The Four Factors You Need to Consider When Pricing Your Product

The 4 Factors you Need to Consider When Pricing Your Collection.png

Pricing your collection or product is often one of the biggest questions we get asked when it comes to merchandising and planning your collection. 

And to be honest, this topic can be debated upon depending on your target market and overall strategy. 

There are many factors that you need to consider when it comes to pricing your product. 

In this blog post we’ll take you through the 4 main factors you need to analyze before you even think about designing your next collection. 


Factor 1: Target Market
This is factor number one because you need to know who your target market is obviously before you even start designing your line. Are you aiming for a more contemporary target market or more of a designer/luxury category? Or is your target audience younger, fast fashion, discount, or price conscious? 

These questions are extremely important to determine prior to even starting your business, so hopefully you’ve already got this factor established. 

Factor 2: Your Competition
Your competition is another important factor when it comes to determining your wholesale price. If you are selling leather jackets for $1,000 and they are made in Italy, and your competition also sells leather jackets made in Italy and they are selling them for $799, you may want to re-think your $1,000 suggested retail price. 

If you’re already making a decent profit at $1,000 and your main competition is pricing their product for a lot less, you need to really determine if your brand is stronger and if there is something that differentiates your product from your competition. 

If a customer goes to a boutique and sees your jacket for $200 more, is there something about the jacket’s design or perceived value that will make them buy. 

Which leads us to…

Factor 3: Perceived Value
This is where pricing becomes a strategy and can get a little tricky. Basically, perceived value is the essentially how much a product is valued in the mind of the consumer. 

For the most part, people aren’t aware of how much materials costs, or what it costs to actually make something. Therefore, the perceived value is something that they decide based on a feeling. 

They usually will ask themselves: 

Does it feel good to them? 
Does the fabric/material look expensive? 
Is the brand perceived as a status symbol? 
Is this a brand that I want to associate with? 

Figuring out your perceived value takes a lot of competitive research and playing around with your final price by factoring in your margin. 

Which leads us to…

Factor 4: Margin
Determining how much margin you should be making is an essential part of determining your pricing and is the most important factor in actually making a profit. 

When you are first starting out, having a decent margin is going to be one of the most difficult aspect of your business to accomplish. When it comes to your initial stages of negotiating your pricing with your factory, unless you are purchasing large amounts of inventory, the factory will usually give you a higher price because your minimum order quantity will be much less. 

The chances of you starting off with really good margins (meaning 50%+) is very low.

However, once you start to grow your business and begin ordering more quantities from your factory, you can also start negotiating better prices in order to make higher margins. 

An important thing to remember when it comes to margin is to figure out how much you need to purchase from your supplier in order to achieve a good margin. This should be your first sales goal for that style. 

So in conclusion.:

Hopefully, by taking these four factors into account when figuring out your pricing, you can start to get a better idea of what you need to look for when determining each price. 

Remember that each style has to sit on it’s own. Meaning, you shouldn’t just take a clear margin of 50% for every single style. Of course this would be wonderful, but it’s not the most efficient way of pricing due to the competition, perceived value, and target market. 

This is why each of these four factors is super important. 

Another great exercise is to ask your buyers about your pricing. Most buyers will always be completely honest with you about your pricing structures because they obviously want to sell as much as they can. 

If you are trying to get into a particular store and the buyer flat out says that your prices are too expensive and it’s not for them, you may need to rethink your strategy. 

Ask yourself if that particular store is your target market, OR is this store right? Am I pricing my collection too high? Can I go back and play around with my pricing for a few styles? 

When it comes to merchandising and pricing, this is why it’s so important to ensure you are creating assortments that can appeal to multiple stores with multiple price points. 

These are just the first steps and basic factors you need to take into account. Make sure you’re checking off each of these factors when you’re going through your collection. You can download your free checklist here to make sure you’re staying on track when it comes to setting your pricing. 

The bottom line is that you have to test everything when you’re first starting out. Once you find your sweet spot, it will get much easier to figure out, but until then, these four factors should be your four rules to abide by when typing in that final figure onto your line sheet. 

Don’t forget to grab your free pricing checklist here.