Deciding an effective price for your product is quite essential as it helps you convince the buyers to make a purchase. Observing other products in the market that compete with you can help you make the right pricing decision.

Shopify’s Desirae Odjick has shared three tips to help brands and marketers decide the right price for their products.

Odjick says, “The most important element of your price is that it needs to sustain your business. If you price your products at a loss, or at an unsustainable profit margin, you’re going to find it challenging to grow and scale.

There are other important factors that your pricing needs to account for, like how you’re priced in relation to your competitors, and what your pricing strategy means for your business and your customers’ expectations. But before you can worry about anything like that, you need to make sure you’ve found a sustainable base price.

How to calculate a sustainable price

There are three straightforward steps to calculating your price.

1. Add up your variable costs (per product)

First and foremost, you need to understand all of the costs involved in getting each product out the door.

If you order your products, you’ll have a straightforward answer as to how much each unit costs you, which is your cost of goods sold“.

How to Price Your Product: What You Need to Know About Pricing Before You Launch