Here’s something that might surprise you: price is often the very first thing shoppers notice, and it instantly shapes their opinion of your work. Before they read your product description or admire your photos, the number on the page sets expectations — which is why learning how to price your products is one of the most important skills you can develop as a shop owner.
Underpricing can backfire. A $12 handmade mug might be just as carefully crafted as one priced at $28, but most shoppers will assume the higher-priced mug is better quality. Your prices don’t just cover costs—they tell a story about your skill, time, and creative vision.
Thoughtful pricing helps customers understand the true value of what they’re getting, while giving you the confidence that your work is worth every penny.
Creating your Break-Even pricing
Before diving into psychological pricing strategies, you first need to figure out your break-even point, which is the minimum price needed to cover your costs. You can’t just toss a price on your products and hope for the best. That’s the quickest way to find yourself out of business.
To determine your break-even pricing, use the formula: Materials + Labor + Expenses = Break-Even Price
Let’s look at each section in more detail.
Materials
Add up the costs of everything you used to create the product, including fabric, paint, wood, and packaging. Keeping track of your material costs ensures you’re not unknowingly losing money every time you sell. For example, a jewelry maker might add up the silver wire, clasps, and gemstone beads that go into a single pair of earrings.
Labor
Your time is part of the product, too. Decide what an hour of your work is worth, then multiply by the time it takes to create a piece. A potter who values their time at $25/hour and spends two hours making a mug knows $50 of labor should be built into the price.
Expenses
Next, factor in the overhead costs that don’t sit in the product itself but are still essential—things like your website plan, listing fees, credit card processing fees, tools, or studio rent. A screen printer, for instance, spreads a portion of their studio rent and ink costs across each batch of printed shirts.
Profit
Finally, add a profit margin (typically 5%–20%) on top of everything else. Profit isn’t “extra”; it’s what allows you to reinvest in your shop and pay yourself fairly. A painter who spends $100 on canvas and paint, plus $200 in labor, might add a 20% margin, pricing the piece at $360 instead of just $300.
Using the psychology of pricing to influence buying decisions
Now that you’ve determined the base prices needed for your products, you’re ready to take your pricing to the next level. How you price your products shapes how customers see and value your work.
When you understand how buyers think about product prices, you’ll:
- Stand out and sell more without racing to the bottom on price.
- Make your products feel more valuable and special.
- Build customer trust by ensuring prices feel fair and approachable.
Pricing psychology is about setting prices in a way that connects with how people actually think and feel about money. Shoppers don’t always make purely logical decisions. Instead, they react to cues like a $9.99 price tag feeling cheaper than $10, or seeing a “best value” option next to a higher-priced one.
Here are five pricing strategies that work especially well for small shop owners:
1. Charm pricing
You've seen this everywhere: $19.99 instead of $20, or $49.99 instead of $50. Charm pricing ties into how our brains process numbers using the left-digit effect. We read prices from left to right, and our brain focuses on that first number, so $19.99 registers as "in the teens" rather than "twenty dollars."
For handmade goods, charm pricing is particularly effective for items under $100, making the product feel more affordable. But don't feel obligated to use it everywhere—clean, round numbers still communicate premium quality and confidence in your pricing.
Example: A candle maker lists their best-selling jar candle at $19.99 instead of $20, making it feel like an easy yes for gift shoppers.
2. Anchoring
Anchoring is about giving shoppers a point of reference so the option you want them to choose feels like the best value. Instead of evaluating a price on its own, people compare it to what else is on the table.
Example: A potter offers three mug options: a basic mug for $22, a hand-painted version for $38, and a large statement mug for $65. Most shoppers end up choosing the $38 option because, compared to the $65 anchor, it feels like the perfect balance of price and value.
For small shop owners, anchoring helps guide customers toward your “sweet spot” products, whether that’s your mid-range bestseller or a thoughtfully curated bundle.
3. Value-based pricing
Instead of focusing only on covering your costs, consider what your product means to your audience. Value-based pricing is about understanding what your customers truly value—originality, handmade quality, customization, limited availability, or the story behind your work.
Example: A bag maker who uses repurposed denim might price their tote at $140, even though a similar mass-produced bag sells for $60. Customers are buying not just the bag, but the sustainability, craftsmanship, and story behind it.
4. Prestige pricing
Higher prices can increase desirability and signal exclusivity, as seen in designer clothing and handbags. This psychological principle works especially well for art, handmade goods, and limited runs. When you price something at a premium, you're communicating that it's special, high-quality, and/or exclusive.
You shouldn’t be randomly inflating your prices, but don’t be afraid to price your work appropriately for its quality and uniqueness. If you create truly exceptional pieces using premium materials or advanced techniques, prestige pricing strategies can attract customers who specifically want something special and are willing to invest in it.
Example: A jewelry designer creates a limited run of rings using rare stones. Instead of pricing them at $90 like their everyday pieces, they set the rings at $300 each to highlight their rarity and craftsmanship.
5. Bundling for perceived value
Selling sets, kits, or complementary products together often makes the offer feel like more than the sum of its parts. A "starter kit" with three coordinating items will feel like a better deal than buying each item separately, even if the total price is similar.
Bundles can also encourage customers to spend a little extra while feeling like they're getting a deal. For makers, this could look like offering care instructions and maintenance supplies with a leather bag, or grouping complementary prints as a collection. The key is making bundles feel thoughtfully curated rather than randomly assembled.
Example: A skincare maker sells soap bars for $8 each, but offers a “Self-Care Set” with three soaps, a bath soak, and a mini lotion for $35. Customers see the bundle as both convenient and a better value than buying items individually.
Putting psychology pricing into practice
Knowing the pricing principles is a start, but making them work in your shop is another step forward. Here are a few simple ways to apply pricing psychology without overthinking it:
- Start with your people. Think about who’s buying from you and what they value most. A budget-conscious student reacts differently than a collector looking for something rare. Price in a way that fits your target audience.
- Experiment in small ways. Try nudging the price of a bestseller up by a couple of dollars or adding a “best value” option. Watch how shoppers respond; often, the changes are more positive than you expect.
- Keep it clear. Customers should never feel tricked. Use straightforward pricing that builds trust, and avoid complicated structures that might push people away.
- Offer a range. Confidently price your premium pieces for what they’re worth, but consider having an entry-level product too. It’s a friendly way to welcome new buyers while keeping your high-value work in the spotlight.
When you put psychology into practice, it’s not about playing games with numbers but making sure your prices match the story you want your products to tell.
Common pricing pitfalls to avoid
Even with good intentions, when setting the price for your products, you can easily fall into pricing traps that undermine your online shop.
- Don’t compete on price: You can't out-cheap mass production, and you shouldn't try. Instead, compete on quality, uniqueness, customer experience, and the personal connection customers feel with your brand.
- Don’t copy competitors: Just because another creator prices their work a certain way doesn't mean you should follow suit. Your costs, quality level, brand story, and customer base might be completely different. Focus on what makes your work special and price accordingly.
Don’t overuse discounts: This erodes the perceived value of your work and can hurt your profit margins. Use sales strategically—for clearing inventory, attracting new customers, or celebrating special occasions—not as a regular crutch for pricing you're not confident about.
Confident pricing, confident customers
Knowing how to price your products is part math, part psychology, and an important piece to building a sustainable creative business. Getting your product pricing dialled in will elevate your work in customers' minds, attract buyers who truly value what you create, and provide the financial foundation that lets you keep doing what you love.
Don't be afraid to experiment, trust in the value you provide, and remember that confident pricing leads to confident customers.
Your work has value.
Your time has value.
Your creativity has value.
Let your pricing reflect that truth, and watch how it transforms not just your sales, but how customers perceive and connect with your brand.