How to Price Your Products or Services in Kenya Without Killing Demand

Back to insights

Published 31/12/2025 • 7 min read

Why Pricing Is Harder in Kenya Than People Admit

Kenyan customers are value-aware and price-sensitive, but not “cheap.” They will pay more when:

• the outcome is clear
• the risk is low
• trust is high
• delivery is reliable
• quality is consistent

Businesses lose money when they price using vibes:

• copying competitors blindly
• underpricing to “get customers”
• pricing without tracking costs
• pricing without considering taxes, transport, and time

This article gives you a complete pricing system you can apply to:

• services (cleaning, repair, tutoring, detailing, freelancing)
• trading businesses (retail, cosmetics, electronics, foodstuff)
• digital services (design, writing, consulting)
• small manufacturing (baking, tailoring, printing)

---

Step 1: Start With the Only Number That Matters: Your Real Cost

Most “pricing problems” are actually “cost clarity problems.”

For products (trading/manufacturing), your true cost includes:

1. Supplier cost (what you pay)
2. Transport (to pick/receive stock)
3. Packaging (bags, labels, wrapping)
4. Losses (damage, expiry, theft, returns)
5. Transaction fees (till charges, delivery fees)
6. Time cost (your time is not free, but don’t overcomplicate this early)

If you ignore any of these, you underprice automatically.

For services, your true cost includes:

1. Time (hours worked)
2. Transport (to and from client)
3. Materials/consumables (soap, fuel, tools wear)
4. Overheads (data, airtime, assistant wages)
5. Risk buffer (callbacks, rework, mistakes)

---

Step 2: Choose a Pricing Model (Use the Right Tool)

Model A: Cost-plus pricing (best for beginners)

Price = Total Cost + Margin

This is safest when:

• costs are predictable
• customers compare prices heavily
• you’re in early stage and need a simple rule

But: cost-plus alone can trap you in low prices if your costs are low and your value is high.

---

Model B: Market-aligned pricing (best for competitive markets)

Price = What customers already accept ± your differentiation

Use when:

• customers can easily compare (salons, barbers, car wash, electronics)
• you want to position yourself (budget vs premium)

This requires competitor research (we’ll do it properly below).

---

Model C: Value-based pricing (best for high-skill services)

Price = Value of outcome, not time spent

Use when:

• you save clients time or money
• your work affects revenue (marketing, design, sales)
• your skill is rare

Example: If your service helps a business make KES 200,000 more, pricing at KES 20,000–40,000 can be fair—if you prove results.

---

Step 3: Do Competitor Research Without Becoming a Copycat

Your goal is not to match prices. Your goal is to understand:

• the “price range” customers are used to
• what customers get at each price
• which features justify higher prices

How to do competitor research in Kenya (practical)

Check:

• WhatsApp status sellers
• Instagram pages
• Facebook Marketplace
• Jiji listings (careful: some prices are bait)
• shops within your area (walk in and ask)
• direct calls (as a customer inquiry)

Build a quick competitor grid

For each competitor, note:

• Price
• What’s included
• Delivery time
• Quality signals (photos, reviews, consistency)
• Guarantee/refund policy

Important: Don’t collaborate with competitors to set prices. In Kenya, price-fixing and minimum resale price maintenance can become a legal issue. Competitor research is observation, not coordination.

---

Step 4: Decide Your Positioning (Stop Trying to Be Everything)

Pick one lane:

1) Budget (high volume)

• lower margins
• fast service
• fewer extras
• strict cost control

2) Mid-market (best balance for most)

• fair price
• consistent quality
• clear deliverables
• professional feel

3) Premium (higher margins, fewer clients)

• strong branding and trust
• better experience
• guarantees
• proof of quality

If your branding is premium but your delivery is chaotic, customers will punish you.

---

Step 5: Build Your Price Using a “Kenyan Reality” Structure

This structure prevents underpricing:

For products:

Selling Price = (Cost + Transport + Packaging + Loss Buffer) + Profit

Add a small buffer for losses and slow movers. Even a 2–5% buffer protects you long term.

For services:

Quote = (Time Cost + Transport + Materials + Buffer) + Profit

A simple service pricing formula you can use today

1. Decide your hourly target (start simple)
2. Multiply by hours
3. Add transport
4. Add materials
5. Add buffer (for rework/uncertainty)

---

Step 6: Handle VAT and Turnover Tax Properly (Without Making It Complicated)

Taxes affect pricing because they affect what you keep.

VAT (Value Added Tax)

Kenya has a general VAT rate (commonly applied to taxable goods/services). If you are VAT-registered, your pricing and invoicing must account for VAT correctly.

If you’re not VAT-registered, don’t randomly add “VAT” to look official. That creates confusion and credibility risk.

Turnover Tax (TOT)

Kenya also has Turnover Tax for eligible small businesses within a defined turnover band. The rate and eligibility details can change with Finance Acts and KRA updates.

Rule: Confirm your applicable tax category on KRA’s official guidance, then build pricing that can survive it.

A price that works before tax but collapses after tax is not a real price.

---

Step 7: Use Psychological Pricing That Actually Fits Kenya

Psychological pricing is not manipulation. It’s clarity.

Tactics that work:

• Price anchoring: show a higher package first, then the standard option feels reasonable
• Bundles: combine items/services to protect margin (e.g., “wash + interior wipe + fragrance”)
• Clear inclusions: customers pay more when they know what they’re buying

Tactics to avoid (they backfire):

• confusing “from…” pricing with hidden add-ons
• random discounts every week (customers learn to wait)
• pricing too low (Kenyan customers also fear scams)

---

Step 8: Discounts Without Destroying Your Brand

Discounts are tools. Use them intentionally.

Safe discount types:

• First-time customer offer (limited)
• Bundle discount (protects your margin)
• Off-peak discount (fills dead hours)
• Referral reward (turns customers into marketing)

Dangerous discount types:

• Permanent “sale” pricing
• Discounts that make your normal price look fake
• Discounts that attract only bargain hunters (they never stay)

A discount should have a purpose:

• increase trial
• increase volume
• increase retention
• increase referrals

---

Step 9: Test Your Price Like a Serious Business

Instead of guessing, run a simple test.

The 3-price test (easy and powerful)

For one product/service, test:

• Price A (lower)
• Price B (your intended)
• Price C (higher, with better packaging/offer)

Track:

• number of inquiries
• conversion rate
• complaints and objections
• repeat customers
• profit after costs

Many businesses discover:

• a slightly higher price reduces bad customers
• higher price attracts serious buyers
• better packaging beats lower price

---

Step 10: The “Underpricing” Warning Signs

If any of these are true, you’re likely underpricing:

• you’re always busy but always broke
• one mistake wipes out a week’s profit
• you dread “difficult” customers but can’t refuse them
• you can’t afford better tools
• you can’t hire help even when demand exists

A good price gives you:

• breathing room
• growth capacity
• stability

---

Practical Examples (Kenyan-style)

Example 1: Service pricing (Cleaning)

• Time: 3 hours
• Target: KES 500 per hour → KES 1,500
• Transport: KES 300
• Materials: KES 200
• Buffer: KES 200

Total base: 2,200
Add profit margin: +800
Quote: KES 3,000

Now you can handle:

• a callback
• a late client
• small wastage without collapsing.

---

Example 2: Product pricing (Cosmetics resale)

• Item cost: KES 550
• Transport allocation: KES 30
• Packaging: KES 20
• Loss buffer (3%): ~KES 18

True cost: ~KES 618

If you sell at KES 650, your margin is tiny and fragile. If you sell at KES 750–850 (depending on market), you can survive price shocks.

---

Final Thought: The Right Price Protects You

In Kenya, pricing is not just about competing. It’s about surviving uncertainty:

• fluctuating supplier costs
• transport swings
• slow months
• customer delays
• rework and replacements

A good price is one that:

• customers accept
• you can deliver confidently
• stays profitable after real costs
• keeps working even when things go wrong

That’s how you stop being “busy and broke” and start being stable.

---

References & Further Reading

• Kenya Revenue Authority (KRA): VAT guidance and business tax categories
• Kenya Revenue Authority (KRA): Turnover Tax (TOT) guidance
• Kenya National Bureau of Statistics (KNBS): CPI & inflation reports (useful context for cost changes)
• Competition Authority of Kenya (CAK): guidance on restrictive trade practices (pricing coordination risks)