How to Price a Product

How to Price a Product. In the world of marketing, pricing products incorporates 2 of the 4 most important aspects of business. Setting a price that brings value to both your customers and your company is essential for the longevity and profitability of your business. Several factors go into determining the right prices for your company's products.

Understand that a price suggests a certain value to a customer. Setting a price that's too high or too low can limit your business growth. It can also cause major problems for your sales and cash flow.

Increase your profit by understanding the value of your product to the consumer. The price of the product is your financial reward for providing the product; the value is what your customer believes the product is worth. Evaluate the benefits your product offers to your customers and how price affects their buying decisions.

Take into account both the fixed and variable costs involved in producing your product. Fixed costs, such as retail space or insurance, remain constant no matter what you produce or sell. Variable costs such as wages and materials rise with the amount you produce or sell. When setting a price, you must take in more money than just the production cost, so you can make a profit.

Align your prices with those of your competition in so far as possible. Never price your products too much higher or lower than your competitors without having a very good reason.

Use different pricing tactics to attract customers while maximizing profits. These include offering special prices during promoted times; odd-value pricing, such as selling something for $9.99 rather than $10; selling products at a loss for the sake of attracting new customers; selling a unique product or service at a high price; and starting a new product off at a lower price, increasing it as the product gains popularity.


  • Be careful of using discounted prices too often. Customers can become suspicious and mistrustful of your everyday prices if you have sales 99 percent of the time.

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