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Define a pricing strategy effective is one of the most delicate (and decisive) aspects for the success of a fashion brand. It is not only a question of choosing a price that guarantees economic sustainability, but of building a positioning, transmitting a value e speak coherently to their audience.
In this guide we take you step by step through the process of setting the right price for your products, with a practical focus on the BAD method.
I am Corrado Manenti, and I have developed this process specifically to help fashion brands structure themselves strategically and competitively.
Why a pricing strategy is crucial for the success of a fashion brand
The price also tells something about your brand: exclusivity, accessibility, craftsmanship. A pricing policy consistent is a powerful ally for building credibility and being recognised in the market.
Many up-and-coming brands, however, fall into the trap of choosing their price solely on the basis of competition, without considering their own costs, objectives or positioning. This 'reactive' approach can lead to two harmful consequences: margins too smallwhich make it difficult to reinvest in the business, or inconsistent prices with brand perception, generating confusion and alienating potential customers.
An effective pricing strategy, on the contrary, is proactive, structured and deeply aligned with brand identity.
How to establish pricing strategy in the fashion industry
But how to establish pricing? The truth is that there is no standard formula: you need method, analysis and a strategic vision that takes numerous factors into account. The price must reflect the value of the product, but also support the business modelgenerate profit and correctly position the brand in the market.
Let's proceed in small steps: let's now look at three key aspects from which to build a solid, tailor-made pricing strategy.
Production and material costs
Every sound pricing decision starts with a deep understanding of the production costswhich are not only limited to the raw material, but include a number of items that are fundamental to the realisation of the finished product.
The main materials represent the heart of the product, but their cost varies according to quality, origin, certification and quantity purchased. Choosing organic cotton or certified wool entails a higher investment, which must be reflected in the final price in order not to compromise margins.
Packaging affects each garment: cutting, sewing, ironing and packaging are operational steps that require time, expertise and in many cases skilled labour. In particular, craft or small-scale processing may have higher unit costs than industrial production, but they also add perceived value.
Secondary but indispensable elements should not be forgotten, such as composition labels, finishes, buttons or zips, which often have hidden costs but impact on the final result and customer experience.
Added to this are logistical coststransport of raw materials, internal handling, possible customs costs (if producing abroad) and shipping to the end customer (especially if the price includes free shipping).
Each element that contributes to production has a direct impact on the cost of the garment. If underestimated or neglected, it can lead to an unsustainable final price, which does not cover real expenses and jeopardises the economic health of the brand.
An effective pricing strategy starts here: know each cost item preciselyupdate it frequently and use it as a basis for calculating realistic and sustainable margins.
Profit margins and economic sustainability
A well-constructed price must not simply cover production costs: it must generate margins that guarantee the economic sustainability and brand development over time. This means including items that are often overlooked, but essential to the health of the business project: marketing campaigns, development of new collections, photo shoots, collaborations, team management and improving the customer experience. Without an adequate margin it becomes impossible to invest strategically and respond promptly to market changes.
Furthermore, the pricing strategy must take into account the different sales channelsIn direct e-commerce, you may have more freedom in defining margins, but also higher management costs (shipping, returns, platforms). In physical retail, on the other hand, you have to provide for discounts and commissions on the final price.
For this reason, to build a sustainable price structure, you must first plan strategically: analysing the needs of the brand, setting clear economic goals and defining the right strategies and sales channels. Only in this way can you create a stable reality capable of growing over time.
Each element that contributes to production has a direct impact on the cost of the garment. If underestimated or neglected, it can lead to an unsustainable final price, which does not cover real expenses and jeopardises the economic health of the brand.
An effective pricing strategy starts here: know each cost item preciselyupdate it frequently and use it as a basis for calculating realistic and sustainable margins.
Customer Perceived Value Analysis
In addition to these factors, there is another aspect that should not be underestimated: price is never just a question of cost. It is a reflection of the customer perception of your brandand is closely linked to the overall experience you offer. You can have an aesthetically perfect product, but if you fail to convey value, the price will be disproportionate or unjustified in the eyes of the consumer.
The perceived value is built through a series of intangible elements but very powerful: thevisual brand identitythe storytelling, the quality of the images, the packaging, the online presence and even the tone of voice with which you communicate. Every detail helps to define whether the customer will be willing to pay a higher price and do so with conviction.
In addition, pricing directly influences positioning: a price that is too low can devalue the perception of the brand, making it less desirable; a price that is too high, if not supported by a coherent narrative, can alienate the target audience. The key lies in finding the balance between real and perceived valueconstantly reinforcing the identity and authority of the brand.
Pricing strategies for fashion
In the fashion world, where collections are renewed rapidly and positioning is closely linked to image, the pricing strategy must be adaptable, multilevel and deeply context-dependent. There is no single valid model: what works for a luxury brand might be ineffective for a streetwear line or a sustainable project. This is why it is essential to build a pricing policy that takes into account not only costs and margins, but also factors such as seasonality, product life cycle, consumer behaviour and sales channel used.
In book “The designer's journey' you will find a chapter dedicated to pricing strategy, because it is not just a matter of putting the price on a price tag, but adopting and following an entrepreneurial mindset that guarantees you a winning positioning in the long run.
Differentiating pricing between e-commerce and retail
Among the most important strategic levers is precisely the price differentiation between e-commerce and retailwhich allows margins to be optimised without sacrificing consistency or competitiveness.
Selling in physical retail implies taking into account the running costs of a shop or the margins of a retailer, even up to 60% on the final price. This means that the list price must be set in such a way that it still guarantees profitability, while leaving room for the retailer's margin.
In the case of thedirect e-commerceInstead, you have more autonomy in setting prices and a more direct relationship with the end customer. However, this also entails miscellaneous operating costssuch as logistics, shipping, customer service and online promotion. These elements must be calculated accurately to avoid eroding the potentially higher margins compared to the retail channel.
A well-constructed omnichannel pricing strategy provides for price differentiations that are not perceived as inconsistent by the customer, but are justified by tangible elements: premium packaging in retail, exclusive online offers, delivery times, additional services. The aim is to ensure healthy margins in every channelwhile maintaining a uniform perception of brand value.
Define the right sales channel for your business with our comprehensive guide: How to choose the right sales channel.
How the BAD method helps define pricing strategy
In defining an effective pricing strategy, it is not enough to make calculations: it is necessary to align every economic decision with the vision, identity and specific objectives of your brand. It is precisely on these principles that the BAD Methoddesigned to support emerging brands in building a strong, distinctive and sustainable business model.
The BAD Method addresses pricing through three fundamental dimensions:
- Brand positioning: clearly define your positioning to communicate coherence and value: what your brand stands for must also be reflected in the price.
- Economic analysis: mapping costs, margins, investments and targets to establish a sustainable and profitable price over time on each sales channel.
- Strategic design: ensure that every element, from product to communication, supports the perception of value and makes the price fully justified in the eyes of the customer.
The BAD Method does not offer standard solutions but proposes a customised path designed to turn your creativity into a competitive business project well positioned in the fashion market. Discover the BAD Method and book a free consultation to gain clarity and give you the opportunity to build an effective path from the first steps of creation to pricing strategy and final production!
Make your dream come true, choose the time and day, we'll take care of the rest together.
FAQ
How to calculate the right price for an item of clothing?
To determine the correct price of a garment, you have to consider several elements: cost of production, overheads, desired margin, e customer perception of value. A common method is the markupwhich consists of multiplying the unit cost by a factor (e.g. 2.5 or 3). However, mark-up alone is not enough: it is also crucial to assess what the competition is offering, which segment you are targeting (luxury, fast fashion, sustainable, etc.) and how much your customers are willing to pay. For premium brands, you can focus on value-based pricingwhere the price reflects the perceived quality and brand identity.
What is the difference between markup and margin?
The markup is the mark-up you apply to the cost of the product to determine the selling price. It is calculated as follows:
📌Markup (%) = (Sales Price - Cost) / Cost × 100
The margin, on the other hand, indicates how much you earn on the sale price. It is calculated as follows:
📌Margin (%) = (Sales Price - Cost) / Sales Price × 100
Practical example: if a dress costs you 40€ and you sell it for 100€, the markup is 150%, but the margin is 60%. It is important to know both to have full control over the profitability of your products.
How to manage sales and discounts without damaging the brand?
Discounts are a powerful tool, but must be managed strategically. Avoid too frequent discounts, which can getting the customer used to buying only on promotion and devalue the brand. Use targeted promotions, such as offers reserved for loyal customers or limited stock. Seasonal sales should be consistent with your collection calendar. For high-end brands, it is best to target added value (e.g. gift wrapping, free shipping) rather than lowering prices. Alternatively, consider outlets or flash sales on external platforms to handle unsold stock without impacting the image of your main e-commerce.
Is a fixed or flexible price better?
It depends on the business model and the type of customer. The fixed price is more consistent with a premium or luxury brand: it conveys stability, security and reinforces identity. A flexible price (e.g. dynamic discounts, temporary offers, tailor-made prices for different channels) is more suitable for those operating in fast fashion or online, where competition is high and speed of reaction is crucial. In some cases, you can also use a dynamic pricingwhich changes according to demand, time of year or user behaviour, but must be calibrated so as not to confuse or alienate regular customers.
How does price influence brand positioning?
Price is one of the strongest elements of positioning. It communicates immediately the value, perceived quality and type of experience the customer can expect. A brand with high prices is associated with exclusivity, craftsmanship and statuswhile a low price communicates accessibility and conveniencebut it can also suggest low quality. The secret is the consistencyprice must reflect and reinforce your brand message, not contradict it. There is no universal 'right' price: the right price is the one that reflects your identity and satisfies your ideal customer.
How much does price influence the purchase decision in the fashion industry?
Price has a big impact, but in a way different depending on target group. For mass fashion buyers, the price can be the MAIN FACTOR. For the conscious or premium consumer, price is important but not the only criterionsustainability, design, materials, storytelling and brand identity also count. Many customers are willing to pay more for a product that they feel relates to their values or tells a story that represents them. So rather than lowering the price, it often pays to increase perceived value of the product.
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