How to price for your clothing line to maximize profit and shape your brand image?
The eCommerce fashion industry is a highly competitive one, and it should come as no surprise that every fashion retailer seeks to maximize profits and keep profit margins high. Pricing is incredibly important for fashion brands because it has a direct impact on the place your brand sits in the market, how you are viewed by your customers, as well as on your profits.
Pricing for your fashion brand is more than just how much something costs. It can also shape your perceived value and your brand image for your customers. If you price too low for instance, your audience could get used to your brand sitting in one end of the market; which may cause you to lose current customers when you try to increase your prices as they are already used to seeing you as a cheaper brand.
So, what are the best strategies when it comes to pricing for your clothing line? When it comes to setting prices, there are six approaches you could take, depending on your business goals and where your brand sits in the market. Understanding these pricing options can help you develop the ideal pricing strategy for your own clothing business so you make a profit while keeping you in business.
1. Budget Pricing Strategy
Many consumers seek low prices when shopping for apparel, especially in eCommerce. The low part of the market is focused on price. Here, your customers are not looking for goods that will last a lifetime or to elevate their social status. They are most likely willing to sacrifice quality for affordability, and are less likely to be loyal to specific brands. A bundled pricing strategy can work well here. When multiple bundled products are sold together at a low price, it can convey a sense of additional cost efficiency for budget shoppers.
2. Value Pricing Strategy
The value pricing strategy is for the middle part of the market, and sits somewhere between the budget and luxury segments. It is when you price your products based on what your target audience is willing to pay, regardless of competition. The key to value pricing is to strike a balance between cost and quality, choosing quality materials and making your products affordable so you can boost your perception as being fair and good value for money. Consumers in this segment tend to look for clothing and accessories that will last several years or more, making the durability of materials a prime concern.
3. Luxury Pricing Strategy
In the luxury tier of the market, the customer’s price sensitivity is often more closely correlated with a brand’s image rather than the product quality or market value. This part of the market is brand-focused, and loyal. Products are closely tied with self-expression and social status in consumers’ minds, so shoppers in this segment are often more concerned with the social image of their apparel than anything else. This strategy focuses on marketing and brand positioning as a main driver of price structure. Take care to keep your prices just as high as competitors. Lowering prices in this segment can actually cheapen a luxury brand’s image and decrease sales.
4. Competition Pricing Strategy
Customers today have a wide range of options when it comes to products and frequently look for the best deal. Competitor-based pricing focuses primarily on the pricing decisions of known competitors to set the accepted market price or a range of prices. You can choose to price your products slightly above your competitors, at the same level, or slightly below their price, according to your business goals. The downside to a competition-based strategy is assuming that your competitor’s pricing strategy is well-developed and that your pricing structure and business goals are similar to theirs, which may not always be the case. This strategy can also be difficult to sustain when you’re a smaller retailer. Lower prices mean lower profit margins, so you’ll have to sell a higher volume than your competitors to succeed.
5. Price Skimming Strategy
A price skimming strategy refers to when a business charges the highest initial price that customers will pay to maximize profit margins, then lowers it over time. The key objective of a price skimming strategy is to achieve a profit quickly. As demands are satisfied and more competitors enter the market, businesses can lower prices to attract a new, more price-conscious customer base. Price skimming can lead to high short-term profits when launching a new, innovative product, or even when you lack the financial resources to produce products in volume.
6. Price Promotions and Discounts Strategy
It’s no secret that shoppers love sales, coupons, rebates, seasonal pricing, and other related markdowns. Use customer loyalty programs, holiday sales events, seasonal sales, off-season discounts and coupons to bring new customers in the door and give existing customers a reason to spend more in your store. Discount pricing strategies are effective for attracting a larger amount of foot traffic to your store and getting rid of out-of-season or old inventory.
Your brand needs to be profitable in order to survive, and setting the right fashion pricing strategy is important if you want to make your clothing brand a lasting success. Spending time on getting it right will help your business to increase revenue, sell slow moving merchandise as well as keep your customers happy and coming back!
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