What Is Pricing Strategy? Cost, Value and Profit Math

Three Places a Price Can Start

Most prices start from one of three bases, or a mix of them.

Cost-plus pricing. Add a set markup to what the item costs you. It's simple, but it ignores what buyers would pay.
Value-based pricing. Charge what the item's worth to the buyer, not what it cost to make.
Competitive pricing. Stay close to what similar stores charge. This matters most when shoppers can buy the same item elsewhere.

Price anchoring shapes how fair a price feels, while dynamic pricing moves prices often, by rule. Both fit inside a pricing strategy.

Why a Lower Price Can Sell More and Earn Less

Your price changes how many visitors buy and how much you keep per order. A cut can lift your conversion rate and still shrink your profit.

Say you sell a soy candle for $30. It costs you $9 to make and pack, so you keep $21 a sale. (We'll skip fees and shipping.) Sell 100 and you keep $2,100.

Cut it to $25. Now you keep $16 a sale, so it takes 132 sales to get back to $2,100. That's 32% more orders.
Raise it to $34. You keep $25 a sale, and 84 sales get you to $2,100. You could lose 16 of every 100 sales and still earn the same.

That's what each price has to do on paper. Only price testing on your own traffic shows what shoppers will actually do.

Where Your Pricing Shows Up in Shopify

In the Shopify admin, each product or variant has a Price, an optional Compare-at price and a Cost per item field. Fill in the cost and Shopify shows your profit and margin right there.

Discounts are short-term price changes. Shopify discount codes and automatic discounts can take a percentage or a fixed amount off. Our page on pricing strategy for percentage vs. fixed discounts compares the two.

Growth Suite, our app, has a price editor that changes native Shopify prices by a percentage or a fixed amount, with one-click rollback.

The Myth That the Cheapest Store Wins

Many owners think pricing strategy means undercutting everyone. Look at the candle again: a $5 cut needs 32% more orders just to earn the same. Some shoppers also read a very low price as a sign of lower quality.