Pricing strategies are evolving rapidly in response to shifting market dynamics. According to Simon-Kucher’s Global Pricing Study, nearly 80% of companies implemented price increases in 2023 to manage rising costs, yet only 65% demonstrated sustainable pricing power. This gap reflects how types of pricing directly affect a company’s ability to retain margin under pressure.
The following sections will discuss different pricing strategies, their applications, and considerations for selecting the most effective approach for your business.
What Is Pricing Strategy?
A pricing strategy is the method a business uses to set the price of its products or services based on specific revenue targets, customer expectations, and market conditions. It connects cost structure with perceived value and directly influences how people respond to an offer.
@maxklymenko the second one is 🤯 #learnontiktok #business #brands #interestingfacts ♬ original sound – Max Klymenko
Read More: Types of Business Entities: How They Work & How to Choose One
Types of Pricing Strategies
Pricing strategies serve specific purposes depending on cost structure, market pressure, and how buyers evaluate value. Below are the different types of pricing you can incorporate into your business:
Cost-Plus Pricing
Cost-plus pricing calculates prices by adding a fixed markup to the total production cost. This method determines all direct and indirect costs, then applies a percentage that ensures a profit.
It simplifies pricing decisions and maintains consistent margins, but it doesn’t account for how customers perceive value or how competitors are pricing similar offers.
Best For: Manufacturers, service providers, and when costs are stable and predictable
Competitive Pricing
Competitive pricing relies on setting prices based on what similar businesses are charging. Depending on their market positions, companies either match, slightly undercut, or charge marginally more.
It helps you stay relevant in markets where buyers compare prices quickly, but it can also reduce margins and leave little room for differentiation.
Best For: High-volume and saturated market categories
Value-Based Pricing
Value-based pricing sets the price based on what the customer believes the product or service is worth. Businesses estimate this value using customer feedback, purchase behavior, and perceived outcomes.
This approach can support higher margins when done correctly, but it requires deep customer insight and strong positioning.
Best For: Products that offer distinct or measurable benefits like premium brands, luxury goods, and innovative services
Penetration Pricing
Penetration pricing involves launching with a lower-than-average price to capture attention and acquire customers quickly. Over time, the price may increase as the product gains market traction.
This strategy can help new entrants gain visibility, but it may attract price-sensitive buyers who leave when the price rises.
Best For: Competitive spaces where switching costs are low, such as new product launches and startups entering competitive markets
Skimming Pricing
Skimming sets a high starting price and lowers it over time as early adopters buy in and broader audiences follow. It works when there’s an initial market segment willing to pay more for early access or innovation.
This technique helps maximize early revenue, but risks losing potential volume if the price stays high for extended periods.
Best For: Tech or product launches with limited alternatives
Dynamic Pricing
Dynamic pricing changes prices automatically based on real-time demand, availability, and customer behavior. Systems analyze variables such as time, location, and stock levels to adjust prices frequently.
This method helps you optimize revenue, but can frustrate buyers if they perceive inconsistency or unfairness.
Best For: Industries with fluctuating demand and digital infrastructure like airlines, hotels or hostels, ride-sharing companies, and e-commerce platforms like Amazon
Psychological Pricing
Psychological pricing uses techniques that influence perception, such as pricing an item at $9.99 instead of $10. This tactic relies on how people interpret numbers rather than the objective value.
It can increase conversions, especially in retail, but has a limited impact if used without supporting value.
Best For: High-volume consumer transactions in retail stores, e-commerce like Shopify, and consumer goods
Bundle Pricing
Bundle pricing offers multiple products or services together at a single price. It encourages larger transactions and increases perceived value.
This strategy also helps you move lower-performing items by pairing them with popular ones.
Best For: Complementary products and packages in software companies like Salesforce, fast food chains like McDonald’s, and subscription services
Premium (Prestige) Pricing
Premium pricing involves intentionally setting prices high to signal exclusivity, limited availability, or superior quality. It targets buyers who associate high prices with higher status or performance.
This strategy can strengthen your brand perception, but it only works if your product quality and marketing reinforce the price point.
Best For: Luxury brands, designer labels, and high-end goods
Freemium Pricing
Freemium pricing provides a basic product version at no cost, while charging for access to advanced features. It reduces hesitation at the entry point and lets users test before committing.
While it supports user growth, converting free users to paid plans remains challenging.
Best For: Digital products with scalable infrastructure and low incremental costs in SaaS companies, mobile apps, and online services
You May Also Like: Gross vs. Net Income: Personal Finance & Business Differences
How to Choose the Right Pricing Strategy?
Your pricing strategy must reflect costs, demand, and buyers’ perceptions and decisions. Use the following tips to apply a pricing model that supports revenue growth and efficient returns.
Analyze Current Market Conditions
Market condition analysis means assessing how external factors like inflation, demand shifts, and competitor pricing influence your offer’s position. You monitor these trends to decide if the market will absorb your pricing or reject it.
For example, use competitor tracking tools like Kompyte, Prisync, or Google Alerts, as well as public earnings data, to compare different types of pricing points and see where your offer fits without undercutting your value.
Understand Your Cost Structure
Cost structure includes all direct and indirect expenses required to deliver your product or service. You need to break down these numbers to set a price that covers every cost layer but still earns a return.
To do this, build a cost sheet from platforms like QuickBooks, Xero, or Bench that tracks labor, materials, logistics, and overhead to find the breakeven point. Then, use that data as the baseline for any pricing model.
Price Your Offers Based on Brand Messaging
Pricing should reflect your brand’s message about quality, exclusivity, and value.
A price that feels inconsistent with your offer can confuse buyers or create the wrong perception. So, if your product is positioned as high-end, price it to match customer expectations.
To execute this, use past purchase data and competitor branding to test whether your price fits what people associate with your category.
You can run this analysis on platforms like Similarweb, Brand24, or SEMrush.
Evaluate Your Target Audience’s Behavior
Target audience evaluation involves looking at how your buyers make decisions, what they compare, and what triggers them to spend.
Use customer surveys, purchase history, and abandoned cart data from tools like Hotjar, Klaviyo, or Google Analytics to map out preferences.
Then, align your pricing with how your audience evaluates similar offers.
Read More: Revenue-Based Finance: Unlock Your Business’ Growth
Can You Use Multiple Types of Pricing Strategies?
Yes. Sometimes one pricing model won’t cover every business need or product category. Combining strategies allows you to handle different customer behaviors, product types, or sales goals without forcing a single pricing rule.
As a result, you can increase your flexibility, profitability, and market share and reach a broader customer base.
What to Consider When Combining Types of Pricing Strategies?
Mixing multiple types of pricing strategies can help you respond to different customer behaviors and product categories.
But to do it effectively, you need to align each choice with the following considerations:
Timing and Context
Combining strategies performs well when you factor in the timing and context. Launch phases, promotional periods, or seasonal demand may call for one model, while standard operations rely on another.
For instance, you can start with penetration pricing to generate attention, then switch to value-based pricing once adoption builds.
Some factors under timing and context include:
Market Position
Your current market position affects which types of pricing strategies can be applied together. Early-stage companies usually focus on volume, while mature businesses prioritize margin.
If you’re still validating product-market traction, using competitive pricing to stay aligned with similar products or services may help you attract attention.
Then, as sales patterns become more predictable, you can introduce value-based pricing to align with what buyers are willing to pay long-term.
Product Type
Not every item carries the same margin potential or buyer expectation. So, different types of pricing strategies may suit different products within the same catalog.
For example, if you sell both entry-level and premium versions of a product, you can apply psychological pricing to the base model while maintaining value-based pricing on higher-end versions.
This combination lets you address different price sensitivities without diluting brand consistency.
Competitive Landscape
Competitive moves can affect how adaptable your pricing should be.
In categories where price undercutting is common, sticking to one inflexible model can limit your reach.
If your competitors are bundling aggressively, you may need to match the structure without fully mirroring their offer.
In some cases, combining cost-plus pricing on commodity items with bundled offers can help protect your margins.
Buyer Perception
Every change in pricing affects how buyers interpret value and fairness. When blending models, you must check that the shift between strategies feels consistent.
One way to manage this is to test psychological pricing on your entry-level products while keeping premium offerings on value-based pricing. The transition should feel natural to buyers and avoid pricing gaps that lead to doubt or drop-off.
Customer Segmentation
Segmentation means dividing your customer base into groups based on shared traits like behavior, value, or lifecycle stage.
Use this method to apply strategy combinations based on customer type, purchase history, or intent.
For instance, offer freemium or discounted pricing to first-time users while retaining higher-margin pricing for loyal, high-spend customers.
This helps you scale without making the entire pricing model feel inconsistent or random.
Pricing Compatibility
Once you have considered the timing, context, and buyer perception, select types of pricing strategies that can operate together without creating friction across products or buyer expectations.
To do this, look for combinations that serve different purposes but still align with your broader pricing goals.
For example, you might use value-based pricing for your core service while applying bundle pricing to add-ons. These methods need to work across touchpoints without confusing the customer or undercutting your margins.
Monitor Results and Adjust Accordingly
You need to track how your combined types of pricing strategies affect metrics like conversion rate, average order value, and churn.
Use tools like Google Analytics, Mixpanel, or your CRM to monitor performance by segment. If one strategy starts distorting expectations or margins, adjust or phase it out before it affects broader performance.
You May Also Like: Create a Successful Business by Game Planning!
Final Thoughts
Smarter pricing starts with knowing what generates a return on investment. When you recognize which types of pricing methods reflect your actual goals, it becomes easier to price with intent and adjust when conditions shift.
To keep sharpening your pricing and revenue strategy, subscribe to the Financial Daily Update for insights delivered straight to your inbox.
