Today, brand values are becoming increasingly important. It’s more critical than ever to deliver pricing that is driven by customers’ perceived value. In other words, unoptimised pricing hurts profit margins. 

To establish an effective pricing strategy, merchandisers can adopt the ‘good-better-best’ pricing approach. With this method, pricing is based on the perceived or estimated value of an item. By balancing the margins of the items according to perceived values, you can ensure profitability is evenly distributed across.

This strategy is mapped against the three different tiers of fashionability:

  • Core
  • Fashion
  • High fashion

Core items, like a t-shirt or plain cami tops, will likely be priced lower compared to more fashionable products in a brand’s collection.

Below are the steps to implementing the ‘good-better-best’ pricing structure, a structure of pricing products based on its fashionability using the Trade Insights Module.

Step 1: Select brand and market 

The first step is to click on the Start Here button under Optimise Pricing Strategy. Follow the guide by filtering to your selected market, brand, gender and date range. It is vital that you choose your set of filters before any analysis is done. 

Step 2: Review brand’s price breakdown by category

Once you have selected your filters, click Show All on the bottom left of the page and click on the 3rd option, Price Analysis by top 3 categories. This will direct you to the pricing structure of the brand selected, sorted from the lowest to highest price

Once you are directed to the Price Breakdown by Brand, you are able to view the price breakdown of the brand by the category selected from the top filters. The price status and stock status are filtered in default as full price and out of stock to identify the top 3 categories of the brand selected, Zara. From the top filters, click on the category button to view the list of categories sorted by the number of SKUs. In this example, we have selected the Tops category for analysis.

Step 3: Review Price Breakdown Based on Tiers of Fashionability

View the assortment in each price bracket by clicking into the price brackets. This is done to identify white spots as well as understanding a brand’s Good-Better-Best pricing structure. You can also deep dive into sub-categories for a more granular analysis. Below are key observations noted for each tier of fashionability.

Good

Products under the Good pricing tier refers to the core products. Core items are products that are considered basics and evergreen, less seasonal, items such as white t-shirts or everyday jeans can be regarded as core items. Core items are more focused on the volume rather than its margins. The margins for a core item can be the lowest as core items tend to sell better and have a lower production cost due to higher order quantity. From the perspective of a customer, core items are also the most basic level in style. Therefore the selling price should be reflective of this.

Here, it can be seen that the “Good” price range for Tops category consists of solid coloured basic products such as basic t-shirts, crop tops, turtlenecks and bodysuits. 

Better

Products under the Better price range refers to the fashion products. Fashion products would be your mid-tier products, items that are more trendy than basics but are not the most elaborate items in your assortment. Fashion items can have average margins as they will most likely have fewer sales compared to core items and have a higher production cost. These items will have a higher perceived value, as customers can justify paying higher prices for a more trendy design.

Under the “Better” pricing tier, a higher number of fashion elements can be seen below, such as puff sleeves, frills, embroidery details and better fabrications such as satin or crochet. 

Best

Products under the Best price range refers to the high-fashion products. High-fashion items are the most elaborate items, with intricate designs and details, in your assortment based on design. They are also most often made with a better quality material as compared to the basic and fashion products. These items have the highest margins as they have a lower sell-out and high production cost. There are cases where margins have to be sacrificed due to high production cost and low order quantity. Still, it is essential to stock this category as it elevates brand perceived value and drives brand PR. Buyers and merchandisers are often advised to take these products to complete the brand story of each seasonal collection to attract people’s attention to the other products in the assortment.

Here, we can see that the “best” price range has the highest fashionability attributes, with louder and bolder fashion elements with progressive designs. The significant attributes that can be seen would be sequinned, voluminous sleeves detailing, draped styling or better materials like linen and satin.

Based on the key insights, we can conclude that the best selling price range for Tops was SGD 45-50, which is the “Better” pricing tier, followed by SGD10-15, the “Good” pricing tier. Some points to consider from here are whether there are differences in the brand’s top 3 categories and your own brand, and how these differences compare to your assortment based on the product’s fashionability.

Key Takeaways

With the ‘good-better-best’ approach, you have a clear idea of how customers perceive a product’s value, at the click of a button. With this, you can always ensure that your products are priced right in the market and be alerted of pricing architecture and strategy changes of competitors to allow you to stay competitive in the market.

Hope you found this article helpful! If you have any questions or would like to explore the Omnilytics dashboard further, feel free to reach out to your respective Client Success Manager.

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