How to Price a Product

Setting your prices is all about careful planning and knowing what your hard work is worth. Unfortunately, it’s also really, really hard! 

It's kind of like raising kids: You're expected to know how to do it, but no one’s ever taught you how. And it's not objective—there are a million variables that go into setting prices. And no matter what you do, you never arrive at a price that is perfect for everyone. You’re always kind of questioning your prices. 

I'm going to give you five steps to consider to figure out how to price your product or service. If you go through this process, you’ll bring in enough money to cover your costs all while staying competitive within your industry.

1. Decide what type of brand you want to be.

There are a lot of ways to position yourself that will inform the price that you set.

I pulled these opposing brand attributes from my course, Content Creator Academy, to help you get started:

Is your brand more…

• Economical, or luxurious?
• Everyday person, or elite?
• Refined, or casual? 
• Common, or exclusive? 
• Sarcastic, or serious?
• Quality, or quantity?

As you identify the type of brand that you want to be, it's going to inform your price. 

Related: What type of clients do you want to work with? For example, if you want to work with high-end clients and to be seen as elite and exclusive, your prices shouldn’t be cheap. Do some consumer research to have data to back up your assumptions about your ideal customer here, too. 

Honing in on some adjectives that describe your brand will begin to narrow the range of what you should charge. You’ll begin to see that because you’re this type brand, you should charge this much. 

2. Determine your costs.

As you’re thinking through how to price a product or service, you must answer this: What is your cost of goods? How much do you spend on things like:

• Materials
• Ingredients
• Shipping
• Labor
• Equipment
• Maintenence
• Packaging 
• Supplies

Knowing your costs will ensure you build that into your price—so you can charge more than that and actually make a profit.

3. Focus on the value you provide.

Whether you’re just starting a small business or you’ve been doing this for years, I love this exercise. What is the value of the results that you promise and deliver on? 

A product-based business has a smaller range for this. For example, if you make pies, people expect to spend between $10-$40 for a pie. If you've got a $200 pie, it better be a magic pie that makes me lose weight! Or if you sell toothbrushes, no one expects to pay $500 for a toothbrush. 

A service-based business has a wider range. You can go out and hire a keynote speaker for $100 an hour, or $250,000 for an hour presentation! Or a wedding photographer for $75, or $20,000. 

Whichever type of business you’re in, don’t ask yourself what you want to make per hour. This is a common mistake, especially in service-based businesses.

Instead, ask yourself, “What is the value I provide?”

If you sell newborn clothes made from organic materials, what is the value of a mother’s peace of mind? If you're a counselor, what is the value of a mended relationship? 

Ask yourself, “What's the value of the results that I provide?”

4. Research the average price for similar products in your market. 

What is a normal price in your industry? This step should not determine your price, but it should inform it. 

Check out your competitors’ online presence to see what they’re doing. What do they charge? What types of promotions do they offer, and when? What are they doing to reach their target demographic? This kind of research allows you to consider whether you can match or beat their pricing strategies.

Pro tip: You don't want to be the cheapest. You may not want to be the most expensive, but you don't want to fall way outside the range of your competition.

5. Calculate the time you spend. 

I’m not just talking about the time of making or doing the thing. How much of your total time does it cost you? 

For example, if I'm booked for a one-hour keynote presentation, that's not just one hour of my

time. Here is everything else that goes into it: 

• Initial meeting or call with the client
• Researching the topic
• Preparing the talk
• Creating slides
• Travel time (local or long-distance)

You see, a lot goes into that one-hour keynote. And I bet a lot goes into your photography package, carpentry, personalized cookies, or custom dress—whatever it is that you’re selling—too. 

After you’ve completed the five steps above, you're ready to come up with a price range. You shouldn’t just set it and forget it; you’ll want to set it, experiment with it, and revisit it in the future.

When to Adjust Your Prices

Your pricing is always going to feel subjective. It might even make a couple people mad.

There's always going to be someone who thinks you’re too expensive, but it’s important for you to be confident in what you charge.

And what you charge today may be different than what you charge in five years. What’s right for your business, brand, and customers will change and evolve. It may be time to update your pricing when: 

1. You see your competition raising their prices across the board.
2. Your cost of goods increases.
3. You’ve added value, whether that’s a product upgrade or further expertise. 
4. You receive regular customer feedback that your pricing doesn’t match the product; i.e. they say it’s worth more than or less than you charge.
5. You gain popularity and demand is outpacing supply. 

Once you carefully think through these things, you will be on your way to setting the perfect price for your product.