Briefly explain how the Internet has affected cost transparency. Include an explanation of the benefits for consumers and the possible disadvantages for marketers

Question

What will be an ideal response?

Answer 1

Cost transparency is the ability of consumers to understand a company's true costs. The Internet has greatly increased cost transparency, as information about prices is abundant, easy to find, and free to anyone with Internet access. Internet pricing sites quickly provide information about the prices charged for the same product by different marketers. This benefits consumers financially, but it has four negative effects on pricing strategy for marketers. Increased cost transparency erodes high margins because consumers develop a better understanding of product costs. Cost transparency can also cause customers to treat goods and services as commodities sold at a common market price rather than differentiated, distinct products. Companies that charge more than others for the same product may cause consumers to perceive price unfairness, and customer loyalty to brands may be weakened.