How Beauty Brands Build Pricing Strategies To Grow

In our previous blog regarding pricing strategies for beauty brands, we covered the unique aspects of the beauty industry that can cause various challenges to arise and how some brands may utilize pricing as a tool to not only counteract such challenges but to grow and succeed. Here, we will delve deeper into some of the real challenges that come with pricing for beauty and cosmetic brands and then introduce a relevant case study to detail how exactly pricing can truly make a difference.

Delving into the challenges beauty brands face

Beyond what we have discussed previously, there are many unpredictable challenges that beauty brands may encounter as they formulate their pricing strategies. 

With numerous brands offering similar products, there is constant pressure to keep prices competitive. This can lead to pricing wars and margin erosion. At the same time, brands need to differentiate their products to justify higher prices. And, because consumers often associate higher prices with better quality in the beauty industry, brands need to carefully manage this perception while staying competitive. Finally, in spite of all of these other challenges, beauty brands will also have to deal with rapidly changing beauty trends, learning how to adapt quickly and making sure their pricing strategies align with these trends to remain relevant and competitive.

Furthermore, introducing product differentiation within such a crowded market can be very difficult. For instance, when a brand introduces a new and unique product, competitors may respond with their own innovations or price adjustments. So, brands must be prepared to adapt their pricing strategies accordingly. Furthermore, introducing a new, differentiated product often requires educating consumers about its benefits. This can be a costly and time-consuming process that impacts pricing decisions. And, differentiated products may require a different distribution strategy, such as being sold exclusively through certain channels. This can impact pricing decisions and channel relationships.

And, as we mentioned previously, the margins are thin for beauty and cosmetic brands due to the numerous costs they accumulate. This can include costs from investing in social media, establishing influencer partnerships, and more that can all eat into your profit margins. Actual product development costs are expensive, especially if you are investing into the research and development of new ingredients and formulas. And, because of the importance of brand image, brands typically incur packaging and presentation costs to appeal to customers who may be more willing to pay if the aesthetics of a product are attractive. Many brands will likely accumulate distribution costs trying to get their products into the hands of consumers, especially if they rely on third-party distributors or retailers due to their own limited distribution networks. So, these are some of the many different kinds of costs that brands will likely amass in trying to make their products stand out and appeal to their target consumers.

Case Study: Helping beauty brands achieve their goals

HelloAdvisr has worked with multiple brands within the beauty and cosmetics industry, accumulating experience and expertise with regards to how pricing can play such a crucial role in building for sustained growth.

For example, here we have a case study of our work with a fast-growing FemTech brand. Needing to assess their own approach and strategy to pricing, this brand realized that they were struggling with their product pricing because it was becoming increasingly complex as they expanded their purchasing methods (e.g. a la carte, bundles, and subscriptions). Furthermore, they were dealing with added complexity due to expansion plans into newer channels like retail. 

As a result, we helped leadership team transform their pricing approach in several ways:

  • Designed a custom pricing strategy workshop with the brand’s senior leadership team.
  • Assessed existing pricing portfolio – the prices and price combinations (including promotions and discounts) created and presented to customers.
  • Conducted data analysis of brand sales and select customer and product cohorts.
  • Reviewed the brand’s customer segmentation and value proposition.

Through our work, this brand was able to build a pricing strategy framework they could use for new and existing products. They also implemented pricing portfolio recommendations including discounts and bundles, which subsequently increased conversion rates. So, with these improvements, they continued to expand revenue growth and were well-prepared for the next round of fundraising. 

Final thoughts

Pricing in the beauty world is a multifaceted challenge that requires a deep understanding of market dynamics, consumer behavior, and brand positioning. By carefully navigating these challenges and staying agile in response to market shifts, beauty brands can find success in setting prices that resonate with their target audience while ensuring sustainable growth. It’s a delicate balance, but one that can ultimately lead to long-term success in this vibrant and ever-evolving industry.

Did you know? 

We shared this article with our email newsletter community first. If you want to get access to our articles and insights before anyone else, you can sign up here (plus, it’s free!). 

Found this article helpful?

Sharing is caring. ❤️

Share this on social – super easy 1-click share buttons below 👇 – or send this article to a colleague or friend who can learn something new to empower their company or hustle.

The Price of Beauty: Navigating the Challenges of Building a Successful Brand

In the world of beauty and cosmetics, where trends evolve and change at a rapid pace, pricing can be a make-or-break factor for brand Choosing the right pricing strategy is not just about covering costs and making a profit; it is about standing out amongst your competitors, where differentiation is the key to sustained success. Here, we will delve into the many pricing challenges that beauty and cosmetic brands regularly face and introduce some strategies that can be used to overcome them.

What makes beauty products unique?

Beauty products are unique in various ways. First, they are very personal. They can help you represent yourself, connect with your values (e.g. using clean ingredients), and identify with a specific community. They are something you frequently put on your face and body for a purpose, permeating into your everyday life. 

As a result, these products hold a unique position in the market due to this intimate relationship with consumers. Because of the emotional connection between the consumer and the beauty product, purchasing decisions can become highly subjective. 

Furthermore, beauty products and brands are no longer simply owned by big conglomerates. They are more accessible to creators and brand-builders, making the industry even more competitive. Furthermore, this beauty marketplace is known for its trend-driven nature with constant innovations. This means that new ingredients, formulas, and technologies are constantly introduced, creating a continuous stream of new products and brands entering the market. 

Finally, more often than not, beauty products are not just products but experiences. They can be moments of self-care, indulgence, and transformation. This aspect adds value to these products beyond their obvious functional benefits, which allow brands to offer them as unique and memorable experiences worth paying for.

Challenges beauty brands face

Due to the unique nature of beauty products, there are many challenges that come with pricing them. 

First, there is increasingly more competition as both big brands and new entrants (some funded by institutional investors) fight over many of the same customer segments. So, it is even more difficult to stand out and differentiate your product from the rest of the competition. Brands often face immense pressure to price their products competitively to attract customers while ensuring that they can cover their costs and make a profit simultaneously. 

Second, it is more expensive to create awareness and willingness-to-pay. With the challenges that come with product differentiation in such a crowded market, many brands find it difficult to communicate their own unique value proposition to potential consumers. As a result, some brands may find it difficult to justify premium pricing and experience price wars with their competitors.

Third, the margins are thin within the beauty and cosmetic industry, not only due to this high level of competition but also many other costs accrued in order to stand out in such a crowded market. These can range from promotional costs to R&D costs to distribution costs, among many others. All of these costs can make your margins extremely thin and increase pricing complexity.

Fourth, while many beauty brands like to implement promotional pricing campaigns to attract new customers and drive sales, it is a balancing act because excessive discounting can devalue a brand. Furthermore, it can erode margins and make it difficult for some brands to achieve profitability despite gaining new customers.

Finally, consumers in this particular market have a wide range of price sensitivity. Pricing plays a role in defining the brand, and can be a factor in switching. Like any product category, a low or discounted price can not compensate for poor products.  Beauty customers have high expectations across price points and channels, so understanding this value exchange – product for a price – is critical for successful beauty brands.

How successful brands use pricing

Facing a wide variety of challenges, we have seen successful beauty and cosmetic brands  turn to pricing as a powerful tool to help them achieve their growth objectives. Pricing can play this crucial role by:

1. Building brand image

Pricing can communicate the brand’s positioning in the market. For instance, premium pricing can help create a perception of quality and exclusivity. On the other hand, value pricing can attract budget-conscious consumers. Retains your company’s overall number of accounts or subscriptions. 

2. Supporting differentiation

Within such a crowded market, pricing can help brands differentiate their own products from those of their competitors. Unique pricing models, such as personalized offerings, can help brands really stand out. And, with competitive pricing and the right promotions, brands can first acquire new customers and then focus on retaining them through their product quality and customer service

3. Creating pathways to sustainable growth and profitability

Nailing a dynamic and effective pricing strategy can really help brands improve their profit margins, so it is important to spend time and resources on developing one that can lead to sustained growth. Doing so can even allow many brands to then reinvest in other areas such as product development and expansion.

4. Building the right customer base

With the right customer segment in mind, pricing can help your brand attract the right customers who are willing to pay for your products. As you attract more and more of them, you can build up a solid customer base aligned to all facets of your business. Furthermore, using pricing strategies such as loyalty programs or discounts for repeat customers can encourage customers to make repeat purchases, ultimately building brand loyalty.

5. Expanding into new markets

When entering new markets and expanding, brands can adjust their pricing based on local market conditions, competition, and consumer preferences to maximize their chances for success. So, establishing dynamic pricing strategies can help maximize your brand revenue.

Final thoughts

The world of beauty and cosmetics today is a tough one to navigate as challenges emerge daily that can disrupt your growth as a company. With such a competitive market that deals with such unique products, many startups find it difficult to figure out where to start with pricing, sometimes dismissing it altogether as something that requires their time and effort. But, dedicating resources to developing your pricing strategy is priceless as it can be extremely rewarding in the long run. The challenges within the beauty industry that we listed above are only several among many others that exhibit the true complexity of growth within this industry. So, it is important to have a detailed understanding of what challenges you may encounter and how you can counteract them as you grow your brand within this space.

Did you know? 

We shared this article with our email newsletter community first. If you want to get access to our articles and insights before anyone else, you can sign up here (plus, it’s free!). 

Found this article helpful?

Sharing is caring. ❤️

Share this on social – super easy 1-click share buttons below 👇 – or send this article to a colleague or friend who can learn something new to empower their company or hustle.