Launching a startup is an exciting journey, brimming with potential and unique opportunities. You’ve got the innovative idea, the drive, and perhaps even an early version of your product or service. But turning that vision into a thriving business requires more than just passion; it demands a strategic approach to the fundamentals. This article will guide you through two crucial pillars of early-stage success: intelligently pricing your offering and effectively taking it to market so that your ideal customers not only see the value but are eager to buy.
Pricing can make or break your business. It impacts how customers see your product, how well you cover your costs, and how much room you have to reinvest in growth. But too often, entrepreneurs either guess or look at competitors and call it a day.
This guide will help you build a pricing strategy that’s sustainable and strategic—rooted in your own numbers and the value you offer. Let’s dive in.
Know Your Costs First
Before you can set a price, you need to know what it costs to deliver your product or service.
There are two types of costs to think about:
- Fixed costs stay the same whether you sell one item or a hundred. This includes rent, insurance, salaries, software, and utilities.
- Variable costs increase with every sale. Think materials, packaging, shipping, payment processing, or contractor hours.
Once you understand your costs, you can calculate your break-even point—how many sales you need to make before you start earning a profit.
Markup and Margin Aren’t the Same
It’s common to mix these up, but they tell you different things.
Markup is the amount you add to your cost.
Formula: Cost × (1 + markup percentage)
Example: A $10 product with a 50 percent markup becomes $15 [$10 x (1+0.5)= $15].
Gross margin shows how much of your selling price is actual profit.
Formula: (Selling price – Cost) ÷ Selling price
Example: If you sell that same product for $15 and it costs $10, you’re left with a 33.3 percent margin.
While a 50 percent markup might sound high, it doesn’t mean you’re keeping half the sale as profit. That’s why understanding your gross margin matters—it needs to be strong enough to not only cover your fixed costs but also leave room for actual earnings.
Look at Value, Not Just Cost
Cost-based pricing is important—but it’s not the full story. Customers buy based on value, not your internal expenses.
Let’s say your handmade mug costs $6 to produce. You could double that and charge $12, but that might undervalue it. If the mug is locally made, artist-designed, and sold in a boutique, customers might be willing to pay $24 or more.
Value-based pricing reflects the outcome your customer gets—not just what it cost you to make.
Offer Tiers or Packages
Not every customer wants the same thing. Creating pricing tiers gives people options and can increase your overall revenue.
Example: Photography Packages
Basic – 30-minute session with 10 edited photos ($250)
Standard – 1-hour session, 25 photos, and a print bundle ($450)
Premium – 2-hour session, 40 photos, online gallery, full rights ($800)
Each tier adds value, and customers choose based on their needs and budget.
Remember Taxes and Fees
Your price needs to account for more than just cost and profit. Overlooking fees and taxes can eat into your margin fast.
Here’s what to include:
- GST: You’re required to register, collect, and remit GST once your business earns $30,000 in annual revenue. However, if you choose to register for a GST number before reaching that threshold, you must begin collecting and remitting GST as soon as your number is active.
- PST: Applies to most goods and some services in Saskatchewan
- Payment processing fees are usually around 2.5 to 3 percent
- Shipping should either be built into your price or added separately
If you forget these details, your profit margin could end up thinner than expected.
Pricing Isn’t Set in Stone
Your first price isn’t your final price. Pricing is something you refine over time as your market evolves and your business grows.
Try these ideas:
- Run a limited-time promo and see how people respond
- Offer a higher-priced version with added value
- Ask loyal customers what they think about your pricing
- A/B test different price points to see what drives more sales. A/B testing involves showing one group one price and another group a different price, then seeing which one works better.
Even small adjustments can have a big impact.
Price with Confidence
Your price should reflect the value you deliver—not your fear of charging too much. Confidence comes from knowing your numbers, understanding your customer, and recognizing the impact your product or service has. Set your price like it matters. Because it does.
But pricing is only half the equation. Once you’ve set a price, you need a plan to actually sell it. In the next section, we’ll walk through how to position, pitch, and promote your product or service so that customers see the value—and are ready to buy.
How to Position, Pitch, and Promote Your Product or Service
Now we understand that pricing strategy is a powerful signal of value. The next crucial step is getting your product or service into the hands (or minds) of your ideal customers. This involves thoughtfully positioning your offering, crafting a compelling pitch, and strategically promoting it to the right audiences.
Consider Your Target Markets
One of the first fundamental decisions you’ll make when going to market is identifying your target or niche markets. These are the specific groups of customers you aim to serve with your product or service. Most businesses cater to more than one niche. It’s vital to consider these niches when shaping your offering and, as we discussed, determining your pricing. For instance, if you’re targeting a premium niche of high-income buyers, they’ll likely expect a high-quality product or service and be willing to pay a premium price. Pricing too low might even suggest a lack of quality or inadequate delivery. Conversely, if you’re selling to budget-conscious students or a lower-income audience, they’ll likely prioritize value for a lower price.
Trying to appeal to everyone often means appealing to no one effectively. If you sell a premium product or service but primarily focus your marketing on saving customers money, you might miss the mark with those who value quality and exclusivity over price.
It’s a common misconception among business owners that saving money is always the primary motivator for shoppers. While price is certainly a factor, it’s not the only one. Don’t assume that emphasizing cost savings will be the key to every purchasing decision.
The truth is, if you can clearly articulate the problem you solve or the value you provide with your product or service, and that value resonates with your target customer, they will be far more willing to pay what you’re worth.
Step one in building a solid positioning and marketing strategy is to meticulously identify your niche markets. Who are the specific groups of people who will benefit most from what you offer?
Develop Compelling Messaging
Step two is to craft compelling messaging that will motivate those niches to buy from you. Your messaging should laser-focus on the problem you solve and the benefits your offering provides, rather than just listing its features. Once people understand why they should buy from you, you can then delve into the details of how they can buy and the specific features of your product or service.
To develop effective messaging for each niche, ask and answer the following key questions:
- What do we do? (Be specific about what you sell.)
- Why does it matter? (What unique benefit does your offering provide to this specific niche?)
- Who should care? (Clearly identify the niche you’re addressing in your messaging so they understand your offering is a good fit for them.)
Once you have clearly answered these questions for each of your target niches, integrate these answers into every opportunity you have to communicate with them – in your marketing materials, on your website, your packaging, and in your physical store.
Example:
Let’s imagine a Saskatchewan startup that produces artisanal dog treats made with locally sourced, organic ingredients. They might identify two key niche markets:
- Niche 1: Health-conscious pet owners. These individuals prioritize their dog’s well-being and are willing to pay more for high-quality, natural food. Their motivation to buy isn’t primarily about saving money; it’s about ensuring their furry friend’s health and happiness.
- Niche 2: Environmentally aware consumers. This group is concerned about sustainability and prefers to support local businesses with ethical practices. While quality is important, they are also motivated by the positive environmental impact of their purchase.
Here’s how the startup might answer the key messaging questions for each niche:
Niche 1: Health-conscious pet owners
- What do we do? We bake delicious and nutritious dog treats using locally sourced, certified organic ingredients.
- Why does it matter? Our treats are free from artificial ingredients, promoting better digestion, a healthier coat, and increased energy levels.
- Who should care? Dog owners in Saskatchewan who prioritize their pet’s health and are looking for natural, high-quality treat options.
Niche 2: Environmentally aware consumers
- What do we do? We create tasty and healthy dog treats using ingredients sourced from local Saskatchewan farms, minimizing our environmental footprint.
- Why does it matter? By choosing our treats, you’re not only rewarding your dog with delicious snacks but also contributing to a greener community and supporting local farmers.
- Who should care? Environmentally conscious dog owners in Saskatchewan who value locally sourced products and want to make sustainable purchasing decisions.
As you can see, the core offering is the same, but the messaging is tailored to resonate with the specific motivations and values of each niche market.
Summary
Price is an integral component of the overall impression your offering makes. Pricing your product or service too low for your target niches and the value you provide can position it poorly and deter customers who are looking for high quality and a premium experience. Conversely, pricing too high when you aim to sell a high volume to budget-conscious shoppers will likely price you out of the market.
Therefore, a successful sales strategy involves carefully considering your fixed and variable costs, analyzing comparable offerings in the market, and understanding the perceived value and quality you want to convey through your pricing. These elements, combined with targeted positioning, a compelling pitch, and strategic promotion, are essential for turning potential customers into loyal buyers.
**This article was created in collaboration with Boost Strategic Coaching**
