Sell custom products without inventory
Learn how to price a product. Start with cost per unit: add everything you spend to make and sell one item. That includes direct costs for each time you sell (production and shipping) and indirect costs (rent or subscriptions). Divide those overhead expenses across your average monthly sales volume to get the whole picture.
Next, pick a profit margin (like 40%) and use cost plus pricing:
Selling price = cost per unit + (cost per unit × profit margin)
Finally, compare that selling price against your competitors and what your customers are willing to pay. Adjust your profit margin to fit market demand.
In this guide, we’ll break product pricing into clear steps: calculating your total cost, choosing a pricing strategy, and doing basic market research to price products with confidence.
Calculate your total costs
Before picking a pricing strategy, you need to know the actual cost of an item. Break down your costs into direct and indirect costs, and combine them into a cost per unit.
Direct costs
Direct costs are the production costs tied to each unit. This includes raw material costs (blank products, packaging), print provider fees, and any variable costs that only apply when you sell. These make up the product’s base cost.
Indirect costs
Indirect costs support your business but don’t belong to one specific product. These include software, business insurance, advertising, and other overhead costs. Add these up into a monthly total, then divide by your average sales volume to spread them across each unit.
Indirect cost per unit = Monthly total ÷ average units sold per month
Cost of Goods Sold (COGS)
Cost of Goods Sold (COGS) combines all the costs involved in making and delivering an item.
A simple way to get your cost per unit is:
COGS per unit = Direct cost per unit + indirect cost per unit
This COGS number is the base you’ll use for your selling price and later pricing decisions.
What to consider before setting a price
Take a step back and look at the bigger picture. Product pricing depends on your costs, customer expectations, and the competitive landscape.
Target audience
Define your target audience. What do they want from your product or service – the lowest price or premium quality? How much are they willing to pay?
Fixed costs
List your fixed costs – expenses that stay the same no matter how many units you sell (like software, rent, or subscriptions). Your prices must cover these as well as per-item costs.
Competitor/market research
Do competitor pricing and market research before setting price points. Study market prices for similar products that already sell well and decide where your product pricing should sit in that range.
Variable costs
Identify your variable costs – the costs that change with each sale, such as fulfillment and production costs. These directly affect your product’s cost and minimum sustainable price.
Profit margin
Set a profit margin that fits your goals and pricing strategy. This is the percentage of the sale you keep as profit, and it turns your cost into a workable selling price. A good profit margin for the average print-on-demand store is between 25% and 40%.
Where to sell
Choose where you’ll sell your product or service – online store, marketplaces, or physical retail. Each channel affects fixed costs, pricing models, and the flexibility of discounts.
How to calculate the selling price of a product
To calculate the selling price for a product, start with your cost per unit (your total cost for one item) and add your profit margin on top of that. A simple cost plus pricing formula is:
Selling price = cost per unit + (cost per unit × profit margin %)
Once you have this base selling price, compare it with competitor pricing and your target market to see if your price points are realistic.
From there, adjust your final selling price using different pricing strategies – like value-based pricing, cost-plus pricing, or competitive pricing. That way, your product pricing fits both your costs and customer expectations.
How to determine your profit margin and markup
Once you know your cost per item, the next step in setting a product or service price is deciding how much you want to earn per sale. That means choosing both a markup and a profit margin. They’re related, but not identical, so let’s break them down.
1. How to set your markup
Markup shows how much you add on top of your cost per unit. Use markup for setting a consistent cost-plus price across your product line.
Markup (%) = (selling price − cost per unit) ÷ cost per unit
Example: If your cost per unit is $10 and your selling price is $15:
Markup (%) = (15 − 10) ÷ 10 = 0.5 = 50% markup
You can also work the other way around when planning prices:
Selling price = cost per unit + (cost per unit × markup %)
This works well for simple cost-plus pricing tables.
2. How to set your profit margin
Profit margin shows how much of the selling price becomes gross profit. Use the profit margin to check if each product still hits your income goals after fees or discounts.
Profit margin % = (selling price − cost per unit) ÷ selling price
Example: With a cost per unit of $10 and a selling price of $15:
Profit margin % = (15 − 10) ÷ 15 ≈ 0.33 = 33% profit margin
To plan from a target margin instead, flip the formula:
Selling price = cost per unit ÷ (1 − profit margin)
If the margin is too low, raise the price or reduce costs. If it’s high but customer demand is weak, test slightly lower price points. Start with a few simple pricing experiments, track what customers pay most often, and adjust until your numbers match your customers’ value perception.
Researching your market and competition
Before you lock in prices, look at the competitive landscape and your target market. This eliminates guesswork and helps set prices that reflect your costs, customer value, and real market conditions.
Competitor analysis
Start by identifying sellers in your niche offering similar products or services. Your goal is to understand the current pricing structure in the competitive market – and where you fit.
- Check competitors’ retail prices for similar products. This shows the real price range in your niche and helps you see where your planned price sits.
- Look at how they position cheaper vs more expensive options. This shows what they add (materials, features, branding) when they charge a higher price.
- Compare product quality, branding, and promises. This reveals their value proposition and how your product can improve on it.
A strong understanding of competitor pricing helps you find a profitable spot between “too expensive” and “too cheap” – without starting a price war.
Market research
Next, focus on your target customers. Use market research to understand their needs, preferences, and what shapes their value perception.
- Talk to potential buyers with short surveys, polls, or interviews. Ask what they use now, what they like or dislike, and what’s missing.
- Ask what they’d be willing to pay and what feels too expensive or too cheap. This shows a realistic price range based on perceived value, not just costs.
- Look for patterns in how they describe value and quality. Use those insights to align your planned price, product features, and messaging with real customer demand.
When you align your pricing with customer expectations, you avoid pricing blind spots and build offers that feel tailored – and worth it.
Adjust your final price
Once you know your costs and understand your market, bring everything together and set a final selling price. This should cover your expenses, reflect your product’s value, and stay competitive in the real market.
Position your product
Decide where you want to sit – budget, mid-range, or premium pricing – and adjust your price to match the quality, branding, and promise of your offer.
Run the numbers
Check that your price covers all costs, maintains the profit margin you’re aiming for, and still looks fair next to competitors. If it feels too high or too low, adjust it until you reach an ideal price that balances profit and customer appeal.
Revisit regularly
Pricing decisions aren’t set in stone. As your costs, competition, and customer demand shift, test different price points to see what converts best. You might even explore tiered pricing to attract more customers at multiple levels.
5 Most common product pricing strategies
There’s no one-size-fits-all approach to product pricing. The best strategy depends on your market, your brand, and your goals. Here are the 5 most common pricing strategies, plus when and how to apply each one.
1. Value-based pricing
Value-based pricing is a customer-focused pricing strategy commonly used in specialty and luxury markets. Instead of starting from costs, you set your price based on how much customers believe the product is worth – its perceived value.
When to use it: Use this when your product offers a unique benefit, premium experience, or emotional appeal that sets it apart.
How to calculate the price:
- Identify buyer personas. Define who you’re selling to and what they care about most.
- Research alternatives. Check what similar products cost and what they offer.
- Talk to customers. Ask how much extra they’d pay for your added features or benefits.
Example: You’re selling women’s Fleece Joggers for $40. But customers say they’d pay $15 extra for pockets. A value-based pricing strategy gives you a price of $55.
Pros:
- Higher prices backed by customer insight
- Focus on customer value and product improvement
Cons:
- Requires research, feedback, and analysis
- Final number is an estimate, not a fixed formula
2. Cost-plus pricing
The cost-plus pricing strategy is common for manufacturers, wholesalers, private label sellers, and artisans. You total your product’s cost and add a fixed markup for profit – a simple cost-plus pricing approach.
When to use it: Use this when you want a straightforward, formula-based way to determine a selling price from costs.
How to calculate cost-plus pricing:
- Add all costs to get the cost per unit. Include production and fulfillment in your cost price.
- Apply your profit margin. Decide how much you want to keep per sale.
Selling price = cost per unit + (cost per unit × profit margin %)
Example: If a custom fleece blanket costs $45 to fulfill and you want a 15% profit margin, the final price is: $45 + ($45 × 0.15) = $51.75.
Pros:
- Easy to calculate and repeat
- Covers all the costs and gives a predictable return
Cons:
- Ignores competitor pricing and customer value
- Flat markups can lead to pricing blind spots
3. Competitor-based pricing
Competitive pricing (competitor-based pricing) sets prices by looking at what similar products cost in your market. Your competitors’ pricing structure becomes the main reference point.
When to use it: Use this when your product is similar to others already on the market – and you’re trying to match or slightly beat the retail price of the competition.
How to set a price for a product using competitor-based pricing:
- Identify similar companies in the same market. Focus on those selling comparable products.
- Research their pricing strategies and average selling price. Note patterns and ranges.
- Choose your position in that range. Go higher, match, or lower based on quality, branding, and goals.
Pros:
- Simple to use with basic calculations
- Keeps you aligned with the wider market
- Makes it easier to follow current trends
Cons:
- Less flexibility because you follow others
- No direct input from customers or willingness to pay
- Can slide into a price war if everyone keeps undercutting
4. Dynamic pricing
Dynamic pricing adjusts prices based on current customer preferences, demand, and other real-time factors. It’s common in tourism, hospitality, entertainment, utilities, and transportation, and more eCommerce brands are starting to test it.
When to use it: Use this when your customer demand, inventory levels, or market conditions shift frequently. It’s ideal for high-volume stores, limited stock, or promotional windows.
How to calculate dynamic pricing:
- Track demand, supply, and competitor pricing. Watch how they move over time.
- Set simple rules for price changes. For example, higher prices at peak demand or lower prices in slow periods.
- Monitor results and refine. Examine sales volume and customer reactions after each change.
Pros:
- Can maximize profits when demand is strong
- Flexible and responsive to current trends
- Often backed by demand and performance data
Cons:
- Frequent changes can frustrate customers or lower trust
- Higher risk of price wars among competitors
5. Psychological pricing
Psychological pricing taps into how people perceive numbers to make prices feel more attractive. It’s frequently used by eCommerce retailers, large retail chains, and discount stores.
When to use it: Use this when you want to increase conversions without changing the product or service. Great for deals, impulse buy triggers, and attracting more customers.
How to apply psychological pricing:
- Charm pricing. Use prices like $4.99 instead of $5. Most shoppers focus on the first digit.
- Urgency-based offers. Limited-time deals encourage quicker decisions and extra purchases.
- Framing deals. Offers like “Buy one, get one free” can feel better than “50% off two items,” even with the same math.
Pros:
- Boosts attention to your products
- Helps shoppers decide more quickly
- Can deliver a strong return on small changes
Cons:
- Can damage trust if overused or misleading
- Doesn’t guarantee sales if the product lacks real value
- May need testing to see what works best for your customer base
Frequently asked questions
First, work out your cost per unit by adding production, overhead, and total variable costs. Then apply your desired profit margin using this formula:
Selling price = Cost per unit + (Cost × Profit Margin %)
Choose the right pricing strategy from different pricing models like cost-plus or dynamic, and refine it into an effective pricing strategy that gives you the right pricing for your offer.
Tools like Shopify’s Profit Margin Calculator and Printify’s Pricing Calculator make it easier. As your business grows, revisit your prices based on market research and customer demand.
The 3 C’s are Cost, Customers, and Competition:
- Cost – the money you spend to make and deliver each item
- Customers – What your target audience is willing to pay
- Competition – what others charge in your competitive market
Together, these help you find a price that balances profit, perceived value, and market fit.
The four main methods – value-based, cost-plus, competitor-based, and dynamic – are the common pricing strategies most businesses start with:
- Value-based – price according to the customer’s perception of value
- Cost-plus – add a markup to your production costs
- Competitor-based – match or adjust from rival pricing
- Dynamic – adjust prices based on demand, trends, or timing
Together, they form different pricing models you can mix and adapt. Many brands experiment with value-added pricing, penetration pricing, or other pricing strategies as their catalog grows.
Add up your total production costs (materials, printing, packaging, labor, fees) and overhead for a batch of items, then divide by the number of units.
For example, $1,000 total cost ÷ 200 units = $5 cost per product. Reviewing this regularly helps you keep costs under control and protect your margins.
Conclusion
Smart product pricing isn’t guesswork – it’s strategy.
Start by listing all the costs behind each product, then study the market and research the competition. Use that context to pick from different pricing strategies, set prices that cover costs, and protect your profit margins.
With a clear process and regular reviews, you’ll make better pricing decisions, stay competitive, and support long-term growth.
