How much should I charge for my product?
TL;DR
Use a mix of three methods: cost-plus (cost + margin), value-based (what it's worth to the customer), and competitive (what similar products charge). For most small businesses, value-based pricing beats cost-plus by 30-100%.
Detailed answer
- 1.Cost-plus: total cost × (1 + desired margin %).
- 2.Value-based: anchor on the value the customer gets, not your cost.
- 3.Competitive: benchmark against 5-10 similar products.
- 4.Psychological pricing: $19 outperforms $20 in tests.
- 5.Tiered pricing: 3 tiers, with the middle option designed to be the most-chosen.
Common mistakes
- 1. Pricing on cost alone (leaves money on the table).
- 2. Racing to the bottom on price (attracts the worst customers).
- 3. Never testing price changes.
What to do instead
Test a 10% price increase on new customers. Most small businesses are underpricing — the customers who push back are usually not your best ones anyway.
Offer 3 tiers instead of 1 price. The 3-tier structure shifts most buyers to the middle option, often 30-50% above your previous single price.
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