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How to Determine the Sales Price of Your New Product ?

How to dtermine the sales price
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When you want to determine the selling price of your new product, you need to consider the production cost, the competition, and the target market. There are many factors that influence your final selling price and profitability of your new product. 

If you want to have a profitable product you need to carefully calculate the total costs to get from product idea, through, development, manufacturing, shipment and launch. Let’s dive in how you can determine the selling price of your new product.

What costs are included in the production costs of your new product?

The production costs of your new product typically include expenses related to the materials, labor, and overhead required to manufacture the product. This also includes costs associated with quality control, packaging, and shipping. 

It is important to carefully track and manage these costs to ensure that your product is priced correctly and your business remains profitable. This is one factor to consider in how you can determine the sales price of your new product.

What is included in the shipping costs of your new product?

The shipping costs of your new product typically include the transportation of the item from the manufacturer to the recipient’s address. Or from the manufacturer to a warehouse and then to the final recipient. 

The shipping costs vary depending on the location of the manufacturer and the shipping carrier used. Some manufacturers also include additional services such as insurance or tracking for the shipment. 

It’s always a good idea to check the manufacturers shipping policy to clarify what is included in the shipping costs of your new product. 

What does Free On Board (FOB) mean?

Free On Board (FOB) is a term used in international trade to indicate the point at which the manufacturer or seller of the goods is no longer responsible for them. When the goods are delivered to a designated port or other location, the buyer of the goods takes over the responsibility for the goods. The term may also be used to indicate the price of the goods, which includes transportation costs to the designated location. 

FOB is commonly used in shipping contracts and can have legal implications, so it’s important to understand its meaning when you do business in international trade.

What is the other option besides FOB (Free on Board)?

The other option, besides FOB (Free on Board), is CIF (Cost, Insurance, and Freight), which includes the cost of insurance and freight in addition to the cost of the goods being shipped.

What happened with logistic costs during COVID-19?

During COVID-19, logistic costs increased due to several factors. Such as disruptions in global supply chains, border closures, and increased demand for certain products. The pandemic also led to a shortage of shipping containers and a decrease in air cargo capacity. This resulted in higher transportation costs and longer lead times for shipments. 

Additionally, companies had to implement new safety measures and protocols. This increased their operational costs. Overall, logistic costs have been a major challenge for businesses during the pandemic.

As we never know what situations we might face in the future, it’s smart to consider having your supply base close to your sales market.

What you should include in the warehousing costs of your products

Warehousing costs of products typically include expenses related to storing and handling inventory. Such as rent or mortgage payments on the warehouse space, utilities, insurance, security, equipment, labor, and maintenance. 

Other costs include transportation expenses for moving goods in and out of the warehouse. Also costs associated with managing inventory, such as tracking, counting, and replenishing stock.

How to calculate the inbound and outbound costs in the warehouse of your products?

To calculate inbound and outbound costs in your warehouse, you will need to consider several factors. Such as transportation, handling, storage, and labor costs. Start by determining the cost of transporting of your products to the warehouse, including any fees for customs, taxes, or tariffs. 

Next, calculate the cost of handling your products, including unloading, inspection, and sorting. Then, determine the cost of storing your products, such as rent, utilities, and insurance. 

Finally, factor in any labor costs, including wages and benefits for employees who handle your products. By taking all of these factors into account, you can calculate a complete estimate of your inbound and outbound costs for your warehouse.

How to estimate the costs of sales staff of your new product?

To estimate the costs of sales staff for your new product, you include various factors. Such as the number of salespeople you need, their salaries and commissions, training and development costs, benefits, and any additional expenses such as travel or equipment. 

You start by researching industry standards for sales staff compensation and benefits. Then adjust for your specific needs and budget. It’s also important to consider the potential return on investment of your sales staff and ensure that their costs align with your revenue goals.

What’s included in the service and warrantee costs of your new product?

The service and warranty costs typically cover repairs and replacements of the product within a specified time period. The exact details of what is included in the costs varies depending on the manufacturer and the product. 

It’s important to carefully review the warranty information provided to understand what is covered and what is not. Some manufacturers offer extended warranties for an additional fee, which provide additional coverage beyond the standard warranty period.

You need to discuss and agree on these terms with your manufacturer and sign a service agreement as part of the manufacturing agreement. Do your warrantee and service standards match the standards from your manufacturer? If not you need to address this early on in the development phase.

What costs are included in overhead expenses of your new product and how to determine the sales price of your new product to be profitable?

Overhead expenses typically include indirect costs that are not directly tied to the production of a specific product. Such as rent, utilities, salaries of administrative staff, and other general operating expenses. It’s important to carefully analyze and allocate these costs to ensure proper pricing and profitability of your new product.

Additionally, factor in any shipping or delivery costs. You should also consider any marketing or advertising expenses, as well as any fees associated with selling through a third-party platform. 

Finally, make sure to account for any taxes or other regulatory fees that may apply to your product. By taking all of these costs into consideration, you can set a price that is both competitive and profitable.

So here you have it! All factors you need to know on how to determine the sales price of your new product to be profitable?


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Hi, I'm Marie-Louise.

I help project managers and entrepreneurs become successful in managing
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