Three approaches
Three ways to set a price
Cost-plus pricing
"My cost is $10, so I'll sell it for $15."
•Cost sets a floor, but it doesn't tell you what customers will actually pay.
•A flat 50% markup will land you on a price of $15 regardless of whether customers are willing to pay as much as $25, or as little as $12.
Competitor-based pricing
"The relevant competitors charge $19 to $22, so I'll charge $18."
•Assumes your competitors know the right price, and that their customers are yours.
•Only smart if you're deliberately the cheaper alternative to someone; otherwise your brand may justify a premium.
Value-based pricing
"My profit peaks if I sell at $23, so I'll charge $23."
•Determines how your own customers respond to different prices.
•Lands on the price where profit peaks — not a markup, and not a competitor's guess.
Concept
Your products' price sensitivity
Every product responds differently to the same price change. That response is what we measure.
High sensitivity product
A small price increase causes a large drop in sales.
Common for products with many alternatives, and non-essential purchases.
Low sensitivity product
A small price increase has little effect on sales volume.
Common for unique items, products with loyal customers, and convenience or impulse buys.
Drivers of sensitivity
Perceived uniqueness
Availability and price of close substitutes.
Perceived quality
How customers judge the product's value.
Brand loyalty
The strength of customer trust in the brand.
From demand to price
From demand to the optimal price
From the demand curve we derive revenue and margin, then read off the price that maximizes your chosen goal.
Current $25
Revenue-optimal $33
Profit-optimal $38
Assumes unit cost
$15
Demand
Fewer sales as price rises
Revenue
Peaks around $33
Profit
Peaks at the optimal price
Who built this
Dr. Pavel Logačev
Founder · Sell Smart, Berlin
I spent years estimating how people respond to change from data that was never collected as an experiment. Pricing is the same problem. Your order history is observational data — the honest way to use it is to model it, not to eyeball it.
That's why this app shows you a demand curve instead of a single number, says so when a product's history is too thin to support a recommendation, and never moves a price without your approval. A recommendation you can't interrogate is one you shouldn't trust.
Questions about the method — contact@sell-smart.app
Sell Smart Price Optimization · apps.shopify.com/smart-price-optimization
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