Getting the price right in retail can be complex and is often one of the most challenging yet crucial parts of an effective business and revenue model.
In this episode of The Rebound, Australian futurist, author, and entrepreneur Steve Sammartino; Creative Director Tommy McCubbin; award-winning television presenter Rad Yeo; and APAC Marketing Lead at Shopify Bertie Ocampo explain the ins and outs of getting pricing right.
The impact of discount sales on a brand
Discounts and reductions are an integral part of the retail mix. With the popularity of Black Friday Cyber Monday and Click Frenzy growing each year, it begs the question: Do sales devalue a brand?
Bertie Ocampo explains, using well-known brand Coca-Cola as an example.
"I love that Coca-Cola was the first brand to hook consumers with discounts in 1887,” she says.
The very first coupon, which was redeemable for a free glass of Coke, would shape the future of commerce.”
The science underpinning the very first discount is still at work today online—receiving discounts releases oxytocin and makes us happier.
Bertie explains, “Unless you run an ultra-premium brand, discounting is unlikely to negatively affect your brand. In fact, it could be really helpful in a number of ways.
“Besides increasing sales, discounts can discourage customers from abandoning their online shopping carts.”
The opportunity to redeem a coupon also motivates consumers new to your brand to make their first purchase.
Bertie says, before offering a discount, clearly define what you want to achieve. Your goals with discounting may include:
- Acquiring new customers
- Increasing sales
- Earning repeat customers
- Getting rid of unsold inventory
“The discount strategy is up to you, and all good pricing strategies require experimentation, so remember to test and learn and iterate,” Bertie says.
Learn more: Pricing Strategies: Discount Strategies and Tactics
Competitive pricing crucial to business outcomes
Pricing your products is one of the cornerstone decisions you’ll make, because it impacts almost every aspect of your business. Your pricing is a deciding factor in everything, including your cash flow, your profit margins, and which expenses you can afford to cover, Bertie says. Bertie adds:
It’s all too easy to get stuck on your pricing strategy when you’re launching a new store or product, but it’s important not to let the decision stop you from launching."
According to Bertie, the best pricing data you can get is from launching and testing with real customers—but you still need to start somewhere, with a price that works. But when setting a starting price, just because it’s the price you use to launch doesn’t mean it’s the price you’ll use forever.
“To set your first price, add up all of the costs involved in bringing your product to market, set your profit margin on top of those expenses, and there you have it,” she says. “Forget about your competitors for now, and do what makes sense for your financial situation.”
Brand equity: proving your product is premium in the eyes of consumers
There’s never a black-and-white approach to setting a pricing strategy, and not every pricing strategy will work for every kind of retail business.
“Every brand owner will need to do their homework and decide what works best for their products, marketing strategy, and target customers,” Bertie says. “You can definitely benchmark your competition and then consciously price products above them to make yours seem more luxurious, prestigious, or exclusive.”
Be confident and focus all your efforts on the differentiated value you provide to customers, and ensure you are providing value for the price you have set.
“For example, great customer service, appealing branding, great packaging, maybe expensive eco-friendly packaging, and premium content on all your channels,” Bertie says. “Find any and every way you can provide real value to customers to demand those higher prices.”
Who’s getting it right?
Rollie Nation founder Vince Lebon began his journey starring in a global reality show, Lace Up: The Ultimate Sneaker Challenge, where he designed shoes for stars like Pharrell Williams and Beyoncé. Now he sells hundreds of shoes around the world and uses price to set the brand apart.
Before starting Rollie Nation, Vince had been in the footwear business for some time, so he had a fairly solid understanding of how to price his product.
“I found that if you hit that price point of $99, it was magic,” he says. “People came in and fell in love with the product. And over time the prices had to increase. Once we started wholesale we had to protect our margin, and then you have the Australian dollar increasing and a rise in prices offshore.”
When it comes to pricing yourself, Vince says it’s all about perceived value, not about trying to be the cheapest in your market. He adds:
People are buying emotionally, so you’ve got to find out if people are invested in your brand. If they are, you can use that to dictate the pricing.”
The sneaker industry is known for its “drops” in the market—when a brand releases a shoe as a one-off—something Vince sees as a crucial part of Rollie Nation’s brand.
“We do drops all the time,” he says. “Scarcity is an important business model. For sneakers, it works incredibly well. We will do drops of special colorways or collaborations all the time, and they’re limited. You get in, get out, and you do not repeat them.”
Rollie Nation has 65% of its store online. Two and a half years ago, it moved over to the Shopify Plus platform.
“It is a matter of using your imagination to work out what you want to do. We are doing 3D work right now that is built into the platform,” Vince says. “With Shopify, everything is in-built.”
Quick takeaway tips
- Don’t underestimate the power of well-carved discount offers and sales.
- When setting the right price for your product or service, test first with real customers.
- A price is never fixed. It can be changed as your business grows.
- When setting the price, clearly demonstrate the value of your product or service.
- Avoid being the “cheapest” in your particular market.
- Explore the concept of “scarcity,” and consider offering limited editions in your offerings.
About The Rebound Season 2
- Episode 4 of The Rebound Season 2 aired in Australia on Saturday, July 24, at 12:30 p.m., on Channel Nine. New episodes are released every week
- Each new episode of The Rebound will cover a different theme to address the most pressing opportunities and challenges facing entrepreneurs today.
- The themes, in chronological order, are: Skills, Design, Storytelling, Pricing, Culture, Growth, Future of Work, and Crypto.
For more information about The Rebound, visit the website, where you can watch all episodes from season 1.