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what is price transparency

What Happens When A Small Business’ Pricing Lacks Transparency? 🪞


A startup’s success hinges significantly on building a strong customer reputation. Achieving this entails offering competitive pricing and a well-structured pricing strategy. When a business provides appealing prices and a transparent pricing structure, it not only attracts potential customers but also fosters trust and loyalty among existing ones. This trust, in turn, can lead to positive word-of-mouth, repeat business, and ultimately, long-term success in the competitive marketplace. But first, businesses must genuinely understand what is price transparency.


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Small businesses, medium-sized enterprises, and startups often grapple with limited resources and capabilities, which can hinder their ability to maintain pricing transparency. This deficiency can lead to customer dissatisfaction and potential backlash. Failing to communicate pricing clearly can result in confusion, erode trust, and deter prospective customers. Thus, it’s essential for these businesses to address these limitations and prioritise transparent pricing strategies to mitigate the risk of customer backlash and ensure long-term success.


In this article, we’ll explore what small and medium-sized businesses can do to improve their price communication and transparency. We’ll illustrate this with the case of a startup game engine company that faced backlash due to pricing transparency issues. Additionally, we’ll offer guidance on avoiding similar pitfalls, emphasising the significance of change management and pricing communication strategies.


At Value Culture, we firmly believe that businesses can enhance customer satisfaction, loyalty, and trust by implementing internal operational changes to align pricing communication with customer expectations. By the end, you’ll gain insights into leveraging pricing to cultivate a more devoted and loyal customer base.


What Is Price Information Disclosure And Transparency?


Price transparency is the practice of openly sharing pricing information with customers and stakeholders. It involves clear and accessible communication of product or service costs, enabling customers to make informed purchasing decisions. This transparency fosters trust, enhances customer satisfaction, and can lead to a competitive advantage in the market. Additionally, it promotes fairness and integrity in business dealings, contributing to a positive brand image and long-term success.


Why is price transparency important?


Effective pricing communication is crucial for a small business’s reputation. Firstly, transparent pricing builds trust with customers. When your pricing is clear and fair, it reduces the likelihood of misunderstandings or customer complaints. For instance, if you own a boutique coffee shop and clearly display your menu prices, customers will appreciate the transparency and feel more confident in their purchase decisions.


Secondly, pricing communication impacts perceived value. When you effectively communicate the value of your products or services, customers are willing to pay a premium. For example, if you’re a freelance graphic designer, explaining the unique design process and quality of work justifies higher rates and enhances your reputation as a skilled professional.


Lastly, consistent pricing communication across all channels reinforces your brand’s image. Whether it’s your website, social media, or in-store signage, a cohesive pricing strategy reinforces your brand’s reliability. Inconsistencies can erode trust. So, maintaining a consistent pricing message, like a clothing store offering the same discounts both online and offline, solidifies your reputation as a dependable business.


The Case Of Unity: What Happens When There Is Lack Of Price Transparency


Unity, founded in 2004, is a well-known game creation platform for game developers. It enables game developers to develop 2D, 3D, VR, and AR games. These games can be developed for mobile gaming, PC, and consoles. The company offers animation production solutions for the film and TV industry. The manufacturing industry can use the platform to depict the life cycle of the product in a 3D version. Architects and engineers can use the platform to visualise and review their AR and VR.


The game engine company now faces strong backlash from the developers as a direct result of the problem in its new pricing model and price communications. 


Unity’s pricing adjustments aim to bill developers based on the number of installations for games meeting certain download and income criteria. Developers don’t like the price model because it seems to overlook the various reasons a game might be installed without being bought; potentially putting developers in a challenging position where they could incur substantial fees without the corresponding revenue to cover them.


Unity assures developers that charity bundles and demos do not incur fees, and any malicious activity could be flagged by developers. However, they also clarify that installing a game on multiple devices is subject to charges; and that, for games offered through subscription services, service providers like Microsoft will be charged too.  


Despite Unity’s efforts to clarify pricing changes, developers remain skeptical about these assurances. They feel the trust has gone because Unity is too concerned with their own profit-driven motives, rather than their needs. 


This situation underscores the significant repercussions that can arise from a business omitting important customer considerations in its new pricing model. It also shows what can happen when you undercook the change management and price communication strategies underpinning any price changes.  


Benefits of Price Transparency for Small Businesses


Price transparency offers numerous benefits for small businesses. Firstly, it builds trust with customers. When businesses openly display their prices, customers feel confident that they’re getting fair deals. For instance, a local bakery that clearly lists its prices for various items fosters trust among its patrons, encouraging repeat business.


Moreover, price transparency reduces friction in the buying process. When customers know what to expect, they’re less likely to hesitate or seek alternatives. This smoothens the sales process and increases conversion rates. Consider an online clothing store that prominently displays its prices and shipping costs. Customers appreciate the transparency and are more likely to make purchases without second-guessing.


Additionally, transparent pricing minimises misunderstandings and disputes. When prices are clear from the start, customers are less likely to feel cheated or misled. This reduces the likelihood of complaints and returns, saving businesses time and resources. For example, a freelance graphic designer who provides upfront pricing for different design packages avoids disagreements with clients over costs.


Furthermore, price transparency enhances competitiveness. In today’s market, consumers have access to a wealth of information and can easily compare prices. Businesses that are upfront about their pricing stand out as trustworthy and reliable. This competitive advantage can attract new customers and retain existing ones. Take, for instance, a small hardware store that displays competitive prices for its products. Customers are more likely to choose this store over others that are less transparent about their pricing.


The benefits of price transparency for small businesses are substantial. By fostering trust, reducing friction, preventing disputes, and enhancing competitiveness, transparent pricing can contribute significantly to a business’s success and growth.


Discussion On What Price Transparency Entails During A Price Change Announcement


By implementing the following strategies and communicating effectively with your customers about pricing, small businesses and startups can cultivate strong customer relationships, leading to increased satisfaction, loyalty, and trust:


what is price transparency


1. Transparent Pricing


Transparency in pricing is the foundation of trust. When your customers know exactly what they are paying for and understand the value they receive, they are more likely to feel comfortable and satisfied with their purchase. Avoid hidden fees, and clearly outline the pricing structure. For example, if you offer a subscription-based service, provide a breakdown of the monthly costs and any potential additional charges for premium features. Transparency not only prevents unpleasant surprises but also establishes your business as honest and reliable.


2. Value-Based Pricing


Effective pricing communication involves highlighting the value that your product or service brings to the customer. Explain how your offering addresses their specific problems or fulfils their needs better than alternatives. For instance, if you run a health food store, educate your customers about the nutritional benefits of your products and how they can contribute to a healthier lifestyle. When customers understand the positive impact your offering can have on their lives, they are more likely to see the worth in what they are paying for.


3. Frequent Updates


Keep your customers informed about any changes in pricing. Transparency should extend beyond the initial purchase to include ongoing communication. Send email notifications or post updates on your website when there are changes in pricing or promotions. This gives your customers a sense of control and allows them to adjust their budgets and plans accordingly. For example, if you operate a local car wash, notify your regular customers in advance of a price increase, allowing them to plan their visits accordingly. Regular communication demonstrates respect for your customers and prevents any negative surprises.


4. Personalised Offers


Personalisation is a powerful tool in pricing communication. Tailor your pricing and discounts to match individual customer preferences and behaviours. This can be achieved by analysing customer data and segmenting your audience. For instance, e-commerce platforms often use this strategy by sending exclusive discounts to loyal customers based on their purchase history. Personalised offers show that you value your customers as individuals and are willing to reward their loyalty, fostering a deeper connection and trust.


5. Responsive Customer Service


Customer service plays a pivotal role in pricing communication. Ensure that you have a dedicated support team that can promptly address pricing inquiries and concerns. For example, if you run a small consulting firm, make sure your clients have direct access to discuss project costs or any billing-related questions. A responsive customer service team not only resolves issues quickly but also provides reassurance to customers that their concerns are taken seriously. This responsiveness builds trust and strengthens the relationship between your business and its customers.


Challenges and Risks of Price Transparency


Price transparency presents several challenges and risks for small businesses to navigate. Firstly, it may lead to increased competition. When prices are openly displayed, competitors can easily undercut each other, leading to price wars that erode profit margins. For instance, a local café that transparently lists its coffee prices may find itself pressured to lower prices in response to competitors, impacting profitability.


Moreover, price transparency can reduce flexibility in pricing. Once prices are disclosed, it becomes harder to offer discounts or negotiate deals with individual customers. This lack of flexibility can limit revenue opportunities, especially in industries where personalised pricing is common. Consider a small consulting firm that struggles to adjust prices for different clients once they’ve been made transparent to all.


Additionally, there’s a risk of backlash from customers if they perceive prices to be unfair or unjustified.


Even with transparent pricing, customers may still feel prices are too high, leading to negative reviews and reputational damage. This is particularly true in industries where pricing is subjective or variable, such as professional services. For example, a landscaping company that transparently lists its pricing may face criticism if customers feel the prices don’t align with the quality of service provided.


Furthermore, price transparency can make it challenging to introduce pricing changes or promotions. Customers may resist changes to established pricing structures, leading to resistance and potential loss of sales. This is especially problematic in industries where pricing is sensitive, such as retail. For instance, a boutique clothing store that tries to increase prices after transparently displaying lower prices may face customer backlash and decreased sales.


While price transparency offers benefits, small businesses must carefully consider and address the challenges and risks it presents. By developing strategies to mitigate competition, maintain flexibility, manage customer perceptions, and navigate pricing changes, businesses can effectively leverage price transparency for long-term success.


Implications Of Having Price Integrity Through Strategic Disclosure And Transparency


Startups and small businesses can enhance customer satisfaction, loyalty, and trust by making changes in their internal operations to ensure pricing communication aligns with customer expectations. Begin by establishing a clear and consistent pricing strategy across all departments. For instance, if marketing promotes a discount, ensure that the sales team is aware and can honour it. This coherence prevents customer disappointment caused by pricing discrepancies.


Additionally, create a responsive feedback loop within the organisation. Encourage employees to share customer feedback regarding pricing concerns or confusion. For example, if a customer reports pricing ambiguities on your website, the feedback should be channelled to the web development team for a quick resolution.


Furthermore, invest in employee training on pricing communication. Equip your staff with the knowledge and tools they need to effectively explain pricing to customers. This could be as simple as providing sales scripts that address common pricing questions or concerns. By enhancing internal operations in these ways, startups and small businesses can minimise pricing-related issues, fostering customer satisfaction, loyalty, and trust while avoiding potential backlash.


Small- and medium-sized firm employees frequently have their hands full of workloads. But, our findings show that with the right set-up and pricing plans in place, incremental earnings gains can begin to occur in less than 12 weeks. After 6 months, your teams can capture at least 1.0-3.25% more margin using better price management processes. After 9-12 months, businesses often generate between 7-11% additional margin each year as they identify more complex and previously unrealised opportunities, efficiencies, and risks.


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Bottom Line


What is price transparency? It is all about being strategic and having effective pricing communication. It is not just a transactional aspect of business; it’s a cornerstone of building trust, satisfaction, and loyalty among customers. Transparency, value-based pricing, and personalised approaches all contribute to a positive customer experience. By being clear, upfront, and responsive in pricing matters, businesses can avoid pitfalls that lead to customer backlash.


Internally, fostering collaboration and feedback loops is key. A united approach to pricing across departments, coupled with an ability to swiftly address customer concerns, can prevent pricing-related conflicts. Finally, ongoing employee training ensures that the entire team is equipped to handle pricing discussions effectively. In this way, small businesses and startups can create a pricing strategy that not only serves their bottom line but also nurtures long-lasting customer relationships built on trust and satisfaction.


For a comprehensive view of ensuring the continuous growth of your business, Download a complimentary brochure on How To Drive Pricing Strategy To Accelerate Sales & EBIT Growth.


Are you a small or medium-sized business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 8607 7001.

You can also email us at if you have any further questions.


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