How to Price Your Product or Service for Maximum Profit

Pricing isn’t just a number—it’s a strategy. It’s one of the most important decisions you’ll make as a startup founder. Your pricing influences how people perceive your brand, who becomes your customer, and how much money you make at the end of the day.

In Pakistan’s competitive and often price-sensitive market, setting the right price can be tricky. Go too high and you scare people away. Go too low and you may attract the wrong audience—or worse, lose money. Whether you’re launching a new app, offering digital services, or starting a product-based business, a smart pricing strategy is what separates sustainable startups from struggling ones.

Why Most Startups Struggle with Pricing

Let’s be honest—most startups don’t know how to price their offerings when they start. And that’s okay. But not learning quickly can hurt your chances of growth.

Here’s why many founders get pricing wrong:

They’re afraid of charging too much and losing customers.
They underprice because they lack confidence or market data.
They copy competitor pricing without understanding the strategy behind it.
They try to please everyone and end up confusing their audience.

Pricing is not just about covering costs; it’s about communicating value. If you’re not confident in your price, your customers won’t be either.

Key Factors That Influence Pricing

Before setting your price, you need to consider a few critical elements. These factors help you find the sweet spot between affordability and profitability:

Your Costs
Know exactly how much it costs to produce, deliver, or support your product or service. This includes hidden costs like customer support, transaction fees, or delivery charges.
Your Target Market
Who are you selling to? A customer buying custom furniture in Lahore will expect very different pricing from someone buying a mobile app subscription in Karachi.
Competitor Pricing
Study your competitors, but don’t just copy them. Understand what value they offer and what sets you apart.
Perceived Value
Sometimes, the perceived value matters more than the actual cost. A well-branded product can be priced higher simply because it looks more premium.
Your Positioning
Are you a budget-friendly option or a premium solution? Your pricing should reflect your brand identity and market position.

Different Pricing Strategies You Can Use

There’s no one-size-fits-all pricing model. The right strategy depends on your product, your audience, and your long-term goals. Here are some common approaches you can consider:

Cost-Plus Pricing
The simplest method—calculate your costs and add a profit margin. This works well for physical products but doesn’t always reflect customer value.
Value-Based Pricing
Set your price based on the value your product delivers to the customer. If your software helps a business save 1 lakh rupees a month, charging Rs. 10,000 is justified—even if your costs are low.
Penetration Pricing
Launch with a lower price to gain quick market entry, then raise prices gradually. This works well in competitive industries like food delivery or e-commerce.
Skimming Pricing
Start with a higher price and lower it over time. This strategy is often used for tech products or limited-edition services.
Freemium or Subscription
Offer a free basic version and charge for premium features. This works well for SaaS products and digital tools where user acquisition is key.

How to Choose the Right Pricing Strategy

Your pricing strategy should reflect more than just numbers—it should align with your vision, brand, and the customer journey.

Ask yourself:

What are your short-term and long-term goals?
Do you want to attract as many users as possible or maximize profit per customer?
How price-sensitive is your target audience?
Are you building a premium brand or a mass-market solution?

For example, if you’re running a niche consultancy with limited time, higher pricing makes sense. But if you’re launching an e-learning platform for students, lower pricing or freemium might be more effective.

The Psychology Behind Pricing

Never underestimate how powerful psychology is when it comes to pricing. Here are a few tricks that businesses around the world (including in Pakistan) use to influence buying decisions:

Charm Pricing: Rs. 999 sounds cheaper than Rs. 1,000—even if it’s just a rupee less. It works because our brain sees the first digit and assumes it’s significantly cheaper.
Anchoring: Show a higher price first, then a discounted or lower-priced option. This makes the latter feel like a better deal.
Bundling: Combine multiple products or services into a package for one price. This increases perceived value and makes it easier to upsell.
Scarcity and Urgency: Limited-time offers or low-stock notifications encourage people to act fast.

Understanding these principles can help you present your pricing in a way that feels valuable and convincing—without needing to lower it.

Pricing Mistakes That Hurt Your Profits

Avoiding common pricing mistakes can save your startup from a lot of pain. Here are some of the most frequent (and costly) errors:

Guessing instead of researching: Pricing without understanding your market or costs is like flying blind.
Trying to please everyone: If you’re too cheap for premium customers and too expensive for budget buyers, you’ll miss both.
Not revisiting pricing: As your business grows, your costs, value, and positioning change—your pricing should too.
Ignoring hidden costs: Taxes, support, packaging, payment gateways—if you don’t include these, your profit margin will shrink fast.
Lacking confidence: If you don’t believe your product is worth the price, customers will sense it. Confidence sells.

How to Test Your Pricing (Even as a New Startup)

You don’t need a huge budget or complex tools to test your pricing—just the right mindset.

A/B testing: Offer two pricing tiers to different segments and track conversion.
Pilot offers: Soft-launch to a small group and ask for feedback on value vs. cost.
Early-bird pricing: Reward first users with lower pricing in exchange for feedback.
Ask directly: Sometimes, the best way to know what people will pay is to ask them during conversations or surveys.

Start small, iterate quickly, and make data-backed adjustments.

Pricing in the Pakistani Market

Pakistan’s startup landscape has its own unique dynamics. What works in Silicon Valley may not work in Karachi or Islamabad.

Here’s what to consider:

Price Sensitivity: Most consumers are highly price-aware, especially in B2C markets.
Cultural Bargaining: Pakistanis often expect some level of negotiation or discounts, especially in service-based sectors.
Income Variability: A wide range of income levels means you may need tiered pricing to cater to different segments.
Digital Trust: If you’re operating online, build credibility to justify your pricing—people still hesitate to pay upfront for online services.

How to Communicate Your Pricing Effectively

Even if your pricing is perfect on paper, poor communication can kill conversions.

Focus on value, not just cost: Explain what the customer is getting, not just what they’re paying.
Use testimonials: Real customer feedback builds trust and justifies your price.
Break it down: Show the customer exactly what’s included in each plan or package.
Be transparent: Hidden fees cause mistrust. Show taxes, shipping, and any extras upfront.
Use social proof: “500+ customers already onboard” makes your price feel more justified.

People don’t mind paying—if they believe it’s worth it.

Examples of Successful Pricing Models (Pakistani Startups)

Let’s take a quick look at how some Pakistani startups have smartly handled pricing:

Tajir: Offers competitive wholesale rates to kiryana store owners, using bulk pricing to win market share.
Bykea: Started with very affordable pricing for ride-hailing and logistics to gain traction before scaling up.
Oladoc: Offers free access to doctors but charges for value-added services like premium booking and consultation slots.
SadaPay: Introduced zero-fee cards and transfers initially, banking on mass user adoption and monetization later.

Each of these businesses priced based on strategy, not just guesswork.

When & How to Raise Your Prices Without Losing Clients

Raising prices can feel risky—but it’s often necessary for growth. Here’s when and how to do it without losing customer trust:

When to Raise Prices:

Your costs have increased.
You’re offering more value or better features.
You’re attracting a higher-end market.
You’ve proven your product works and want to scale.

How to Do It Gracefully:

Give advance notice.
Offer legacy pricing for loyal customers.
Clearly explain the added value.
Introduce new features alongside the price increase.

If done transparently, most customers will understand—especially if they see consistent value.

Conclusion

Pricing your product or service isn’t something you “set and forget.” It’s a living part of your business strategy that needs constant attention and adjustment.

Here’s what you should always remember:

Don’t underprice your value.
Don’t overcomplicate your offer.
Understand your market, your customer, and your brand identity.
Test and adapt until you find your sweet spot.

Most importantly, be confident in what you’re offering. If you believe in the value you provide, your customers will too.