3 ways to price your products

Constance Holmes FEBRUARY 27, 20205 MIN READ
3 ways to price your products

Working out how to price your product can be a daunting task, and it can be tempting to choose a number without putting much thought into it. However, pricing your products without the proper research and understanding of your costs, competitors, and customers, can have very negative results for your business. This article will provide an overview of the steps you should take to make an informed decision about how you will price your products.


Evaluate the market

Competitor research

Conducting competitor research is crucial when deciding the price for your product. It is important that you see what other companies with similar products are selling them for, so that you don't price yourself out of the market, or have a price so low that customers doubt the quality of your product.

Product positioning

Product positioning refers to what audiences you will target your product at. Audiences can be separated by a variety of different criteria, including age, gender, hobbies, etc. In terms of pricing, some audiences are budget conscious whilst others are looking for status purchases. It's important to fully understand your product and audience when determining your price, so that you know how much customers are willing to pay.


Pricing strategies

Cost-plus pricing

In cost-plus pricing the seller works out the inherent costs of the product, which include materials and labor among others, and then adds a percentage markup, to ensure profit. The advantages of this strategy are that it's simple to work out, and any price increases are easy to justify to the customer by showing where the additional cost is coming from.

However, the disadvantages of this strategy are that depending on the costs and markups of different competitors, they can end up with very different final prices. Similar products with very different prices in the market can be a problem as companies either price themselves out of the market or are perceived to have lower quality products.

Market-oriented pricing

In market-oriented pricing, sellers look at what their competitors are charging and determine their own price based on how their product compares to their competitors. Another technique to determine market prices is to check the top 100 SKUs on platforms, such as Alibaba.com.

This strategy is advantageous as it means your price is balanced in the market, however its disadvantage is that you have less control over your profit margins. Your competitors may be larger and have streamlined their costs, meaning they can afford to offer their products at lower prices than you are unable to match. Trying to compete with them could result in financial losses for your business.

Value-based pricing

In value-based pricing you need to work out how much customers are willing to pay for your product. Value-based pricing is beneficial as it means you are able to maximum your revenue, by charging the highest price that customers are willing to pay. However, it requires more substantial research, with questionnaires and focus groups needed to more fully understand the customer.


Additional factors

Dynamic pricing

It's important to be flexible with pricing and adjust it according to region, market trends, and promotional opportunities, such as holidays. In this way, you are able to maximize sales by taking advantage of changing and variable conditions.

Payment terms

Depending on your product you may offer flexible payment terms, such as paying in installments. If this is the case, it's important to keep on top of how your payment terms are affecting the cash flow in your business and make sure it is a service you are able to manage.



It's crucial for your business that you choose the right price for your product, as pricing too high or low can negatively affect your sales. Pricing your product well starts with market research, to fully understand your competitors and your target customers. There are also various pricing strategies that you can employ to help you determine your price, these include cost-plus pricing, market-oriented pricing, and value-based pricing. Finally, when you've decided on your price, it's important to remain flexible, and adjust it according to need and opportunity.