How to Make Your Pricing Strategy Profitable

Creating and maintaining a successful business can involve a variety of different processes. Arguably, one of the most important considerations is pricing as this can dictate the overall health of your company and whether you are turning a profit. The general consensus is often that the lower your prices are the more popular you will be with customers but this isn’t always the case. Your pricing strategy should be completely tailored to your individual business and should take into account the specific issues affecting your company.


When creating a pricing strategy, one of the first things to look at is the cost to your business. This can include anything from design, manufacture, shipping, promotion and customer service. Each and every company will have different costings to consider in accordance with the product which is being sold.

All of these costs should be factored in to the overall price of your product or service. The amount you spend to produce and provide the product shouldn’t be higher than the cost applied to the customer otherwise you won’t earn a profit. This may seem like an obvious point but it’s one that is often forgotten by many businesses. Especially those who work within a volatile market that is subject to unexpected price hikes. It should be noted that start-up companies may find it difficult to make a profit in the first year due to the time it takes to establish a business and attract a customer base but this is something which is individual to each business. Profit should be the eventual goal of every business.


Once you have calculated how much it will cost to run your company, it can be useful to check out your competition. Look to your peers who are offering similar products or services and find out how much they are charging. This doesn’t mean you should copy your competitors and their price plan but it can be useful to ascertain what customers are paying for similar products. This is important as it can be quite difficult for businesses to judge the financial thresholds of their clients. Charge too much and you alienate your customer base, charge to little and you may send out the wrong message e.g. poor quality.

Using your competition as a benchmark for your pricing strategy can be difficult for companies who offer unique products and/or services. There are some businesses out there who don’t have many peers, if any at all and they can find it difficult to decide on a specific price point. In these circumstanced your business costs become even more important and influential.

Cost vs. Value

Some companies can charge a price for their products and/or services which is much higher than it costs them to provide it. This is when the idea of value comes into play. The cost of an item is how much a company think its worth, the value of the item is how much the customer is willing to pay and this difference can be pivotal. Some companies have become incredibly successful because they base their pricing strategy around the value of their products.

The value of a product or service is determined by many different factors, including the type of product, branding, function and in some cases even packaging. A good example of this phenomena can be found with tech giant Apple. The overall cost of manufacturing and selling a product such as an iPhone is much lower than the final price applied to the customer. Whilst many companies are unable to achieve this with their own tech, Apple have succeeded because consumers are willing to pay extra because they recognise Apple as a high quality brand. This is the same reason why some customers will pay extreme amounts of money for designer clothing which will have been made for a fraction of the cost. Value is an important concept.