Lily Rice: how I decided what price to sell my products for
Lily Rice launched her women’s sportswear brand, Lexie Sport, after receiving a £10,000 Start Up Loan from Virgin StartUp. One of the hardest parts of starting her business? Deciding how much to sell her product for.
“What’s it worth’ is probably one of the first big questions entrepreneurs need to ask themselves when setting up a business.
A price can change your entire business model and even whether you have a business at all. There are many ways to price your product, look at the market, work out your costs or for some, simply picking a figure from thin air works! Our road to pricing was a combination of all three.
When launching Lexie, part of the brand DNA was the pricing structure. While competitors targeted the yummy mummies with cash to blow or the fashionistas who are more latte bar than squat rack, Lexie would under cut them on price, while still keeping quality high. We would attract the cool girl, the graduate that looks awesome even on her daily 5k and has just discovered a bit of disposable income. Well that was the plan.
Our first batch of production was manufactured abroad so costs were fairly low. Using a simple pricing equation and looking at our competitors pricing we came up with our end figures, £30 for shorts up to £65 for a hoody.
The first problems arose when we launched with a pop up shop. Customers who weren’t aware of the price told us the product was cool and awesome, which it was. Customers who clocked the tags thought it couldn’t possibly perform (it did) as it was too ‘cheap’. Yuck. If there is one thing in fashion you don’t want to be it’s cheap. But the prices were set and there wasn’t much we could do so we soldiered on with a new plan for next season.
With our second collection we decided to re-shore. We’d had loads of great press and some retailer interest but now we encountered a new challenge. Our costs were going to rise dramatically and we couldn’t possibly keep our prices the same but we still wanted to attract the same consumer, a consumer who was now vaguely aware of our current prices.
Our basic cost price tripled. This was not negotiable and so the only way was up. Luckily for us we had costed out all our pricing before we pressed the manufacturing button (something I strongly advise, excel is your friend I promise!). Again we considered our competitors. Our model has always been to price low and sell high, something that’s a struggle for a start up, but we had committed to our plan and built a brand around this strategy so we decided to make some important pricing decisions.
Lily Rice (on the right), being mentored by co-founder of Innocent, Richard Reed
Firstly we decided that if we were going to up our prices we had to make the most of our new USP, Made in Britain, so we made sure this was now prominent on our press and product. Secondly the product had to have more perceived value. Part of the new higher cost was, what is now our signature print. We could drop this and be stuck with a middling price and non descript product or push forward with a higher cost but a product that was unique and visually exciting. We chose the latter and luckily it worked.
We also made sure we added value through our presentation and packaging, making the customer feel that the product is value for money through small touches like postcards and wrapping.
Since launching our product prices have doubled. We still undercut our competitors and sit inline with the retailers we are targeting. Our prices have risen but so have our sales. Being too cheap can be as damaging as too expensive and it is important to be flexible and reconsider your offering.
Testing your pricing out on friends and family is great but ultimately they are always going to agree to pay more once you’ve banged on about all the things that make your brand special. Sadly you won’t be there to do the same in the real retail world.
So having looked at the market and worked on your costings, the best way to really test your pricing is to get out to the consumer. From our first shared shop to having our own Boxpark unit in London, testing with real consumers, no matter the scale is the only real test of pricing. Reacting to this, changing your plans if necessary, dropping lines and rescaling, it can all come down to pounds and pence!"
For more information about Lily Rice, head to her profile on our entrepreneur stories page.