Pricing is one of the most powerful levers for profitability, yet it's often set without proper analysis. This calculator helps you evaluate different pricing strategies and find the optimal price point that maximizes your profit while remaining competitive.
The simplest approach: add a fixed percentage markup to your cost.
Price = Cost / (1 - Desired Margin)
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Best for: Commodity products, manufacturing, retail resellers
Set prices based on the value your product delivers to customers, not what it costs to produce.
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Best for: Differentiated products, B2B solutions, premium brands
Set prices based on what competitors charge, positioning yourself relative to the market.
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Best for: Competitive markets, online retail, similar products
Price elasticity measures how sensitive demand is to price changes:
| Elasticity | Description | Examples |
|---|---|---|
| 0-1 (Inelastic) | Demand barely changes with price | Medicine, gasoline, utilities |
| 1 (Unit Elastic) | Demand changes proportionally with price | Some services, moderate luxury goods |
| 1-2 (Elastic) | Demand is sensitive to price | Consumer electronics, dining out |
| 2+ (Highly Elastic) | Demand is very sensitive to price | Airline tickets, commodities |
Lower prices may increase volume but reduce margin. The optimal price depends on:
Prices ending in 9 or 99 appear significantly lower. $99 feels much cheaper than $100, even though it's only a $1 difference. This works because we read prices left-to-right.
Show a higher-priced option first to make other options seem more reasonable. The original price crossed out next to a sale price is a classic anchoring technique.
Higher prices can signal higher quality. If your product is premium, don't underprice it - customers may perceive it as lower quality.
Specific prices ($347 vs $350) appear more calculated and fair. This works especially well for B2B and high-ticket items.
Combine products to obscure individual prices and increase perceived value. Bundles can also encourage customers to try new products.
Add a third option that makes your preferred option look like the best value. Many subscription services use this with their pricing tiers.
In restaurants and luxury settings, removing the $ sign can reduce the pain of paying and increase spending.
A $5 coffee seems expensive at a gas station but reasonable at Starbucks. Position your price within the right context.
The best pricing strategy depends on your unique situation, market position, and business goals. Use this calculator to analyze different approaches, understand the tradeoffs, and find the price point that balances profitability with competitiveness. Remember to test and iterate - pricing is not a set-it-and-forget-it decision.