How do you price your products and services correctly?

Top voted answer


Hi Derrick

There are a number of strategies to pricing correctly.

1. Know what competitors are charging and adjust your price according to your positioning strategy. If you think you offer a better value proposition or you want to be known for higher quality or premium, price higher than them, and if you want to be a lower cost, higher volume producer price lower than them.

2. Value - on rare occasions you can completely change the paradigm on pricing in a market - I heard of an example in manufacturing where a company doubled the life expectancy of a key component in a production facility, they could have priced their product at twice the competitor, but ended up charging more than 1000x the competitor because they found out that by doubling the lifespan of that component they saved companies millions in production downtime.

3. Cost Plus - in this method you have to understand the cost inputs to your product or service - it isn't just production cost, it's time and money to sell, market, insure and other items- but in essence you cost out everything you can think of and then add a margin which not only covers this but gives you a profit too.

4. Survey - by surveying potential customers of a new product or service, you can determine their sensitivity or interest of that product at certain price levels and based on this determine where you should price for optimum return for you.

hope this helps


Jef Lippiatt

Jef Lippiatt, Owner at Startup Chucktown

Fantastically robust answer Hunter.

Jeremy Carter

Jeremy Carter, CEO | Leadership Trainer | Management Consultant | Business at

Hi Derric,

The correct price is the one that allows you to maximise the profit you generate from a product line. Too high and demand will be too low. Usually the person with the biggest problem with pricing is the business owner, not the customer.

When you learn to focus on and sell value, not price, the sales process is much easier. You never want to be the cheapest in a marketplace unless you have found a way to be more efficient that everyone else in that marketplace. e.g. Aldi and Costco

How to set a price? Survey your competitors, analyse their strengths and yours and decide where you want to position your product in the quality vs price continuum.

Review your prices on a regular basis. If you're not getting an occasional complaint that your prices are too high then I would suggest they are probably too low. Focus on profit ahead of turnover.

Hope this helps.