Pricing is the fastest lever you have on profit — a small change moves the bottom line more than almost anything else. Yet many shops price by copying competitors or adding a rough markup and hoping. This guide shows how to price products for profit properly: from true cost to method to the psychology that nudges customers to buy.
Start with your true cost
You cannot price for profit if you do not know your real cost. Include not just the purchase price but freight, duties and handling — your full landed cost. Pricing off an incomplete cost is the number-one reason shops make less than they think.
Choose a pricing method
| Method | How it works |
|---|---|
| Cost-plus (markup) | Add a set percentage to your unit cost |
| Margin-based | Set price so profit is a target percentage of the price |
| Value-based | Price on what the product is worth to the customer |
| Competitive | Price against rivals, then confirm it still covers costs |
Markup vs margin — don't confuse them
These two are measured differently, and mixing them up quietly loses money:
A 50% markup is only a 33% margin. Always know which one you are targeting — see how to calculate profit margin.
Set prices that hit your target margin
Decide the margin you need to cover your fixed costs and profit, then work the price back from cost. Check the result against your market — if it is far above what customers will pay, the answer is to cut cost, not to price at a loss.
Use pricing psychology
- Charm pricing ($9.99 vs $10) still nudges perception.
- Good-better-best tiers steer buyers to the middle and capture those who will pay more.
- Anchor with a premium option so mid-range prices feel reasonable.
And when you discount, do it deliberately — see discount without losing profit.
Review and adjust
Costs and competitors move, so prices should too. Review margins by product regularly. RushFlow tracks cost and margin on every sale, so you can see exactly which lines make money and reprice with real numbers, not guesswork.