How to Use Pricing Strategies in Your Merchandising Plan
We all know that when it comes to pricing your collection it can be tough to figure out the exact process and the exact price point or sweet spot that resonates with your customers.
Obviously, if you start seeing some traction in your sales, your price points are most likely on target and in line with your brand’s perceived value.
But did you know that many brands and retailers use pricing strategies as a way to merchandise their products within a store or online to not only differentiate their store’s assortment but also to lure more customers to buy specific products?
Not only do fashion companies use this tactic, but many other product companies such as cars, grocery stores, or even the tissue that you blow your nose with!
They ALL use pricing strategies to create different product assortments to appeal to different customer segmentation.
But what exactly do we mean when we say to use pricing strategies as a way to either:
- Lure even more customers to your collection
- Create a pricing niche within your category.
We’re going to get into each of these subjects in further detail, but first, ask yourself these questions regarding your current pricing strategy.
- Do you understand where your collection falls in the realm of other competing brands?
- Are you on the lower or higher scale within this realm?
- Does your product have the perceived value that you are offering it for - i.e. does the value of the product align with the price point.
The first part of using pricing strategies to lure customers to your collection is by offering different levels or pricing tiers.
You may have heard of the terminology good - better- best.
This is basically a way to give not only the buyer of a retail store but your final customer options.
It doesn’t matter if you’re Louis Vuitton or Zara, they all use these pricing strategies to employ different customers and lure customers no matter their budget.
At Louis Vuitton, you’re not only going to have the most expensive handbag going for $3,000+ but they also sell smaller leather goods like wallets or even key fobs for the customer looking to get just a taste of luxury at a fraction of the cost.
While at Zara; although the majority of the clothing is lower end and affordable, there will still be some key pieces that offer a higher quality level, a higher perceived value and is also reflected in the price. These pieces can cost upward of $100, while the majority of the other styles fall below the $100 price point.
So you may be thinking how does this apply to you and your brand?
Well even if you’re just starting out and you have a small collection of let’s say six pieces; you’re going to want to make sure you have different pricing levels to satisfy different customers.
If you sell multiple items meaning: pants, tops, dresses, etc, you’ll probably realize that a dress costs much more than a top or pants. So do you have a lower priced top that can satisfy a store that may not be able to afford a higher priced dress?
Or if you sell only one category, let’s say in this case dresses, do you offer the different tiers of good, better, and best?
Meaning, do you offer a style that’s an opening price point and very basic?
Do you offer a mid-priced dress that is still relevant to your design aesthetic?
And what about a “best” option or highest price point that not everyone will buy but will add a higher perceived value and elevated element to your collection?
This is just one pricing strategy that many retailers and brands use to “lure customers”.
It’s a way for the customer to feel like there’s an option just for them.
If you have a higher budget you may want to buy all of the pieces or possibly just the higher end styles which are the “best” styles.
But if you have a smaller budget, you’re going to most likely choose the style at the opening price point level or “good” option.
Another way to create a collection that will sell well is to look at what other people are doing and find a pricing niche within a category.
This can be considered a bit more strategic and should be more thought out in earlier development stages, but basically, you create a collection around a price point that hasn’t been tapped out yet.
An example we can think of is the handbag brand Mansur Gavriel who ultimately created the first “post-recession It bag”. They basically had huge success because they discovered that people wanted luxury handbags but didn’t necessarily want to pay over $1,000 for most luxury brands were offering at the time.
This “sweet spot” price point really became the trigger for a ton of new brands looking to get into the luxury market and thereafter many other handbag companies with similar price points started popping up everywhere.
So, the main idea around this pricing strategy is to identify a way to stand out in your category and create a niche.
Think about premium denim about 15 years ago. Did you ever think you’d pay more than $100 for a pair of jeans? Probably not. Now it’s not uncommon to see denim prices up to $500!
So that’s just something to think about when creating new products.
The ultimate idea and goal around pricing strategies are to find a way to sell more product.
It’s all about positioning your brand as something desirable to both buyers and the ultimate consumer.
So take ten minutes today and ask yourself if you’ve used any of these pricing strategies in your business. And if you haven’t, now you know what you can add to your merchandising strategy for next season.
So cheers to selling more and making more in your business! You’ve got this.