How to Calculate Selling Price of a Product + Formula — Katana (2024)

4. Most significant digit pricing

This is why a retailer is more likely to price a product at $19.99 rather than $20.00.

Customers are more likely to make a purchase when it is $19.99 because our brains tell us — “Less than $20.00? It’s a bargain.” Other industries tend to use this technique, such as those in real estate. You can try it yourself.

Take the previous price of $62.50. Would $59.95 be the more enticing price that leads to higher profits?

5. How to find the best pricing strategy

If your pricing strategy is the same as your competitor’s, then it’s like missing out on utilizing a helpful tool.

Like it or not, customers infer a lot of information about your business from your prices. Another thing — the results of price changes are not always linear. For example, a company could raise its prices by 1% and seeoverall profits increaseby far more than that, even if demand remained the same.

The best strategy you can apply is a flexible one.

For example,WTMWB (What the Market Will Bear)is better during short periods when you need to recoup costs quickly, such as releasing a newSKU after a period of research and development. Cost-plus pricing is how to find the selling price per unit. In contrast, GPMT helps you decide if this approach can scale up.

Once you come up with a suitable price, you can apply the most significant digit pricing.

Commit to changing your price for a set minimum time and stick to that plan. Don’t keep changing prices, as this could reduce your customers’ trust in you.

6. Pricing strategy case study

Let’s use the example of furniture manufacturers to illustrate the steps to finding a pricing strategy.

You know your manufacturing costs and resources spent, but is this enough to add a markup and call it a day? Definitely not. Pricing is contingent on the current state of the marketplace and where your products fit into it.

First, you need to understand your market.

Do all the research you can on the criteria of furniture pricing. These could be:

• Direct-to-consumer prices
• Wholesale prices
• Consignment prices
• Any area that deals with selling furniture

You need to figure out how your product fits into the current landscape.

It’s good to set a minimum price that you will not go below. If you think of boundaries like this, it helps you think clearly in the stressful tasks of pricing and negotiation. Don’t undersell yourself or go below your minimum price.

7. Pricing strategy quickfire tips

1. Have a strategy, and stick to it
2. Use pricing analytics torecord manufacturing trends and predict future market changes
3. Look at the whole picture, not just on a transaction-by-transaction basis
4. Adopt avalue-based approach to customer satisfaction
5. Don’t use a one-size-fits-all approach to pricing. Be adaptable.Create pricing plans and product variations for customers with different needs

With these tips and some flexibility, you can steer your business straight to greater profits and customer satisfaction.

8. How to calculate the selling price with Excel

Now you know why finding the right pricing strategy for your business is so important.

But it’s just as important to find the best software to figure out how to determine the price of your products. Solutions like Excel can be an incredibly valuable tool for businesses when it comes to calculating the selling price. It offers various functions and features that make the process more efficient and accurate.

Here are some ways Excel can assist with calculating the selling price:

• Easy formulas — Basic arithmetic operations in Excel allow users to create custom formulas. It’s simple to set up a formula to calculate the selling price based on factors like COGS, overhead costs, and desired profit margin.
• Flexibility — Excel offers the flexibility to change input values quickly. Adjust your costs or profit margins and instantly see how it affects the selling price. This way, you can explore different pricing scenarios and find the most suitable option for your business.
• Time efficiency — Save time and effort compared to manual calculations with Excel’s automatic calculations. Once the formula is set, it can be applied to multiple products or services.
• What-If Analysis — Using Excel’s “What-If Analysis” tools allows you to project outcomes based on various input values. This helps assess how changes in costs or profit margins impact the selling price and overall business profitability.
• Data visualization — Excel offers charting and graphing options to visualize pricing data. These visuals help compare selling prices, track customer trends, or analyze the value of different products.
• Precision and accuracy — Excel handles large quantities of data and complex calculations, accurately determining selling prices.
• Trend and demand analysis — By organizing past selling prices and sales data, Excel facilitates analysis of historical trends and patterns, aiding data-driven pricing decisions.
• Availability — Excel is widely available and commonly used across industries, making it a convenient choice for selling price calculations for any business.