How to price your products is a key sticking point for every business with everything that needs to be considered. If your prices are too high, you can lose out on sales; too low, and you’re leaving money on the table.
Whether your custom apparel business is brand new or you’re thinking of changing your price point because you’re not making enough profits or sales, first make sure that you’re not losing money or time with your current supplier and that you’ve partnered with the right screen printing services and apparel supplier. The pricing strategies below all have their justifications and risks, so think carefully before picking the right one for you.
This pricing strategy involves calculating your cost to provide your products or services and adding a percentage or fixed dollar amount as a markup. You need a precise calculation of all your costs to ensure you’re making the profit you intend to. The downside of this method is doesn’t take into account the market value of your products or services. But using this method can tell you how many sales you need to reach specific business goals.
This strategy is done by basing your prices on what competitors are already charging for similar products. If you’re not using the same price points they are, you need to find ways to differentiate your products and use that differentiation to justify to your target market why you are charging either more or less for your products than your competition is.
This approach requires researching your market and really knowing your customers for it to be successful. You are basically charging as much as you can, based on what your target market is willing to spend on it or the “value” they place on your products.
Price Skimming is when you are able to charge a higher price because your product or service is new on the market and you have no competitors. It could be argued that custom apparel is unique and, therefore, new, but if somebody comes along doing something similar, they can undercut your prices.
Often when new companies enter an already crowded market, their prices tend to be lower, and they have more promotions. This is the strategy of entering a competitive market by undercutting your competitor’s prices until you become an established brand and then raising your prices. This can be a risky strategy because a) your lower prices may make it look as though you’re selling inferior or bad-quality products, and b) raising your prices after acquiring customers could alienate them. Companies that use this strategy normally raise their prices very slowly in low increments over a long period of time.
Further Research is Required
These are short explanations of a few of the most common pricing strategies, and there is a lot of thought that must go into how you price your products. If you sell clothing from other brands alongside your custom apparel, for example, you have to consider different pricing strategies that include the manufacturer’s suggested retail price and keystone pricing.