What is a Price Point?

A price point is the suggested retail price of a product or service. It is usually set in relation to the prices at which goods and services are being offered by competitors, or at the prices associated with substitute products. An ideal price point should maximize profitability for the seller. To find this optimal point, a seller runs tests at various price points to see which one generates the largest aggregate profit level. This price point may need to be changed over time, in reaction to the prices being set by other parties for similar items.

In rare cases, increasing a price point can actually increase the number of units sold. This usually only happens when the goods sold are perceived to be extremely high-end, so that status-conscious consumers are more willing to purchase at a higher price point than at a lower one.