Are Your Prices Too Low? How to Find Your Pricing Sweet Spot

Pricing can be weird.

You know what your ingredients cost. You know how much work goes into making something. You probably have a decent idea what other vendors are charging too.

But changing a price from $6 to $7 can still feel like a huge decision.

Will people complain?

Will they stop buying?

Is $7 suddenly too expensive?

So a lot of small businesses just leave their prices alone.

There isn’t a perfect formula that can tell you exactly what you should charge. But there are some things you can watch for that might tell you it’s time to take another look.

One of these things by itself probably doesn’t mean much.

It’s when several of them start happening at the same time that it gets interesting.

At a glance

• Your margin is getting smaller.
• Customers keep coming back.
• You’re regularly selling out.
• Customers don’t seem bothered by the price.
• Your average order is getting bigger.
• Your business has changed, but your price hasn’t.

1. Your Margin Is Getting Smaller

This is probably the easiest place to start.

Let’s say something costs you $2 to make and you sell it for $6.

That leaves you $4 after the direct cost of making it.

But over time, maybe that same product starts costing you $2.75.

	Original	Later
Selling price	$6.00	$6.00
Cost to make	$2.00	$2.75
Amount remaining	$4.00	$3.25

Your customer is still paying the same $6.

You’re just keeping less of it.

That can happen pretty easily.

Sugar goes up.

Packaging costs more.

Maybe you start paying for a commercial kitchen.

Maybe you switch to better ingredients or better packaging.

Most of those changes don’t happen all at once, which makes them easy to ignore.

Ten cents here. Twenty cents there.

Then one day you realize a product that used to cost $2 to make now costs $2.75 and you never changed the price.

That’s probably a good time to look at it again.

It doesn’t necessarily mean you need to raise the price.

It just means the math that made sense when you originally picked that price might not make sense anymore.

2. Customers Keep Coming Back

Repeat customers are really useful when thinking about pricing.

A first-time customer doesn’t know if your product is any good yet.

A repeat customer does.

They’ve already tried it, they know what it costs, and they came back anyway.

That doesn’t mean you can raise the price as much as you want.

But it does tell you something.

Imagine someone buys from you at a market.

Two weeks later, they buy again.

Then you see them another month later and they buy again.

At that point they’re probably not buying because your product was cheap enough to try.

They’re buying because they like it.

That’s an important difference.

If you have a lot of customers doing that, it can be a sign that people value your product enough that a small price increase may not scare everyone away.

3. You’re Regularly Selling Out

Selling out is usually a good thing.

But if you’re selling out of the same thing over and over again, it’s worth paying attention to.

Let’s say you bring 40 of your best-selling product to a market.

You sell all 40.

Next time you bring 50.

Those sell too.

Then you bring 60 and they’re gone again.

At some point you have a few choices.

You can keep making more.

You can decide you’re okay with selling out.

Or you can take another look at the price.

This matters even more for small producers because production time is limited.

You can only make so much in a week.

If you’re constantly trying to make more of one product just to keep up with demand, price becomes part of that conversation.

That doesn’t mean every product that sells out needs to cost more.

Sometimes selling out is exactly what you want.

But consistently having more demand than you can supply is something worth noticing.

4. Customers Don’t Seem Bothered by the Price

You can learn quite a bit just by watching people shop.

When customers see your price, what happens?

• Do they pick the product up and immediately put it back?
• Do they regularly tell you it’s too expensive?
• Do they spend a lot of time comparing prices?
• Or do they just pick what they want and buy it?

Don’t read too much into one comment.

Someone will always think you’re too expensive.

Someone else will tell you that you should charge twice as much.

Neither person really tells you much by themselves.

What matters is what happens over and over again.

If most customers see the price and buy without much hesitation, price might not be the biggest part of their decision.

Your sales data can sometimes show this too.

Maybe a more expensive product sells just as well as a cheaper one.

Maybe customers regularly buy three products instead of one.

Maybe your bundles sell really well.

Those things don’t automatically mean your prices are too low.

But they’re useful pieces of information.

5. Your Average Order Is Getting Bigger

Maybe your average customer used to buy one item.

Now they’re buying two or three.

Or maybe you added bundles and customers are regularly choosing them.

Your average order starts moving up.

That doesn’t necessarily mean you should raise prices.

But it does show that customers are comfortable spending more money with you.

Imagine your average order used to be around $7 and now it’s closer to $14.

You didn’t necessarily raise your prices.

People are just buying more.

That’s useful to know when you’re trying to figure out how sensitive your customers are to price.

This becomes more interesting when you combine it with other things.

Maybe your average order is going up.

Your repeat customer rate is strong.

And your product costs have gone up.

Now you have a few different reasons to at least review your pricing.

6. Your Business Changed, but Your Price Didn’t

Sometimes the biggest sign is simply that it’s been a while.

Maybe you picked your price when you first started.

Since then:

• Your ingredients changed.
• Your packaging got better.
• Your process improved.
• Your product improved.
• Your booth got better.
• You built a customer base.
• You started paying for a commercial kitchen.
• You added equipment or other expenses.

But the price is exactly the same.

That’s pretty common.

When you’re starting out, you’re making your best guess.

Maybe you forgot to account for some costs.

Maybe you wanted the product to be cheap enough for people to try.

Maybe you looked at what a few other businesses were charging and picked something close to that.

There’s nothing wrong with that.

You learn more about the business as you run it.

The mistake is assuming that the first price you picked has to be the price forever.

Every once in a while, it’s worth looking at it again.

Don’t Raise Prices Because of One Good Weekend

This part is important too.

One really good market doesn’t mean your prices are too low.

Selling out one Saturday doesn’t mean your prices are too low.

One customer saying, “You should charge more for this,” doesn’t mean your prices are too low.

Look for patterns.

Look across multiple events.

Look at your product costs.

Look at your margins.

Look at whether customers come back.

Look at how much customers normally spend.

Then see if those things are starting to tell the same story.

The goal isn’t to figure out the absolute highest price someone will pay.

It’s to find a price that works for the customer and still makes sense for your business.

Try Small Changes

A price increase doesn’t have to be huge.

Going from $6 to $7 can feel like a massive change when you’re the person changing the sign.

Your customers may barely notice.

Or they might notice.

The nice thing is that you can watch what actually happens.

After changing a price, look at things like:

• Did you sell fewer units?
• Did total revenue go up or down?
• Did average order value change?
• Did your repeat customers keep buying?
• Did the extra margin actually make a difference?

You don’t need to perfectly predict what’s going to happen.

Make a reasonable decision and then pay attention to the result.

Selling Less Isn’t Always Bad

This one can feel a little strange.

Let’s say you normally sell 100 products at $6 each.

That’s $600.

Then you increase the price to $7 and only sell 95.

	Before	After
Price	$6	$7
Units sold	100	95
Revenue	$600	$665

You sold 5 fewer products.

But you made $65 more in revenue.

You also had to make five fewer products.

Depending on your costs, you may have made more money while doing less production.

That’s why simply looking at the number of units sold doesn’t tell you whether a price change worked.

Of course, the opposite can happen too.

You could raise the price and lose enough sales that it wasn’t worth it.

That’s why it’s important to look at your own numbers instead of assuming there’s one pricing rule that works for everybody.

CottageOps Can Help You See These Things Together

This is the idea behind Sweet Spot Pricing in CottageOps.

Pricing isn’t really a separate part of your business.

Your product costs matter.

Your sales matter.

Your margins matter.

And what your customers actually do matters too.

Things like repeat customers, average order value, product sales, and demand can give you more context when you’re thinking about changing a price.

CottageOps isn’t trying to give you a magic number and say, “Charge this.”

Every business is different.

The idea is to put the useful information in one place so you’re making the decision with actual data instead of guessing.

Because the question probably isn’t:

Can I get away with charging more?

It’s:

Does this price still make sense for my business?