As a new luxury brand owner, markup comes with several benefits to help your business find tremendous success. There are ways you can use the selling price of your luxury goods to your advantage and beat the already competitive market to gain more exposure, customers, and sales. Before we proceed, let’s define the term markup to understand the concept fully.
What is Markup?
Markup, also known as price spread, is the difference between your luxury product’s selling price and its cost price (here’s a pretty decent breakdown courtesy of an established high-end jewelry retailer.). A markup adds the total cost you incurred while producing or acquiring the products into the costs of running the business and creating a profit. Markup can be stated as a fixed amount or a percentage of the total cost or selling price. In other words, it’s the method of determining the selling price of your luxury product by adding a percentage to the product’s cost.
How should luxury startups use markups to beat their competitors?
Here are the various ways a luxury startup can use markups to beat their competitors. You can implement these strategies right away to get instant results from your luxury startup blog or business.
- By using it to create a presumed value and exclusivity
One of the best ways to compete as a startup luxury blog is to increase your markup to create a certain level of value and exclusivity. Many people who purchase luxury items do so to feel special. Customers like to buy products with a presumed value. One way to achieve that is to increase your markup and make it feel like it’s only for a particular class of people. Furthermore, potential customers develop a level of curiosity anytime they see a business charging higher than expected. This will lead them to check out your product to know why, and this process may lead to a sale.
- By using it to gain customer retention
You can use markups to gain loyal customers over a long period. For example, a luxury jewelry business has a high markup. As a startup in a competitive niche like this, you can lower your markup. In the beginning, you might lose a little profit, but you will get many loyal customers who will buy your products, and you will make a lot of earnings in the long run. Many businesses in your niche will have a very high markup, provide your customers with quality at a lower price, and make more through volume. For example, provide quality bags at a lower price.
- By using it to determine the price of each product
When acquiring your items and presenting it for sale, you decide your luxury goods retail price and calculate the total revenue you want to generate and the most considerable price it will go for in retail. For instance, if you aim for a 15% return on each luxury wristwatch that goes out, the selling value of one piece must be the total cost price that includes a 15% profit on the cost price. You are using your markup to determine your retail price. If you know your competitor’s markup, you can use it to your advantage to assess your selling costs.
- By using it to meet profit goals
When you consider markup pricing, it helps you set strategic prices for your luxury blog to profit. If you mark up your luxury goods, you can help balance any expenses incurred during production. When you are meeting your profit goals, it gives you the resources to spend on advertising and marketing to compete with other businesses. When consumers see your business alongside other top brands in your niche, they will give you the same regard and patronize you.
- By using it to create a pricing plan
It is easy for your business to create a pricing plan using markup to your benefit by generating an operative pricing method for sales. With a unique pricing strategy, you can get more returns while maintaining a particular range of prices. This will help strengthen your luxury blog and customers’ trust because they know you are not always increasing your cost. This process will ensure that you stand out and also position your brand to achieve a remarkable feat in its niche.
Ash Oak is an online marketer, author and a business writer. He is a writer by the day and a reader by night. He helps businesses in creating a marketing strategy for startups.