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How do I set my pricing?

Tuesday, 31 August 2010 | By Patrick Stafford

Your selling price can be based on value, or cost.


Using a cost-based price structure is based on deciding on a gross profit margin that you want to add on top of amount that the item costs you. If the item costs you $100 and you want to make a 20% gross margin, you charge $120. 


Companies setting their prices on a “value” basis set their prices at an amount they believe the customers will pay, and based on the value of the service.


Many companies using a value-based service take into account the benefit they believe the customer will get from using their product. Using a value basis usually requires a fairly heavy marketing push to convince customers why you believe they should pay a little more.

You should make sure to do some market research before you set prices, so you know how much customers are willing to pay for a product in your industry.