Pricing is the most consequential decision you'll make.
It affects your margins, your brand perception, your customer profile, and your ability to grow. Get it right and the business works. Get it wrong and no amount of great marketing fixes it.
Most first-time founders make the same three pricing mistakes. Here's how to avoid them.
Mistake 1 — Pricing from cost upward (and stopping there)
The most intuitive approach: calculate your cost of goods, add a margin, and that's your price. The problem is this ignores everything the market is telling you.
Cost-plus pricing is necessary but not sufficient. Your price must also:
- Be credible for your brand positioning
- Be competitive in your category
- Leave room for channel costs (marketplace fees, distributor margins)
- Generate enough margin to fund customer acquisition
Mistake 2 — Pricing for the first order, not the business
Your costs at 500 units are not your costs at 5,000 units. As you scale, your per-unit manufacturing cost decreases, your packaging cost decreases, your logistics cost per unit decreases.
Founders who price based on their first-order cost and discover they have no margin once they factor in marketing, returns, and platform fees are extremely common.
Build your pricing model for the business you're building — not just the first order.
Mistake 3 — Competing on price against established brands
A new brand with no awareness and no social proof trying to compete against established players by being cheaper is almost always a losing strategy. The established player can outlast you on price, outspend you on marketing, and has customer trust you don't yet have.
Competing on price is a race to the bottom that a new brand almost never wins.
The framework that works
Step 1 — Define your fully-loaded unit cost. Manufacturing + packaging + labels + inbound logistics + a QC allowance. This is your true cost per unit, not just the manufacturing invoice.
Step 2 — Add your target gross margin. For a viable D2C product brand, aim for 60–75% gross margin on your direct-to-consumer price. This sounds high, but you need it: marketplace fees (Amazon charges 15–40%), payment gateway fees (2%), returns (2–5% of GMV), and customer acquisition cost all eat into it.
At 60% gross margin: If your product costs ₹200 all-in, you need to sell it for ₹500. That's your floor.
Step 3 — Sense-check against the market. At ₹500, where does your product sit versus competitors? Is that positioning credible? Too expensive? Too cheap?
If your cost floor is above what the market will bear — you have a cost structure problem, not a pricing problem. Fix the cost first.
Step 4 — Price for the channel. If you're selling on Amazon, add 20–30% to your D2C price to cover fees while maintaining the same margin. If you're selling through distributors, add 35–50% for their margin plus your margin.
Different channels need different list prices, or you'll find your distribution destroying your D2C economics.
Step 5 — Test and iterate. Launch at your calculated price. Watch conversion rates. If conversion is too low, test a lower price point or a bundle. If conversion is strong and you're selling everything you make, test a higher price — most founders undercharge, not overcharge.
The psychological dimension
In supplements and personal care, price signals quality. A ₹299 protein supplement signals something very different from a ₹999 one — even if the formulation is similar.
Know what your brand is signalling. Premium positioning requires premium price. Budget positioning requires volume. There is no successful middle ground in most consumer product categories.
The VP23ARK approach
We give clients a clear pre-quote early in the process — manufacturing cost, packaging cost, logistics — so the unit economics are known before any money is committed. Pricing decisions made without knowing the real cost structure are guesses. We try to make them informed decisions instead.
