Pricing Pitfall #3: Going Above Retail Price Ceilings

by Jane Button on February 19, 2011

Going Above Retail Price Ceilings: Not Understanding What the Market Will Bear

 

Pricing is subjective – there is no question about it. It's based on perceived value. Add a little doodad or a designer logo and tada the price goes up and no one really cares because they see the value.

However, for certain items there are price ceilings or at the very least price levels. And it's important when you're selling an item that you learn to recognize these price ceilings in your industry. 

Some items sell better when they are priced under certain retail limits. 

For example when my company was in the sweater business the ceiling on children's cotton sweaters was $50.00 at the retail level.  This meant that the majority of cotton sweaters sold at retail for under $50.00.  Once they retailed over the $50.00 price they had to be extra special in design, details or other areas.  We needed to be well aware of this in our wholesale pricing to the market.  Our wholesale prices needed to be at around $23, tops, in order to get the sales and quantities we wanted.

We would sometimes experiment with raising wholesale prices but found for the most part, and for our customer base we stayed in, that that range was a good one for us. Our customers were the Nordstroms, Bloomingdales, high end boutiques, so even though we could occasionally go up we would reach a smaller market – i.e. the super high end boutiques in NY or Beverly Hills. And even though that might be prestigious – we needed to make money.

Do your homework in your particular market so you fully understand the ceilings or levels before you go out and compete in the marketplace. If you're going to step up into the next level be certain your special features are outstanding and are perceived by your market as killer benefits that will give them the sell through edge they need and want.

 

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{ 1 comment… read it below or add one }

Jewell Scott April 5, 2011 at 12:49 pm

Your website is a great find! It's a real pleasure reading your articles because it is obvious you speak from experience and not opion.

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