how to set prices for your products or services
Setting the right price for your product or service is a balance between covering your costs, staying competitive, and maximizing profit—without scaring customers away.
Heres a complete step-by-step guide to help you price confidently and strategically:
? How to Set Prices for Your Products or Services
? 1. Know Your Costs (Break Even First)
Before you make a dime, you need to cover all your costs.
For products:
-
Direct costs (COGS): materials, packaging, shipping
-
Indirect costs: rent, utilities, software, salaries
-
Dont forget taxes and transaction fees
? Formula:
Break-even price = Total Costs Number of units/services sold
? 2. Understand Your Market and Competitors
Research what others are chargingbut dont blindly copy them.
Ask:
-
What do similar businesses charge?
-
How is your offering different (better/faster/unique)?
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Are you positioning as budget, mid-range, or premium?
? Look at online listings, reviews, and pricing pages to compare real examples.
? 3. Choose a Pricing Strategy That Matches Your Brand
| Strategy | Use When | Example |
|---|---|---|
| Cost-plus pricing | You want to guarantee a profit margin | $50 cost + 40% = $70 price |
| Value-based pricing | Your service delivers strong results or ROI | Business coaching = $1,000/session |
| Competitive pricing | You want to match or undercut market rates | Your $99 service vs market avg $120 |
| Tiered pricing | You offer options for different needs | Starter ($99), Pro ($199), VIP ($399) |
| Psychological pricing | You want to influence buyer perception | $49.99 instead of $50 |
? 4. Factor in Your Time (for Services)
Your time is valuableeven if you enjoy the work.
Use:
Hourly rate = (Target annual income + expenses) billable hours/year
? If you charge per project, build in extra for revisions and scope creep.
? 5. Test Different Price Points (Smartly)
Pricing is not set it and forget ityou can test and adjust.
Try:
-
A/B testing price tiers
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Introductory pricing or launch discounts
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Raising prices for new clients
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Bundles or package pricing (e.g., 3 sessions = 10% off)
? If demand stays high at a higher price, youre likely underpricing.
? 6. Offer Value Justification (Not Just a Price)
Tell customers what theyre getting and why its worth it.
Highlight:
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Benefits over features
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Testimonials and results
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Guarantees or bonuses
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Limited-time offers or urgency
? People will pay more when they understand the value clearly.
? 7. Avoid the Race to the Bottom
Low prices = low profit = burnout.
Instead:
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Focus on service, experience, or expertise
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Offer a freebie (like a sample or consultation) to attract trust
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Charge fairly and confidently for your value
? Remember: You dont need to be the cheapestjust the most valuable.
? Example: Product Pricing Breakdown
| Item | Amount |
|---|---|
| Material cost | $12 |
| Packaging & shipping | $5 |
| Platform fees (10%) | $2 |
| Time (15 min @ $20/hr) | $5 |
| Total cost | $24 |
| Markup (100%) | $24 |
| Final Price | $48 |
? Bonus Tips
| Tip | Why It Helps |
|---|---|
| Round down slightly (e.g. $29 vs $30) | Psychological edge |
| Show a price anchor (e.g. was $199, now $149) | Increases conversions |
| Offer payment plans for higher-ticket services | Makes pricing feel more manageable |
| Reassess pricing every 612 months | Adjust to growth and inflation |
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