How To Price A Product For Retail

By Sam Iontton22/11/2022


For small businesses, pricing is essential. Knowing how much of a margin you can make on a specific product should be one of the most important parts of your business plan. But, how do you price a product for retail?

At Displaysense, we have a few tips for you to consider when establishing your pricing strategies, such as introducing new products, repricing existing products and sales tactics.


  • Why does it matter to get product pricing right?
  • How to calculate product pricing
  • Different types of pricing
  • Online pricing considerations
  • Evaluating your pricing strategy

Making sure you hit your pricing right is important for your business and customers. If you price products too high, you won’t have any customers. If you price products too low, then you could be at a loss.

Getting your pricing right will also determine the type of customers you attract. If you are constantly discounting your products, this will attract customers who are single-time purchasers and alter customer perceptions of the worth of your brand.

The right price for your products should hit the sweet spot between being competitive against other competitors and keeping your products valuable.

This will also protect your profit margins and allow your business to be profitable compared to your expenditure.

How to calculate product pricing

Each retailer is different when it comes to pricing their products, and what works best for one industry could be harmful to another, which is why it is important to look at what your competitors are doing and evaluate your pricing. With that being said, competitor pricing shouldn’t be your only benchmark. You will find what works for you and your business.

How to calculate unit cost

How to calculate unit cost

  • The total cost of all product units purchased.
  • From here, divide the total cost by the number of units. This will give you a cost price.
  • If you price lower than this, you will be at a loss. Some products will have a higher profit margin than others, so it is important to consider this on a case-by-case basis.

Different types of pricing

Value-based pricing - This pricing considers how much customers are willing to pay for products before you add any costs. Explore your target market for these sorts of figures.

Competitor-based pricing - Using your competitors, identify similar products you sell and look at their price ranges. This will allow you to align your pricing competitively and assess if you are charging too much or too little.

Cost-plus pricing - Work out your cost of production (or unit price) and then subtract this from your price to give you a profit figure.

Elasticity-based pricing - Customers are adaptable with how much they are willing to pay for products. They will let you know if your pricing is too high or you will see a decline in sales. Elasticity-based pricing is testing and analysing how customers respond to changes in prices. This can be tested by looking at the sales quantities of past transactions with current sales with an inflated or deflated price. If more people are purchasing more units, or the trend stays at a similar level, this is a good indicator that you have set a reasonable price. If sales decline rapidly, you should reconsider your pricing.

Different types of pricing

Online pricing considerations

If you have a bricks-and-mortar business and an eCommerce business, it is important to consider the differences in pricing online versus in-store.

Shipping costs - You should calculate shipping costs into your pricing. Most online retailers charge for delivery, but make sure that this doesn’t affect your profit margins too much. The cost of shipping a product and packaging can be expensive, so be mindful of this. Many online retailers offer free shipping, but a smart strategy is to set a minimum order value to qualify.

Create a business that customers enjoy with Displaysense

Evaluating your pricing strategy efforts

It is important to constantly evaluate your pricing strategy to keep up with your competitors and the market. Reviewing this every so often will ensure that you don’t fall behind when it comes to pricing your products.

How do you evaluate that you are pricing correctly? There are a few ways to review this; keep reading to see how and what you should be assessing.

Sales volume

This may seem obvious, but simply checking your products' stock levels and quantities is a key indicator. If you have a product that hasn’t sold too well, you should consider lowering the price or asking yourself if it aligns with what your customers are searching for.

Profitability versus time

Do you have best-selling products that fly off the shelves as soon as they are in stock? If these are low-priced items and the profit margin is too big, it could waste your time and efforts. Whilst these items may bring customers into your premises who could purchase other items; you could be focusing your attention on items with a higher margin.

Customer retention

If you find that customers are not returning to your business, this could be because of high pricing. Analyse your systems to see how many returning customers you have. This does depend on the nature of your business but could be a significant indicator that prices may be set too high.

Order size

If customers are purchasing a lot from you, this could be a key metric that your pricing strategy is working well. Customers are more likely to purchase multiple products from one place as opposed to one or two products from many retailers.

Create a business that customers enjoy with Displaysense

Create a business that customers enjoy with Displaysense

Make sure that your customers are informed about your products, discounts and promotions with the range of snap frames, sign and menu holders, and chalkboards from our range of literature & information supplies for businesses.

Alternatively, we have a range of display and merchandising products to help you stand out in your market. These include various POS products such as display cubes, dump bins and mannequins.

If you are a new business and want more business advice, you should check out our Advice & Inspiration hub, where you will find a wealth of information on how to attract customers, retain them and run a successful business.