Cost Transparency:
How Consumers’ Expectations About Transparent Cost
Attributes Influence Brand Attitude
by
Yoram Wegscheider
Cost Transparency:
How Consumers’ Expectations About Transparent Cost Attributes Influence Brand Attitude
Yoram Wegscheider - S2668467 Nieuwe Kerkhof 11a, 9712PV, Groningen
y.wegscheider@student.rug.nl
University of Groningen Faculty of Economics and Business Master Thesis for M. Sc. Marketing Management
Table of Content
1. Introduction 3
2. Theoretical Framework 4
2.1. Positive Effect of Cost Transparency 4 2.2. Rise of Ethical Consumption 6 2.3. Expectations From People With Ethical Values 7 2.4. Response From People With Ethical Values 8
2.5. Living Wage 11
3. Pilot Test 12
3.1. Participants 13
3.2. Materials 13
3.3. Procedure 14
3.4. Results and Conclusion 14
4. Experiment 15
4.1. Participants 15
4.2. Materials 16
4.3. Procedure 18
4.4. Results and Conclusion 20
Abstract
Cost transparency and ethical consumption are terms that have gained a lot of attention in the retail industry in the past years. Especially for the clothing industry, an industry that affects most consumers, ethical choices are on the rise. Past research often claims that cost transparency is beneficial for the retail world, as it increases brand attitude and sales. However, as many findings highlight the positive sides of cost transparency, this work wants to stress that transparency does not always meet the desired expectations of the consumer. This in turn can have negative outcomes on the brand attitude. The present paper discusses the effect of cost transparency on brand attitude when consumers are faced with realistic pricing and have expectations about the outcome of the underlying cost attribute. For this research, I have operationalized consumers’ expectations with ethical values. To test whether ethical values have a moderating effect on the relationship between cost transparency and brand attitude, two tests were used. A pilot test was used to identify whether people with higher ethical values have higher expectations about the ethical cost attribute. In the main experiment, which was held independently from the pilot test, two response groups were then randomly assigned to one of two conditions: non-transparent versus transparent. The results showed that brand attitude is lower when the consumer is confronted with the transparent information. Ethical values, however, did not play a significant role in the outcome. The main effect was mainly visible between the transparent and non-transparent condition. Therefore, transparency in general had a less favorable effect on brand attitude due to a mismatch between expectations and reality.
1. Introduction
The world has been shrinking due to globalization by means of transportation and technology (Kirsch, 1995) and is often even referred to as a global village (Dalglish, 2006). Due to this shrinking world, trade between countries is greater and faster than ever. One big industry affected by these advances is the clothing industry. Worldwide approximately 60 to 75 million workers are employed in the textile industry and world garment exports were about 567 billion EUR in 2014 (Stotz & Kane, 2014).
These numbers however come with a downside. Due to the huge demand for fast and cheap items, the rapid increase in trade led to an increasing exploitation of people in developing countries to further cut costs for production (Yimprasert & Hveem, 2005). The fast fashion trend has eventually led to the creation of so-called sweatshops (Mayer, 2007). Sweatshops are defined by low wages, high working hours and inhumane working conditions (Ferguso & Ostmann, 2018). Garment workers in the textile industry are often paid way below the living wage, which is a threshold that is calculated to determine the amount a human being would need to support a decent standard of living in each country (Sessoms, 2016).
After the collapse of a garment production site, the Rana Plaza building in Bangladesh, which had a death toll of more than a thousand workers, consumers in the Western world were confronted with common practices and conditions in the garment industry. Thus, a new trend toward a more ethical consumption has emerged (Hancock, 2017).
Since then, ethical clothing items have seen a steady growth in demand, as consumers are informed about the negative impact of today’s consumption habits on the environment and people (Carrigan, Szmigin, & Wright, 2004; De Devitiis, D’Alessio, & Maietta, 2008). Consumers, therefore, more often demand information about the origin and production of the products (Jenks, 2017). Hence, with the rise of ethical consumption, there is also a steady rise in transparency. Consumers now want to know where, how and by whom the clothing items were made (Jenks, 2017).
towards the brand (Simintiras, Dwivedi, Kaushik & Rana, 2015; Carter & Curry, 2010; Mohan, Buell & John, 2014).
The aim of this research is to find out whether the positive effect of cost transparency on brand attitude is universal or whether this effect diminishes in some cases. As especially consumers with ethical values are often willfully ignorant when it comes to ethical attribute information (Ehrich & Irwin, 2005), a closer look at these consumers will be taken, as it can be assumed that these consumers have higher expectations about such cost attributes. Consequently, if people have higher expectations about certain cost attributes, this could have less favorable outcomes on the relationship between cost transparency and brand attitude if these expectations are not met in reality.
Accordingly, this paper will build on previous research on cost transparency. This research will be conducted by adding the condition of overly high expectations by operationalizing these with consumer’s ethical values. The results will indicate how expectations impact the effect of cost transparency on brand attitude. This paper contributes to the topic of cost transparency by adding an important aspect that might have a crucial impact on businesses who consider cost transparency for future practices.
2. Theoretical Framework
2.1. Positive Effect of Cost Transparency
to distinguish products. This is something consumers also have realized in the past years, hence the demand for more transparency has increased dramatically (Karapetian, 2017).
Cost transparency in the retail world is a topic that has been discussed in several studies with the overall claim that it has a positive effect on both business and consumer side (Simintiras et al., 2015; Mohan et al., 2014; Carter & Curry, 2010). It is often stated that consumers show positive responses when information about costs is made available (Gerdeman, 2014; Mohan et al., 2014). The explanation for this effect is the creation of trust from the consumer toward the brand. This phenomenon was also observed and described by Mohan et al. (2014) in a natural experiment. In this experiment, the researchers had the opportunity to analyze a marketing mistake of a company that sold wallets. This company tried to boost sales of a wallet model and decided to be transparent about the cost structure for this particular model. The initial plan was to implement transparency for all available color variations, however, a mistake was made, and the product information of two of the color variations did not include the transparent cost structure. The results of the sales showed that the models that did not display the cost structure saw far fewer sales than the wallets that did. This effect was described as ‘’intimate disclosure’’, which entails that people are more attracted towards brands that disclose information that is usually kept as a tight secret (Mohan et al., 2014). Simintras et al. (2015) state, that the effect of transparency also has a positive effect on the consumers’ feeling of free choice. The researchers claim that consumers seek for products that satisfy their personal gratification. This is the ultimate goal and can only be achieved by feeling price fairness and satisfaction, which is made possible through the use of transparency and thus can increase brand attitude.
Thus, according to these past findings, it can be argued that consumers show positive responses towards transparency, which in turn can have a positive effect on brand attitude.
H1: Cost transparency increases brand attitude
2.2. Rise of Ethical Consumption
Furthermore, people have become more conscious about their purchasing behavior and have realized that their choices make an impact on the people and the environment that are involved in the production process. Accordingly, there is a general consent that consumers tend to have an overall better attitude and trustworthiness towards a firm when the firm shows ethical initiatives (Folkes & Michaels, 1999). As a consequence, ethical products are on the rise.
2.3. Expectations From People With Ethical Values
As people with ethical values are more involved when it comes to information about ethical attributes, one would argue that especially these consumers should have realistic expectations. Ironically however, I argue that ethical consumers are the ones having overly high expectations when it comes to ethical information. These expectations will eventually not match with reality. Reason for this effect is that consumers are often confused about pricing details as they lack the necessary information about ethical aspects (Carrigan & Attalla, 2001). The individual then creates own ideas about ethical issues which are often burdened by false beliefs and inaccurate predictions (Jefferson, Bortolotti & Kuzmanovic, 2017). Consequently, false beliefs and inaccurate predictions might result in a misrepresentation of how certain things are or are going to be. Eventually, people make assumptions about the underlying issue, which can result in overly high expectations that are built in the consumer’s mind, without having any hard evidence to back this assumption (Jefferson et al., 2017). Past findings have also pointed out that ethical consumers often only selectively remember and use ethical information during their purchase making. This phenomenon can be caused by a willfully ignorant memory effect, which indicates that ethical consumers only use ethical information that does not affect their mood in a negative way (Reczek, Irwin, Zane, & Ehrich, 2018). Consumers are then rather biased in the way they process information. This leads them to expect amounts for ethical attributes that are not realistic. Ethical consumers thus tend to make assumptions that they feel are acceptable and favor their own subjectively desirable conclusions (Hughes & Zaki, 2015). As a result, the information stored about these attributes will then be higher than it is in reality. This effect is often referred to as wishful thinking, which entails that consumers match their expectations with desirable beliefs about the underlying issue (Bar-Hillel & Budescu, 1995).
Considering the theoretical background, I hypothesize that consumers with higher ethical values may have overly high expectations that do not match reality. In this research case, I argue that consumers with higher ethical values will expect the garment workers to earn more money than the proposed living wage that is demanded by social activists in order provide a decent living in Bangladesh.
H2: Ethical people have overly high expectations about ethical cost attributes
2.4. Response From People With Ethical Values
According to Claeys, Swinnen & Abeele (1995) values are the main driver for consumption choices and Schwartz & Bilsky (1987) state that values guide human behavior. Baron & Spranca (1997) argue that so-called protected values are values that result in moral obligations. Intuitively it could therefore be argued that people with higher ethical values prefer products with ethical attributes, and even more products that are transparent about such attributes. Keeping this in mind, it could be assumed that the consumption choices of people with ethical values go towards items that correspond with their own values, as this would support their self-image (Gutman, 1982). Aligning individual values with the values attached to a product is termed the “self-image congruity” (Sirgy, 1982). The self-image therefore acts as a cognitive structure of an individual and is linked to behaviors and feelings (Sirgy, 1982). Consequently, consumers’ consumption choices can result from the self-image (Zinkham & Hong, 1991). The self-image congruity in turn can be connected to the individual’s intuition that a product is in line with one’s own values. Intuition is labeled as a ‘’gut feeling’’ and acts as a system to tell the consumer what is right and wrong. Intuition comes into play when the time to make an appropriate decision is only limited and can result in feelings, signals or interpretations to better understand the issue at hand (Malewska, 2018).
appreciated by consumers with ethical values. These consumers should be the ones showing positive responses towards products with ethical and transparent information that proves the ethical claim of the product.
Therefore, intuitively it could be argued that consumers with ethical values should favor companies that are transparent about their ethical practices and costs. However, as was assumed in the previous abstract, especially those consumers with higher ethical values might be the ones having overly high expectations when it comes to ethical cost attributes. This raises the question about how much the consumer really knows about the underlying issue of transparent cost attributes. Keeping this in mind, does transparency still result in a positive effect on brand attitude when the consumer has certain expectations about the ethical cost attribute?
Considering that people with higher ethical values have overly high expectations, this leads me to the assumption that these expectations can have a negative effect on brand attitude. Ironically, ethical consumers might not see the ethical information aligned with their own values and their self-image, as the transparent cost attribute is not as high as if they would have expected it to be. As mentioned previously, consumers’ decisions about brand choices and products are often aligned with their self-image (Schiffman & Kanuk, 2000).
Furthermore, past researchers have found that cost transparency also seems to have a negative impact when consumers feel betrayed (Mohan et al., 2014). The findings indicate that this might be the case, for example, when the margin for the company itself is way bigger than the costs of production or when the consumer is able to compare the costs and prices to another brand and realizes that these differ significantly from each other. Based on the assumption that consumers with higher ethical values have higher expectations when it comes to ethical attributes, companies then face the risk that these consumers feel betrayed. This might be the case, once the consumer realizes that the ethical cost attribute only makes up a marginal fraction of the total costs of the product itself.
This ultimately might lead the ethical consumers to be disappointed about the information at hand (Xia, Monroe, & Cox, 2004). Disappointment is a result of a mismatch between an individual’s expectation and the actual outcome of that situation (Bell, 1985). The effect of disappointment might be enlarged through higher ethical values, because a higher expectation often results in a higher emotional reaction (Tzieropoulos, Grave de Peralta, Bossaerts, & Gonzalez Andino, 2011). Consequently, this creates an even stronger response towards the transparent information (Rajeev & Bhattacharyya, 2007).
Considering the theoretical background, I hypothesize that the positive effect of cost transparency will diminish for people with higher ethical values, as they have overly high expectations about the ethical cost attribute that do not match with reality. Consequently, these consumers will be dissatisfied about the actual outcome of cost transparency, which will have a negative effect on brand attitude.
Figure A2 Conceptual Model
2.5. Living Wage
For this research, ‘’salaries paid to garment workers’’ for a Bangladeshi garment worker served as the ethical cost attribute and was calculated based on the living wage in Bangladesh. Living wages are crucial to increase living standards (cleanclothes.org, ethicaltrade.org, fairwear.org) and therefore are a threshold for the ethical attribute. The living wage is often even referred to as a human right, as they are high enough to meet basic needs, for workers and their families (Hirsch & Valadez, 2017).
5,300 Taka per month, which is about €56. These low wages allow the country to have a competitive advantage over other countries in attracting garment manufacturing, however, this also means that most workers are paid wages that are not humane (Khan, Anker, Anker, & Barge, 2016). The required amount for a living wage is between 17,350 Taka, which is about €189 (Khan et al., 2016) and 25,600 Taka per month, which is about €276 (Adnan, 2018).
To determine the amount of money a Bangladeshi garment worker should earn per shirt, in order to correspond to the living wage, this value had to be calculated. In recent papers, there is no such information available yet. There are different calculations for living wages in Bangladesh, and they differ depending on the size of the family and the location of the worker. For the calculation of this wage per shirt, I considered the living wage of Adnan (2018), which is about €276. This wage takes into consideration all living necessities for a family of 5. The amount was displayed in $314 and was therefore exchanged to €EUR. The amount was then used in combination with the productivity of a garment worker in Bangladesh:
A garment worker in Bangladesh has a production median of 16 shirts per day (Sarkar, 2014). With 9 daily working hours, the worker can produce 1.8 shirts per hour (16 shirts / 9 hours). Assuming that the worker will work 6 days a week and only gets paid for the days he is working, the garment worker works 24 days or 216 hours out of the 30 days per month. Dividing the €276 by 24 working days, the worker should earn €11.5 a day (€276 per month / 24 working days). Subsequently, by dividing the suggested daily wage of €11.5 by the 9 working hours, the worker should earn €1.28 per hour (€11.5 per day / 9 hours per day). The garment worker can make 1.8 shirts per hour and thus the hourly wage should be divided by 1.8 (€1.28 per hour / 1.8 shirts per hour). This equals an amount of €0.71 for every shirt produced. This amount was then used as the ethical cost attribute for the pilot test and the actual experiment.
3. Pilot Test
experiment, as it allowed me to determine whether expectations can be operationalized with ethical values. This was done by testing respondents’ ethical values first, followed by the question ‘’An ethical clothing company pays €0.71 to its garment workers in Bangladesh for each shirt sold. The monthly wage of this garment worker is €276 per month. The shirt costs €49.95 in retail. Would you have expected the company to pay more or less to the garment worker?’’.
3.1. Participants
The pilot test was distributed randomly to people in the Dutch city of Groningen with the use of a QR code and a website link (Figure A1). The distribution of the pilot test was kept locally in order to avoid that participants of the pilot test would participate in the actual experiment as well. For the pilot test, a total of 70 people have participated of which 16 did not fill in the survey completely, resulting in a total of 54 responses (77%). 48.1% of the respondents were male and 51.9% were female. More than 50% of the respondents were in the age range between 22 and 27. The minimum age was 16 and the maximum age was 61.
3.2. Materials
In order to determine respondents’ ethical values, I have used the corrected version of the questionnaire of De Groot & Steg (2010). This questionnaire consists of 13 questions each on a 9 point Likert scale. The questions are based on three values with the corresponding items:
altruistic - equality, a world of peace, social justice, being helpful (M = 5.5, SD = 1.0), egoistic -
3.3. Procedure
Sixteen respondents did not fill in the questions determining their ethical values properly. This lead me to the assumption that the questions were either too difficult to understand or the number of questions was too high. The frequency analysis showed that there was one extreme value in the remaining responses. This particular outlier responded with a value 1 (opposed to my
values) for question 5 (a world at peace). The other responses of this participant showed no
extreme values and thus the lowest value of all other responses for question 5 (value 6) was used for this outlier. Next, the biospheric (M = 4.9, SD = 1.2) and altruistic (M = 5.4, SD = 1.0) values were transformed into one new variable. This allowed me to measure individual differences to the extent that people value ethics. The egoistic values have not been included in the new variable, as I was mainly interested in how higher ethical values affect expectations. All biospheric and altruistic items included in the analysis showed positive correlations with a Cronbach’s Alpha of 0.858 (M = 5.2, SD = 0.9). Therefore all 8 questions measuring altruistic and biospheric values could be transformed into the new combined variable EthicalValues. With the combination of these questions, I was able to test whether people with higher ethical values expect more than €0.71 as a garment worker’s salary. Finally, a linear regression analysis was performed with the variables Pilot and EthicalValues in order to predict expectations about garment workers’ salaries based on ethical values.
3.4. Results and Conclusion
ranging from way less to way more (top to bottom). With a mean of 3.9 and a standard deviation of 1.0, it can be concluded that the majority would have expected higher outcomes regarding the ethical cost attribute. As the results supported my hypothesis, I can continue with the actual experiment by operationalizing expectations with ethical values. The concurrent experiment will then allow me to find out whether ethical values have a moderating effect on the relationship between cost transparency and brand attitude.
Figure A3 Responses of the Pilot Question
I can reject the null hypothesis and accept ‘’H2: Ethical people have overly high expectations about ethical cost attributes’’
4. Experiment
With the experiment of this research, I tested the consequence of my findings from the pilot test on the relationship between cost transparency and brand attitude. The experiment aimed to find out whether transparency can have a negative effect on brand attitude (revised H1), when people have high ethical values and thus higher expectations about such attributes (H3).
4.1. Participants
which 26 did not fill in the survey completely, resulting in a total of 107 participants (80%). Of the remaining participants 42.6% were male and 57.4% female. More than 50% of the respondents were between the age of 22 and 25. The minimum age was 16 and the maximum age was 71.
4.2. Materials
For the experiment as well, I have used the corrected version of the questionnaire of De Groot & Steg (2010) with 13 questions on a 9 point Likert scale, in order to determine the ethical values of each respondent. Again, the values with the concurrent items are as follows: altruistic - equality, a world of peace, social justice, being helpful (M = 5.5, SD = 1.0), egoistic - social power, wealth, authority, being influential, ambition (M = 2.6, SD = 1.2) and biospheric - preventing pollution, respecting the earth, unity with nature and protecting the environment (M = 4.1, SD = 1.4).
Figure A4 Non-Transparent Advertisement
The second advertisement showed the same information, however this time additional information about the explicit garment worker’s salary was visible. Hence, the information ‘’Our garment worker has earned €0.71 with this shirt’’ was added to the advertisement as a transparent condition. The additional information allowed the consumer to be informed about the underlying meaning of the ethical claim. This advertisement can be seen in figure A5.
Figure A5 Transparent Advertisement
These two advertisements served as the two conditions respondents could randomly get assigned to.
Finally, I used the brand attitude scale from Spears and Singh (2004) in order to determine the respondents’ brand attitude towards the company PLAIN. With this scale, participants were asked to rate the company on 5 dimensions on a bipolar 7 point Likert scale:
Unappealing-Appealing, Bad-Good, Unpleasant-Pleasant, Unfavorable-Favorable, Unlikeable-Likeable (M =
4.4, SD = 1.5).
4.3. Procedure
Of the 26 respondents that were not able to be included in the analysis, 17 quit randomly. There was no specific indication of why these respondents did not continue with the questionnaire. Another respondent was deleted due to this respondent having extreme values for 7 of the 8 questions that represent altruistic and biospheric values. This raised the question of whether this particular participant answered the questions in an extreme and opposite manner intentionally. Thus, this respondent was not included in the further analysis. After grouping and sorting the two conditions transparent vs. non-transparent, I realized that 8 other respondents did not fill in the questions on brand attitude. 4 of these missing respondents did not click on continue and probably were not aware that the survey still continues after the advertisement was displayed for 10 seconds. The other 4 respondents left after seeing the advertisement and clicking on the continue button. Consequently, the 8 incomplete respondents were not included in the further analysis. Another participant showed extreme values for 3 of the 8 questions related to altruistic and biospheric attributes but not for the other questions. Therefore, the overall average of the responses of the other respondents was taken for these 3 extreme values.
After all data had been collected, again the biospheric (M = 5.3, SD = 0.9) and altruistic (M = 5.7, SD = 0.8) values were tested for correlations with a reliability analysis. All items included in the analysis showed positive correlations and the output indicated a Cronbach’s Alpha of 0.804 (M = 5.5, SD = 0.8). Again, the 8 questions measuring altruistic and biospheric values met the criteria to be transformed into the new combined variable EthicalValues. Furthermore, the variable Group, which served as the variable that indicated the two conditions group 0: non-transparent (M = 5.4, SD = 0.9) and group 1: transparent (M = 5.6, SD = 0.6) was computed.
Subsequently, the respondent was asked to rate the brand PLAIN on the 5 dimensions
Unappealing-Appealing, Bad-Good, Unpleasant-Pleasant, Unfavorable-Favorable, Unlikeable-Likeable. The picture of the respective advertisement was still visible during this step in order to
allow the respondent to include all information about the advertisement in the decision making. To test whether the 5 questions that were intended to measure brand attitude could be used in one variable, I then conducted a reliability analysis for these questions. The questions were all positively correlated and the results indicated a Cronbach’s Alpha of 0.947 (M = 4.4, SD = 1.5). Hence, these questions met the criteria to be computed into the new variable
BrandAttitude. To test the hypothesis that transparency has an effect on brand attitude, and more
Table 1 Descriptives and Correlations Experiment n M SD 1 2 1 Brand Attitude 107 4.39 1.48 2 Ethical Values 107 5.47 0.786 -.005 3 Transparency 107 0.51 0.50 -.336** .113 ** p < .001
4.4. Results and Conclusion
As can be seen in table 2, the results of the direct effects of the variables transparency and ethical values on brand attitude accounted for a significant amount of variance in brand attitude, R² = .114, F(2, 104) = 6.71, p = .002. Although ethical values were not a significant predictor for brand attitude b = 0.062, t(104) = 0.357, p = 0.722, transparency was a significant predictor on the outcome of brand attitude b = -1.002, t(104) = -3.663, p < 0.001. Hence, this result indicates that the two conditions not transparent versus transparent show significant differences in the outcome on brand attitude after being confronted with the respective advertisements. The
unstandardized coefficient b showed a negative value, which indicates that group 1 (transparent) (M = 3.9, SD = 1.5) significantly ranked lower on brand attitude compared to group 0 (not transparent) (M = 4.9, SD = 1.3). After the interaction term between transparency and ethical values was added to the regression model, opposed to my expectations, this interaction term did not show a significant outcome on brand attitude ΔR2 = .007, ΔF(1, 103) = 0.833, p = 0.363, b = -0.336, t(103) = -0.865, p = 0.3888.
on brand attitude will not significantly differ from other respondents with lower ethical values and thus lower expectations (H3). As I assumed that the higher expectations would result from a rather egoistic point, as ethical consumers try to align their expectations with their self-image, this was not the case in the end. In this result it seems as if the respondents were less emotional involved and had a more rational response to the information displayed.
Table 2 Results Interaction Effect
Model 1 Model 2 b Sig b Sig Brand Attitude 4.44 0.001 4.88 0.001 Ethical Values 0.06 0.722 0.005 0.980 Transparency -1.002 0.000 -0.993 0.000 Ethical Values x Transparency -0.336 0.363 R² 0.114* 0.121* ΔR² 0.007 n 107 107 *p < 0.01
I can reject H1: Cost transparency increases brand attitude and accept the null hypothesis, as cost transparency did not increase brand attitude
brand attitude, as ethical values and overly high expectations did not have a significant effect on the outcome of cost transparency on brand attitude
5. Discussion
5.1. General Discussion
Previous studies have mainly highlighted the positive effects of cost transparency (Gerdeman, 2014; Simintiras et al., 2015; Mohan et al., 2014; Carter & Curry, 2010). This paper gives a new perspective on the relationship between cost transparency and brand attitude, by indicating how consumers’ expectations can have an effect on this relationship. With the findings of the studies, I discovered a negative outcome on brand attitude, namely when there a mismatch between the expectations of the respondent and the actual transparent cost attribute. In this research, the living wage of a Bangladeshi garment worker served as the ethical and transparent cost attribute of a fictitious ethical clothing company. This research consisted of a pilot test and the actual experiment, which were both held independently.
The pilot test aimed at finding out how consumers’ ethical values influence their expectations towards the ethical cost attribute ‘’garment workers’ salaries’’. The results of the pilot test were significant and indicated that people with higher ethical values have higher expectations about the ethical cost attribute. Thus, I have operationalized respondents’ expectations with ethical values in order to use these as a base for the actual experiment.
that ethical consumers want to protect their own self-image and thus have overly high expectations. The results might therefore rather stem from an objectively evaluated point, that the garment worker simply does not earn enough money. It seems that consumers might lack the cognitive capabilities to understand the cost attribute in context and therefore assume and expect outcomes that they feel are desirable. The results of the actual experiment therefore show an important finding: certain cost attributes can trigger negative responses through expectations. Therefore, expectations of consumers need to be taken into consideration when planning to introduce transparent cost attributes. Whether this is mainly the case for ethical cost attributes still needs to be researched. However, as the findings indicate that higher ethical values did not play a significant role in the less favorable responses towards the brand, it could be assumed that these findings could also be applied more broadly to other industries and cost attributes that are not directly related to ethical aspects. Consequently, it is important to realize that each cost attribute that is considered to be made transparent needs to be analyzed thoroughly and used carefully in practice.
In this research case, the garment worker’s wage was a piece of important information to claim that buying the product has a positive impact, as living wages for garment workers in developing countries would already be a great improvement for the workers and their families. Supporting and stimulating purchases of items that contribute towards a positive development of such standards would therefore be highly beneficial. This indicates that being honest about certain cost attributes, in order to increase brand attitude, is not as straightforward as often assumed by previous researchers.
5.2. Managerial Implications
However, with the findings of this research paper, I want to stress that cost transparency can have significant negative effects when consumers have expectations about the cost attribute at hand. These expectations can trigger negative responses when they do not match with reality. In practice, companies should evaluate whether the information that is planned to be made transparent could trigger negative responses and whether the chosen attribute will meet consumers’ expectations. In order to avoid that consumers have unrealistic expectations or make assumptions about the underlying issue, it might be helpful to provide more information, if ethical values play a role in the decision making (Carrigan & Attala, 2001). Thus, it could be favorable to support the claim of the transparent information by adding a reference about the impact of the underlying attribute. For example, indicating the positive impact the attribute has on the people or the environment. This has to do with the fairness perception, which is a judgement of whether the outcome is acceptable or reasonable. The fairness perception indicates that the feeling of fairness is only possible when the consumer has a comparison price or procedure which shows a certain standard or reference (Bolton, Warlop, & Alba, 2003).
Therefore, I propose to use cost transparency wisely and to understand that not all information is valued by consumers, even when the intentions of the company are good.
5.3. Limitations
Although this paper presented important findings regarding cost transparency, the research was restricted to a limited field. By focusing on clothing with one ethical cost attribute, this paper also has several limitations that need to be addressed.
Second, I focused on one ethical cost attribute, namely garment workers’ wages. This makes it difficult to determine, to which other cost attributes the findings can be applied to. Is it only ethical attributes or more specific only attributes that affect social issues or can it be applied more broadly to other non-ethical attributes as well? The main finding is, that expectations play a role in the relationship between transparency and brand attitude, however, the findings do not give a clear indication of which attributes could be affected by consumers expectations. As ethical values did not play a significant role in this research case, it could be assumed that the findings can be applied to other non-ethical cost attributes as well, however further analysis regarding this issue need to be made.
Third, I have focused on wages within Bangladesh, a country with the lowest wage in Asia (Wright, 2018). Bangladeshi wages are substantially different to wages Western Europeans are used to, as they only make up a fraction of a monthly wage compared to Western European standards. This might have had a crucial effect on the responses to the advertisement. Reason for this could be that people have cognitive difficulties to understand the information in context. Individuals might compare the information displayed to information that is readily available to them (Cowan, 2013). This makes it difficult to process the information in a manner that is realistic. The wage of a Bangladeshi worker however was used, as Bangladesh is one of the major players in the textile industry worldwide (Mirdha, 2018) and the clothing industry in Bangladesh is still burdened with inhumane practices (Mariani & Valenti, n.d.).
Fourth, in the main experiment, the respondents were not aware of the daily production capacities of a garment worker. This could have been important information for the respondent to be properly informed about the total wages a Bangladeshi worker could have earned per month. Therefore, only providing information for the cost attribute for a single item left a lot of space for assumptions regarding the garment worker’s monthly earnings. Consequently, it might be difficult for the consumer to evaluate these attributes without doing extensive research. The expectations are then based on the working memory of the respondent, which entails bringing up information that is readily available in the consumer’s mind (Cowan, 2013).
fraction of the total price (€49.95) of the shirt, which is equal to 1.4%. The missing information about the other cost attributes might have been important for the respondent to understand the complexity of the cost structure of a shirt. Ironically, the production of a shirt usually only makes up a fraction of the total costs of a clothing item. The other expenses are often attributed to marketing, transportation, human resource, and other cost components. Not being informed about the other attributes and not being familiar with the cost structure could have left a lot of room for assumptions. Respondents for example could have assumed that the total costs for the production of the shirt were only €0.71 and that the remaining €49.24 were profits for the company. This might make the company seem unethical and can give the impression that the company is working only in self-interest. As mentioned before, consumers do not want to feel as if they were betrayed by the company (Mohan et al., 2014). Consequently, displaying other cost attributes might have had a better effect on the consumer.
Sixth, the statement that the shirt is ethical was not backed by any official claim. No pilot test was performed in order to find out whether consumers believed the ethical claim made by the fictitious company PLAIN. According to Calfee & Ringold (1988), consumers can be distrustful of ethical information that is made by the company itself. This could have resulted in scepticism towards the ethical claim of the company (Darley & Smith, 1993), with the result that the respondent might have thought that the company is acting in self-interest (Elving, 2013). Sceptical responses thus can have a negative effect on the brand’s attitude (Ashforth and Gibbs 1990). It could be helpful to add a label which is issued by a trustworthy source in order to support the ethical claim (Shaw & Tomolillo, 2004).
5.4. Future Research
Finally, this research might be extended by testing what the next step of the consumer, who was confronted with the transparent condition would be. Would this respondent decide not to buy the product and switch to another brand? And if he would switch to another brand, would it be a brand that also claims to be ethical but does not show any cost transparency or would it be a brand that has no ethical claim at all? The choice for a non-transparent alternative might be the case due to the motivated reasoning theory, which states that people tend to make decisions that are satisficing, which means as long as the “illusion of objectivity” is maintained, the individual feels good about the decision made (Kunda, 1990). In this case, there would be no transparent information that could affect the consumer negatively. The latter might be the case if the consumer thinks that his purchase does not have a great impact and thus he might decide that the non-ethical purchase will almost result in the same outcome for the garment worker.
6. Overall Conclusion
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8. Appendices
Figure A1 QR Code Pilot Test
Figure A3 Responses Of The Pilot Question
