How to Price Your Product

Know your costs first

Before choosing a price, add up what each sale really costs: materials or product cost, packaging, shipping, payment fees and a share of fixed costs like rent and software. Many new businesses underprice because they forget fees, returns and their own time. Our free margin calculator on the tools page helps you check.

Three main strategies

Cost-plus pricing adds a markup to your cost, for example cost times two. It is simple but ignores what customers will pay. Competitive pricing sets prices relative to similar products in the market. Value-based pricing starts from the value customers get: a product that saves a business hours of work can be priced on that saving, not on what it costs you to make.

Margin vs markup

Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. If something costs 10 dollars and sells for 20 dollars, the markup is 100 percent, but the margin is 50 percent. Mixing them up is a common and expensive mistake. Our margin calculator shows both.

Key takeaways

Know your full cost per sale before setting a price. Choose cost-plus, competitive or value-based pricing, or a mix. Understand the difference between margin and markup. Test prices and track results rather than guessing. Remember that underpricing is one of the most common reasons small businesses struggle, even when sales look busy.

Psychology and testing

Prices ending in 9 or 99 can feel cheaper. Offering three options, good, better and best, often pushes buyers toward the middle. Anchoring, showing a higher price first, makes others look reasonable. The best way to find the right price is to test: try a price, track sales and margin, and adjust. Raising prices slowly with better value is easier than cutting margins later.

This page is general education, not financial, tax or legal advice. Everyone's situation is different, so check official sources and consider talking to a licensed professional before big decisions.

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