A beginner-friendly guide for entrepreneurs to set the right price — balancing sales, profit, and competitiveness.

Pricing is one of the most important decisions in business. Price too low → you lose profit. Price too high → customers won’t buy. This guide breaks it down simply.

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Step 1: Know Your Costs

Before you even think about the selling price, understand all your costs:

Direct Costs

• Product cost (from supplier)
• Shipping / delivery cost per unit
• Packaging cost

Indirect Costs

• Marketing & ads (Facebook, TikTok, Google)
• Payment processing fees (PayPal, Stripe, Shopify Payments)
• Platform fees (Shopify, Amazon, Etsy)
• Returns / refunds

Formula:

Total Cost per Unit = Product Cost + Shipping + Packaging + Fees + Ads

You cannot price below this if you want to make money.

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Step 2: Decide Your Profit Margin

Profit margin is the percentage of profit you make over costs.

Common Margin Targets

• Low-ticket products (<$30): 40–60%
• Mid-ticket products ($30–$100): 30–50%
• High-ticket products ($100+): 20–40%

Example:

• Product cost: $10
• Ads: $5
• Shipping + packaging: $2
• Total cost: $17
• Desired margin: 50% → Selling price = $17 ÷ (1 – 0.5) = $34

Tip: Always test different prices to find the sweet spot for your audience.

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Step 3: Check Market Prices

See what competitors charge:

• Amazon, eBay, Etsy, Shopify stores
• TikTok Shop / Instagram Shops (international sellers)
• Google Shopping & product comparison tools

Goal: Don’t price too far above or below the market unless you provide unique value (branding, faster shipping, better content).

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Step 4: Factor in Psychology

Pricing isn’t just math — it’s psychology.

Popular techniques

• Charm pricing: $29.99 instead of $30
• Tiered pricing / bundles: Buy 2, get 1 free → increases average order value
• Anchoring: Show original price “Was $49.99 → Now $34.99”
• Perceived value pricing: Premium packaging or branding allows slightly higher prices

Pro tip: Test prices in your ads — sometimes a slightly higher price converts better because it signals quality.

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Step 5: Consider Shipping & Taxes

For international sales:

• Decide if you include shipping in price (“free shipping”) or charge separately
• Account for VAT / GST in some countries
• Check import duties for products in your main markets

Example: A $30 product with $5 shipping may sell better if you advertise $35 “Free Shipping” than $30 + $5.

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Step 6: Optimize With Data

Pricing isn’t static. Test and optimize:

• Run A/B tests on product pages
• Track conversion rates at different prices
• Monitor competitor changes
• Adjust for seasonality (holidays, back-to-school, etc.)

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Step 7: Advanced Tips for Maximum Profit

• Upsell / cross-sell: Bundle products → increase order value
• Loyalty pricing: Discounts for repeat customers
• Dynamic pricing: Adjust prices based on demand or inventory
• Limited-time offers: Create urgency without permanently lowering price

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📌 Summary

1. Calculate all costs
2. Decide your desired profit margin
3. Check competitor prices
4. Use psychology pricing tricks
5. Include shipping & taxes in your strategy
6. Test and optimize continuously
7. Explore upsells, bundles, and promotions

Pricing is both art and science. Start with numbers, refine with market data, and test with your audience.