Private Label Definition
These are brands owned by not by a manufacturer, but by a retailer or supplier. Retailers and suppliers purchase the goods, then label and market them under their name.
Do you know that the pricing strategy you adopt has an effect on your business as a whole? Most retailers don’t know this, so they don’t put enough thought into planning their pricing strategy.
You may think pricing your products very low would help attract customers, but this is usually an ill-advised move as what it often does is tell your potential customers that you are offering them low-value products. Like it or not, people always want to buy expensive products even if they are of the same value as the cheaper ones. It doesn’t make sense right? Well, most people tend to equate the value of an item to its price.
Prestige pricing involves pricing your product very high to attract shoppers. It is also called premium pricing, and the strategy is purely a psychology one. It gives shoppers the impression that they are getting a product with better quality than its cheaper counterparts are even if that is false. This strategy has been such a successful one because it attracts people that define their status with what they own. Premium priced products usually come in limited copies and the thought of owning a product that no one else owns drives some people into purchasing these items.
In premium pricing, the way customers perceive your brand is very crucial, which is why consistency is one of the most important qualities for any business offering prestige pricing. It is essential that you don’t sacrifice price whenever it seems like your business plan is not going the right way. Doing this will only send the message that you have a weak brand and you are one of the mainstream companies that cut the price to earn their business. You don’t see Luis Vuitton cutting down on the prices of their products because customers are not buying the products.
Using premium pricing makes your brand standout among the competition. In retailing, a business that stands out often attracts more shoppers than others because of the curious nature of humans. By increasing the visibility of your brand, you are automatically drawing more sales, which consequently leads to a higher profit margin.
Although using prestige pricing has its advantages, it is not without its weaknesses too. This business strategy – although effective – often requires more marketing cost. You have to be prepared to invest a lot of money in building up your brand to make it a premium brand. No one will pay top dollar for a brand that they have never heard of, so it is your job to make your brand ring in everyone’s ears. If you are not ready to invest a lot in this business strategy, then you should probably stick to the standard, competitive pricing. Also, running this strategy means you have a limited customer base. This makes sense because your products will be targeting the upper-class members of the society. Therefore, while you may be making fewer sales, you will surely make up for it with more profit on each sale.