After you’ve gone through the process of designing, producing, and organizing clothing in your store, you have to decide what to price your items. Shoppers don’t wait until they reach the cash register to check the price tag. Determining the right price is a marketing tactic that helps invite and excite customers.
Here are three questions to ask yourself before deciding what to price the clothing in your store.
1. Who Is Your Manufacturer or Wholesaler?
The cost for producing your clothing will differ depending on which manufacturer or wholesaler you use. To earn a profit, your will need to sell your items at a higher price than what the manufacturers and wholesalers charged you to make them. This cost-based pricing strategy helps you identify a minimum sales price. As for your exact price, there are other pricing methods to layer on top of the cost-based approach to help you decide how much to mark up the price.
Keystoning is when a seller doubles the price from its previous cost, whether that seller be a retailer, manufacturer, or wholesaler. Both wholesalers and manufacturers use keystone markups – manufacturers selling at double the production costs and wholesalers at double the manufacturing cost. This is why we advise cutting wholesalers out of the purchasing process: why buy an article of clothing for two times the manufacturing cost when you can simply buy it at cost?
While many retailers opt for the keystoning method, a 100% markup may be too demanding for some brands. For lesser-known brands selling in a competitive market, it’s best to lean into reasonability over profitability, without compromising on either.
There is also Manufacturer Suggested Retail Price to consider. MSRP is the price a manufacturer advises a retailer to use. MSRP helps standardize global pricing of certain items and products. However, this becomes an issue if you sell in a competitive market. While your price should fit the market you’re in, it should also differ from those of your competitors, whether higher or lower.
2. Where Do You Fall in the Market?
Many boutique owners assume that the best way to stand out from their competitors is to offer the cheapest price. However, raising your prices beyond your competitors can also cull customers. If you advertise your brand as high-quality, then higher prices will reinforce that outlook. Because Starbucks considers itself the “premier purveyor of the finest coffee in the world”, customers expect to pay more for a Starbucks coffee than a Dunkin Donuts latte. Besides high-end brands charging more, celebrity brands also enjoy a higher sales price. Their products get immediate recognition upon their release thanks to the name the celebrity has established for themselves. This is why Kylie Jenner can get away with a $20 lipstick.
If you are not yet an established brand, your customers will expect lower prices. Customers who peruse the clothing racks of low-end stores aren’t looking to buy clothes for the brand name; they are simply looking to buy clothes at a reasonable price. If this is the case, you should meet their needs. Knowing your targeted customers’ wants can help you set a price for your clothing.
Another thing to keep in mind as you navigate a competitive market is who your direct competitors are. Price wars are only relevant if the other brand is a direct competitor. As previously mentioned, if you can offer something different from another store, then price becomes a side factor. If, however, one of your competitors offer similar products in a similar manner, it is important to use price as a differentiator. Know which competitors pose a threat before lowering your price to outshine theirs.
3. Which Psychological Tricks Do You Want to Employ?
There are three psychological tricks that many stores use to garner customers.
1) Multiple Pricing
Multiple Pricing is when stores sell numerous items together at a single price. Selling multiple items in a bundle gives the illusion of a better deal than buying each item individually. Nintendo found success with this trick, selling more handheld console products when the devices came with a game.
2) Discounted Pricing
Another popular strategy is to offer discount pricing. Nothing is more appealing than a discount. With this in mind, Amazon introduced “Amazon Prime Day,'' a day where products sell at a discounted price. Some companies have even raised product prices prior to “Amazon Prime Day” so that they could join in on the discount madness without reducing their desired profit margin. The same can be said for “Black Friday”.
3) Anchor Pricing
Anchor pricing plays on the discount trick by sharing the previous price of an item (with the price crossed out) alongside the updated price. The higher price acts as an anchor, a measurement of this item’s value. Once the price is lower than the anchored price, customers now feel it is worth buying that item considering it “should be bought for more”. More often, price determines value rather than the other way around.
4) An Odd and Unusual Trick
In William Poundstone’s book Priceless, he found that sales increased by 24% when prices ended in an odd number. As for which odd number to tail at the end of your price, researchers at MIT and the University of Chicago found that number 9 is the most influential. Between a women’s clothing item clocked at $34, $39, and $44, the $39 item sold the most.
Consider using these three questions as a guide to decide the best price point for the clothing in your store.