Pricing and Promotional Strategies

Forever 21 was founded in 1984 and is known for its trendy and fashionable clothing offered at low and affordable prices that undercut even those of its major competitors, such as H&M clothing and others like Urban Outfitters and Guess. The company has been offering fashion and accessories to teenage men and women for more than 20 years now and most of its apparel is made in California, U. S. A. Forever 21 Pricing If effective product development, promotion and distribution sow the seeds of success, effective and attractive pricing is the harvest and plays an important role in the growth of any business.

Customers do not buy benefits and features, they actually buy value! The recent economic downturn has put many companies in a pricing vice and it is impossible to raise prices where the pressure to slash them continues. However, cutting prices always is not the best option as it can signal to consumers that price is more important than the brand; and Forever 21does not intend to create such an impression. The giant clothing company has carefully selected its target market and has positioned its products well in the minds of its customers.

The target market that Forever 21 basically addresses is the younger generation including teens, college students and young adults who are fashion conscious and so, the prices need to be adjusted according to the affordability of this target market. Forever 21 offers reasonable prices for its clothing with some exceptions such as brands that are specifically targeted towards a niche with the prices tailored to their affordability. An example of this is the “Fabulous Finds” brand by Forever 21 which has inexpensive items that are imported from Vietnam.

(Forever 21 – Wikipedia) Another Forever 21 brand by the name of Twelve by Twelve is a slightly more sophisticated luxury line with a little bit higher prices, but still lower when compared to its competitors. Twelve by Twelve is targeted towards the high-end market. Merchandise at Forever 21 is reasonable, with casual shirts selling from $4. 99 to mostly under $19. 99. Forever 21 also offers hundreds of ddifferent $12. 99 T-shirts at its stores splashed with sports logos etc. The enormous quantities produced allows spectacular economies of sale to Forever 21 which it passes on to consumers.

The right price is that which most adjusts to the value that customer mentally attributes to the product. Product costs set a floor to the price; consumer perceptions of the product’s value set the ceiling. In Forever 21’s case, price is a crucial product-positioning factor that defines the product’s market, competition and design. It follows value-based pricing strategy for its apparel, setting price based on buyers’ perceptions of product values rather than on cost, keeping in mind the pocket book of teenagers and young adults.

Value based pricing reverses the process as in cost based pricing. The target value set for the product is then used to drive decisions about product design and what costs can be incurred and the price is set to match consumers’ perceived value. This is how Forever 21’s sales grow, by offering the right combination of quality and price to its target market. (Pfaff) The pricing strategy used by Forever 21 also includes “Promotional pricing”, temporarily reducing prices on apparel and accessories (specially on those that are out of season) to increase short-run sales and revenues.

Psychological pricing is a basic part of pricing strategies used by many companies today, specially in the U. S, and Forever 21 also practices this. (It’s prices are written with “. 99” which produces a psychological effect on the buyer of paying lesser amounts. E. g. Writing $29. 99 instead of $30) Discount and allowance pricing also has a significant importance. Forever 21 offers its product at relatively lower prices than competitors and introduce special offers such as “Buy 2 get 1 free” or get a “20 percent discount on the second item” which actually motivates buyers to buy even more.