I’m about to share a secret that the most successful mass fashion brands use to achieve sell-through rates that are 2x the average, or more. That’s going to translate to higher eCom conversion rates, higher clickthrough rates, and higher ROAS.
But first, I want to thank this week's sponsor: Segments Analytics.
Segments Analytics integrates with your Shopify store and finds you actionable, profitable customer segments instantly, then lets you push those segments to your marketing channels seamlessly.
This is a trick that most great merchants know. I actually learned about it for the first time when I was working as a women’s denim designer back in 2008.
The secret is perceived value.
How Perceived Value Works
Imagine that you’re scrolling through your Instagram feed. You’ve been browsing different dresses over the past few days because your birthday is coming up.
All of a sudden, you see an ad for a gorgeous dress–it feels like the designer pulled the details right out of your brain and made them real. Based on other, similar dresses you’ve been browsing, you estimate that this dress must cost at least $500–that’s out of your price range.
Even so, you click through the ad to learn more about the brand and check out additional images of the dress. When you reach the brand’s website, you’re shocked: the dress only costs $325! That’s a bit over your target price, but it feels like an amazing deal compared to your expectations, so you check out almost immediately.
That’s the magic of perceived value in a nutshell: making your products look and feel more expensive than the MSRP. This isn’t simple or easy, but it can become a deep competitive moat for your brand.
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Customer Lifetime Value is one less obvious indicator of perceived value. Reason: the more a customer loves what they purchased, the more likely they are to come back and buy more.
Unfortunately, analyzing LTV by SKU, subclass and category is a time consuming process.
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Brands with big, broad product assortments–brands like ILIA Beauty and Jambys–use Segments Analytics to maximize the ROI of their retention marketing, lift repeat rates and increase customer LTV.
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Creating Perceived Value 101
The easiest way to create a gap between perceived price and actual price is to take less margin. In fact, this is Zara’s entire strategy: their MSRPs represent an average of 40-50% product margin while most fashion brands price for 70-80% product margin.
Zara achieves this by accelerating sellthrough rates to minimize the need for discounting. Discounting is the reason fashion brands require such high margins.
To achieve those higher sellthrough rates, Zara reimagined the entire fashion retail calendar and supply chain (you can read more about that here). Obviously, that isn’t feasible for most brands, especially bootstrapped brands. That doesn’t mean that perceived value is out of reach.
You increase perceived value at a 70-80% product margin through value engineering–you over-invest in the things your customers care about and under-invest in the rest.
Perceived Value Case Study: Mom Jeans Circa 2008
Here is how we thought about perceived value when I was designing mass market women’s denim in 2008:
Fit was table stakes. We invested a lot of time in developing three core denim fits that our customer (middle-aged women with middle-aged bodies) loved.
Once the initial fit development was done, we spent a meaningful amount of time checking the production runs from various factories to ensure they were within fit tolerance.
But fit isn’t really a “perceived value” trait. It’s very personal–you can take the measurements from 10 different women who wear a size six and get 10 different sets of numbers.
Fit could be a “perceived value” trait if you were tailoring your fits to an underserved market (see: Good American’s Good Curve jeans). But to make this work, you need to "romance" the body. You can't say something like "finally, jeans that fit your post-partum FUPA!"
We delivered perceived value via two avenues (that I happened to be responsible for as a designer, lol): free belts that came attached to the jeans, and elaborate back pocket embroideries with “bling”.
Our customer loved the belts because she felt like she was getting a “freebie”–this is the same logic as a gift with purchase. Of course, the belts cost between $0.01 and $0.02 to produce. The quality was terrible compared to a standalone belt.
The back pocket embroideries were swirly designs embellished with press-on plastic rhinestone crystals. Remember: this was 2008. True Religion jeans were hot. Everyone wanted to be Paris Hilton with her crystal-embellished Blackberry.
We were able to deliver the McMansion-chic look for trailer park prices. Our best selling style during my tenure, with a record-breaking 10.8% sell-through, was a pair of jeans in our core fit with thick, True Religion-style embroidery and big blingy crystals on the back pockets.
Every aspect of the garment was value-engineered, including the value ads. Our skill as mass market designers was to make something look as expensive as possible (in the eyes of the customer), using the cheapest possible materials.
7 More Ways To Develop Perceived Value
Perceived value is different in different segments of the fashion market; consumers value different things. Here are a few examples:
- The right print, in the right colorway, might make a fabric look and feel more luxurious.
- One style of weaving fabric might look more expensive than another. For example, a heavyweight polyester twill might look more luxurious than a lightweight silk flat weave.
- Some consumers perceive all natural fibers like 100% cotton as higher quality than synthetics or blends, even if the natural fabrics are lower in quality.
- Embellishment (sequins, embroidery, beading) often makes clothing appear more expensive, especially if it is well-executed. But mass-market brands will usually only embellish the front of something, leaving the back plain, to cut costs.
- Well designed packaging and a beautiful unboxing experience help many consumers view the contents of the package through rose-colored glasses.
- The fact that a celebrity or social clique wears a brand can enhance its perceived value for folks who admire the celeb or aspire to be part of the clique.
- Logos are the classic perceived value enhancer, but it takes a lot of strategic investment and time to imbue a logo with that power.
Big cosmetics and fragrance brands are masters of perceived value. The packaging is often more expensive than the cosmetics or fragrances contained within. And that packaging is designed to maximize first impressions, but on second glance, it’s pretty cheap.
Check out the 30ml and 50ml sizes of any Tom Ford fragrance (except for special editions). The full presentation feels luxurious, but if you take a close look, you’ll realize that the labels are simple foil stickers and the rest of the packaging is lower quality than it initially appears.
Cosmetics and fragrance brands frequently use GWPs (gift with purchase) as a marketing lever but, again, these are usually all sizzle, no steak.
3 Ways To Get Better At Engineering Perceived Value
Here are a few ways to improve your perceived value skills:
1. Talk to your customers, or folks in your target market. Ask them about the other brands they shop. Ideally, accompany them to a multi-brand retailer and ask questions as they gravitate towards certain styles.
2. Go to a multi-brand retailer where you are carried (or where other brands in your competitive set are carried if you are pure play DTC). Grab some similar items from five to 10 different brands. Take them to the dressing room and hang them up side by side.
What items look more expensive? What items have the most hangar appeal? What does each item cost? You might want to hang them from lowest to highest price.
3. Perform the same exercise in item two, but do it through an owned eCom lens. Which brands look more expensive in ads? On the website? In the unboxing experience? When you actually take out the clothes and hold them?
The ability to create perceived value is a blend of strategic thinking, product knowledge and taste. The best way to develop your skills is to look at a lot of clothes. But once you crack the code, it can revolutionize your ability to scale.