Product Price vs Profit Analysis
This modeled analysis holds the cost structure fixed and varies only selling price. It shows how expected profit and margin change across a realistic price ladder—and why a higher price does not add the same amount of profit dollar-for-dollar.
Numbers come from the Product Pricing Calculator engine. They are scenarios under stated assumptions, not observed market prices.
Fixed cost structure
Costs match the product-pricing calculator example: product $15.00, fulfillment $5.00, packaging $1.00, advertising $10.00 per order, payment processing 2.9% + $0.30, platform fee 0.0%, refund rate 5.0%, shipping revenue $0.00, and target expected margin 20.0% (optional dollar target $10.00).
Under those assumptions the engine solves break-even selling price $33.98, target-margin selling price $42.82, and target-profit selling price $44.84.
Modeled selling prices
Safe discount is headroom above the target-margin price for that same cost structure. Implied markup is informational only: it is relative to base product-side costs in the engine, not a substitute for margin.
| Selling price | Expected profit | Expected margin | Payment fee (gross) | Implied markup | Safe discount to target margin | Δ profit vs $50 |
|---|---|---|---|---|---|---|
| $30.00 | -$3.67 | -12.9% | $1.17 | -3.2% | $0.00 | -$18.42 |
| $40.00 | $5.54 | 14.6% | $1.46 | 29.0% | $0.00 | -$9.21 |
| $50.00 | $14.75 | 31.1% | $1.75 | 61.3% | $7.18 | $0.00 |
| $60.00 | $23.96 | 42.0% | $2.04 | 93.5% | $17.18 | $9.21 |
| $75.00 | $37.78 | 53.0% | $2.48 | 141.9% | $32.18 | $23.03 |
Observations from the model
- Moving from $50.00 to $60.00 increases expected profit by $9.21, not by a full $10.00. Percentage payment fees rise with gross revenue ($1.75 → $2.04 on the successful-order fee line), so part of every price increase is shared with processors.
- Expected margin and implied markup are not the same thing. Markup can look large while expected margin—after fees, ads, and refund expectations—remains much tighter.
- Pricing from COGS alone would ignore fulfillment, ads, fees, and refunds. The break-even and target-margin solves exist specifically because those other costs change the required price.
- Target-margin pricing asks for a price where expected profit ÷ expected retained revenue equals 20.0%. That is different from adding a fixed markup on product cost.
Limitations
The ladder does not claim customers will pay any of these prices. It only shows unit economics if they do, under the stated assumptions. See methodology.
Related tools
Related analyses: E-commerce profit sensitivity · Selling channel cost comparison.