Decoding Pricing Strategies Vol.2

More than mathematical…

Crafting appropriate pricing for your collection is very much like dancing on a tight rope, in our last article we discussed pricing models and margins that are a necessity when producing a price for your products, but what else informs attractive pricing for your customer.

Setting the right price for products or services involves a strategic blend of understanding target market dynamics, analyzing competition, and optimizing sales channels. How do you set a price that’s achieves your goals as a business, not only financial goals but also establish your brand firmly in the minds of your customer.

How does your business set prices that appeal to your target customer and what role does your competition play in your pricing?

Lets discuss some more possible goals for your pricing strategy?

A.    Remain affordable and accessible to my target market

B.    Compete with similar brands for their customers

C.    Utilise pricing to optimise sales channels

D.    All of the above

Image: Lulla House

Here are the steps to consider when refining your pricing once that maths is all out of the way.

1.     Current & Target Customer

2.     Brand Competitors

3.     Sales Channels – Local and Domestic

1.Your Current and Your Target Customer

Everything in business begins and ends with your customer, the one you’re currently serving and the one you dream of (if they’re currently not the same person).

Your customers are the first reaction to your pricing so you need to ensure this is in line with their reasonable expectations. Understanding the psychographics, needs, preferences and shopping behaviour of these customers will bring your pricing over the line. Consider factors such as age, income levels, geographic location, and household composition. These factors directly influence your customers purchasing power and willingness to pay.

Luxury products target customers with greater disposable income, this comes with the expectation that luxury products have higher than average pricing. Your pricing has to be somewhat expected by your customer, as discussed in our previous article, pricing should always be reflective of value. Where your customer does not feel the price is reflective of the value of your product offering, they will likely be suspicious or lose interest in the product all together.

Furthermore, consider your customers spending habits. Do your customers shop weekly for example, for special occasions or during special seasons? The frequency of this expense would also inform the price. If your customer feels your product price is inexpensive, they are likely to buy more often. If this price is aspirational or out of their regular budget it is also likely they will save to purchase or purchase only on special occasions.

Now that you have this on board, how much is required to alter the price of your products to suit your customer. Tailoring your pricing to emphasize these value propositions ensures that customers perceive your offering as worth the price. By aligning pricing with customer insights, businesses can enhance satisfaction, improve sales conversion rates, and foster long-term loyalty.

Image: Viviers Studio

2. Keep Competitive  

Competitive analysis helps in benchmarking prices against industry peers and differentiating offerings based on unique selling propositions. Consider the competitive landscape and what your customers other options are because they will too.

Competitive analysis is integral to setting prices that are both competitive and profitable. Start by thoroughly examining direct competitors in your market. Analyze their pricing strategies, product offerings, and market positioning. Understanding where competitors stand—whether they position themselves as premium, mid-range, or budget-friendly alternatives—provides a benchmark for pricing decisions.

Highlighting your Value Proposition is crucial. What sets your product apart from competitors? Whether it's superior quality, innovative fabrication, or exceptional customer service, this value should reflect in the pricing. You will need to ensure these are communicated effectively through marketing to justify pricing away from your competition.

You should never go toe to toe with your closest competitor on pricing because your miss the opportunity to either enjoy premium pricing or the very profitable position of undercutting your competition. Decide on your market positioning relative to competitors and ensure your marketing puts you in the best position to capture market share.

By strategically analyzing competition, businesses can optimize pricing strategies to stand out in the market, attract target customers effectively, and achieve sustainable profitability.

Image: Olooh Concept 

3. Where are you selling (and how?)  

Your pricing strategy should also help you optimise your sales channels, pricing is a huge factor when move into new markets that you have no established customers. Further consider peoples perception of spending online and in person, does your pricing need to consider a wholesale to retail margin, or does it require a tailored personal experience as opposed to clicking a button on a website.

Direct-to-consumer aka. DTC (discussed in an earlier article) sales offer businesses greater control over pricing strategies, customer relationships, and brand experience. Implementing dynamic pricing strategies, personalized offers, and direct feedback mechanisms can optimize sales and profitability.

Indirect sales on the other hand such as partnerships with distributors or retailers, extend market reach but require careful pricing alignment. With your pricing, you must consider what value looks like to your retail partners and this is usually an operational margin. As the origin brand, you must promote consistency in pricing to ensure that profit and value is shared amongst your sales partners.

Online and offline channels each have distinct dynamics. Offline channels, like physical stores, offer tactile experiences and personal interactions that can justify premium pricing, does your product require an in person service, and how does the price reflect the service provided, again – a further consideration of value exchange between company and customer.

By considering your active sales channels in your pricing strategy, your businesses can streamline distribution costs, expand market penetration, and tailor pricing strategies to leverage the unique dynamics of each channel for overall growth and profitability.

Image: Christie Brown

In conclusion, effective pricing strategies integrate insights from target market analysis, competition assessment, and sales channel optimization. Businesses should continuously monitor market dynamics, consumer trends, and competitive moves to refine pricing strategies accordingly.

Book a consultation with our experts to explore personalised approaches tailored to your business goals and market dynamics. Proactively adapting pricing strategies ensures businesses remain competitive, profitable, and responsive to evolving market demands. This proactive approach not only enhances market positioning but also drives sustainable growth and customer loyalty in a competitive business environment.