How to Price Your Premium Brand for Profitable Growth

Last week I made you a promise. I said I’d bring you real numbers, from two real brands – including one that had pulled back from wholesale almost entirely, absolutely convinced there was more profit in selling online. And I told you that when we actually ran the numbers, it turned out to be nowhere near that simple. Today I’m going to keep that promise, and I’m going to use it to answer a much bigger question, which is really the question underneath this whole series: how do you price a premium brand so that it’s genuinely, durably profitable? Profitable enough to not just survive, but to actually fund its own growth. Fair warning up front – this is a numbers episode. I promise it’s not a spreadsheet read aloud, but there are figures, and they genuinely reward following. So if you can grab a pen, or a note on your phone, this is a good one to do that for.

Here’s the heart of it, before we go anywhere near a calculator. Most brand owners are pricing off the wrong number. They look at how good a product is, or how good a whole channel is, by its margin – the gross margin, that lovely healthy-looking percentage. And gross margin is quietly one of the most misleading numbers in your entire business. Because it only ever counts one single cost: what the product cost you to make. It ignores every other cost that stands between making a sale and actually keeping the money. And those costs are enormous, and they are wildly different depending on how, and where, you sold the thing.

The number that actually tells you the truth has a rather less exciting name. It’s contribution per unit. Not “what’s my margin,” but “when I sell one of these, through this particular channel, what do I actually keep in my hand, after I’ve paid for everything that sale really cost me?” That’s the number that matters. That’s the number you should be pricing against. And the moment you switch from staring at margin to looking at contribution per unit, some very uncomfortable, and very useful, things fall straight out.

Let me give you the picture in one image, because it’s the whole idea. Judging a product or a channel by its gross margin is a bit like choosing between two job offers purely on the salary, and completely ignoring that one of them is a five-minute walk from your front door and the other is a ninety-minute commute each way. On paper, same money. What you’ve actually got left of your day, and your life, at the end of it – utterly different. Gross margin is the salary. Contribution per unit is what’s really left after the commute. And most brands are choosing their products, their channels, and their whole pricing strategy on the salary, and then wondering why there’s nothing in the bank.

So let me make it real, with one actual product, from a fashion brand I audited recently. I’m keeping them anonymous, so all you need to know is that they’re a lovely brand with a genuinely loyal following, and they sell across a website, a couple of their own shops, and events.

One of their best-selling items – let’s just call it a pair of shorts – sells for about fifty-six dollars. It costs them about twenty-seven dollars to make, finished and ready to sell. So the gross profit is around twenty-nine dollars a pair. Call it a fifty-two per cent margin. And if you stopped right there, which is exactly where most people stop, you’d say – lovely, healthy product, nothing to worry about here. Twenty-nine dollars a pair. Grand.

Now, the first problem is hiding inside an average, so let me pull it out into the light, because this one catches almost everybody. Across the whole store, this brand’s blended gross margin came out at a perfectly respectable-sounding fifty-five per cent. Sounds completely fine, doesn’t it. Healthy. But when I broke it apart, category by category, the picture flipped straight over. The best-selling lines – the shorts, the shirts, the caps, the things genuinely flying off the racks – were sitting at just forty-six to forty-nine per cent. And the lovely high-margin products, the ones up at sixty and seventy per cent, were the ones selling in the smallest numbers. So that comfortable fifty-five per cent average was being quietly propped up by the slow sellers, while the products doing all the actual work, bringing in most of the revenue, were the very thinnest of the entire range. The average wasn’t just unhelpful. It was actively hiding the problem. And you cannot price well off an average that’s lying to you.

But here’s where it gets genuinely interesting – and this is contribution per unit doing its work. Take that same fifty-six-dollar pair of shorts, that twenty-nine dollars of gross profit, and let’s just follow it through two different ways of selling it, and watch what actually survives the journey.

First, sell it over the counter, in one of their shops. That twenty-nine dollars isn’t really twenty-nine dollars, because that shop has to exist. The rent alone, worked out per order that goes through the till, comes to about eight dollars and forty. So your twenty-nine dollars is really more like twenty. And that’s before you’ve paid the person standing behind the counter, before the power bill, before a single other thing. So – roughly twenty dollars a pair, in-store.

Now sell that exact same pair online, and ship it free, which is increasingly just what customers expect. Watch what happens to it. Off comes the postage, about thirteen dollars fifty. Off comes the picking and the packing – the satchel, the tissue, the little thank-you card – a couple of dollars. Off come the transaction fees and the merchant fees, another few dollars. All up, the real cost of getting that one online order out the door is about nineteen dollars. So your twenty-nine dollars of gross profit is now… about ten. Ten dollars. On the very same pair of shorts that earned you twenty over the counter.

Same product. Same price. The same twenty-nine-dollar “margin” printed on the label. And depending purely on how you happened to sell it, you kept twenty dollars, or you kept ten. That gap is the cost to serve – the real cost of actually fulfilling a sale – and almost nobody builds it into their pricing. In this brand’s case, more than eighty per cent of their orders went through the shops and the markets, where that cost to serve had never once been priced in. It was just quietly eating the margin, order after order after order, completely invisibly.

And now the number that genuinely made me sit up, because it’s the one almost nobody ever counts. What if that online order isn’t from an existing customer at all – what if it’s a brand-new customer, one you paid to acquire through Meta ads? For this brand, the cost of winning a single purchase through advertising was running at around seventy dollars. So let’s do the whole sum, on that one pair of shorts, sold online, shipped free, to a brand-new customer. Twenty-nine dollars gross. Minus about nineteen to fulfil it. Minus about seventy to acquire the customer. That is not a small profit. That is a loss of around sixty dollars. You paid sixty dollars for the privilege of selling somebody a pair of shorts.

Now, in fairness, a real online order is usually a bit bigger than a single pair of shorts, so in practice it isn’t always quite that brutal. But even on a normal-sized order, once you’ve paid to acquire a genuinely new customer, that first sale barely washes its face. It roughly breaks even, at very best. And that leads me to the single most important sentence in this whole episode, so I’m going to say it slowly. For a brand like this, you do not make your money on a new customer’s first order. You make it on the second one. The repeat. The order that comes with no acquisition cost attached, ideally at full price. That is where all the actual profit lives. Which is precisely why training your customers to only ever buy on discount, or letting them drift away after a single purchase, is so quietly lethal – you’re killing the one order that was ever going to make you any money in the first place.

Now, I want to stop here and pull the lens right back, because we’ve just uncovered something that completely changes how you should think about pricing – and it’s the thing I most want you to take away today.

For years, the accepted wisdom was that a fifty to sixty per cent gross margin meant you had a healthy product business. That was the benchmark. Hit sixty per cent gross margin and you were doing well. And I want to say this as plainly as I possibly can: that is no longer true. A fifty to sixty per cent gross margin is not enough to thrive anymore. In a lot of cases, it’s barely enough to survive. And you’ve just watched exactly why, in real numbers. Because every one of those variable costs – the cost of making the product, the cost of shipping it, and above all the cost of advertising to win a customer in the first place – every single one of them has gone up, and up, and up. The old sixty per cent benchmark was set in a world where it cost a fraction of what it does now to acquire a customer. That world is gone. So a historically “good” sixty per cent gross margin, once you run it through everything we just ran that pair of shorts through, is now frankly a pretty terrible place to be. It leaves you almost nothing to actually live on, let alone reinvest.

So what do I actually aim for, when I’m helping a brand price? I want to see gross margins in the seventy to eighty-five per cent range. Genuinely. Seventy at the absolute floor, eighty-five and up if the brand’s premium positioning can carry it – and for a truly premium brand, it very often can and should. That is the margin that survives contact with the real world. That’s the margin that pays for your advertising, absorbs your cost to serve, funds your next stock run, and still leaves something behind. That fashion brand at fifty-five per cent, propped up by slow sellers, with the best-sellers down at forty-six? That’s not a healthy business hiding a small problem. That’s a business running on fumes and calling it a margin.

But – and this is the enormous, non-negotiable catch, so please don’t hear the first half without the second – you do not get to just charge those prices. Pricing at seventy, eighty, eighty-five per cent margin only works if two things are absolutely, genuinely spot on. The first is your product. It has to actually be worth it. The quality, the materials, the craft, the experience of owning it, all of it has to genuinely justify the price you’re asking, because a premium price on a mediocre product is a promise you break the moment the customer opens the box. And the second is your marketing content – everything you say and show, the way you communicate the value, the story, the reason this costs what it costs. Which, if you’ve been with me for the last few weeks, is the entire thing we’ve been talking about. Understanding your buyer well enough to tell her exactly what she needs to know. If either of those two things – the product, or the content – is not up to scratch, then a premium price doesn’t lift you. It exposes you. The customer feels the gap between what you charged and what you delivered, and they abandon ship, and they don’t come back. High margins aren’t a licence to overcharge. They are what a genuinely excellent product, communicated brilliantly, is allowed to command – and required to command, now, just to make the maths work. The price, the product, and the content all have to rise together. You can’t have one without the other two.

Which brings me, rather neatly, to my second brand. And this one you’ll know, because it’s one of ours: Babiators, the children’s sunglasses brand. Because Babiators is a real, live example of what happens when the pricing, the positioning, and the market all move at once, and a brand doesn’t move with them.

When we took Babiators on, several things were happening all at the same time, and between them they were quietly strangling the profitability. The first was that the prices simply hadn’t been properly adjusted in years. And in that same stretch of time, the cost of actually making and landing the product had climbed steadily – a mix of a weaker exchange rate and higher shipping costs, both of which are completely outside the brand’s control, and both of which quietly ate into the margin from underneath, without anyone ever really deciding to let it happen. So on one side, costs rising. Prices standing still.

But something else was happening at the very same time, and this is the part that turns a margin problem into a brand problem. While Babiators had been holding still, the market around it had filled up. A whole crowd of new competitors had entered the space. And because Babiators’ price point hadn’t moved in years, it suddenly found itself no longer standing where it used to stand. It had lost its clear position. Its price had drifted, through sheer standing still while everyone else arrived, into the forgettable middle ground – not the cheap option, not the clearly premium option, just… somewhere in the muddled middle, where nothing stands out and nobody quite knows what you are.

And that is a genuinely dangerous place for a premium brand to end up, because it’s a double blow. On one side, your margins are being squeezed, from rising costs and creeping discounts. And on the other, your premium positioning itself is drifting away – and as it drifts, it actively alienates the very audience that was drawn to you because you were premium in the first place. The people who loved Babiators because it stood for something specific looked up and found a brand that had blurred into the crowd. So you’re losing money and losing your identity, at the same time, and each one makes the other worse.

And then, on top of all of that, there was the channel decision – the one I promised you last week. Somewhere along the line, the brand had steered away from wholesale, pulled back from selling through retailers, on the belief that there was simply more profit in selling online, direct. Keep the full price, cut out the middleman. The exact belief we spent last week pulling apart.

So we ran it. Properly. Contribution per unit, both channels, everything the online sale truly costs – the ads, the discounting, the fulfilment, all of it – against everything the wholesale sale truly costs. And here is what we actually found, and I want to be really precise about this, because it’s the important bit. Online was not more profitable than wholesale. But wholesale wasn’t more profitable than online either. Run honestly, contribution per unit, the two channels came out roughly equal. The whole premise the brand had quietly reorganised itself around – that online was clearly the more profitable place to be – simply wasn’t true. It was never true.

But the really important insight is the next one, and it’s the one I most want you to hold onto, because it ties directly back to last week. Those two channels are not just equally profitable in isolation. They are at their absolute best when they’re grown together, at the same time, because they feed each other. The wholesale channel would never have performed the way it did without the brand-building and the demand-building that the online marketing was doing. Think about it – it’s the online presence, the content, the ads, the whole visible brand, that makes a parent walk into a shop already knowing and wanting Babiators. The online work creates the demand that the wholesale stockist then gets to fulfil. They are not rivals. Online is the engine that makes wholesale fly.

But – and here’s the sting – that only works if the online channel isn’t competing too aggressively against the wholesale one. The moment online leans hard into discounting, undercutting the retailers, it stops feeding the wholesale channel and starts strangling it. So the mistake was never simply “they pulled back from wholesale.” The mistake was believing online was more profitable when it was merely equal, and then, chasing that phantom, running the online channel in a way that would have quietly undermined the wholesale one anyway. Fix the pricing so the margins are real again. Re-establish the premium position so the brand stops drifting in that forgettable middle. Rein in the reflexive discounting so online stops competing with the shelves. And then grow both channels concurrently, each one making the other stronger. That’s the whole play. That’s what “equally profitable” actually unlocks – not a choice between two channels, but a partnership between them.

Now – I can almost hear the question forming. “If they’re equal, and they’re better together, do I even need to think about the difference between them at all?” You do, and here’s the one that actually matters – because it isn’t about which is more profitable. It’s about who owns the relationship with the end customer.

Both channels bring you repeat business, so let’s be clear about that. On the wholesale side, the repeat is the stockist reordering – they sell through what they bought, and they come back to you for more. That’s real, dependable, repeat revenue. But notice who the brand actually has a relationship with there: the shop. Not the person who ends up wearing the product. The end customer belongs, quite reasonably, to the retailer.

Online, it’s completely different – and this is the part that’s worth so much more than people realise. When you sell direct, you own the relationship with the actual end user. And yes, part of the value of that is obvious: you’ve got their details, you can email them, look after them, bring them back yourself at full price, again and again. But the deeper value is subtler, and it compounds. Because being in direct contact with the people who actually use your product means you are learning from them, constantly. You find out what they love and what they don’t. You hear why they nearly didn’t buy. You learn the exact words they use to describe what you make. You see what confuses them, what delights them, what’s missing. And all of that intelligence flows straight back into making your products better and your marketing sharper, year after year after year.

That is the thing a wholesale-only brand genuinely struggles to do – because it sits at arm’s length from the end customer, behind the retailer, and never really gets to meet the person using the thing. It can make a lovely product and send it off into the world, but the feedback loop is broken. It’s flying half-blind. So owning the customer relationship online isn’t just a repeat-sales machine. It’s how a brand gets better on purpose, over time – and it’s why, if you’ve been with me these last few weeks, the brands that genuinely understand their buyer are almost always the ones talking to that buyer directly. You can’t learn what she needs to hear if you never actually meet her.

And wholesale has a catch of its own on top of that, worth naming quickly: the stockist owns the volume, the terms and the timing. They decide how much to order and when, they pay you on their schedule, and they can choose to drop you. So wholesale is efficient and it reaches people you never could alone – but it isn’t yours to control, and it doesn’t teach you much. The real distinction between the two channels was never profit. It’s ownership, control, and above all, learning. And once you see it that way, the point was never to choose. Each one gives you something the other can’t – so you want both, grown together, on purpose.

So the pricing and the channel strategy were never two separate conversations. They’re the same one – because what a price earns you depends entirely on where you sell it, and because the channel that teaches you most is the very channel that lets you keep improving the product and the content that justify a premium price in the first place.

And there’s one last thing both of these brands scream at you, and it’s about discounting – because now, at last, you can see why it’s so corrosive in cold, hard arithmetic, rather than just brand feeling. When your real contribution per unit is this thin – ten dollars on a fifty-six-dollar pair of shorts, once everything’s honestly counted – a discount doesn’t shave a little slice off a nice fat margin. It eats a thin one alive. Take twenty per cent off that fifty-six-dollar pair. That’s about eleven dollars off the price. And your contribution online was only about ten. So one single, “small,” twenty-per-cent discount doesn’t dent your profit. It erases it. It takes you straight past zero and out the other side, and now you are quite literally paying people to take your product. That is the arithmetic sitting underneath everything I’ve been banging on about for a month. Babiators drifting into the discounted middle ground, the fashion brand’s unrecovered costs – it’s the very same wound: a contribution that was always far thinner than the margin made it look, being nibbled away to nothing. And it’s why real margins – proper, seventy-plus per cent margins – aren’t greedy. They’re the buffer that lets you weather all of this and still have a business at the end of it.

So here’s where I’ll leave you – or nearly. You have almost certainly, at some point, been told to chase the channel with the best margin, or been quietly reassured that a healthy-looking gross margin means a healthy business. But margin was never the number that mattered. Contribution per unit is. What you actually keep, from one sale, through one channel, after everything that sale genuinely cost you. Price against that number. Aim for real margins that can survive what things actually cost today, not the comfortable old benchmarks from a cheaper era. Make sure your product and your marketing are genuinely good enough to earn those margins. And design your channel mix so the parts feed each other instead of fighting. That is how you price a premium brand for profitable growth.

And I want to leave you with the reason all of this actually matters – because pricing for profit can sound a bit cold, a bit mercenary, and it honestly couldn’t be further from how I think about it.

Healthy margins are not about greed. They’re about freedom. When a brand is genuinely, properly profitable – when it’s priced so there’s real money left after everything that sale truly costs – it gets to do so much more than just survive. It gets to innovate: to fund the R&D, to develop the new thing, to invest in the materials and the quality most brands can’t justify. It gets to look after its people properly. And it gets to reach beyond itself and actually make a difference to the community it serves. None of that is possible on fumes. A brand scraping along on a thin, nibbled-away margin has nothing left to give – every dollar is already spoken for just keeping the doors open. Thin margins don’t just put the business at risk. They quietly strangle everything that made the brand worth loving in the first place, until there’s nothing left but a commodity, competing on price, indistinguishable from the crowd.

Think about Babiators again for a moment. Because they’re priced as a proper premium brand, and not caught in a race to the bottom, they get to do work that goes well beyond selling sunglasses – like their genuine mission to educate parents about sun safety for children’s eyes, something most people simply don’t realise matters until someone tells them. That work costs money. It comes directly out of being profitable enough to fund it. A brand trapped in the discounted middle ground, fighting for every last dollar of margin, could never afford to do it – and wouldn’t really be trusted to, either, because that kind of genuine mission is exactly the sort of thing that makes a brand premium in the first place. Do you see the loop? Profitability funds the meaningful work. The meaningful work deepens the premium positioning. And the premium positioning is what earns you the margins that fund it all. It feeds itself.

So when I talk about pricing your premium brand for profitable growth, this is what I actually mean. Not squeezing every last cent out of your customer. Building a brand strong enough, and profitable enough, to create, to improve, to stand for something, and to give something back – year after year. That is what the right margins buy you. And it’s the difference between a brand that merely gets by, and a brand that gets to matter.

And that, in the end, is the thread running through this whole run of episodes. It was never one magic thing that quietly unlocks all your growth. It’s understanding your buyer well enough to give her what she actually needs. It’s designing your channel mix on purpose, instead of on a slogan someone handed you from a stage. And underneath every bit of it, it’s doing the real work – looking at the honest numbers, and pricing off them, instead of the flattering ones. None of it is a hack. All of it is just refusing to be seduced by the simple, comforting version, and doing the real thing instead.

If you’d like us to run exactly this analysis on your brand – your true contribution per unit, channel by channel, and the pricing and mix that genuinely follow from it – that is precisely what a Brand Growth Strategy Session is for. It’s the difference between guessing which of your channels and products actually make you money, and knowing. The link’s in the show notes. I’ll see you next week.