Wednesday, June 3, 2009

Shoes of Prey - Pricing

We've been giving some thought to the issue of pricing for Shoes of Prey.

Issue 1 - General Price Range We feel that a fair price for our shoes is around the AUD$250 mark. The shoes from the supplier we're going to work with are fantastic quality, and they supply ready made shoes to other retailers in the Australian market who sell the shoes for around $250. $250 also gives us a good margin and we think we can offer a very generous returns policy at that price which will be great for our customers. This price point positions us as a premium product without being as high as some of the famous, established premium shoe brands.

Issue 2 - Price Variation Between Styles The cost price we'll pay to our supplier will vary depending on the options customers select when designing their shoes. For example, a higher heel or more detailed embellishment will generally add to our costs.

Do we change the price we charge the customer depending on each minor change they make to the shoe? This would mean pricing would reflect our cost structure, however we think this would make the design process too confusing and take some of the fun out of it.

Do we use a flat pricing structure? This would be much simpler for the customer, however it might encourage customers to only design more elaborate shoes so they feel they are getting better value for money, and it doesn't make sense to price a simple, classic ballet flat the same as a more elaborate evening shoe.

We think the solution is to have a small number of different price points depending on the general style of shoe being designed. For example, all ballet flats would be one price, simple heels another price, stilettos another price. Based on issue 1 above, the average price we'd aim for would be around AUD$250.

What are your thoughts on issues 1 & 2 above?

9 comments:

  1. ohhh my! This is a huge topic...it could be the difference between make & break!

    I think I'll need some oats for lunch before I start on this one.

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  2. Lol! Get those oats simmering Dom, looking forward to your thoughts on this one!

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  3. right, no-one else has said anything, so it's my turn. I've had beans today, which are like super-powerful oats, so be warned that I am NOT going to hold back.

    here goes...I THINK YOU ARE WRONG. Ah, that is better. So I agree 100% that pricing is a major consideration, but I personally think that you are a tad wrong to think that you can pick the price point now. I think that given the maturity of your product, but the immaturity of your chosen sales channel, that the "price" will be the output of all other things/decisions/actions combined. What I mean is that I think its dangerous to pick and price and then plot your business model, though I don't think you are doing this. I think for flexibility (upscale/downscale and changes to the brand message) that its important that you pick the appropriate drivers that you think will increase the perceived value and then point them in the right direction at the desired price. I think that $250 as a number is high, but that is without context. You guys bring the context by consistently matching up every decision in your channel & shopping experience towards top end personalised quality...if you do that, then the price will work itself out.

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  4. Those beans sure are powerful Dom! Some excellent thoughts there and after digesting your comments, as you did the beans, I think I couldn't agree more with you, there's really very little context in our pricing post as to how that price is justified so it will be hard for people to judge from a post like that. As you say, the key to a $250 price tag is going to be a great, personalised shopping experience and great quality shoes. The supplier makes amazing shoes so that part is covered (as long as we get sizing right) and our plan is very much to make the shopping experience highly personalised to tie in with the very personal experience of designing your own shoes. We now have to execute on that and agreed, flexibility will be important as we won't have everything right, quite possibly including price from the start.

    Thanks again Dom!!

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  5. No worries fellas. My main point here is one I didn't make. You have several choices that you are making now and they are choices where you do not have readily available information to make those choices more informed. I am guessing (could be wrong) that this is probably the first time you guys have been making business decisions for yourself, and doing so pretty much in the dark. The great thing about corporate world, is when big mr ceo/manager wanted a decision, they give us all the peices of the puzzle to make the decision with. Here, you don't know what the puzzle even looks like!

    So my hope, suggested and expectation is that you build a channel and experience which is consistent with your core values (sounds wanky, but I think its important when you don't have the puzzle) and that you make sure that it can be tweaked. My assumption is that clever techno chaps like you aren't going to lock anything down yet, and I think that tweaking will take you to the $$ value of the product.

    So my Q back; are you both aligned with exactly what this (not the shoes) looks like and feels like, so that you get the consistency?

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  6. Dom, brilliant thoughts again, thanks.

    We're in the process of defining exactly what we want the brand/Shoes of Prey experience to look and feel like and following on from your advice, we're going to start out with what we believe will work, but be flexible and adapt as we progress and find out what our customers like and don't like about the experience, and as we determine exactly who our customers are. And as you've suggested, as the look and feel of the brand/experience develops, so to will price.

    Thanks again for helping us out with this one. :D

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  7. Based on pure gut feel and not Economics, I think $250 feels ok because I pay on average $150-$200 for a pair of shoes now, so a premium of $50 for custom made does not feel too steep.

    I am not entirely convinced of the Issue 2 argument where people will design more expensive shoes because they are paying more for it. This feels counter intuitive when it comes to something so specific like shoes. Makes sense in a buffet or something related to food, where people fall into the trap of eating more because they paid for it. In this case, I am more likely to pay $250 for a shoe I want to design rather than design a shoe to make the most of $250.. hope that makes sense?

    Though having said that in the fashion shoe world, I expect (and generally get) the following price hierarchy (cheapest to expensive)
    + sandal like flats
    + ballet flats
    + covered heels, strappy heels, anything with heels!
    + Boots

    Lastly, I think its ok to charge a little extra for expensive embellishments. You can work it into the software so that that if you add fake diamantes, it would be free, where as Swarovski crystals will cost you another $2 per crystal. (keep a running show cost on the screen somewhere?)

    Thats all! I wish I could've partaken in the beta :0)

    ~Isis

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  8. Great thoughts, thanks Isis! Glad to hear you think $250 is around the right mark and your buffet food / shoe thoughts make good sense. We'll have to think that part through some more. Beta testers have been going straight for the heels, though that is probably because those are the most popular rather than the flat price we're using for the test.

    We'll likely do another beta test once the designer and website is ready in 2 months or so, and hopefully by then we'll have sizing sorted out so you'll be good to partake in that one! :D

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  9. yay! can't wait! you can test out your U.S customers.
    re: flats vs heels. I think many ladies prefer to wear fairly simple flats and they usually easy to find in stores. However with heels, we like to make more of a statement and therefore more likely to want one custom made. I could be totally wrong..

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