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The Right Product for the Right Price

When establishing your new business, finding the right price is crucial to the success of your new business. Price is considered one of the 4P’s in Marketing: Product, Price, Place, and Position. Eachoperates in balance with one another, allowing businesses to thrive successfully within their marketplace. Making the wrong decision in either area can be detrimental to any business. However, the wrong price for a product/service impacts both a business’ revenue and reputation.

We can agree, there is a science behind selecting the right price for your product or service. However, as your business evolves, your pricing model, like other areas of your business, deserves an upgrade too. Ensuring you offer the best, reasonable price for the quality of service you deliver is the sweet spot. So, whether you have a base pricing model in need of upgrading to match your elevated service, or you’re starting from scratch and need to select the right price for your product, we’re here to help!

Let’s explore areas to consider when developing your pricing model for your product or service.


How to Find the Right Price?

Understand your Costs

Never price your product or service at a price that will undercut your profits. The goal when going into business should always be to make a profit. When developing your pricing model, consider all costs involved in production such as marketing, delivery, materials, labor, overhead, and any other expenses associated with it. Begin with estimating your monthly and/or annual expenses. Once determined, set a goal for your profit margin expectations. Throughout the year, monitor and compare your actual expenses with your projected to gain a more accurate picture of what your year-end expenses will be. If your expenses begin to soar above your estimation, review and adjust.

Failing to accurately account for all costs associated with producing and delivering your product or service can lead to unsustainable pricing. Unsustainable pricing can lead to bankruptcy and low yearly returns, making it impossible for your business to continue operations. Account for direct costs such as materials and labor as well as indirect costs like marketing when setting your pricing structure to ensure your revenue covers your costs.

Research and Know your Market

Take time to understand how your product will compete in the marketplace. Know your competitors and what they charge. If you are priced higher than your competitors, understand the unique value you offer, if any, and consider whether your target audience will pay the difference.

Offering your product/service at a premium price? It’s important to have a strong understanding of your target market and their willingness to pay that premium. Part of your research should include where your customers are spending to determine what they are willing to pay.

Understand the Demands of your Customer

This goes without saying, the potential demand of your consumer should be part of your initial research process when deciding to start your business. Understanding the degree of demand will help you determine your supply level. It’s basic economics; demand and supply are two sides of the same coin. If demand is high, price increases usually follow. High demand means there is a large number of potential consumers within the marketplace. Low demand indicates a shortage of consumers and usually an unwillingness to buy. Take the current real estate market, for example. During COVID, interest rates dropped tremendously, and the housing market began to show an increase in the number of homes purchased – demand began to exceed its supply. Since, interest rates have increased, resulting in higher sale prices per home.

Through research, learn how much your consumer is willing to pay for your service/product. Conduct surveys, interviews, and focus groups to gather necessary feedback and understand how customers perceive the value of your business. Pay attention to your marketplace as it is an active space sensitive to economic changes in inflation, and other recessional behavior.

Test Different Price Points

Failing to test different price points or adjust pricing based on customer feedback, market dynamics, and business performance can hinder your ability to perfect pricing and meet customer demand effectively. There are many ways to test different price points with your customers. A great way to test the market is to start with an introductory pricing model to assess the market’s response. Monitor sales volume, customer feedback, and profitability as you move out of the introductory phase with your customers.

Another option is price variation. Create different price points for your product or service and offer them to different customer segments or geographic regions. Monitor the sales performance, customer feedback, and profitability associated with each price point to decide which one generates the best results.

Other options include experimenting with bundled pricing where you bundle multiple products together or tiered pricing with different levels of features, benefits, or service levels. Each tier should have a distinct price point that corresponds to the value it provides. Monitor the adoption rates of each tier, customer feedback, and revenue generated to determine the best pricing structure. Be creative and consider the best strategies for you and your customer base.

Review and Adjust

Pricing is not meant to be static. Inflation is a given, but there will be opportunities to adjust costs based on other data points. Market dynamics such as the competitive landscape or customer preferences will guide your choices along the way. Regular reviews and adjustments will preserve the profitability of your business moving forward. If inflation drives your costs up, adjust your pricing accordingly to foster business growth and protect your revenue. Customer perceptions and expectations can change over time. Reviewing pricing helps you gauge whether customers perceive your product or service to be worth its current price. Adjusting prices based on customer feedback and preferences can enhance perceived value and increase customer satisfaction.

Pricing plays a crucial role in customer acquisition and retention. Regularly reviewing and adjusting pricing can help you attract new customers by offering competitive pricing or targeted promotions. It can also help retain existing customers by ensuring they continue to perceive value in your offerings and remain loyal to your brand.

With so many factors to consider, developing the right pricing for your product or service sometimes feels like walking a tight rope. While there is room for error and growth, there are certainly some things small business owners should avoid when developing their pricing model. Let’s review a few of these.

Don’t Underprice Your Product/Service

Underpricing your product can lead to customers devaluing your product or service. It will also affect the quality of customers you attract to your business. Customers that choose everything based on price are not only nitpicky about every little thing but are not loyal. Regardless of the quality you provide to keep their business, they will quickly leave you for the next business with a better offer because they are always shopping for the lowest bidder. Rebounding from this mistake can prove extremely costly and may require rebranding to attract the customers you want.

Don’t Overprice your Product/Service

Too little can be damaging to your business but too much can also affect your business growth. Pricing your product or service higher than the perceived value can lead to limited demand. While you may want to differentiate yourself from your competitors, you may also want to offer pricing that is within the competitive landscape. If the average cost for your service is $150 but your pricing is $300, you may be pricing yourself out of the market. Overpricing your product or service can also make it difficult to penetrate new markets. If you're the new kid on the block and your product or service is more expensive than everyone else, you’ll likely have a hard time penetrating the marketplace.


Developing the right pricing for your business is a methodical process; it should take time and research. Pricing strategy should be an ongoing process integrated into the daily operations of your business. By adapting the processes suggested in this article, a new business owner can increase their chances of establishing an effective pricing strategy, supporting their growth and profitability.

If you need a partner to work with, or a soundboard as you’re testing these strategies, consider VAAS Professionals. We have over 20 years of experience working with small businesses to maximize their success and profitability.


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