Pricing decision guide

How to Set a Target Selling Price from Landed Cost

A target selling price should cover the true unit cost, selling-channel costs and the margin you want to retain. Working forward from landed cost makes the assumptions visible.

Quick answer

Start with all fixed unit costs, then solve for the selling price after percentage fees and target margin.

Target Selling PriceFixed Unit Cost / (1 - Selling Fee Rate - Target Margin)

This formula works when the fee and target margin are both measured as percentages of the final selling price.

Build the price model

Five inputs should be explicit.

01

Landed cost per unit

Use the true sourcing cost at the defined destination, including product, freight, duty, customs and direct import costs.

02

Fulfillment or delivery cost

Add any fixed per-unit cost that must be recovered through the selling price.

03

Other fixed selling costs

Packaging, handling or other fixed channel costs can be included if they are reliably estimated per unit.

04

Percentage selling fee

Marketplace commissions or payment fees based on revenue should be modeled as a percentage of selling price.

05

Target profit margin

Define margin as profit divided by selling price, not markup on cost.

Worked example

A landed-cost-driven selling price.

Assume landed cost of $17.50, fulfillment of $2.20, other fixed selling cost of $0.80, a 10% selling fee and a 30% target margin.

INPUTSUSD
Landed cost
$17.50
Fulfillment
$2.20
Other fixed cost
$0.80
Fixed unit cost
$20.50
Selling fee
10%
Target margin
30%
RESULTTARGET
Denominator
60%
Target price
$34.17
Selling fee
$3.42
Target profit
$10.25
Fixed cost
$20.50

Why the denominator matters

Fees and margin both consume parts of the selling price.

At a 10% fee and 30% margin, 40% of the final selling price is reserved before fixed cost is covered. That leaves 60% of the selling price for the $20.50 fixed unit cost, so $20.50 รท 0.60 = $34.17.

If fee rate plus target margin reaches 100%, the model cannot produce a viable positive selling price.

Cost target vs market price

The calculated price is a benchmark, not proof of demand.

A product may need to sell for $34.17 to support the target economics, while the market only accepts $29.99. That gap is useful information: lower sourcing cost, lower fees, lower fulfillment cost, a smaller target margin or a different product may be required.

Work backwards to a supplier price ceiling

Checklist

Before using a target price.

Use landed cost, not supplier priceInclude fixed fulfillmentConfirm percentage feesDefine margin consistentlyAllow for returns if materialCheck taxes where relevantCompare with market pricingRun a lower-margin scenario