The art of pricing fashion
Posted by Ari on July 28, 2009 | 2 Comments
Pricing can be very tricky. Go too high and no one buys. Go too low and you sell yourself short. Get it right and you will sell more and keep tidy profit margins.
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.
Tags: fashion business > fashion design > fashion marketing > fashion pricing > fashion retail > luxury in the recession > luxury pricing
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2 Responses to “The art of pricing fashion”
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August 3rd, 2009 @ 2:57 pm
It was a very interesting post thanks for writing it!
August 11th, 2009 @ 12:56 pm
Good work! Adding to my faves :)
http://www.somethingdesigner.co.uk