Product pricing is no longer a simple decision based only on cost. In Saudi Arabia, rising competition and multiple sales channels have made product pricing methods a key factor in profitability and long-term sustainability.
In this article, we explain the concept of product pricing, outline practical pricing steps, and highlight six widely used approaches in the Saudi market. We also review tools that support smarter pricing decisions.
What Does Product Pricing Mean?
Product pricing refers to setting the monetary value at which goods or services are sold. The goal is to balance cost coverage, profit generation, and customer acceptance.
This balance is influenced by three main factors:
- The actual product cost, including direct and indirect operating expenses.
- Market price, which reflects the average pricing among competitors in the same category.
- Perceived value, meaning how customers judge the product’s worth compared to its quality or benefit.
Although the concept sounds simple, applying it in practice requires accurate data and structured systems, especially when managing many products or sales channels.
Product Pricing Steps Explained Clearly
To build sustainable pricing, businesses can follow these steps in sequence. These steps support consistent product pricing methods across operations.
1. Calculate Costs Accurately
This includes purchase or production costs, as well as indirect expenses such as rent, salaries, shipping, consumables, and maintenance.
Any missing cost element will distort all pricing outcomes and reduce reliability.
2. Analyze the Market and Competitors
This step helps identify acceptable price ranges for customers. The purpose is to understand market position, not simply copy competitor prices.
3. Define the Target Profit Margin
Profit margins vary by industry and product turnover. At this stage, different pricing strategies start to align with business goals.
4. Establish a Clear Pricing Policy
A documented pricing policy reduces individual guesswork, standardizes discounts, and ensures consistent decisions across teams.
5. Review Prices Using Data
Once prices are applied, performance should be reviewed through sales reports and analysis. Decisions based on data are more reliable than assumptions.
Also read: How Withholding Tax in Saudi Arabia Works and Its Link to E-Invoicing
Why a Pricing Policy Supports Business Stability
A structured pricing policy creates consistency, especially during expansion or when adding new products. It also helps to:
- Reduce individual pricing errors.
- Standardize discounts and promotions.
- Improve mid-term and long-term financial planning.
- Keep product pricing methods stable and scalable.
6 Proven Product Pricing Methods in the Saudi Market
Businesses in Saudi Arabia use different approaches depending on size and activity. Below are six practical product pricing methods explained simply.
1. Cost-Based Pricing
The price is set by adding a profit margin to total cost.
For example, if a product costs SAR 50 and the margin is 30 percent, the final price is SAR 65.
This method is simple and transparent, but it may not reflect real market value.
2. Market-Based Pricing
Here, pricing depends on competitor averages. This approach suits similar products but limits differentiation unless added value is clear.
3. Value-Based Pricing
Prices are set based on customer benefit rather than cost alone. This approach is common in premium or high-quality sectors.
It is one of the strongest pricing strategies when customer perception matters most.
4. Competitive Pricing
This approach focuses on offering lower prices or added benefits compared to competitors. It is often used to enter new markets or grow market share.
5. Dynamic Pricing
Dynamic pricing adjusts prices based on demand, seasonality, and inventory levels. It is widely used in e-commerce and fluctuating-demand sectors.
6. Channel-Based Pricing
Prices may differ between direct sales, online platforms, or wholesale channels. Each channel carries different costs and margin expectations.
Also read: Ecommerce Invoicing in Saudi Arabia: Your Fast-Track Guide
How EZ Integrated Supports Smarter Pricing Decisions
EZ Integrated provides advanced integration solutions between accounting systems and the FATOORA portal. These solutions help Saudi businesses apply accurate and consistent pricing by:
- Ensuring reliable cost and price data within accounting systems.
- Automatically calculating VAT in line with Phase Two requirements.
- Issuing electronic invoices aligned with approved pricing structures.
- Supporting decision-making through unified, analyzable reports.
The Role of CODEIT in Point-of-Sale Pricing Strategies
CODEIT’s POS system, designed for restaurants, cafés, retail stores, and groceries, helps businesses apply and review product pricing methods effectively through:
- Precise inventory management that tracks product costs and price changes.
- Sales analysis to identify top-performing prices and most profitable items.
- Offline operation across Android devices and computers.
- Full support for electronic invoicing in both compliance phases.
To build pricing structures that support both profitability and compliance, EZ Integrated offers complete accounting integration with the FATOORA portal and POS systems.
Contact us today to improve your pricing approach and make more confident financial decisions.