Start from the full cost of each unit, including its share of fixed expenses, because that is the lowest price you can charge. Then look at what your customer pays for alternatives and the value they get from you, and set your price between the two according to your position in the market.
Step by step
- 1
Direct cost
Materials, time, packaging, shipping and payment fees for each unit.
- 2
Share of fixed expenses
Divide your monthly rent, salaries and marketing by the number of units you expect to sell.
- 3
Prices of alternatives
What does your customer pay today to competitors or for other ways of solving the problem?
- 4
Value to the customer
How much time, money or risk does your product save them? This is where the room for a higher price lies.
- 5
Test and review
Try the price on one segment, watch your close rate and profit margin, and review it every six months.
Pricing below your competitors attracts the least loyal customers and leaves a margin too thin to pay for marketing or development.
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