Price can communicate a variety of messages – yes, it can position a product as cheap, or alternatively as good quality, good value or luxury, and therefore in the right circumstances a higher pricing policy can sometimes be perceived as a positive thing (in fact in research even analgesics are perceived as more effective when people are told they are expensive). This proves that although we may consider pricing to be a distinctly rational process, the shopper subconscious has a very important role to play.
So are there any rules when setting a pricing policy?
The answer of course is that every product faces its own unique set of circumstances and challenges so that it’s almost impossible to generalise. However with a nod to the proven effectiveness of behavioural economics and the power of comparison, pricing policy can effectively present a ‘bronze, silver, gold’ proposition to the shopper (guiding the shopper in the majority of circumstances to the ‘silver’ option) i.e. when the shopper is presented with three unbranded and identical cans of beans priced from cheap to expensive, they will invariably decide to opt for the middle-priced can.
Which provides a neat segue to the aptly named ‘300 Club’. So called because in a time of tightened purse strings, there are still a number of shoppers who, whilst cost-cutting on a daily basis on commodities, reward themselves for their thriftiness a couple of times a year with something a little more luxurious. But at what price?
Well the concensus appears to be circa £300. This is the new ‘sweet spot’ for the aspirational shopper seeking accessible luxury designer handbags, shoes and accessories. As a result, there are now a rising number of luxury brands using lower prices – with a £300 tag – to attract more customers ( there are about 900,000 women aged between 25 and 35 in the UK buying accessible and high street luxury brands according to Kantar research ).
The leader of the ‘300 Club’ is Michael Kors, which, with 17m fans on social media, is the most searched for designer brand on the internet. His best selling £310 Dillon tote carried by celebrities including Rosie Huntington-Whiteley and Miranda Kerr has become the must-have bag of 2015 with sales of Kors accessories up 80% in the second half of 2014 at Selfridges.
Other members of the club such as Fendi, Mulberry, Prada, Vivienne Westwood, Ted Baker, Reiss and Jigsaw are all enjoying booming sales of products priced in and around the magic £300 mark with products such as; DKNY feather skirt (£300), Tamara Mellon suede court shoe (£310), Nicholas Kirkwood metallic shoes (£305) and Michael Kors red silk dress (£265).
So what’s your pricing strategy saying about your brand?
Can you be down-sizing volumes and offering less for the same price, or should you remain as is and be increasing your price? Is there an advantage in tiering your product offering? Should you be introducing a range extension with a premium price tag in order for all products in your portfolio to benefit from the ‘luxury’ halo this creates?
When it comes to pricing, there’s no one answer. It’s dependent on, among many other factors, market forces and product category, but it’s always worth remembering that leaping to discount price in a recessionary environment isn’t always the best solution.