Setting the right price is a balancing act — price too high, and you scare customers off; price too low, and you cut your profits (or worse, make your business unsustainable). Let’s dive into how to price your products or services strategically — so you stay competitive and profitable!
1. Understand the Psychology of Pricing
✅ Why pricing is more than just numbers:
- Higher prices signal higher value. People assume expensive = better quality.
- “Bargain” pricing can backfire. Too-low prices can make your offer seem cheap or unreliable.
- Odd numbers convert better. Prices ending in 7, 9, or 5 feel more appealing (e.g., $47 or $29.95).
- Bundle pricing feels like a deal. Packaging products/services together makes customers feel like they’re getting more for their money.
💡 Example: A fitness coach could price a 6-week program at $197 instead of $200 — making it feel more “affordable,” while still reflecting value.
👉 Tip: Price communicates value — make sure yours aligns with the perception you want customers to have.
2. Calculate Your Costs First
You can’t price for profit without knowing your costs.
✅ Include these costs:
- Product costs (COGS): Materials, manufacturing, packaging, etc.
- Operational costs: Website, marketing, software, rent, etc.
- Labor costs: Your time and any employees or freelancers.
- Taxes and transaction fees: Platforms like Etsy or Stripe take a percentage.
- Shipping (if applicable): Factor this in — don’t let it eat your margins.
💡 Example: A handmade soap business spends:
- $3 on materials (per bar)
- $2 on packaging
- $4 on marketing and website costs
- Total cost per bar: $9
👉 Tip: If you’re a service-based business, don’t forget to value your time — you’re not working for free!
3. Choose a Pricing Strategy That Fits Your Business
Let’s explore the most effective pricing strategies:
✅ 1. Cost-Plus Pricing:
- Add a profit margin to your total costs.
- Formula: (Total costs + desired profit) = price
💡 Example:
- Total cost = $9
- Desired profit = $6
- Price = $15 per bar of soap
✅ 2. Value-Based Pricing:
- Price based on the value you provide — not just costs.
- Great for services or premium products.
💡 Example: A photographer who delivers emotional, lasting memories might charge $500 per photoshoot — even if their costs are only $100.
✅ 3. Competitive Pricing:
- Research competitors — price similarly or slightly lower/higher based on your positioning.
- Best for markets with lots of competition.
💡 Example: A social media manager could price a package at $350/month — in line with competitors but offering “weekly content audits” as an added value.
✅ 4. Penetration Pricing (Introductory Pricing):
- Start with a lower price to attract new customers, then increase later.
- Great for launching products/services fast.
💡 Example: A subscription box could offer “First month for $10 — then $25/month after.”
✅ 5. Premium Pricing:
- Position yourself as high-end or luxury — with pricing to match.
- Works best when you offer something competitors don’t (better quality, unique experience, faster delivery, etc.).
💡 Example: A custom cake business might charge $200 per cake — because they offer personalized designs, premium ingredients, and delivery.
👉 Tip: Pick the strategy that matches your brand and market position.
4. Factor in Profit Margins
Profit isn’t optional — it’s what keeps your business alive.
✅ Standard profit margins:
- Products: 20-50% (higher for handmade or luxury items)
- Services: 50-70% (because time is your biggest cost)
- Digital products: 70-90% (e.g., e-books, courses — minimal costs after creation)
💡 Example: A jewelry maker might aim for:
- Total cost per bracelet: $15
- 40% profit margin: $25 price tag
👉 Tip: Always leave room for unexpected costs (e.g., marketing, refunds).
5. Test and Adjust Your Pricing
Pricing isn’t permanent — tweak and test until you hit the sweet spot.
✅ How to test pricing:
- A/B test prices: Try two price points (e.g., $47 vs. $57) and track sales.
- Bundle offers: Package related products or services together (e.g., “Website design + branding for $800”).
- Offer limited-time deals: See if temporary discounts boost conversions.
- Raise prices slowly: Start with a small increase ($5-$10) and monitor customer reactions.
💡 Example: A coaching program might start at $197 — then bump to $247 after the first 10 sales.
👉 Tip: Don’t panic if sales dip after a price increase — loyal customers often stick around.
6. Handle Pricing Objections Like a Pro
Customers will question your price — that’s normal. Here’s how to handle it:
✅ Common objections and responses:
🔹 “It’s too expensive.” → “I get that — but this product saves you time/money/stress in the long run. Let me show you how.”
🔹 “Can I get a discount?” → “I totally understand, but my pricing reflects the time, quality, and results I deliver. However, I do offer flexible payment plans — would that help?”
🔹 “Why is your competitor cheaper?” → “I can’t speak for them — but I focus on [quality, personalization, faster delivery, etc.], which ensures better results.”
💡 Example: A web designer might explain: “I charge more than DIY templates because I build custom, SEO-friendly websites that actually convert visitors into customers.”
👉 Tip: Defend your value — not your price.