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Pricing Strategies for Retailers: An Overview of Pricing Concepts and How to Choose the Right One

How much should I charge? It’s a difficult question to answer even for experienced retailers. When dealing with luxury products, a product should sell for more than it cost to make; otherwise, what’s the point? Nailing down exactly how much more than cost you should be charging depends on a number of factors including your business goals, your competition, and what you offer consumers beyond the product itself. And in the fine jewelry business, you want your pricing. Here are a few different approaches to pricing to consider.


The most common pricing strategy, cost-plus pricing is also the simplest. The goal in this type of pricing is to recoup the cost of production plus a profit, the final price being whatever the consumer is willing to pay for it. Cost-plus pricing requires much less market research than other strategies, but more trial and error as you search for that middle ground between desired profit and consumer demand. It is a good starting point for a new business, but as you gather more data or set goals for growth, you might find you need a more precise pricing strategy.


If you’re not interested in trial and error, you could always just look to your competitors for a pricing strategy. If your main competitors are charging $1,200 for an 18k gold 0.5 ct. diamond engagement ring, it’s probably a safe bet for you to charge the same. If you don’t need to demonstrate your value to customers because you have a well-established customer base, competition-based pricing might work for you.

While like cost-plus pricing, this strategy might also be a good way for a new business to enter the market, just imitating your competitors raises a question: if you’re charging the same amount they are, why should their consumers give you a chance rather than stick with what they know?


That’s where value-added pricing comes in. Value-added pricing solves some of the problems with cost-plus pricing and the question raised by competition-based pricing. If you want to charge as much as possible, how do you justify that extra cost for the consumer? And if your charging the same as your competitors, what can bring them over to your business? The answer to both is the same: your product might be the same, but you are adding value in different areas.

Maybe you offer a higher-quality product than competitors. Your gemstones might be cut by a more accomplished lapidarist or are set in a more appealing design. You might also offer better customer service, delightful packaging, thorough after-sale care and support, a unique shopping experience, or a website or social media presence full of entertaining and educational information.


When you use this strategy, you are pricing your products above the market average to signal to customers that you’re offering something better. This strategy can work for the luxury brand with an image of exclusivity selling to customers for whom price is no issue. In fact, for the customers of such a brand, being able to pay a higher price is a point of pride, affording a level of status to the consumer. Of course, premium pricing has to be backed up by a premium product.


Once you’ve worked out the most effective pricing strategy for your products, you might also consider bundle pricing. By offering a bundle of products at a reduced price, you will ensure a higher sales volume in exchange for overall lower revenue had you sold the bundled products separately. For products that aren’t selling well, bundling them with higher-performing products could be the answer.

Should I Sell Below Cost?

Loss leaders might help you get your foot in the door or get new customers through the door, but selling at below cost, or below a level that is profitable, is not sustainable or even all that effective in the luxury or fine jewelry sector. If you are attracting customers whose main concern is price, these customers will not return once prices return to normal levels. And if you set prices too low, you may no longer be perceived as a luxury brand by consumers.

Furthermore, these types of strategies rely on large sales volumes—and in some cases, creative merchandising—to drive revenue. For example, grocery stores often sell milk at a loss, but the milk cooler is also located at the back of the store, forcing the customer to run an impulse-buy gauntlet of products they’ll unthinkingly toss into their basket while making their way toward the milk.

The bottom line is that fine jewelry retailers are selling luxury goods at luxury prices. This doesn’t mean you can charge whatever you want, but it also doesn’t mean you should sell yourself short or try to compete on price. You need some other strategy to justify your prices and attract customers. If premium pricing is your goal, cultivate your image as an exclusive and unique brand and sell products that back up that image. If value-added pricing is your goal, your marketing materials—and your customer reviews—should make consumers aware of everything they’re getting in addition to a high-quality product.