How To Price Your Product Or Service

The price that you charge for your product or service is an important business decision that can impact your survival and growth. This is because it can lead to serious problems for your cash flow. Hence always consider your pricing strategy carefully before you start any business. Established businesses have to improve their profitability by doing regular pricing reviews.

Set your prices in such a way that allow your business to be profitable. Next, always consider where your product or service stands in comparison to the competition. Have a pricing strategy that lets you work out your costs and make sure that your business is profitable.


You need to know the cost of your product or service. This refers to the amount you spend in order to produce it. Your price will be the financial reward you want for providing that product or service to the consumer. The difference will be your profit.

You would always like to maximize your profitability. But your pricing has to be based on a number of factors. You need to know what benefits your customers perceive from using your product or service. Next, consider the criteria used by your customers for making buying decisions. This can include speed of delivery, convenience and so on. You will also have to consider the value your customers place on your product or service on receiving benefits from it. Hence prices need to reflect the value provided and not just the cost.

Cover The Costs

Your business has to cover its costs to make a profit. You need to divide your costs in to fixed costs and variable costs. Fixed costs are those which do not fluctuate with the amount of business you are doing. This would include rentals and salaries. Variable costs will rise as your sales increase and decrease as it decreases. This would include raw materials, labor and transport and so on.

Your price must be higher than this variable cost. This way each sale you make will cover your fixed costs, and help you to make profits too.

You may also price your products and services based on cost or on perceived value. This will be based on your business type, what influences the buying decisions of your customers and your competition. There are a number of strategies available for you to price your products or services.

How To Price

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