The Price is Right: Tips on Pricing your Products to Match Your Value

Pricing a product isn’t just about covering your costs — it’s about value. This one is for those that are in the ecommerce world, selling products or services online or IRL. This one is for those that want to showcase their true value. 

When you’re working with a lean team, your pricing strategy is pretty important. So what’s the right price? Queue it up: “Come on down, you’re the next contestant on The Price is Right.” All kidding aside, let’s get into some tips on how to price your products to match your value. 

Know your costs before anything else

You can’t set a price if you don’t know what it costs to make, market, and deliver your product. This is the baseline for your pricing strategy. Here’s what to include when you analyze your business costs. 

What to include in your cost analysis

• Direct costs: Materials, manufacturing, packaging, and labor — anything tied directly to making one unit of your product.
• Overhead: Rent, software subscriptions, salaries, utilities, and insurance. These are the costs that exist whether you sell one product or one thousand.
• Sales and marketing costs: The spend behind acquiring a customer — from paid ads to the time your team spends on follow-up.

Once you know your total cost per unit, you can find the lowest price to charge before losing money. From here, you layer in your profit margin to get a starting price. Try this quick guide to get started: What Is Cost Plus Pricing? How Do You Use It In Sales? 

Understand what your customers are willing to pay

Here’s where pricing gets interesting. Your costs set the floor — your customers set the ceiling. Value-based pricing works by anchoring your price to what buyers perceive your product to be worth, not just what it costs to produce.

And, our latest research shared that price/cost is one of the top factors founders consider when evaluating new tech — which means your buyers are probably as well. The goal is to find the price that feels fair to them and profitable for you.

To understand your value, ask yourself:

• What problem does this solve? 
• What’s the cost of the alternative? 
• Who is my customer? 
• What tools do I need to accomplish my goal?

There is an art to quantifying the answers to these questions. And something you will factor in cost of later: tools, time, and resources.

Choose the pricing strategy that fits your stage and goals

Once you know your costs and your customers, it’s time to pick a pricing strategy that fits where your business is today — and where it’s headed.

The most common pricing strategy approaches for SMBs

• Cost-plus pricing: Simple and protective of your margins. You add a markup to your production cost. Best for product businesses with recurring costs.
• Competitive pricing: You benchmark against what similar products cost in the market. Use this when you’re in crowded competition.
• Penetration pricing: You enter at a low price to get attention and build a customer base fast, then raise prices as your brand earns recognition. 
• Price skimming: You launch at a premium for early adopters, then lower the price over time. Ideal if you have a new or differentiated product with built-in buzz.
• Value-based pricing: You price to what your product is worth to the customer. Not what it costs you to make. 

How to price a product when you’re just starting out

Now we get to the good stuff, let’s put this into action. Here’s a practical sequence to follow when you’re setting a price for the first time: 

1. Calculate your break-even point. Use your total costs and estimated sales volume to find the minimum price where you generate profit.
2. Research your competition. Look at what comparable products cost and how they justify their price — in features, branding, or positioning.
3. Talk to potential customers. Have a few informal, honest conversations with your prospects, asking them what they would like to pay. 
4. Set a launch price and adjust. Your first price isn’t permanent. Make changes as needed and rely on your smart business tools to help these decisions. 
5. Track what’s working. Keep track of your product’s conversion rates, average deal size, and abandoned carts. 

(You can do all of this in a CRM, by the way.)

Get some pricing assistance from AI business tools

Ah, the pricing decision. Pricing too low can make buyers question your quality. Too high, and you risk losing to cost alone. Pricing is how you signal where you sit in the market — and it works alongside your brand messaging and goals. No pressure, right? 

That’s where artificial intelligence (AI) sits in your pricing process. AI tools can surface patterns across your sales — which deals close at which price points and where prospects hesitate. With AI agents, your team can act on these insights faster, so pricing conversations are backed by real data. And keep in mind, when you have one tool to rule them all, you’re keeping costs down. Getting assistance from AI can be a great strategic move for growing teams. 

The price is right with the right tools 

The right pricing strategy is the one that fits your business. We’re here to help you bring it all together. Get started with Salesforce Suites for free or activate Foundations to try out Agentforce today.

AI supported the writers and editors who created this article.