If you’ve ever stared at your product listing wondering, “Is $29.99 too much? Should it be $24.99?”
What if nobody buys it?” Welcome to the club. Setting prices for physical products is way trickier than it looks.
And honestly? When I first started selling, I thought I could just “feel” my way through it. Spoiler alert: I couldn’t.
Here’s what I learned (after a lot of painful lessons) about pricing strategies for physical products and how you can set prices that actually sell and make you real profits.
Why Getting Your Pricing Strategy Right Matters?
It’s not just about math.
Your price tag literally sends a message to customers about your brand.
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Price too low? Customers wonder if it’s low quality.
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Price too high (without a reason)? They bounce.
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Price just right? They feel good about the purchase and they come back for more.
Plus, underpricing almost killed my business once. I was selling products barely above cost, thinking volume would save me. (It didn’t.) You need healthy margins if you want to survive and thrive.
If you’re still in the early stages of setting up your store, this ties directly into how to sell physical products on Payhip, where pricing smart is key from day one.
Know Your Costs Like the Back of Your Hand
This sounds boring, but listen you have to know what each product really costs you.
Costs to track:
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Direct costs: Materials, manufacturing, product sourcing.
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Indirect costs: Shipping, packaging, website fees, transaction fees (hello, Stripe and PayPal).
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And the sneaky one?
“Free shipping.” It’s NOT free — you’re either eating that cost or building it into your price. (Hint: build it in.)
When I finally factored everything in, my prices went up about 15% — and guess what? My sales didn’t tank like I feared. In fact, my profit margin finally made sense.
You’ll want to review how shipping and delivery options impact profit margins to make sure those hidden costs don’t sabotage your pricing strategy.
5 Proven Pricing Strategies for Physical Products
Here’s the good stuff, the real strategies that actually work:
1. Cost-Plus Pricing
Super basic but solid:
Take your total cost and add a markup (usually 30–50%).
Example:
Product costs you $10 → Sell it for $15–$20.
Simple. Predictable. Safe.
2. Competitive Pricing
Spy on your competitors.
What are they charging? Can you match it, beat it slightly, or offer better value (like bundles)?
Warning: Don’t race to the bottom. Undercutting everyone only kills your margins.
Want to stay competitive without killing profit? Start with choosing the best products to sell online, which naturally affects how easy it is to price profitably.
3. Value-Based Pricing
My favorite.
Set your price based on how much value the customer feels they’re getting, not just your costs.
Example: A handcrafted leather bag may cost $50 to make, but if it feels premium, you might sell it for $200.
Value > Costs.
4. Keystone Pricing
Classic retail formula:
Double your wholesale cost.
Example:
$15 cost → $30 price.
It’s super common in boutiques and shops.
5. Psychological Pricing
Pricing that “feels” better to the brain.
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$29.99 feels cheaper than $30.
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$49 bundled with free shipping feels better than $39 plus $10 shipping.
Small tweaks = big perception shifts.
How to Test and Adjust Your Prices Without Losing Customers?
Don’t be scared to experiment.
Tips for testing:
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Run a flash sale at a slightly higher price but offer a “limited time” discount.
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A/B test product pages if your platform allows it.
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Watch your conversion rate like a hawk.
When I tested a $5 price bump on one of my bestsellers, sales actually increased because it felt more premium. (Wild, right?)
Raise prices carefully:
Explain value increases (“new eco-friendly materials” or “hand-finished for quality”). Most loyal customers won’t mind — in fact, they’ll often brag about buying early.
If you’re managing many SKUs or slow movers, tie this to your inventory management strategy. Deadstock is just money sitting on a shelf and pricing can help move it.
Pricing Mistakes to Avoid (From Someone Who’s Made Them)
Oof, I’ve made ‘em all. Don’t be like me:
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Don’t underprice thinking you’ll “make it up on volume.”
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Don’t ignore hidden costs like packaging and payment fees.
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Don’t blindly copy competitors’ prices without knowing your own margins.
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Don’t forget to reassess prices every 6–12 months. Costs (and customer expectations) change.
Also, don’t forget that product taxes vary by region. Make sure you understand how to handle taxes on physical product sales, especially if you’re selling internationally or offering free shipping.
Your goal isn’t just to make sales, it’s to make profits that actually keep you in business.
Final Thoughts
Pricing physical products isn’t a guessing game, it’s a strategy.
When you price smart, you:
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Protect your business.
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Build a stronger brand.
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Actually make money instead of just spinning your wheels.
Trust your value. Know your numbers. Test fearlessly. And remember: You deserve to get paid well for what you create.
Set those prices like you mean it.
