Pricing and Credit

1
Pricing and Credit

• Fashion Marketing

2
Fashion Marketing Math

• Robys is a manufacturer of home-office
  furniture. The company borrowed 10,000 at 7
  percent interest for one year. Calculate the
  amount of interest that Robys will pay.

3
Objectives

• What are the five price levels of fashion
  apparel?
• What are the considerations used by fashion
  makers to determine prices?
• How do manufacturers use credit?
• What are the types of credit offered by retail
  stores?

4
Why its Important?

• Fashion marketers must be familiar with
  classifications and factors that determine the
  price of fashion products. Credit plays an
  important role in all segments of the industry.

5
The Price of Fashion

• Consumers want to feel confident about the price
  and value of a fashion product.
• Makers of fashion products give careful
  consideration to specific price ranges, price
  styles, and the target customer.

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Where does the pricing start?

1. Textile phase the quality and construction of
   the fabric.
2. Production phase the reputation of the
   designer, the type and amount of labor used, the
   complexity of the style, and the construction of
   the garment.
3. The retailer establishes a selling price or
   retail price, which is the amount the consumer
   pays for merchandise.

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Fashion Price Levels

• There are five price levels that are associated
  with the quality of the fashion product
• Couture custom-made designer garments in the
  highest price category. Garments by Dior and
  Chanel are examples of couture.
• Bridge Lines Secondary lines of well-known
  designers priced between the couture and better
  categories. Represents the most expensive
  ready-to-wear apparel. Sometimes sold in
  individual boutiques.

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Fashion Price Levels

• 3. Better garments most reasonably priced
  garments that maintain high quality. These items
  are found in specialty stores and department
  stores.
• 4. Moderate lines medium priced garments with
  well-known brand names.
• 5. Budget lines the least expensive category of
  garments that are knockoffs or downscaled
  duplications of designer styles, which are
  mass-marketed. Less expensive fabrics with
  cheaper trims are used in budget lines, and the
  details are simpler.

9
Determining the Prices of Fashion Goods

• Fashion marketers use four main considerations
  when establishing prices
• Achieving the most profit
• Obtaining the most sales volume
• Being competitive
• Presenting an image

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Calculating Price

• Selling price
• Cost of production operating expenses profit
• The largest component is the cost of product
  the cost of the merchandise from the
  manufacturer.
• Operating cost all costs associated with the
  actual business operations.
• Profit what the company wants to receive.

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Markup

• Markup the difference between the cost of the
  product and the retail price.
• Sometimes retailers use a keystone markup which
  is a price that is twice the wholesale cost. This
  is to simplify the process.

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Pricing Techniques

• Odd A fashion marketer selling a coat might
  calculate the retail price at 300. But, the
  retailer might ticket the coat at 299.99 because
  the price appears to be less expensive.
• Even On the other hand, to give the coat a
  prestigious image and attract a high-end market,
  a retailer may use even pricing and set the price
  higher at an even 300.

13
Prestige Pricing

• Prices purposely set high to create image of
  quality.
• Targeted toward markets who equate high price
  with quality.
• Examples Perrier Water
• Ralph Lauren
• Lexus

14
Multiple Pricing

• Targeted toward value-conscious markets
• Example 3 for .99 instead of .33 each.

15
Promotional Pricing

• Used with sales promotions
• Temporary price reduction
• Designed to increase store traffic
• Loss-leader pricing
• Special Event pricing
• Back-to-school
• 4th of July
• Memorial Day

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Price Lining

• All merchandise in one category priced at the
  same price.
• All blouses - - 25, 35, or 50
• Typical in Department Store setting

• Advantages
• Customers differentiate between value
• Helps customers make decisions
• Allows store to target multiple markets
• Allows salesperson to up sell or down sell
  more easily.

17
Credit in the Fashion Industry

• Serves as an incentive to get people to buy
  merchandise.
• With credit you receive merchandise immediately.
• Fashion marketers use credit to develop their
  business.

18
Consumers and Credit

• Stores accept consumer credit cards from
  customers to increase the average purchase amount
  and increase overall sales.
• Consumers usually spend more money on fashion
  products when they can buy with credit instead of
  having to pay with cash.

19
Types of Consumer Credit Cards

• Third-party credit cards type of credit card is
  the most widely used by consumers.
• Proprietary credit cards when retailers offer
  their own credit cards. Beneficial to retailers?
• Private-label credit cards imprinted with the
  stores name and logo but they are issued and
  managed by a bank.