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To price a product, first calculate the full cost of making and selling it, then weigh that figure against comparable offers, what your target customers value, and the business goals your price needs to support. No single method works for every product; a defensible starting price combines these inputs and can be revisited as you learn from the market.
1. Calculate the full cost of making and selling the product
Start with the costs tied to creating and selling one product. Include materials, labor, and other relevant expenses rather than treating the materials bill as the whole cost. Shopify’s guide to pricing products describes cost-plus pricing as calculating total product costs and adding a markup.
This gives you a useful baseline: if the price does not cover the costs you included, it cannot meet your profitability needs on those assumptions. The result is only as sound as the cost figures you enter, so identify the expenses that genuinely belong in your calculation before choosing a markup.
2. Research comparable products, not just competitor prices
Look at products aimed at similar customers and compare what each offer includes, its quality, and its brand positioning. The Library of Congress small-business pricing guide recommends considering competitors’ prices alongside branding strategy, such as premium or low-cost positioning.
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A competitor’s price is a reference point, not an instruction. As the Australian Government’s pricing strategy guidance puts it: “Use your competitor’s prices as a guide, but don’t copy them exactly.” A product with different features, quality, service, or brand promise may warrant a different price.
3. Find out what your target customer values
Consider the problem your product solves and which benefits set it apart. Research your target market and what customers may be willing to pay; surveys can help you gather customer views, as the Library of Congress guide notes. Treat responses as evidence to consider, not as a guaranteed price: a short survey alone does not establish what the wider market will actually pay.
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Value-based pricing starts with the value customers perceive rather than production cost alone. Shopify notes that this approach is particularly relevant when perceived value differs from the cost of making the product. It can be useful when benefits are subjective or vary among customers, but cost and market comparisons still matter when checking whether a proposed price is workable.
4. Choose a pricing method that fits your product
These methods organize the decision around different inputs. They are not mutually exclusive: even when one is your main approach, the other information can help you assess the result.
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| Method | Main input | When it can help | What to check alongside it |
|---|---|---|---|
| Cost-plus | Total product costs plus a markup. | When production costs are relatively stable and predictable. | Whether customers will accept the resulting price and how it compares with similar offers. |
| Value-based | Customers’ perceived value of the product. | When customer-perceived value is subjective or differs from the cost of making the product. | Whether the price covers relevant costs and fits the market and target customer. |
| Competitor-based | Prices for comparable offers. | When comparable products and their prices are visible. | Differences in quality, features, brand positioning, costs, and customer value. |
Shopify describes these approaches and their use cases in its product pricing guide. Competitor-based pricing can help you decide whether to position above, below, or near comparable offers, but the comparison is only useful when the offers are genuinely similar.
5. Check that the price supports your business goals
A price should make sense for the customer segment you want to reach and the position you want the product to occupy. The Library of Congress guide identifies target customers, brand and quality strategy, desired profit margin, competitor prices, and willingness to pay as relevant considerations. OpenStax also describes pricing objectives that can include customer value, cost, sales, market share, target return, competition, and customer orientation in its pricing-policy framework.
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- Does the price fit the product’s intended quality and brand positioning?
- Does it address the target customer and the value that customer sees?
- Does it meet the business’s margin or other pricing objective when calculated against relevant costs?
- Is the comparison with competing offers fair, given differences in what each product provides?
If the answers point in different directions, revisit the inputs rather than assuming one pricing method should decide everything. A cost-based calculation, customer evidence, and market context can each reveal a different constraint.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to use the five tips together
Build a starting price from your cost base, compare it with relevant offers, and assess whether target customers see enough value at that level. Then choose the pricing method that best fits the product and check the result against your positioning and business objective. The right outcome depends on the product, its costs, its market, and the customers you intend to serve; the sources do not establish a universal price or margin that suits every business.
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Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
