It does depend on what you are selling, as a pricing strategy will be different for either products or services. With a product, I always felt that you take the cost price and look for 100% mark up but again, it really does depend on the item and what you think your turnover of the item might be.
In terms of services it is different again. I am a head of SEO at www.mysticsense.com where our online psychics are advised to start off with a low rate per minute, undercutting the established advisors, whilst they have no ratings or regular customers, in order to encourage people to try them out. After they gain a good set of star ratings and an excellent reputation, they can raise their prices. We do not recommend any of our psychics increase their price by more than 20% at any one time or more than once a month. Equally, when they become more established a higher price indicates quality and actually attracts customers thinking they will receive a premium service.
Overall, it is mostly a trial and error experience to see if you can hit a sweet spot with pricing and stick with it.
Analyze the prices of competitors offering similar products or services. Then set you prices near their prices. This will mean your prices are always near the market price.
Alternatively, you could also determine what it costs to produce your good/service and charge a set percentage over top of costs. For example, if you want a 30% profit and it cost you $1 to produce your thing, you would charge $1.30. This method can allow you to seriously undercut your competition.
There are 2 popular pricing methods. One cost+ pricing and other value-based. I have always preferred the latter one.
A general rule of thumb method for cost+ pricing is that if your cost of goods is $1 then keep the pricing thrice i.e. $3. This varies from business to business. Also, you may go by calculating the fixed costs and the variable costs in your business and then mark it up with profits.
Talking about value-based pricing, it is completely based on how do you position your product/service and the value it translates on the customer's end. A great example of this would be Apple products. However, this model would be difficult to implement on commoditized products/services.
How much do you charge for a haircut?
Is it $5, $10 or $25?
Whatever your price is, there is a value attached to that price.
You won’t charge $25 if the customer thinks they are getting an extremely basic hairstyle.
You won't charge $5 if the customer thinks they are paying for a high-end and complex styling.
The price of your product or service has more to do with the value you are providing than anything else.
So in order to optimize your product pricing - you need to keep in mind 2 things:
1. What is the value you are providing to your customers in terms of time saved, money earned, or money saved. For instance, if you are selling a widget which will save the customer 1 hour of their time every day. That means you can save them about 20-25 hours per month. How much is that worth to them?
2. What is the highest dollar figure your customers will pay without decline in demand. Generally a wealthier person or larger company will value their time more than their cash reserves and vice versa.
Now you can test the waters by offering the same services to two groups of customers. Notice the sales for a week or two. Pick the price which gives you more net revenue.
Rinse and repeat.
Pricing a product is “probably the toughest thing there is to do,” according to an expert. Pricing your product usually involves considering certain key factors, including pinpointing your target customer, tracking how much competitors are charging, and understanding the relationship between quality and price.
You can read more here: https://www.inc.com/guides/price-your-products.html
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath
Your question's scope too wide to discuss, probably will receive many methods but may confuse you further.
I would highlight to you an underlying principle of pricing in the commercial world:
"A price is attached to a product as an effort/ cost the buyer willing to pay to exchange the product. Pricing, on the other hand, is the intention of the seller to attract the buyer to buy the product so that the buyer can be benefited in the way the seller wanted to."
Thus, if you are clear of what you want the buyer to be benefited, you will know what price you want to set (ideally).
Based on the cost + plus or market value approach, you can match with your ideal price to close the gap to make your pricing more reality and competitive at the same time.