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  • DBMS Global

Costly Mistakes to Avoid When Pricing for a Luxury Design Startup

The consequences of the wrong price can destroy the authority and credibility of a luxury brand. That’s why the pricing strategy needs to be managed as rigorously as clients and budgets.

When it comes to luxury, price is about perception. When clients think the prices are higher than what they are, pricing power is built. The “luxury extra value” is to be found in the experience and activations luxury companies create.

Annual increases of 5% - 10% on the price list are expected by luxury customers, and this expectation doesn’t change during an economic downturn. But during a recession, many businesses lose their confidence and they are tempted to discount with the hope of keeping up with the forecasts. Discounting luxury products always dilutes the brand’s equity, authority and perception of luxury.

The four most common mistakes in pricing luxury are costly because they are all reasons why companies go out of business.

Mistake #1: Underestimate the brand value and pricing too low

In my experience, management of luxury brands can be hesitant in setting and annually increasing premium prices. This hesitation is due to the insecurity of being able to meet the desired results, which leads to price setting based on production costs to feel comfortable.

Pricing luxury too low creates the wrong reference and compromises the perceived value. Pricing corrections are possible, but they confuse consumers and lead to fewer sales, with revenue implications. The leadership and management you want for a luxury brand are aware of the brand value, exclusivity and pricing power. They know that luxury doesn't have tangible features, but comes from the intangible added value.

So how do you avoid pricing your luxury brand too low? Price your products from the launch phase without hesitation, and when introducing a new price list, remember the rule that luxury prices always and only go up.


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