Money Talks! How to Price Your Product or Service in 2025

If you want to succeed in starting a business, one of the best things you can do is price your product or service fairly and competitively. With so many pricing strategies available, it can take time to determine exactly how to price a service or product.

Pricing too low can be detrimental to your revenue while pricing too high can deter customers from frequenting your business. Below, we discuss everything you need to know about effectively pricing a product or service.

Why do pricing strategies matter?

Phillip Kotler, a marketing author and consultant stated, “Pricing is the only element in the marketing mix that produces revenue; the other elements produce costs.” This should confirm the importance of building a successful product pricing strategy. 

Once you’ve started a small business, setting fair prices is critical. While many tactics come into play when determining your pricing, most are rooted in psychology.

We tend to look at the whole dollar rather than cents. Retailers and service providers often play into this by setting prices just below whole numbers, for example, a $25 item or service would be priced at $24.99, seemingly less expensive.

When determining the right price for your products, there are five top pricing strategies that you can use to stay competitive.

  1. Cost-based pricing
  2. Competitive pricing
  3. Price skimming
  4. Value-based pricing
  5. Penetration pricing

But first, let’s review product pricing basics:

Product pricing basics

product pricing strategies

To understand product pricing strategies, it’s important to grasp a few fundamental concepts that will shape your approach to setting fair and profitable prices. Here are the key terms you need to know:

Fixed costs vs. variable costs:

Fixed costs are expenses that stay the same regardless of how much you produce or sell like rent, insurance, and salaries. Variable costs can change with production or sales volume like packaging or shipping. You need to know both types of costs to ensure you can cover all expenses while leaving room for profit. 

Cost of Goods Sold (COGS):

COGS is the costs that come from producing your product, such as salaries or third-party tools and providers. It assists in determining the base price you need to charge to break even on your product.

Gross profit margin:

This is the percentage of revenue you keep after accounting for costs. To calculate it, subtract the COGS from your selling price, divide that figure by the selling price, and multiply by 100. A higher profit margin means you’re earning more on each sale.

Equation: (Selling Price – COGS)/Selling Price x 100

For example, say your product costs $100, that’s your selling price. And your COGS is $25. This would look like $100-$25 which is $75. We would then divide $75 by $100 (selling price) which gives us 0.75. And finally, multiply 0.75 by 100 and we get a profit margin of 75%! 

Break-even point:

This represents the number of units you need to sell to cover all your expenses. Knowing your break-even point helps determine how sustainable your pricing strategy is and how long it’ll take to become profitable.

Equation: Fixed Costs/Gross Margin %

For example, let’s say our fixed costs are $550. We would divide this by our profit margin percentage which we got above and is 75%. $550/0.75 = $733. This means that you need to sell $733 worth of your product to break even this month. 

Perceived value:

Price is often influenced by how customers perceive the value of your product, rather than its actual cost. This perception is shaped by factors like brand reputation, quality, customer service, and exclusivity. A strong perceived value allows you to set higher prices while still appealing to customers. Think of luxury brands!


We understand it’s a lot to soak in if you’re new to setting your product’s price. But don’t worry if you’re not an expert yet, there are plenty of pricing calculators out there that take into account profit margin and how to efficiently scale. 

Some of our favorite pricing calculators are Shopify’s free download and Online Labels’.

How to price a product—5 strategies for success

Roll up your sleeves and let’s get into some pricing strategies to make you competitive and value-driven in the market.

1. Cost-based pricing

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  • What is it: Cost-based pricing is a method where the price is set by adding a fixed markup to the production and distribution costs of a product.
  • When to use it: Best for businesses aiming to cover production expenses while maintaining a consistent profit margin.
  • Downsides: Overlooks customer demand and competitor prices, which could lead to overpricing or underpricing in a competitive market.
  • Calculation: Unit Cost + (Unit Cost x Markup %) = Selling Price

Cost-based pricing is a pricing strategy that businesses use to set product prices based on their cost of production, manufacturing, and distribution, as well as branding and marketing costs.

The overall cost of the product is determined by adding a markup—a percentage increase from the manufacturing cost. While the exact markup amount varies, 50% is typically a good starting point.

Using the equation above, let’s say our unit cost is $25. We would multiply $25 by 50% so $25 x 0.5 = $12.50. So our cost-based pricing calculation would be $25 + $12.50 which gives us a selling price of $37.50. 

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2. Competitive pricingBlog-Update-How-to-Price-Your-Product_COMPETITIVE pricing strategy

  • What is it: When you set your product’s price based on your competitors’ pricing for similar products.
  • When to use it: When entering a crowded market with similar products where customers are price-sensitive and comparing options.
  • Downsides: Can limit your ability to highlight your product’s unique value or build higher margins, and you might get caught in a price war that erodes profitability.
  • Calculation: Competitor’s Price ± Adjustment Based on Your Value Proposition = Competitive Price

When using a competitive pricing model, you strategically set product prices based on what your direct competitors are selling the same (or similar) items for. For example, if your competitor’s product is priced at $40, you might choose to set your pricing higher or lower, while still using $40 as a benchmark.

This is where the importance of branding comes in. If your brand is professional and has a strong differentiator from your competitors (you offer sustainable products or higher quality products) your business could sell that same item for $50.

This method works best when pricing products that have been available to consumers for quite some time. This way consumers have a general idea of the value of these items.

3. Price skimming

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  • What is it: Brands launch their product at a high price and then gradually reduce it over time as more price-sensitive consumers enter the market.
  • When to use it: For new or innovative products, typically seen in tech or luxury industries.
  • Downsides: Can alienate price-sensitive buyers at the start and competitors can undercut pricing and obtain more market share.
  • Calculation: Cost of Goods Sold (COGS) + High Initial Profit Margin = Initial Price

Price skimming is a strategy that’s commonly used on high-demand or luxury items. Businesses initially set higher prices for their items, creating the perception that products are high-quality and worth a higher price. When using this strategy, businesses lower prices over time, making the product available to a wider market.

For example, if the COGS is $300 for a tech product, and the company wants an 80% profit margin initially, the equation would be $300 + ($300 x 0.80) which equals $540. After a certain period, you may decide to reduce the price to appeal to more consumers.

Apple is a great example of price skimming. When an iPhone initially launches, it’s very expensive. But as competition rises and the hype passes, the price of the iPhone will drop to become more attainable. This is also seen in products like PlayStation or Xbox.

4. Demand/value-based pricing

How-to-Price-Your-Product_VALUE-BASED pricing strategy

  • What is it: Price of the product is based on perceived value to the customer rather than the cost to produce it.
  • When to use it: Works best when your product has a unique value proposition or is in high demand, such as luxury goods or innovative products.
  • Downsides: Can be difficult to implement if your customer base varies widely in their perception of value.
  • Calculation: Perceived Value to Customer (based on demand and scarcity) + Desired Profit Margin = Selling Price

Demand or value-based pricing uses customer demand to determine price. This strategy considers fluctuations in demand, meaning that as seasonal demand or the scarcity of a particular item changes, so does the price. Demand pricing is often used for products such as clothing and seasonal items.

For example, if customers perceive the value of a limited edition designer handbag at $2,000, and the company wants a 20% profit margin, the selling price would be calculated as $2,000 + ($2,000 x 0.20) which is $2,400.

Housing markets and exclusive luxury goods fall under value-based pricing. Diamonds are also an iconic example of value-based pricing. After an incredibly clever marketing campaign that positioned Diamonds for eternal love, the value placed on the stone continues to skyrocket to this day.

5. Penetration pricing

Blog-Update-How-to-Price-Your-Product_PENETRATION pricing strategy

  • What is it: A strategy where a product is introduced at a low initial price to quickly capture market share. Once established, prices gradually increase.
  • When to use it: For new products entering a competitive market. It’s especially useful for subscription-based models where retaining long-term customers is the priority.
  • Downsides: This may result in lower profit margins early on and can be difficult to justify price hikes later without losing customers.
  • Calculation: Unit Cost + Initial Low Markup = Selling Price

Penetration pricing is essentially the opposite of price skimming. When a product initially hits the market, the price is set low to attract buyers and make the product accessible to a broader range of consumers. As the item’s initial sales fizzle out, the price increases in small increments to maximize profits.

So if your unit cost is $20 and the initial markup is just 10%, this makes the selling price $22. Once demand grows, you may increase the markup to 40%, bringing the price up to $28.

An example you’re probably familiar with is Netflix. After its initial launch and buzz, Netflix has slowly been increasing the price of its monthly subscription. But for many, myself included, we’ve already become too reliant on the streaming service to cancel it.

This is a key element to penetration pricing, making sure that you won’t lose too many customers as you increase prices. But on the flip side, you need justification behind the increase in prices without angering too many users and getting a bad rep.

How to price a service—4 steps to getting it right

Determining how to price a service can be more difficult than product pricing. After starting a service business, there are several steps you should take when developing pricing strategies for your services.

1) Decide how much you want to make

First, you need to decide how much you want to make. This is the time to dream big — think about what you truly feel your service is worth and how much you’d be happy to earn from what you do. This is your starting point and along with a few other important factors, it’ll help you to determine the best price for your service.

After thinking about your desired earnings, you need to do some research and calculations to see whether your goal is realistic. First, take a moment to calculate your costs. You’ll want to consider the following:

  • Your overhead operating costs
  • Branding and logo design costs
  • Labor costs if you’re hiring assistants or other contractors 
  • Invested time in marketing, business management, and providing services

2) Find out what people are willing to pay

Once you’ve calculated your own costs, you need to determine the perceived value of your services—what people are willing to pay you. The best way to do this is often by shopping around at competitors. Call similar businesses to obtain quotes, ask clients what they’re willing to pay, and research online to find similar services and their costs. 

A great place to go is other websites where businesses sell their services such as Upwork or Fiverr. 

This information, combined with your desired earnings, will lead you to the right pricing model for your business.

3) Determine how to charge for your services

Another part of determining how to price a service is to figure out how to charge your clients. The most common options are:

  • Charging an hourly rate
  • Setting a project fee
  • A set retainer if your work is ongoing

How you charge for the services you provide mostly depends on the type of service you’re providing.

While healthcare providers (think massage therapists and acupuncturists) normally charge per service, other professionals who offer long-term services (like attorneys and marketers) may prefer to hold a retainer for services from their clients.

If you work as a consultant or freelancer, it’s often easier to set your pricing once you know your client’s budget. Don’t be afraid to ask for this upfront! We’ve got a list of common service rates below!

4) Drive value with a great brand experience

The biggest mistake some business owners make is thinking that price is the only factor customers consider when choosing a service provider. Creating a positive brand experience that makes your business stand out among the competition is just as important when it comes to driving revenue and attracting clients to your business. Make sure that in addition to a fair price, you’re also offering your clients the following:

  • Unparalleled customer service
  • A memorable experience when they work with you
  • Attractive branding
  • Quality service

Don’t know what to charge? We’ve done some digging and put together a helpful list for you here.

Service rates for common service-based businesses:

Consultant

There are many types of consultants so of course, the type of consulting you do will play a big role in what you charge for your services. While the average salary for consultants is $87,000 per year, different areas of consulting may charge more or less. 

Management consultant

  • Average salary: $97,095 per year
  • Low end: $70,000 per year
  • High end: $154,000 per year

IT consultant

  • Average salary: $87,393 per year
  • Low end: $66,000 per year
  • High end: $133,000 per year

Healthcare consultant

  • Average salary: $88,212 per year
  • Low end: $67,000 per year
  • High end: $135,000 per year
Check out some consulting logo ideas!

Freelance writer

Freelance writers may charge for their services based on a per-word, per-hour, or per-project basis. The average base salary for a freelance writer is $42,070 per year. Those with less experience can expect to earn closer to $29,000 per year while those with more experience may earn as much as $111,000 annually. This also comes out to an average hourly rate of $27.25.

Photography

Photography business owners may work on a freelance basis or for commercial use. Depending on the type of work you do, your service charges may vary. For instance, the average wedding photographer charges up to $3000 per wedding. Say they complete 15 weddings over wedding season, that’s $45,000 for half the year.

Check out some photography logo ideas!

Commercial photographer

  • Average salary: $57,03 per year
  • Low end: $40,000 per year
  • High end: $88,000 per year

Freelance photographer

Life coaching

Life coaches may use a pricing strategy that involves charging clients on a retainer or they may charge per session, or per hour. Coaches generally charge $18 per hour. The average salary for a life coach is $38,219 per year. Those with less experience may earn closer to $32,000 per year while the high-end annual salary for this profession is $46,500.

Makeup artist

Makeup artists generally charge per service; however, depending on who you provide services to and the contract terms you have with your clients, charging hourly can sometimes be a better option. The average makeup artist charges $125-175 per person and can make around $52,605 per year.

Less experienced artists can expect to earn a lower salary of about $25000 while top makeup artists working in the fashion industry earn upwards of $139,000 per year.

Check out our guide on starting a beauty business to get started!

Event planner

Most event planners charge per project but those who take on multiple projects for the same client may require a retainer. The average annual salary for event planners is $63,335. The lower end of the salary range for this profession is $28,000 while those who earn most can expect a salary closer to $91,000 per year.

Check out some event planning logo ideas!

Wedding planner

Most wedding planners use a package pricing strategy, with their level of involvement ranging from low to high as the price increases. Wedding planner packages range from $1800-4000. Less experienced wedding planners might earn closer to $11,000 per year while top wedding planners can earn about $71,000 annually.

Check out some wedding logo ideas!

Personal trainer

Personal trainers typically charge per session or by package. For most, the average hourly rate is $28.72 per hour; however, those on the lower end of the scale may earn as little as $15.16 per hour. Top personal trainers in the U.S. make up to $54.39 per hour. This results in an average salary of $46,477 per year.

Check out some health logo ideas!

Videography

The pricing strategies you use as a videographer depends on who you’re serving and how often you work with them. The average salary for a videographer is $73,703 per year. Less experienced individuals in this profession may earn about $49,042 per year, while those with more experience earn upwards of $108,325 annually.

Counseling

In most cases, counselors price their services on a per-session basis. Most mental health counselors charge between $75-$100 an hour. Top mental health counselors with certain degrees or certificates can charge over $200/hour, especially if working with groups or couples.

Plumbing

As a plumber, you may have some flexibility in the way you charge your clients. While some plumbers charge hourly, others prefer to provide a quote for an entire project. Projects typically range from $175-450 depending on the size of the job, time commitment, and complexity. Some plumbers also charge a flat rate or service fee which is $300 on average.

Landscaping

Landscapers typically charge following a similar structure as plumbers; however, some are contracted out seasonally to perform snow removal or yard services and may charge on a monthly or seasonal basis. The average hourly rate for landscapers is $17 per hour.

Newer landscapers may earn a lower wage of about $10.82 per hour while those who’ve been in the industry a while often earn closer to $22.84 per hour.

Check out our guide on how to start a landscaping business and some landscaping logo ideas to kick off your research!

Childcare

Childcare providers often price their services hourly, weekly, or monthly, depending on the terms agreed upon with their clients and the frequency of care. Typical hourly rates for childcare workers are around $16 per hour. Inexperienced childcare workers may earn a lower rate of around $7.69 per hour and more experienced workers usually earn closer to $30.29.

check out some ideas for childcare logo ideas!

Florist

Florists often use cost-based pricing to determine the cost of their services. A florist generally charges per service or product. Those who create floral arrangements for weddings, funerals, and other events may also charge on a per-session basis. The average annual salary for florists is $33,104 per year. The lower end of florists’ salary range is $22,500 while the high end is $45,000.

Want to start your flower business? Check out some flower logo ideas to get inspired.

Pet grooming

Pet groomers typically charge by the hour or by the service. The average hourly rate for pet groomers is $24 per hour with the lower end of the salary range being $10.34 and the higher end being $39.90.

Check out some animal logo ideas to get inspired!

Time to determine your pricing strategy!

Whether you’re selling a product or a service, your pricing strategies should depend on several factors, including your own cost and the price competitors are charging for similar goods or services. 

Taking advantage of cost-effective services from platforms like Looka that help you create powerful branding assets will reduce your overall costs and help increase your profit margin as you bring your product or services to market!

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