service that people value most – such as skilled staff, artists or quality ingredients rather than focusing on overheads like administration or advertising. 

The research team say the findings challenge the assumption that consumers only care about the final price. Instead, when people understand what their money is funding, they are more likely to see prices as fair and voluntarily pay more. 

The team tested the idea across six different service sectors – restaurants, museums, dance workshops, guided tours, online courses and newspaper subscriptions. To reach their conclusions, researchers carried out two field experiments alongside six experimental studies involving 2,606 participants.  

Participants were presented with different pricing scenarios across a range of services and asked to make real or hypothetical payments. The team compared how different explanations of business costs affected perceptions of fairness and the prices people chose to pay.  

Across almost every setting, customers who were shown information about customer-facing costs paid significantly more than those given no explanation or information about behind-the-scenes business costs. The research also found the effect was strongest among people who would normally pay the least.  

Dr Brigitte Stangl, lead author of the study and Associate Professor at the University of Surrey, said: 

“Many businesses assume customers only want the lowest possible price. Our findings suggest something quite different. People are often willing to pay more when they understand the value they are receiving and where their money is going.” 

“It’s not about revealing confidential financial information. Simply explaining the parts of a service that directly benefit customers, such as expert staff, high-quality ingredients or talented artists, can make prices feel fairer and encourage people to pay more willingly.” 

Researchers found that messages focusing on costs customers could directly relate to consistently outperformed those highlighting general operating expenses. Explaining that customers were helping fund teachers, chefs or artists proved much more effective than mentioning administration, marketing or building costs. 

The findings suggest businesses could improve customer trust and reduce resistance to prices by being more transparent about the value behind them, particularly at a time when rising costs have made price increases increasingly difficult to communicate. 

ENDS 

Notes to editors 

• For interview with Dr Brigitte Stangl, please contact: mediarelations@surrey.ac.uk 
• The full study has been published in the Journal of Service Research