But how do you figure out the best price for your products?

New eco friendly denim label Reco Jeans did an interesting experiment: They did a Dutch Auction for jeans, where bidders could suggest how much they’d be willing to pay. Then, 300 winners were chosen. Winners were those bidders who fell closest to the average between the highest and the lowest bids.

For some products this approach works very well. Radiohead released their 2007 album In Rainbows with the announcement that fans could download it for any price they wanted. About a third didn’t pay at all. Average price paid was £4, although some paid as much as £20 or more. The marginal cost of selling an extra album is near zero. Fashion is different. Production and materials require an up-front investment. You need to be sure that you can at least cover your costs.

How did the Reco auction end? Most of the winners ended up bidding $100-200, more or less the price range they had aimed for all along. In this FT column Vanessa Friedman speculates the reason for the surprising result is that Reco gave bidders information on competitors’ price points. These were similar and customers probably adjusted their bids accordingly. Thus, it’s very important that you put your brand in the right category, giving customers a clear points of reference when judging whether your prices are good value.

So beware of slashing prices just to please buyers who are hit by the recession. Pricing is as much a long-term strategic decision as it is a short-term one. Pricing is an integral part of your label’s identity. Consider the long-term repercussions before changing prices, and separate what is temporary (economic climate) and what will remain (buyers’ expectation of lower prices, repositioning of your brand).

This is not to suggest that you shouldn’t consider changing it. Just make sure you’re careful about it.

Companies like Gilt Groupe, HauteLook and RueLaLa hold short sales open only to invited members. Marketing centres around getting members to refer friends to sign up. Once on the mailing list, members receive exclusive access to 24-72 hour designer sales.

Holding these sales is relatively cheap due to the small amount of dead stock. By offering a very limited product selection at hugely (usually 50% +) discounted prices risks related to surplus stock go down. It also heightens the sense of scarcity, which is a powerful tool in private sale companies’ marketing arsenals.

If you run a fashion label, think about how these principles could help you. Limit your sample offering; this means both less work for you and less costs for machinists, patterns, etc. New designers often make the mistake of making their early collections too broad. This approach comes from the hope that making enough different styles makes it more likely that any given buyer (retailer) will find something they like. But buyers don’t invest in individual pieces; they invest in your brand. The more clearly you communicate what you’re about, the more likely buyers are to buy from you.

In this way making collections more focused can cut costs while sharpening your brand identity.

How do private sale companies avoid the gigantic advertising costs faced by other retailers? Mailing lists are a big part. And word of mouth marketing to populate those mailing lists also plays an important role. If you haven’t already started, begin building your mailing list today.

Invite customers who you know like your products. Offer something in return for them signing up. Give people an incentive to refer their friends. This can be exclusive access to sample sales, discount prices, prize draws. Anything that people might be interested in! Make referring friends easy.  Just make sure you don’t overdo it, or get tempted to spam. Only to send out announcements when you have something genuinely interesting to offer; make it easy to unsubscribe. Tools such as mailchimp make handling mailing lists easier than ever.

Behind every success story, there’s a wealth of lessons to be drawn. Understand why some companies struggle. And copy the companies that are successful (business practises, not creatively!).

I’m surprised that it’s taken them this long to catch on to the potential of viral video. I’m even more surprised that smaller labels aren’t doing more videos to promote themselves. It’s not an entirely level playing field; the buzz created by the release of these videos show that marketing budgets are important. However, smaller labels can make a big impact with viral video – much more cheaply than by forking out for adverts or billboards.

Let us know if you know of any good examples of viral video campaigns by smaller labels!

Below is a teaser of the Dior video:

And, for comparison, here’s the Chanel video: