Show your costs to boost sales • Hacker News Board

Re: Show your costs to boost sales

#141

Post by therealdrag0 » Fri, Apr 30, 2021, 6:34 AM UTC

mistersys wrote: post #122

xgulfie wrote: post #103

Earlier quoted context omitted.

Yeah, seeing the cost breakdown for luxury goods like this feels totally different than for seeing one for other things, like a bottle of Coke or a handmade good from Etsy.

Yeah I don't think a cost breakdown on my drop ship products on Etsy would increase sales. We roughly double the price vs. cost of goods, but it's not like we're rolling in dough because at our volume fixed expenses take up a really significant amount of our profit.

What if you amortized your fixed costs (equipment?) over expected life span and included that in the breakdown?

Re: Show your costs to boost sales

#142

Post by taneq » Fri, Apr 30, 2021, 9:14 AM UTC

CodeWriter23 wrote: post #96

tdmckinlay wrote: post #31

Earlier quoted context omitted.

Author of the summary here: You are right regarding the chocolate bar experiment. That's why the researchers ran multiple experiments, some of which measured actual behavior: - People were 16.1% more likely to bid for a gift card for an Everlane backpack (vs a J.Crew one) when they saw cost information about it - Sales of chicken noodle soup bowls ($4.95) in Harvard’s campus canteen increased 21.1% when costs were di…

It's kind of lazy of you to disclose the Backpack and Chicken Soup cases in a declarative way. You present no references, no drill-down on whether all other effects were equal in these cases. For example, did chicken soup sales continue for an extended period of time and were not driven by other factors such as "a cold going around" or low temperatures? Trust is certainly a factor in consumer behavior, but it nowhere…

> You're also lacking cases where the markup is high, 500-2000% is common among a wide range of products, from Fashion to SaaS.

The article does cover those cases explicitly:

> Extremely high profit margins (>55%) could trigger a negative reaction, although this was not tested.

Basically they didn't even bother because it's pretty clear that someone selling a commodity for a massive markup is not going to benefit from this approach. Of course, that doesn't mean this hypothesis isn't worth testing...

Disclosing your costs if you have a modest profit margin and also modest absolute costs is good signaling on multiple fronts (as long as you're credible):

- Higher parts/ingredients costs are a signal indicating good quality

- Low profit margins make customers feel like they're getting a good deal

- The appearance of transparency signals your own confidence in all aspects of your business

Re: Show your costs to boost sales

#143

Post by paul_f » Fri, Apr 30, 2021, 11:53 AM UTC

tanaros wrote: post #138

rmason wrote: post #124

We've got a couple of local BBQ place's funded by proceeds from the sale of a local tech company. The founder just posted a video on Facebook yesterday explaining why their popular wings were being taken off the menu. He breaks down their exact costs, why they're currently selling them at a loss and why they'd have to raise prices 50% to make the dish profitable. A lot of people were angry when they announced the win…

It's a nice video, but I don't really understand the formula. They make the claim that they need to price products assuming 30% goes to food / ingredients, 30% goes to labor, 20% goes to fixed costs, and the remaining 20% is kept as profit. Thus, the increase in wing cost means they have to increase the price from $14 to $22. However, the labor and fixed costs don't increase just because the ingredient cost increased…

Exactly, this is so dumb. Our food costs went up a bit, so we have to give everyone a raise to match the percentages?

Re: Show your costs to boost sales

#144

Post by ajkjk » Sat, May 01, 2021, 1:47 AM UTC

rmason wrote: post #130

ajkjk wrote: post #125

Earlier quoted context omitted.

want to, uh, just summarize it here?

The video isn't that long ; 1. Increase the price of wings 50% 2. Cheapen the ingredients 3. Take it off the menu until the price of ingredients drop After surveying their customers they found demand would drop drastically if they raised prices. They don't want to cheapen the ingredients because it would hurt their brand so the only real choice was to take them off the menu.

Yeah, but I didn't want to watch it on Facebook.