Simply explaining where customers’ money goes could make them more willing to accept higher prices, according to new research from the University of Surrey. Published in the Journal of Service Research, the study found that businesses can increase customers’ willingness to pay by explaining how their money supports the aspects of a service that customers value most, such as skilled staff, talented artists or high-quality ingredients, rather than focusing on overhead expenses like administration or advertising.

The findings challenge the common assumption that consumers care only about the final price. Instead, the researchers found that when customers understand what their money is funding, they are more likely to perceive prices as fair and voluntarily pay more. Greater transparency about the value behind a product or service can therefore strengthen customer trust while reducing resistance to price increases.

To investigate this relationship, the research team examined six service sectors: restaurants, museums, dance workshops, guided tours, online courses and newspaper subscriptions. The study combined two field experiments with six experimental studies involving a total of 2,606 participants. Participants were presented with a variety of real and hypothetical pricing scenarios and asked to decide how much they would be willing to pay after receiving different explanations about how business costs were allocated.

Across nearly every setting, participants who received information about customer-facing costs consistently paid more than those given no explanation or information focused on behind-the-scenes operating expenses. The effect was particularly strong among individuals who would otherwise have chosen to pay the least, suggesting that transparency can be especially effective in increasing price acceptance among more price-sensitive customers.

Lead author Dr Brigitte Stangl, Associate Professor at the University of Surrey, said the findings demonstrate that customers are not simply looking for the lowest possible price. Instead, they are often willing to pay more when they understand the value they receive and how their payments directly support the quality of the service. She emphasised that businesses do not need to disclose confidential financial information; rather, highlighting customer-facing investments such as expert staff, talented artists or premium ingredients is sufficient to improve perceptions of fairness.

Overall, the study found that explanations centred on costs customers can directly appreciate consistently outperformed messages focused on general operating expenses, such as administration, marketing or building costs. By clearly communicating how customer payments contribute to service quality, businesses can build greater trust, increase perceptions of fairness and encourage customers to accept higher prices more willingly—an approach that may prove particularly valuable as organisations continue to navigate rising operating costs and the challenge of communicating necessary price increases.

More information: Brigitte Stangl et al, The Impact of Cost Structure Appeals on Fairness Perceptions and Payments, Journal of Service Research. DOI: 10.1177/10946705251341080

Journal information: Journal of Service Research Provided by University of Surrey