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Pricing Private Label Beauty Products 101 (Free Template)

There is no one-size-fits-all strategy when it comes to pricing beauty products. If you price your products too low, you may end up with a small profit margin. But if you price your products too high, you may miss out on sales. 

There are several factors you need to consider such as human psychological behavior, external supply and demand, and more. 

Do you ever wonder why a lot of products have an ending price of $.99? Or how discounts often draw you back to complete your purchase? 

Once you’re done reading this article, you’ll have all the tools you need to price your private label beauty products.

Before we get started 

Let’s make sure we are all on the same page with the various pricing definitions:

Product Cost: This is the cost you pay your supplier for the product.

Retail Price: This is the price you charge your customers. 

Profit: This is the amount of profit you generate on a product. 

Retail price – product cost = profit.

When it comes to pricing beauty products, you need to think about two key things:

  1. Profit: How much profit do I want to generate?
  2. Fixed cost: How much in other expenses do I need to cover? 

These two factors together will contribute to your pricing strategy. 

Types of private label pricing strategies

Now that we have the basics down, it’s time to think about product line pricing strategies. We are going to cover the following strategies to help you maximize sales and increase profits:

  • Fixed markup (%)
  • Fixed markup ($)
  • Tiered markup

Fixed markup (%)

Fixed markup is a type of pricing strategy that involves adding a pre-set profit % amount to the cost of your products. What’s the pre-set profit percentage you might ask? Well, there is no “right” pre-set percentage. Usually, businesses do a 50% markup to ensure that fixed costs are covered with space for a profit margin.

Here’s an example for a liquified lipstick:

  • Product cost: $7.00
  • Fixed markup: 120%
  • Markup: $8.40
  • Retail price: $15.40

Fixed markup ($)

Fixed markup is a type of pricing strategy that involves adding a pre-set profit $ amount to the cost of your products. 

Here’s an example for a liquified lipstick:

  • Product cost: $7.00
  • Fixed markup: $10.00
  • Retail price: $17.00

Tiered markup

Tiered markup is a type of pricing strategy that involves setting different markups based on your product’s pricing. 

Here’s an example:

  • Product costs between $0.01-$4.99 = $19.99 retail price
  • Product costs between $5.00-$9.99 = $29.99 retail price
  • Product costs above $9.99 =  200% markup

Other things you need to determine when pricing beauty products

In addition to the strategies listed above, here are a few other things you’ll want to keep in mind:

Shipping 

Shipping is an added cost on top of your product cost. You’ll want to consider whether you’re going to offer “free shipping”, which simply means blending your shipping cost with your product cost. Alternatively, you might want to charge a margin on top of shipping. 

When choosing a pricing strategy, make sure you decide on a shipping strategy as well.

Pricing beauty products with discounts

One common strategy that online entrepreneurs use is discount pricing. According to the research site, Software Advice, their study claims that discount pricing is the top pricing strategy for 97% of the survey respondents in the retail industry.

The science behind it? It’s simply that coupons and discounts create happiness in people and a happy customer means they’re more likely to spend money. Sounds like a great feedback loop!

As a merchant, you can keep prices high but offer special coupons and discounts. This makes the customer feel as though they are getting a good deal, and can help generate higher sales in your store. 

Offering attractive discounted prices to new customers can also bring new, organic traffic to your store, as well as an opportunity to convert abandoned cart losses into new sale opportunities.

Ending your price in $0.99

You’ve seen this in retail stores or online a million times – prices that end in $0.99. Why do retailers do this? It’s a psychological tactic that makes customers think the price is lower than it is. 

Lee E. Hibbett, an associate professor of marketing at Freed-Hardeman University, Tennessee, claims that humans emotionally associate with the first number of a product price as we read from left to right. So people will associate a makeup brush for $4.99 closer to the $4 mark versus a makeup brush for $5.00, associating the first number closer to $5. 

Bundle pricing

“Buy one get one free (BOGO)” and  “two-for-the-price-of-one” are types of bundling. For example, you might consider bundling together a lip liner and a liquified lipstick. This one-stop-shop strategy simplifies a customers’ buying experience by reducing their decision-making willpower! Bundle pricing is a great way to increase your sales as well as offering more value for your customers, giving them the option to own complementary products.

If you have a beauty product that’s underperforming in your store, bundling is a great way to encourage shoppers to own high-value products with complementary lower-value products.

Just remember that customers will still want to buy separately so give them the option to bundle and buy beauty products separately if you do decide on bundle pricing. This strategy lets you pad profit on low-profit items and also helps you stand out from competitors.

Research your competitors and your customer base

This may sound obvious, but many merchants forget to see what their competitors are charging in the market. Taking a look at the availability and demand in the marketplace can give you a good insight into what you can do to price your private label beauty products. Are your beauty products unique? What are other companies doing for similar products you want to sell? 

You can list the value propositions of your beauty products and list out competitors’ value propositions to do a simple comparison. Think about why your customers might want to go to a competitors’ store instead of yours. What are your customers’ values and how are they aligned with your competitors’ values?

Reading customer feedback and reviews on Reddit and Quora can be a great start to deep diving into what your customer base wants to see in the marketplace.

For example, When it comes to liquified lipstick, Sephora is selling Too Faced liquified lipstick for $22.00. The reviews often reiterate that the lipstick smudges so the product receives several 3-4 star reviews out of 5. This is a helpful signal to see if your product can be a better fit for your customer base and whether you can price under, at, or over the market.

Conclusion

You will likely have to experiment with different pricing strategies in your store to find the one that works best for you. Although pricing strategies can be complex and overwhelming, just know that the good news is, you can always evolve the pricing strategy for your business as the market grows and evolves. 

You can run a price comparison to see how your strategies do as you develop your online business. Optimize the feedback you get by seeing what your customers are saying and doing!

Remember – pricing beauty products is both an art and a science!

To help you plan out your private label pricing strategy and to help project your expenses, we have put together a free private label budget template for you here

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