How to break the discount cycle in a fashion brand

The interview is in Spanish. This summary is in English.

Ana Salazar, partner at Prisier, was a guest on the anniversary episode of Fashion & Commerce, David Rojas's podcast on fashion e-commerce, recorded with more than 50 brands in the audience. The topic was how to set prices in a fashion brand and how to stop depending on discounts.

1. In fashion, price and product go together

In a sector like fashion it is almost impossible to separate price problems from product problems. (translated from Spanish)

Ana illustrates this with a swimwear brand from Medellín. During the pandemic it moved to digital channels and its agency recommended selling at a discount. In three months it went from making about 5% of its sales at a 20% discount to making 80% of its sales at a 50% discount. Watch at minute 8:07.

Since buyers had already become used to the discount, recovery required rethinking the product, the portfolio and the communication to return to the previous positioning.

2. Three frequent mistakes

1. Setting the price without knowing who the customer is. Assuming the customer is the founder or her close circle works at the beginning and holds back growth. A gold jewelry brand said its friends could not afford its prices; the conclusion is to review the product or review the target customer.
2. Not knowing where the brand is on the shelf. A benchmark and a competitor are different things. A brand of handmade bag charms compared itself with Versace and Louis Vuitton, which are good benchmarks and fall outside its buyer's set of options. The buyer's budget and the place the brand holds among their priorities also count.
3. Giving discounts to sell. With the right product and price, the target customer buys. The discount is reserved for other purposes.

Watch at minute 10:31.

3. The discount changes a behavior

I do not give discounts so that people buy from me. I give discounts to modify a purchase behavior.

Behaviors that justify a discount include, for example: raising the ticket from 100,000 to 120,000 pesos, buying earlier, paying with another method, moving the purchase to the website, buying more frequently or trying another line of the portfolio. A customer who always buys eyeshadow can be given a discount on the lip gloss she has never tried. A discount on the second unit follows the same logic. Watch at minute 14:02.

4. How to get out of the discount cycle

I say that discounts for fashion brands are like heroin.

The discount solves the month and creates dependence in the customer, in the sales team and in cash flow. As long as that way out exists, purchasing and logistics have no incentive to plan better. Watch at minute 17:35.

Getting out of the cycle requires firmness. Ana cites a company in another industry with 80,000 million pesos in idle inventory: management banned raw material purchases for five months and the inventory moved. Sales may fall for a few weeks while the customer adjusts; it is advisable to estimate that period before deciding.

On Black Friday, a shapewear brand sold three times a normal week and almost nothing in the following three weeks. The net result was pulling sales forward at a discount, putting pressure on supply and logistics, and spending more on advertising.

5. Revenue growth management

Revenue growth management (RGM) manages all the levers of profitable revenue growth: price, portfolio, product, discounts and commercial terms. Watch at minute 20:06.

Ana's example is a T-shirt pyramid at 29,000, 49,000 and 89,000 pesos. If design replaces each 89,000 T-shirt that does not sell through with a 29,000 one, the portfolio shifts toward the entry price and revenue falls even though the list and discounts stay the same. The cause is in the mix.

The other lever is understanding what the customer values. A small brand gave a 15% discount for abandoned carts with little result. One of the partners began calling those customers: some were missing a color, which arrived in the next production run, and others had forgotten. In both cases the sale closed at full price. Watch at minute 22:51.

6. How to set the prices of a collection

1. Review the target customer: whether their needs, ticket or conditions changed.
2. Define what price must achieve in this collection. With budget-constrained buyers, raising prices is difficult; the alternatives are increasing purchase frequency, average ticket or number of pieces.
3. Place the brand on the shelf and within its competitive set.
4. Design the portfolio and the price together, with a role for each product: generating traffic, providing breadth or serving as an anchor.

An anchor product can sell little and still fulfill its function. A 129,000-peso necklace makes an 89,000-peso one seem more accessible and helps sell the rest of the portfolio. Watch at minute 25:20.

I design price pyramids, I design product roles and then I say: OK, what product do I need to launch to hit this price and to hit this need?

7. Design within pricing governance

Every brand, of any size, needs a pricing governance model that defines who decides, when and with what criteria. The minimum is a pricing committee with sales, design and finance. Watch at minute 28:03.

In Ana's experience, design teams appreciate these guidelines because they reduce the work discarded at the end because of price or cost. To design within that framework they need to know the customer, their needs, their budget, their set of options and the purchase occasion.

8. Price by channel

Buyers compare prices across stores in seconds, for example with Google Shopping. With little execution capacity, the recommendation is a single price across all channels. Watch at minute 31:57.

A bad strategy well executed is preferable to an excellent strategy that I am not able to execute.

With the capacity to manage different prices, the question is what role each channel plays and how much the customer pays for its experience. In online commerce the purchase is more planned and comparable, and the customer tends to be more price sensitive. In the physical store the customer may pay for the experience or immediacy; depending on the industry, between 2% and 7% more.

Another option is varying the portfolio by channel: entry products online, premium lines in store, or different presentations by channel, such as single socks in one and three-packs in another.

For Ana, online commerce also sells at full price, because it offers convenience and greater availability of sizes and colors. The risk lies in the habits the brand creates. If the discount always appears online, the physical store becomes a fitting room. If a coupon arrives every 28 days, the customer stops buying at full price.

9. What drives the purchase and what customers pay for

Ana distinguishes two questions: which attributes drive the purchase and which ones the customer pays for. In fashion, according to the studies Ana cites, younger generations pay between 18% and 30% more for brands with sustainability attributes. In other categories, the stated preference for sustainable products rarely translates into a higher price. Watch at minute 41:19.

10. How to measure a discount campaign

A campaign is measured as a trend: sales in the three weeks before, during the campaign and in the three weeks after, compared with the previous season. This separates market growth from brand growth. Watch at minute 43:27.

It also helps to leave products out or with smaller discounts. If products at 20% sold the same as those at 15%, the next season 15% is enough.

Campaigns combine urgency, opportunity and scarcity. When reviewing the sales Pareto, the best sellers tend to be products that were already selling at full price. The final question is whether the campaign met the objective it was designed for: cash, product trial, new subscribers or database.

11. Monthly price review

A static price is the one that leaves the least profitability. In fashion, Ana recommends reviewing the pricing strategy every month and at least every three months: price, product mix, channel mix and discount mix. Watch at minute 49:49.

1. Average price per product for the previous month: total revenue over units sold.
2. Average price per order.
3. Cause of each movement: price, product mix or discounts.
4. Competitors' moves and risk to the brand.
5. Price, product and portfolio adjustments.

A high discount can be profitable. A T-shirt brand went from a 20% to a 40% discount and earned more because volume compensated. The open question is what that does to the brand in the long term, especially if it seeks a premium positioning.

12. Pricing governance for a small brand

A brand without a budget for consulting can start with four definitions: Watch at minute 53:15.

1. The price benchmarks it will monitor.
2. The review frequency: ideally monthly, at least quarterly.
3. The discount policy by sell-through. For example, 10% on products with low sell-through in their first 30 days and 20% if they still do not sell 30 days later.
4. The maximum discount the brand is willing to give.

For a small brand the priority is cash, because accumulated leftover inventory turns into debt. On granularity, the ideal is to set a price per SKU. With thousands of SKUs, as in accessories, ranges (XS to XL) are defined by attributes such as chain length, charms or metal plating, and each range carries its price. Watch at minute 55:20.

13. Documenting the founder's knowledge

For Ana, the biggest mistake of fashion brands is not systematizing their pricing knowledge. The founder who sets prices successfully for years knows the customer, their willingness to pay and what they value, even if they describe it as intuition. If that knowledge is not written down, the team cannot reproduce it, and as the brand grows the founder moves away from the buyer and decides based on earlier biases or on the cash pressure of the moment. Watch at minute 56:41.

To the brands present at the episode she left this statement:

Stop defining prices and start designing prices.

The underlying method is in how to apply value-based pricing, and Prisier works on these rules in its pricing governance and RGM service. The discount breakeven calculator gives the minimum volume a promotion needs to pay for itself.

Episode chapters

• 0:00 Intro
• 1:38 Welcome and introduction to Prisier
• 4:26 From finance to pricing
• 8:07 The case of a swimwear brand
• 10:31 Three frequent pricing mistakes
• 14:02 Discounts to change purchasing behavior
• 17:35 How to break the discount cycle
• 20:06 Revenue growth management and portfolio mix
• 22:51 Abandoned carts and customer needs
• 25:20 How to set the prices of a collection
• 28:03 Pricing design and governance
• 31:57 Price by channel
• 41:19 What drives the purchase and why customers pay
• 43:27 How to measure a discount campaign
• 49:49 Monthly price review
• 53:15 Pricing governance for a small brand
• 55:20 Price by item or by range
• 56:41 Documenting the founder's knowledge
• 59:27 Quick questions