How do you determine the appropriate price for your products?

Aug 17
4 min read

Updated: 2 days ago

Introduction

Determining the appropriate price for products is not just a calculation, but rather a careful combination of Deep understanding of cost, market needs, customer behavior, and competitive strategy.

In fact, the price could be:

A reason for the success or failure of the product.
A key to entering or exiting the market.
A means to attract the customer or a source of alienation.

So, how do you determine the ideal price that brings you profits and makes your customers happy? In this article, we will guide you step by step to determine the appropriate price for your products in a scientific and practical way.

First: Understand your costs well

It is not possible to talk about pricing without knowing the exact costs of the product. The costs are divided into two parts:

1. Direct costs

These are the costs directly related to the production of the product, and include:

Raw materials
Direct labor wages
Packaging cost

2. Indirect costs

These are the costs you pay to run the activity as a whole, such as:

Rent and electricity
Management salaries
Marketing and advertising
Taxes

Basic equation:

📌 Practical example: If you sell a box of chocolates:

Direct cost = 5 riyals
Indirect costs (divided per product) = 3 riyals
Required profit = 4 riyals⟶ So, selling price = at least 12 riyals

Second: Determine your pricing goal

Each project has different pricing objectives. First determine why you are pricing the product:

the goal

Proposed strategy

Enter the market and gain new customers

Low Pricing

Achieve the greatest amount of profit

High pricing with added value

Market price competition

Pricing that matches or is lower than the competitor

Offering a luxury product

High pricing reflects quality and excellence

🔍 Ask yourself: Do you want to be the cheapest? Or is it better? Or balanced in price and value?

Third: Study the market and competitors

1. Competitor analysis

Monitor the prices of competitors selling a similar product, and note:

Lowest price
Highest price
The most common price

2. Value comparison

Does your product offer an additional benefit? Example: If your coffee is specialty and organically sourced, you can price it higher than commercial coffee.

3. Understand your audience

Is your audience price sensitive?
Or is he looking for quality regardless of price?
Do you prefer offers?
What is his average income?

📌 Collect this information to know how receptive the market is to the price you are considering.

Fourth: Choose the appropriate pricing strategy

1. Pricing based on cost + profit margin

The simplest way
Price = cost + profit percentage

✅ Suitable for small projects ❌ Does not take into account the market or competitors

2. Pricing by value

Price is determined based on “expected value” by the customer
Example: A smart watch is priced at 400 riyals, even though it costs only 70 riyals, because the customer sees a great benefit in it

✅ Suitable for premium products ❌ Requires smart marketing to convince the customer

3. Psychological Pricing

The product is priced at 19.99 instead of 20
It gives the impression of being cheaper

✅ Very effective with ordinary consumers ❌ Not suitable for luxury products

4.Bundling pricing

Selling more than one product at a lower price than if the customer bought them separately
Example: Offering 3 juices for 25 instead of 30 riyals

✅ Enhances sales volume ❌ Needs coordination between products

5. Penetration Pricing

Setting a very low price initially to gain market share

✅ Fast in attracting customers ❌ Risk of reducing profit margin

Fifth: Monitor performance and adjust prices when needed

Product pricing is not written in stone, but must be constantly reviewed. Here's what you should watch for:

Indicators to monitor:

Indicator

What does it mean?

Sales are low

The price may be too high

Sales are high but profits are weak

The price is too low or the costs are high

Clients negotiate a lot

The price is not convincing or justified

Negative comparison with competitors

The market does not see additional value in your product

📊 Tip: Use tools like Google Sheets or POS software to track performance and analyze profitability.

Sixth: Golden tips when pricing your product

Don't price out of emotion ➤ Don’t say, “No one will buy it at this price” without real analysis.
Make sure the price reflects the value ➤ The customer pays when he feels the price is “worth it”.
Don't always compete on price ➤ You may lose profit and make your product appear to be of poor quality.
Display different levels of products ➤ Such as: regular version - plus version - deluxe version, with different prices.
Make smart offers instead of direct discounts ➤ Example: “Buy two products, get the third free” instead of “33% off.”

Seventh: Tools that help you price your products

Google Forms + Customer Surveys-

( To find out their acceptable price)

Calculators Excel-

(to calculate costs and profit margin)

Google Trends and Amazon Best Sellers-

(to compare market prices)

-Point of sale (POS) software Such as: Z - invoice - notebook

Eighth: Common errors in product pricing

Error

Why is it dangerous?

Pricing based on “gut” only

It leads to losses or pricing that is disproportionate to the market

Imitating a competitor without analysis

Your costs or audience may be completely different

Forget about indirect costs

It makes the price lower than the actual cost

Not reviewing the price periodically

The market is changing, and prices may become unsuitable

Conclusion

Product pricing is not a random decision; Strategic decision It is based on accurate knowledge of costs, market, customers, and project objectives.

Start from:

Understand costs
Define your goal
Market study
Choose the strategy
Then monitor and adjust

✅ Good pricing is what achieves you Profit Without the customer feeling that Lost.