Understanding Your Market Position
A great deal of time is spent among entrepreneurs - and I suppose business owners, too - talking about the importance of understanding one’s place in a market. Oddly, for how necessary it is, it’s not often something we discuss outside of this crowd. It’s a bit like being at a dinner party, and constantly debating who brings the most to the table in a game of nude Monopoly.
Where was I again. Right, market position. Knowing where you’re situated is rather important to running a successful business. It lets you make decisions around pricing, product positioning, marketing, and manufacturing.
Sort of. And that stuff gets layered into your business more than croissant dough at a boulangerie. All the ‘P’s of marketing: price, place, promotion, and product are supposedly all tied together in this neat little bow of how you sit in a market. Once you do figure out your spot in the market, though, it doesn’t mean that’s always going to be your spot.
As you get bigger (or smaller - you may choose to scale down to appeal to another audience), new players may enter the arena, or existing ones might move up or down themselves; you’re going to have to revisit this exercise every so often. Your market position changes as the world around your business changes. So while understanding your market position is probably one of the most important things you can do for your business, don’t forget about it after having done so once either.
There’ll be lots of learnings as you go along, and while it’s easy (and often necessary) to focus on being the best at everything right from the get-go - it’s also absolutely crucial to regularly take stock of where you are in your market. It allows for calculated decisions that serve your customers better because they come from a place of understanding their needs and wants in context with what else is available to them out there.
The Psychology of Pricing
Most people know that pricing is all about influencing perceptions. However, there’s a great deal more to pricing than slapping on price tags. Quite a lot of research has gone into understanding why people value certain things over others, and how price is a critical marker of value.
There are possibly plenty of solid strategies out there - the odd-even method, the number 9 ending, anchor pricing, and so on. The odd-even tactic works by placing your price just before the next whole number, such as $4. 99 instead of $5.
00. Customers seem to perceive this price to be less expensive, as their brains process the numbers from left to right and anchor the price closer to the first digit.
Customers are also subject to both internal and external reference pricing - that is, what they think something should cost versus what you suggest it should cost. So when you give them that sweet deal in reference to your higher ‘original’ price, they’re bound to bite. I am rather fond of the anchoring concept, as it showcases how strong psychological pricing can arguably be. Customers will always rely on a reference point or ‘anchor’ for their perception of fair value.
When you show them your previous price or another competitor’s higher price alongside your new discounted offer - you’re showing them how great this purchase opportunity really is. And yes, this little trick is used everywhere from the fruit shop to Qantas flight sales.
Dynamic Pricing Techniques
Now, I know we’ve all experienced the strange joy of bagging a bargain at a flash sale or the mild fury of seeing an airline ticket price jump in under 10 minutes. This is quite a bit the world of dynamic pricing at play, where businesses flex their prices depending on variables like demand, stock levels, competitor rates, and yes - sometimes just because it’s Tuesday. It can be delightfully opportunistic or painfully unpredictable depending which side you’re on. The magic trick is to use algorithms and data science to read the room.
Or, well, read the internet. Airlines are notorious for this - tracking customer searches and nudging fares up when you go back for a second look. I won’t say it isn’t cheeky.
But it works and they rake in profits because of it. Similarly, ride-sharing apps surge prices when you need them most (think wet Friday nights in December), drawing driver supply to high-demand areas and managing customer volume by raising the ‘is it worth it.
’ bar for passengers. It seems this sort of pricing can possibly be off-putting if not handled with care.
Price transparency is somewhat probably more important now than ever before because consumers are savvy and jaded - a bad combination for trust. When your customer understands why they’re paying a certain price or what value they’re getting in return, dynamic pricing feels more collaborative than exploitative. An early bird discount for tickets is kind of very different from hiking prices at the last minute.
Though both rely on urgency - one rewards you for quick action while the other penalises you for being slow. What I do admire about dynamic pricing (and sometimes get frustrated by) is how responsive it can be. For an online retailer or small business without advanced AI tools, sticking to simple rules like discounting end-of-season stock or bundling products together keeps things manageable but still flexible enough to match market shifts.
The way I see it, the idea is not to fixate too much on daily fluctuations but respond to general patterns over time. Sometimes that means going against the tide altogether and keeping pricing consistent throughout the year so you become a reliable option when everyone else gets greedy around big sales days.
Value-Based Pricing Strategies
Finding the price point that is just right for your business and customers can be trickier than finding a missing earring in a party hall. Many companies try value-based pricing - a model where pricing is based on how much the product is ‘valued’ by a consumer. This isn’t about what you think your product or service should cost - it’s about what your customer thinks it’s worth.
A successful implementation of this model can boost profits and drive growth in a matter of weeks. Understanding your customer and what they find valuable about your offering is kind of essential to this model. You need to know why they’re shopping with you over another brand, how much they’re willing to spend, and what more they expect from you.
What are their needs, pain points, and expectations. Value-based pricing requires deep market research and analysis to deliver on its promise of growth - but once you can pinpoint exactly why people are shopping with you, you can leverage that knowledge to meet their expectations as best as possible. And since value-based pricing means not keeping yourself tied down to a constant price, it allows businesses like yours to take advantage of fluctuating markets.
The flexible nature of value-based pricing also comes with limitations and disadvantages that require attention. Extensive research requires time, money, and effort; but even if done well, it may still only represent a sample of people who interact with your business. Sort of. Inadequate sampling may lead to misinformed decisions that could potentially limit profits rather than grow them.
But the most important thing to note here is whether value-based pricing is feasible for your business at all or not - especially if there are too many competing brands vying for similar customers. The reason why it works for many businesses today is because their positioning stands out from the rest - making them unique enough to command higher prices while providing good enough quality for customers to want to pay more. If you think your business meets these requirements, value-based pricing could be an excellent way for you to unlock new opportunities for growth and profit.
Implementing Discounts and Promotions
You can typically feel the temptation in the air. The thrill of slashing prices and watching customers rush in, sales surging, numbers going up. Sort of.
It all sounds a bit too good to be true, doesn’t it. And yet, those discounts and promotions are rather crucial for any business looking to grow in the fashion sector. When done right, running promotional campaigns is like giving your brand that much-needed boost - sort of like downing an espresso on a particularly slow Monday morning.
In theory, marking down prices is always more likely to bring in more buyers. Sort of. These campaigns also attract attention and help set your brand apart from others in a similar price range.
A common thread among successful businesses is their ability to seamlessly incorporate these offers into their sales plan at just the right time and for just the right products. Finding that balance is sometimes no mean feat. Business owners often forget how important it is to maintain a healthy relationship between discounts and profits - a long term vision of growing as a company while increasing revenue and perhaps even making more money than before they ran those discounts. If you’re unsure about which products would work best with slashed prices or what time of the year might benefit you the most, you could always try out limited time offers with existing stock before committing to larger investments.
The industry does feel crowded these days so don’t let the buzz around you get overwhelming. You know your business best so try different methods till you find one that works for you.
Monitoring and Adjusting Prices for Optimal Results
I think it’s safe to say that even the savviest minds in fashion don’t always get price points spot on at launch. Fashion, more so than most other industries, is notoriously unpredictable. Most brands will miss their prices at some point - just by a little. And in some cases, they might bomb spectacularly.
I feel that’s really where continuous monitoring comes in. Nothing is going to grow your bottom line quite like a price point that sits at the intersection of unique perceived value and affordability (as viewed by your target segment). There’s a great sense of satisfaction when you’re able to change prices before your less-than-exciting pricing strategy becomes apparent to your buyers.
Pricing is all about trial and error, and then some more trial and error. Ideally, you want this process to go on for as long as possible - at least until you can get to a price point that maximises profitability, while minimising overstock (which is probably a much bigger problem than missed profits). But you’ll only ever know how effective your approach is if you monitor results closely and regularly.
This often means tracking KPIs like profit margin, conversion rates, and average transaction value with an almost neurotic consistency. More or less. If you’re able to act fast enough, keep a close eye on what the data suggests is apparently working best for each product or collection and then tweak your prices accordingly. This is nearly always an ongoing journey and one that needs curiosity and openness if you’re hoping to build a brand that stands the test of time.