How to Price Your Products Without Guessing

There is a better way. Three ways actually. And none requires a degree in accounting.

Method 1: Cost-Plus Pricing — The One Every Retailer Should Start With

Cost-plus is simple. Add up everything it costs to get that product into the customer's hands, then add your margin on top.

• Cost of goods: What you paid the supplier. Include transport to your shop or store.
• Platform fees: If you sell on Instagram or WhatsApp, include what you spend on data, M-Pesa charges, and any selling fees.
• Delivery: What you pay to get the item from you to them. Even if the customer pays, factor in the time and coordination.
• Your margin: A standard retail margin in Kenya is 30-50%. For fashion, aim higher — 50-60%. For fast-moving essentials, 20-30% works.

So if a dress costs you KES 800 from the supplier, KES 50 for transport to Nairobi, and KES 150 for delivery to the customer, your all-in cost is KES 1,000. A 40% markup means you sell it at KES 1,400.

Anything below KES 1,200 and you are running a charity, not a business.

Method 2: Competitor-Based Pricing — Don't Copy, Learn

The temptation is to look at what someone on Instagram is charging for a similar item and match it. That is dangerous because you do not know their costs.

Instead, use competitor prices as a check not a target. If cost-plus says you should sell at KES 1,400 and competitors are at KES 1,200, figure out why. Do they have cheaper suppliers? Higher volume? Lower quality? Maybe they are selling at a loss to attract customers (a bad strategy, but common).

If your cost-plus price is significantly above market, you have a sourcing problem, not a pricing problem. Fix the supply chain, not the price tag.

Method 3: Value-Based Pricing — Charge What It Is Worth

This is the most profitable method but the hardest to get right. Value-based pricing means setting the price based on what the customer thinks the product is worth, not what it costs you.

A KES 2,000 dress from a trusted Instagram seller who posts real try-on videos and ships same-day is worth more than the same dress from an account with two photos and a blurry price list. Your reputation, speed, and trust are assets — you can price accordingly.

The trick is to increase the value, not just the price. Better photos, faster delivery, clearer sizing info — each of these lets you charge more without raising your actual costs much.

The One Rule: Know Your Number

Whatever pricing method you use, the most important number is your break-even price — the minimum you can sell at without losing money. For the dress example above, that is KES 1,000. Anything above that is profit.

A good retailer checks their break-even price every month. Costs change. Suppliers change. M-Pesa charges change. If you are still using last year's prices, you might be losing money on every sale and not know it.

Common Pricing Mistakes Kenyan Retailers Make

• Rounding down to a nice number: KES 1,000 feels better than KES 1,100 but that KES 100 might be your entire profit on the item.
• Ignoring M-Pesa charges: A KES 500 sale costs you about KES 13 in M-Pesa business charges. On 50 sales a month, that is KES 650. Include it in your cost calculation.
• Pricing everything the same markup: Low-cost items can have a higher markup (they feel cheaper). High-cost items can have a lower markup (the absolute profit is still good). Think 80% on a KES 200 item vs. 30% on a KES 5,000 item.
• Not raising prices when costs go up: If your supplier raises the price from KES 800 to KES 900, your selling price needs to go up. Do not absorb the increase — your customers understand when you explain it.

How to Test a New Price Without Losing Customers

If you have been selling at KES 1,200 and want to move to KES 1,400, do not change it overnight. Try this:

1. Add a small improvement to the product or service (better packaging, faster response, a care card).
2. Announce the new price with the improvement attached. "Better packaging now included."
3. Keep the old price for existing customers for one month. Transition them gently.
4. If sales drop, go back to KES 1,200 and work on your supplier costs instead.

Price is not a number you set once. It is a number you manage, like stock or staff. The retailers who check their prices monthly are the ones still in business next year.