Is it just me, or does every brand want to position itself as the luxury option?

An influencer or celebrity starts a beauty brand. One tube of serum is $100+.

A fashion designer builds a brand around the perfect t-shirt and white sneaker. The t-shirt will only set you back a cool $80.

Yes, inflation is real. No, not every brand deserves its luxury status.

Unfortunately, it’s not so cut and dry. Branding, like most marketing, is a combination of art and science. For instance, let’s deconstruct that tube of serum.

Ingredients = $0.65
Labor = $1.15
Design & Packaging = $1.45
Marketing = $0.75

On average, manufacturing a skin care product will run $3.50-$4.00 per unit. If the price on that tube of serum is $120, what’s the markup? 30x! Now, it’s not that simple. There are additional costs that go into building a sustainable business.

However, let’s pretend we live in a perfect world. At $35, let’s say this business breaks even. Which means, the company can pocket everything else. Therefore, net profit is $85 per unit. A good day for any business. It’s still a 3.5x markup.

Here’s the thing. What part of that pricing structure do you view as the brand value or perception? Realistically, price sets the expectation of branding, but the reverse is also true. That’s why it’s so paramount that brand and product expectations match quality and price. Importantly, you don’t want expectations to dip too far below the price charged to the customer. Otherwise, you’ve got a queue of unhappy leaving bad reviews, placing returns, and taking to social media to complain.

Don’t be a brand that chooses the luxury path purely to gain pricing power and exclusivity. It’s a luxury trap. It’ll only cost more problems down the road.