A Contrarian View on Transparency

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In March, 2014, StubHub announced a novel “all in” pricing policy that displayed online ticket prices inclusive of add-on fees and other service charges. The company was responding to consumer research “showing that fans hate nothing more than to see their final ticket price jacked up with additional fees and service charges when they reach checkout,” according to a Wall Street Journal article (The Truth? Customers Don’t want to Hear It, March 26). Good move. Give customers what they want. Nothing wrong with that!

But then something unexpected happened: StubHub sales dropped as fans began to buy from sites that listed lower base prices. Ticket brokers who bought from StubHub reported that sales declined by 15% to 50% since the new pricing policy was implemented. In case you haven’t bought a concert ticket lately, ancillary fees can escalate the final cost by as much as 50% of the list price that draws in online shoppers. The Wall Street Journal article cited a $400 Justin Timberlake ticket on VividSeats.com in which the company assessed a $199.50 service charge. eCommerce has brought new meaning to the sales cliché, “But wait! There’s more!”



Processed food brand managers can relate to the conflicts that occur when there’s dissonance between what customers say they want and what they really want. “When you tell people something’s healthy, they think it doesn’t taste good,” said Sarah Bittorf, Chief Brand Officer of Boston Market. General Mills recently cut the per-serving amount of sodium by up to 50% in more than 27 varieties of Hamburger Helper. They jazzed up the product by adding other strong flavors like garlic, onion, tomato, and spices. “But the company was careful not to tell consumers about the sodium cuts,” according to another Wall Street Journal article, Food Makers Move Gingerly on Changes (June 24, 2014).

So, if you’re following the pattern here, indiscriminate transparency can put the brakes on sales. Ugh! Did I just do that – qualify transparency with an adjective? How about partial transparency? No, I don’t like it! Selective transparency? Nope – the same! You can see where this is going, opening up a can of distinctly un-tasty sales worms. For business developers, it’s more comforting to believe that in an era of unprecedented “customer information power,” transparent, socially-responsible enterprises will prevail over shadier ones that pull the wool over their customers’ eyes, or maliciously manipulate what they can see.

But in fact, the ideal of a fully-transparent enterprise is Pollyanna. It doesn’t matter how egalitarian the organization’s purpose. Consider the challenges surrounding corporate transparency about data breaches. “There is this crazy hysteria” about cyber-attacks, said Dawn-Marie Hutchinson, head of information security for Urban Outfitters. In August, The Wall Street Journal reported that some executives “argue that many breaches don’t lead to harm and can be handled quietly. Not every corporate document is a valuable trade secret; credit-card numbers may be exposed but never stolen, or stolen but never used. Disclosure can cause its own problems, prompting consumers to waste time replacing credit cards, for example. Most seriously, they say, going public could expose weaknesses that others could exploit.” Damned if we do, damned if we don’t. It’s an untenable position.

Compared to sales of concert tickets and hamburger supplements, transparency about compromised information security seems to scare the bejeebers out of legislators, and has garnered great regulatory interest. Only four states, Alabama, Kentucky, New Mexico, and South Dakota, do not have a data breach notification law. Ahhhh, to the surprise of no one, a loophole the size of Texas has already been uncovered: “We actually don’t use the term breach,” Ms. Hutchinson said, because that could trigger disclosure laws,” according to The Wall Street Journal. Clever.

Many executives huff that honesty and transparency are among the core ideals their companies and employees have embraced. Get with the program! I have advocated it, too. But how straightforward is the act or effort of being transparent?



Not very, it seems. Do customers always benefit when companies are open and honest? Do consumers persistently perceive corporate transparency in positive ways? If not, how should companies define ethical boundaries when it comes to disclosure – about anything? These are complex questions which undermine the often-held assumption that corporate transparency, customer-centricity, and shareholder value all play together nicely in the same sandbox. It’s harder than it looks. More transparency does not always equate to better outcomes.

7 COMMENTS

  1. Andy, you can take any good idea to an extreme.

    As humans we say we value honesty, but have you ever met someone who took that idea too far? (“Hey, you look older! Have you put on weight, too?”) Complete honesty doesn’t work.

    In The Truth About Lying, a psychologist is quoted as saying: “Lying has long been a part of everyday life. We couldn’t get through the day without being deceptive.” Others have said “little white lies are social lubricants.”

    One study found that in an average week men and woman “deceive about 30 percent of those with whom they interact one-on-one.”

    Consumers say all kinds of things, but I don’t recall any study that found consumers want complete and total transparency. That would be mean really knowing what really does on in the factory, the kitchen, etc. Ignorance is bliss, or we couldn’t use our smartphones, wear a shirt or eat a hamburger without massive guilt.

    My take is consumers want “just the right amount” of transparency. How much is anyone’s guess, but I think it’s fair to say that consumers are taking more of an interest (perhaps due to media coverage) in a company’s supply chain and personnel practices. That’s why we’ve seen more companies strive to be “green,” “sustainable,” etc.

    Just as in our personal lives, companies can fail by over sharing just as easily as being too opaque.

  2. Bob / Mike: thanks for taking the time to post these comments. What interests me greatly are the challenges the companies face when they believe they are doing the right thing. It makes sense that consumers dislike buying concert or theater tickets, only to discover four or five screens into the transaction that there are sizable unavoidable ‘convenience fees.’ I applaud StubHub for sticking their neck out.

    In this case, “the right thing to do” would seem to be representing the charges so customers know the final purchase price right up front. Yet, the policy backfired, at least in terms of StubHub’s revenue. This is, in part, the reason that I am wary of recommendations couched in terms of “Rules.” Transparency seems reasonable as a guideline, with the caveat that there are situations where it doesn’t add much value, and in fact, can possibly erode it.

  3. Yes, agree that this seems like “the right thing to do.” Puzzling that consumers didn’t respond more favorably. Maybe it will take some time.

    I recall efforts by the fast food industry to create a “healthy” hamburger, more salads etc. — because consumers said they wanted that. But their behavior (read: sales) didn’t back that up.

    I wonder if Stubhub misjudged consumer awareness and dissatisfaction with the convenience fees. By taking the lead is solving a “problem” consumers weren’t that concerned about, Stubhub put themselves at a competitive disadvantage.

    Although Stubhub shows “All-In Pricing” on their web site, if ticket prices are compared on third party services, the consumer might not know that they are comparing apples to oranges. In fact, a Wall Street Journal article suggests the problem may be related to ticket brokers who post tickets on resales sites. In this situation the higher “all-in” prices would not compare well with other sources that didn’t disclose the hidden fees.

    Maybe what they needed was a marketing campaign like Southwest’s “Bags Fly Free.”

    All in all, I think it’s a bit early to judge this as a vote against transparency. It be a case that a) Stubhub’s competitive advantage will build over time and b) Stubhub needs a solution for the special case of ticket brokers reselling on 3rd party exchanges.

  4. It feels like much of this is about trust – whether a) it exists as belief that a company will act in a customer’s best interest, and b) the level and consistency of it. To believe that a company is acting in a transparent and honest manner, the customer has to trust them. Some years ago, I wrote a blog in which lyrics to Billy Joel’s “A Matter of Trust” were paraphrased to represent the jockeying, positioning and communication dance that goes on between vendor and customer:

    “Some love is just a lie of the soul
    A constant battle for the ultimate state of control
    After you’ve heard lie upon lie
    There can hardly be a question of why”

    Maybe, substitute the word LOVE for TRANSPARENCY or HONESTY (also a Billy Joel song).

  5. Bob/Michael – thanks for your sharing your thoughts. At the risk of oversimplification, most problems in business boil down to executing the wrong strategy, or executing the right strategy the wrong way. In the case of StubHub, it’s hard to argue that their intentions and motivations seemed misguided. Responding to a well-known customer concern in a responsible, thoughtful way doesn’t seem to be something that would go on company’s ‘not to do’ list.

    In this case, the execution seems problematic. Possibly the company assumed the ‘better mousetrap’ phenomenon – that all they had to do was ‘fix’ the reviled add-on fee policy, and consumers would come flocking to their site. I think they were right to address the problem, but StubHub’s management needed to do a better job of selling their new approach.

    Michael – thanks for the Billy Joel reference – I’ll check out the song.

    –ar

  6. Just goes to show that human relationships and customer relationships have a good deal of similarity. Billy Joel, whose songs speak about the human condition, could be a customer experience management consultant. In “Honesty”, he said (three times):

    “Honesty is such a lonely word
    Everyone is so untrue
    Honesty is hardly ever heard
    And mostly what I need from you”

    Resonates, doesn’t it?

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