Finance and Pricing

9.4 3 Strategies To Price Your Product
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Module Overview

00:00:00 / 02:32:57



M0 Baking Fundamentals
3 mins
M1 Ingredients: Basics for Breads, Pastries and Cakes
25 mins
M2 Equipment: Breads, Pastries, Cakes
13 mins
M3 Food Hygiene and Safety: Food Preparation and Storage
13 mins
M4 Packaging: Function and Purpose
4 mins
M5 Menu Planning
9 mins
M6 Product Planning: Healthy Alternatives
4 mins
M7 Business Plan: Scalability and Expansion
23 mins
M8 Business Plan: Entrepreneurship
17 mins
M9 Finance and Pricing
20 mins
M10 Legal: 4 Things To Do Before Opening For Business
6 mins
M11 Marketing Strategy: Digital and Social Marketing
15 mins

About this module

Money talks, and in the world of business, it’s important to manage your finances throughout every step of your business! Learn about the many key sectors and hidden costs that go into running a baking business, from crowdfunding, production, operations and more. Find out which parts you shouldn’t overlook, and how you can budget your money smartly to steer your business forward!


Let’s talk about pricing strategy. First, we must be aware that good pricing strategy in today’s competitive environment is no longer a unique selling point for businesses. Nowadays, it is a necessity for any new business or product to enter the market and have a chance to succeed.

As a result, a lot of pressure is being put on entrepreneurs for having the right price for the right product, and it has become one of the biggest concerns for aspiring and experienced home bakers alike. Let’s see what our Home Baking Talents have to say about determining the right price.

I would say our breads are actually slightly cheaper than outside. It would be much more average priced. It’s affordable. Because we are homemade, so we don’t use preservatives. Of course, kalau dekat kilang, they are all machines. Here, we put our whole heart into it. We bake and kalau benda tak cantik, kita tak akan bagi.

How we priced our products in the early stage was we didn’t sell at an expensive rate. When I started out, I didn’t factor in the cost of the alcohol which means I don’t make money on alcohol and they can be very expensive. All I care about is just to make sure people get to know my brand so I can scale it up. Until recently, when we start moving into factory and having more overhead, we need to start charging people for the alcohol.

Each home baker has their own experience and preferences, but luckily, all of them are right. They are in their own way, expressing each of the three basic pricing strategies available for any home baker to use. These three pricing strategies available are Cost-Based Pricing, Market-Based Pricing, Value-Based Pricing.

To put things into perspective, these three pricing strategies actually came about over many business cycles. So let’s look into the strategies in this order.

Each strategy has its advantages, and with a bit of practice, any home baker will be able to make use of all three strategies side by side, to determine and validate their pricing decision. For example, if you use the Market-Based Pricing Strategy, you could use the Cost-based and Value Based Pricing Strategy to check and validate your pricing before making the decision.

The first and most straightforward strategy is Cost-Based Pricing. This strategy is Based on the simple concept that your Final Selling Price should be your Product Cost plus Profit.

Using an accurate product costing sheet, you can decide how much profit you want to make out of the product – this is known as your Mark Up. To make things easy, you may also determine how many percent Mark Up (based on your cost) that you want to make out of your products.

We have provided a product costing sheet template for you, downloadable through the link below the video.

Fill up the portions in yellow, and the formulas will compute the Total Food Cost and Food Cost per Unit for you.

The second method is Market-Based Pricing. This is also another straightforward strategy, where you do a survey of all the products available in the market which you feel is most similar to yours – in terms of size, type and quality. You may put these products side by side, and determine where your price point will be, by comparing the price and criteria.

The advantage here is that you will be able to put pressure on your competition, and challenge them for market share.

The last strategy available is Value-Based Pricing. It takes the opposite approach from Cost-Based Pricing.

Instead of calculating the cost and marking up from there, this strategy starts with the customer’s point of view. What is the customer’s perceived value in terms of quality of ingredients, quality of products, branding, and other external factors?

This requires a deep understanding of your customers, know who they are, what they value and how they consume and spend their money.

Then, you can add a monetary value on top of your cost.

The advantage of this strategy is that you can add in the marketing value and is customised for your customers.

Once you understand the fundamentals of these pricing strategies methods, which are simple and effective in practice, you have all the tools to make a well-informed pricing decision.

Try them out and see which works best for you!

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