2026-07-17
How to Set Product Prices That Stay Profitable and Competitive
How to set product prices for MSMEs: start from COGS, use markup, value-based, and psychological methods, and avoid mistakes that leave prices too low.
With the right price set, it is time to reach more buyers. Explore the digital marketing service from Omset Laris to reach more customers and boost sales.Learning how to set product prices is one of the most decisive choices for an MSME, yet it is often done carelessly. Many owners simply copy a competitor's price or guess a number that feels right, without knowing whether it truly covers cost and leaves a profit. The right price keeps products selling while protecting your margin over the long term and leaving room to grow.
Why Prices Should Not Just Copy Competitors
Copying a rival's price looks safe but is risky. Every business has a different cost structure: a competitor may buy cheaper, operate at larger scale, or be burning investor money to grab market share. Copying blindly can mean selling at a loss. Good pricing always starts from your own cost data, not a competitor's screen whose situation you do not know.
Start from COGS and Your Target Margin
The first step is always knowing your cost. Calculate product COGS accurately, then add your target margin. If COGS is Rp 6,500 and you want a 50% margin, the base price is around Rp 9,750. That gives you a safe price floor before considering the market. Without this step, every pricing decision is a risky guess.
Three Methods to Set Product Prices
There are three approaches you can combine based on the product:
Markup (cost-plus) — COGS plus a fixed profit percentage. Simple, fast, and good for mass products.
Value-based — price set by the benefit customers feel, ideal for unique or premium products.
Market-based — look at the range the market will pay, then position within it.
Applying It
For mass products like snacks, markup from COGS is usually most practical. For services or handmade goods with uniqueness, value-based pricing allows higher prices because customers pay for the benefit. Combining both helps you find a number that is profitable yet reasonable, without having to be the cheapest.
Psychological Pricing to Boost Appeal
Once you have a base number, psychological touches can boost appeal. Rp 49,000 feels far lighter than Rp 50,000 even though the gap is small. Bundles or tiered pricing (small, medium, large) also nudge customers toward the option that benefits you more. Showing a struck-through price next to a promo price helps customers feel they gain value. For more on raising transaction value, see a strategy to double your revenue.
Test Prices Before Finalizing
Price is not fixed. Before finalizing, test a few price points across different customer segments and watch the sales response. You can try a slightly higher price on one channel, or offer a premium version as a comparison. Real sales data reveals the optimal price far better than guessing.
When to Raise Prices Safely
Raising prices is not taboo as long as it is done with a clear reason and good communication. The right moments include when material costs rise significantly, when your quality or service improves, or when demand far exceeds capacity. Raise gradually and communicate the value, not just the number.
Common Pricing Mistakes
Pricing too low out of fear it will not sell, wiping out the margin.
Forgetting hidden costs like shipping, packaging, and marketplace fees.
Never raising prices even as material costs climb.
Discounting too often, so customers only buy during promos.
Conclusion
Setting prices well means balancing three things: cost, value, and market. Start from COGS, add a healthy margin, adjust for value and market, then review regularly. If you need help shaping pricing and sales strategy, the Omset Laris services team can help map your priorities.