The cosmetics industry is a profitable and competitive one. Beauty companies need to stand apart from the competition, and pricing can help with that. Many beauty brands use different strategies for their prices, including price bundling, price lining, or just by how much they are overpriced or underpriced. The few factors affecting the pricing of a beauty brand are:
- The cost of the ingredients
This is probably the most important factor when it comes to pricing. If the ingredients are costly, the brand will have to price their products higher. For example, brands that use rare and expensive ingredients, like La Prairie and SK-II, will have higher prices than those that don’t. The loreal brand, for example, uses ingredients that are not as expensive and therefore have lower prices.
- The cost of manufacturing
This is the cost of producing the products. It includes labor, materials, and shipping costs. The more complex or time-consuming it is to make a product, the higher the price. For example, brands that have intricate packaging or use a lot of manual labor will have higher prices than those that don’t.
- Distribution and marketing costs
Brands need to spend money on advertising and distribution to get their products out there. This increases the cost of the product and results in a higher price tag.
- Competitors’ prices
When setting their prices, beauty brands often look at what their competitors charge for similar products.