The Challenge:
A pre-launch fashion brand was set to introduce a range of ‘elevated basics’ but had priced their products based solely on production costs. They hadn’t factored in the full cost of doing business—transaction fees, marketing expenses, cost of acquisition and customer expectations like free shipping and returns. They needed a pricing strategy that would sustain profitability from day one and support future expansion into wholesale.
Our Approach:
We started with a detailed cost analysis, identifying every hidden expense that would eat into their margin. Beyond production costs, we factored in the behavioural-driven elements that influence conversions—such as offering free shipping and easy returns, both of which are now standard expectations in the mid-luxury D2C space.
This exercise led us to a new price point that kept them positioned within the ‘everyday luxury’ category while ensuring a viable margin for both direct-to-consumer sales and wholesale expansion, where retailers demand at least a 50% margin.
But setting a price isn’t just about covering costs—it has to work for the customer, too.
Behavioural Economics Meets Market Research:
We always start with two key factors: disposable income and consumer spending habits. Market research shows that people typically spend around 5% of their after-tax income on clothing each month. To comfortably spend £75 per month on fashion, a customer needs an annual salary of at least £21,000. Given that these items wouldn’t constitute a shopper’s entire clothing budget in a given month (or be something they were willing to save for across multiple months), we set our sights on customers earning at least £48,000 per year—high enough to afford mid-luxury but without the expectation of designer-level exclusivity.
With this salary threshold in mind, we mapped out a target age range and social class, using UK salary data to refine the brand’s target audience.
Aligning Brand Positioning with Pricing:
A pricing strategy is only as strong as the brand supporting it. The company had already designed packaging and executed their first photoshoots, but we needed to ensure their brand identity aligned with their ideal customer. Would the messaging, visuals, and overall experience justify the price point? After a brand audit, we fine-tuned their positioning to resonate with the identified audience, ensuring consistency across all customer touchpoints.
Setting Up for Scalable Growth:
With a strong pricing foundation, we calculated the brand’s Cost of Acquisition using our category-specific ROAS benchmarks. From there, we developed a sales strategy that would allow them to scale profitably, hitting their revenue goals without eroding their margin.
The Result:
The brand launched with a sustainable pricing model from day one—profitably positioned for both direct-to-consumer sales and future wholesale expansion. Instead of playing catch-up on margins post-launch, they started with a pricing structure designed to support long-term growth.
Key Takeaways:
- Pricing isn’t just about production costs—it must account for the full cost of doing business and acquiring customers.
- Behavioural economics helps pinpoint the spending limits of your target audience.
- Your brand identity must justify the price you charge.
- A pricing strategy built for both DTC and wholesale ensures long-term profitability.