Fashion pricing strategy is one of the most challenging areas for fashion apparel and accessories brands. For the most part, the challenge is due to product (SKU) complexity, relatively limited item comparability within (especially small) brands and frequent flow of new collections.
Pricing fashion products historically has involved more art than science. Being that most creative are not so number savvy, pricing has led to problems in many fashion businesses.
Today’s consumers are very educated and they really know what they want.
Savvier about price and positioning, more than ever, they are able to easily compare between competitor brands and contrast across all the available options.
This new reality requires brands to be sharper and requires them to spend time to get their pricing strategy right.
What does that mean?
In real terms, it means that as a brand owner you need to be aware of some basic pricing strategy principles in order to ensure that when you do get to do the pricing, you will do it well.
So let’s look at some common mistakes fashion brands make when it comes to pricing their products. Often, by looking at what is wrong, we can better understand how and what to improve and how to organise our business affairs better.
Self-identifying the issues, within your fashion business, is the best way to ensure they get fixed. Only then you – the brand owner and CEO – will truly understand the problem and the cost associated with not addressing it.
So, without further ado – if you feel that you are not making the profits you should, then you most likely to be committing one of these seven fashion pricing strategy mistakes.
Pricing Strategy Mistake #1: Pricing too low
When you first started your brand you didn’t know how to work out accurately your pricing. You got your manufacturing costs and added your materials and benchmarked against competitors.
You decided that to sell more you should price “competitively”. Aka cheaper.
You didn’t know where to start, so you started too low.
Why is this wrong?
For starters because pricing too low means that you may be selling at a loss or making no money at all. At best, if you’re lucky you might be making a small profit margin, which quickly can be lost easily by a number of highly possible scenarios any fashion brand encounters on a regular basis.
Pricing too low also means that you may not be appealing to your ideal customer audience and therefore appealing to entirely the wrong type of customer.
Your price tells people who you are as a brand.
What you should have done instead is price so that your price tells people who you are as a brand, what your position is and how valuable your product is. Prices act as a signal to the brain and allow your potential customers to immediately make assumptions (rightly or wrongly) about what type of brand you are and what your products (or services) must be like.
Pricing helps customers buy. Or not!
When you understand how numbers associated with a product or service affect the brain, you’ll know why you can’t price your products or yourself cheap.
Pricing Strategy Mistake #2: Too much choice
Most creative entrepreneurs suffer from an affliction called “idea abundance”.
You are never short of ideas and when something doesn’t go as per plan or how you “imagined” it should be, instead of looking what is wrong and how to fix it – creative business owners swiftly move on to a new idea.
Most creative and fashion entrepreneurs almost never learn or are taught that “less is more”. Instead, they follow the logic and have the wrong belief that “more is more” and it must lead to more sales, more opportunities and generally anything and everything, only more of it.
The simple truth and a fact of life is that if you overwhelm your customers with choices, they won’t buy. Too much choice creates confusion for our brains. That is why young children (and animals) are from an early age trained to discipline and management of their emotions and expectations by only offering them two choices.
While I am not suggesting you only have two products or services to offer, I simply want to illustrate the principle of less bringing more to the business.
So if you are just starting out, identify the one (two or three at most) product or services you really want to sell.
You need to sell that one key item before you sell any of the extras and add more to your collection portfolio.
By offering less you will strengthen your brand image. A point in case is the fashion brand, Marc Jacobs. During the boom decades of the nineties and the years that followed before the recession of 2008, the brand had diversified and had many diffusion ranges, that over time diluted the brand authority and image. It led to confusion with the customer base. When the recession began and sales dried up, the management closed its contemporary and designer collections and merged them all back into one label. This, in turn, created more confusion among retailers and consumers alike.
While the prices were generally lower than they had been in the past — the shift was poorly communicated. As a result, the brand has shrunk by half, according to industry analysts.
Too much choice may look like a good logical step for a business, but numbers don’t lie. More often than not, the abundance does not translate into more sales.
Pricing Strategy Mistake #3: Too little choice
If having too much choice can be detrimental to your business, having too little choice can also have the same effect.
If you only sell one thing, there’s nothing else to compare it to.
If people struggle to make a choice when there are many possibilities and options, they also struggle to decide if they should buy when there is no choice.
People struggle to choose when you only offer one product or service. You need to have a range of offers and services, which cover a range of different price points.
Another great tip to notice that all big brands do is to create combination offers that make people want to buy. But take care that when putting them together you don’t devalue your overall business.
Pricing Strategy Mistake #4: Price structure
Creative entrepreneurs do not have to have an accounting or math degree to be able to accurately price their products.
Understanding the simple concept of what costs make up your product and how and what to add in order to sell at profit, albeit small, is imperative to the survival of any business.
Most industries do not have the complex product collections, constant newness and regular discounting opportunities, which in a way acts as a guard to their profit margin. In fashion, constant discounting is the norm, so more than ever, knowing how to price and what your break-even price point is and how many units you need to sell to make a profit is a core prerequisite for anyone thinking of launching a brand or already in the thick of it.
Pricing Strategy Mistake #5: Price presentation
How you “design” your price matters more than you think.
The brain works (mostly) better when receiving visual information. Therefore, it matters how you visually show your product or service price in print documents and on a screen.
One of the most important factors to consider is creating order and logical flow of your pricing. Messy pricing leads to confusion and we already covered what happens when the brain feels confused, right?
Creative entrepreneurs often focus their creativity on the actual execution of the product. But the colour and font of all collateral that is visual and where and how information is placed on paper and on the screen is vitally important to the decision to buy.
Get this wrong and you’ll be turning customers away. Studying successful businesses inside and outside of the fashion industry will reveal many tips and tricks you can use to display better your price.
Pricing Strategy Mistake #6: Price communication
Just because you created a beautiful product, an amazing service and a great website – it does not mean customers will come and buy.
Learn how to talk about your prices, how to communicate the best features of your product or service to your potential buyers. Otherwise, you’ll struggle to sell much of anything. That goes for online and offline sale activities.
How you talk about your product and the price attached to it, positions you in the market.
Every successful business talks about the products and their prices in a way that connects with potential customers.
Economists over the years have in fact developed and written many books on buyers psychology and psychological techniques that can be used to target the right customers and encourage people to buy.
Pricing Strategy Mistake #7: Poor communication of changes
Ideally, brands should get pricing right when they are first established. But that often is not the case. In such scenarios, it’s important to “course correct” as early as possible and get back to the right and solid pricing strategy.
This can be a complicated and often emotional exercise that requires a large dose of unemotional and pragmatic approach.
If this is the case, whatever the reason for it, this change must be gradual and slow ideally.
If it is not – it is important to communicate these changes to the target market in a way that ensures continued support and goodwill.
An example of such scenario badly executed was observed with the British brand Mulberry.
A few years back, Mulberry newly appointed CEO (ex-Hermès executive Bruno Guillon) attempted to reposition the brand to a more elevated, luxury market position. The move from the accessible luxury market positioning to the high end of the market backfired dramatically, shrinking its profit by half in 2013. In addition to the financial damage done, the brand lost many loyal customers who felt betrayed and snubbed.
A poorly executed pricing strategy cost the brand years of management changes, business restructures and costly re-building of their customer base.
So all in all, you must realise by now that having a pricing strategy in place is paramount to success. As they say “the devil is in the detail”. Taking time to ask important questions at the start like “What do I want my brand to stand for?” “Where should my brand be positioned?” are important starting points. The answers then naturally lead you on to make choices and decisions that will easily feel good or bad if they are not congruent with the ethos of the brand defined by the initial questions.
Pricing is a science and an art.
It is much easier to understand when you study the principles of human persuasion psychology. Then you will understand that any fear of something being priced too high is unfounded if the price is presented well. A “price” in isolation is just a number. How you display and present this number in the wider context of your brand and fashion industry is what gives it meaning. Spending time on getting it right is the foundation on which your business must be built on.
For help with your brand pricing strategy and a brand audit, contact us at firstname.lastname@example.org We’d be happy to assist you to get your brand on the right pricing strategy track and grow your success.