9 Pricing Strategies In Marketing

Pricing strategies in marketing play a critical role in how companies position their products, attract customers, and drive profits. But what is pricing in marketing exactly? And how do you choose the right approach? In this guide, we’ll explore the concept of a pricing strategy in marketing, including key pricing methods, real-world examples, and tips for selecting the most effective marketing price strategy for your business. From cost-based to market-driven models, each method has its own strengths and use cases. Keep reading to discover examples of price in marketing, and learn how to apply the best pricing tactics to meet your goal.

What is Pricing Strategy in Marketing

A pricing strategy in marketing is the method businesses use to determine the optimal price for their products or services. It aims to maximize profitability, attract target customers, and maintain a strong competitive position in the market. A well-chosen pricing strategy not only influences consumer demand but also shapes how a brand is perceived and positioned within its industry. In marketing, pricing is closely tied to overall business goals, revenue models, and customer expectations — making it a key component of any successful marketing strategy.

Why is Pricing Important in Marketing?

Pricing is a crucial component of any successful marketing strategy. It not only determines revenue but also influences customer perception, market positioning, and competitiveness. Choosing the right price strategies in marketing can make the difference between profitability and lost opportunities.

Pricing is more than just assigning a number to a product—it directly impacts consumer behavior, brand positioning, and business growth. Here’s why pricing in marketing matters:

1. Defines Brand Perception

The price of a product or service shapes how customers perceive it. A premium price suggests exclusivity and high quality, while a lower price can attract budget-conscious buyers. Businesses use marketing pricing strategies to position themselves as luxury, mid-tier, or budget-friendly brands.

2. Drives Revenue and Profitability

The right marketing pricing ensures that businesses cover costs while maintaining profitability. Underpricing can lead to losses, while overpricing may push potential customers away. Strategic pricing balances affordability for customers with sustainable profit margins.

3. Influences Customer Buying Behavior

Consumers rely on price as an indicator of value. Discounts, bundle offers, and psychological pricing (e.g., $9.99 instead of $10) are common price strategies in marketing that encourage purchases. Competitive pricing can also help businesses gain an edge in crowded markets.

4. Helps Businesses Stay Competitive

Markets evolve constantly, and businesses must adapt their marketing pricing strategies to remain competitive. Monitoring competitor prices and market trends ensures businesses can adjust their pricing to attract customers without sacrificing profitability.

5. Supports Market Penetration and Expansion

Pricing plays a critical role in entering new markets. Businesses often use penetration price strategies marketing (offering lower initial prices) to attract customers and gain market share. Over time, they may adjust their pricing in marketing to reflect demand and brand positioning.

For example, Spotify used a penetration pricing strategy by offering free trials and heavily discounted student plans to quickly attract users in new regions. Similarly, Xiaomi entered the Indian smartphone market with high-spec phones at lower prices than competitors, gaining massive market share before gradually increasing prices as the brand gained recognition.

6. Impacts Customer Loyalty and Retention

Transparent and fair pricing fosters trust and long-term customer relationships. If customers feel they are getting good value for money, they are more likely to return and recommend the brand. Subscription models, loyalty discounts, and personalized pricing strategies help businesses retain customers.

7. Affects Marketing and Advertising Strategies

Price directly influences how businesses promote their products. A high-end brand may focus on exclusivity and premium quality in its marketing, while a budget-friendly brand highlights affordability. Marketing pricing decisions shape messaging, promotional tactics, and overall brand strategy.
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Factors to Consider When Pricing a Product

You probably already understand the importance of considering your business expenses and competitor pricing when marketing strategy pricing. You aim to strike a balance: pricing that allows for profitability without driving potential customers away to competitors offering better deals. However, the process is more complex than it seems. Several factors come into play when determining the optimal pricing strategy for your business.

Cost is undoubtedly a critical starting point. If your prices fail to cover your costs, your business won't survive long.

When assessing costs, ensure you account for:

Product materials‍
🟠 Employee wages (including your own compensation)
🟠 Overhead expenses (rent, insurance, utilities, taxes, etc.)
🟠 Software and services for essential functions like accounting, marketing, and legal compliance.
🟠 Shipping and transportation.

Economic Factors

As costs fluctuate, you should adjust your marketing price strategy to maintain competitiveness and sustain profitability. Businesses directly reliant on commodities like lumber, oil, and metals are particularly susceptible to economic shifts, though all industries are impacted by global, political, and social changes. Conduct comprehensive research to understand the economic conditions conducive to your business and fortify it against economic downturns. Proactively anticipate events that may affect supply and demand, and build a financial safety net within your profit margins to endure slow periods, especially if you operate in a volatile industry.

Competitor Pricing

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Your pricing strategy need not always undercut competitors', but if your prices exceed theirs, you must justify it with superior quality. Conversely, if your products are of lower quality, lower prices should reflect this justification. Your position on this spectrum determines your value proposition, a concept we'll delve into shortly. Regardless of your pricing approach, it's crucial to monitor competitors' pricing, industry pricing trends, and effective pricing models for your market. Accessing competitors' pricing information is typically straightforward, either through their websites or by direct inquiry. Maintain a spreadsheet to record prices and note factors like introductory offers, loyalty programs, and discounts during your competitor analysis.

Positioning

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While discussing pricing methods in marketing, a prevalent misconception suggests that only high-quality products lead to business success. However, buyers exist across all price and quality tiers; the critical factor is the alignment of product quality and price positioning. The airline industry exemplifies this concept vividly, where a literal curtain separates high- and low-quality purchases. Ordinarily, price and quality are correlated: first-class tickets offer premium quality at a premium price, economy tickets provide basic quality at a lower price, and remaining passengers occupy standard coach class.

Value Pricing

As a pricing strategy in marketing, value pricing arises when quality surpasses price—such as flying during off-peak times or receiving a complimentary upgrade to first class. In periods of high demand and limited seating, airlines can charge premium prices for lower-quality seats, relying on passengers' willingness to pay full price for any available option, even if suboptimal.
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Marketing Pricing Models for Different Industries

Pricing strategies are highly individualized, tailored to fit the specific needs and objectives of each industry and company. However, to provide some insight, we've outlined a few industries along with strategies that complement them well.

Marketing Pricing for SaaS/Subscriptions

‍For SaaS and subscription-based businesses, value-based pricing reigns supreme. This approach allows you to set prices according to the perceived value by your customers, often enabling you to charge higher rates compared to competitors. Since your pricing aligns with customer willingness to pay, it remains untethered from artificial constraints, ensuring optimal revenue generation.

Marketing Pricing for B2B

‍Similarly, value-based pricing is favored for B2B companies. This strategy encourages outward focus and deepens understanding of customer needs, facilitating the identification of optimal pricing points. Moreover, it fosters robust client relationships, contributing to the overall growth and success of your company.
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Nine Main Pricing Methods in Marketing‍

There are six main examples of price in marketing, two of which assume calculating prices based on the cost of the product (cost-oriented pricing), and four other pricing models are based on the factors of market environment (market-oriented pricing). That's esentially what you should understand about pricing approaches in marketing.

1. Perceived Value Pricing

This strategy sets prices based on how much value the customer believes a product has. The key is to match or slightly undercut this perceived value to maximize conversions. For instance, Apple leverages brand perception to price its products significantly above competitors. The optimal pricing point is typically 5–10% below the perceived value.

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Formula: Price = Perceived Value (PV) × Adjustment Factor (k), where k = 0.90–0.95

Pros:

• Enables premium pricing when brand value is strong
• Aligns price with customer expectations

Cons:

• Requires thorough market research
• Not suitable for commodity or low-engagement products

At first glance, it looks quite simple: to calculate the price, you just need to show the item to your target consumers and ask them about the expected value of the product being demonstrated. However, in practice, to achieve the purity of the experiment and get undistorted data, it is required to comply with certain conditions.

Tip: If you have never heard of the pay-what-you-want (PWYW) strategy, it’s high time you did. This is a pricing model, which borders with charity and donation when it comes to setting the cost for products or services. It was successfully implemented by Wikipedia, the Radiohead band and Humble Bundle digital video games store. For the first, the PWYW model has been a tremendous success, helping them raise more than $112 million during the 2018-19 donation run.

2. Price Barrier Pricing

This strategy segments products into consumer price ranges or "clusters" like economy, mass-market, premium, and luxury. Customers tend to shop within familiar price brackets. For example, a skincare brand might sell basic moisturizers under $30 and premium ones over $100, each targeting a different cluster.

Pros:

• Helps position products effectively
• Aligns pricing with customer expectations based on perceived category

Cons:

• Price clusters vary by market and require consumer research
• May limit flexibility if product spans multiple categories

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Price clusters examples

🟠 Under $30: Items of the economy segment with the basic characteristics and of low quality;

🟠 $30-50: mass-market products, unknown brand, good quality, with basic characteristics + some improvements;

🟠 $50-100: high-quality premium products, well-known brands, with a maximum number of characteristics;

🟠 $100+: luxury products, status, well-known brands.

Tip: Research the psychological effect of certain numbers. You’re definitely aware of your brain processing $3.00 and $2.99 as different values. But what about it (brain) perceiving odd numbers like 5, 7 and 9 differently from the mean ones, making buyers feel like they’re getting a better deal, even if they’re not?

3. Competitor-Based Pricing

This strategy sets product prices based on competitor pricing. Brands choose to price slightly above, below, or at parity with market rivals. For example, Samsung often prices its flagship phones slightly lower than Apple to attract value-conscious customers.

Pros:

• Simple and fast to implement
• Keeps pricing competitive

Cons:

• May ignore product uniqueness or costs
• Can lead to price wars

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Tip: Why not compete with yourself? Price anchoring is the practice of establishing a price point which customers can refer to when making decisions. This way, every time a consumer sees a 25% discount like  ̶$̶1̶0̶0̶ , the $100 is the price anchor for the $75 sales price. Another psychological trick that works great for all ecommerce niches.

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4. Going-rate Pricing

Going rate pricing is a pricing strategy employed by businesses to establish the cost of their products or services in direct correlation with prevailing market prices. In essence, this approach involves setting prices based on the current market conditions, ensuring that a product or service remains competitive within its industry.

This market-oriented pricing method is used to establish prices for similar product markets. In such markets, the differences in the product are minimal or the consumer buys goods only for their basic characteristics and is not ready to pay more for additional features or conditions. Accordingly, the consumer chooses the product with the lowest cost. (For example, the market of aluminum or steel, matches, toothpicks, etc.) If the difference between the prices on the market is not great – the arithmetic mean value is taken.

Pros:

• Easy to align with market expectations
• Reduces need for price experimentation

Cons:

• Difficult to differentiate product value
• Limited control over pricing strategy

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Tip: Since competitor prices tend to be similar, it’s challenging to stand out with your product or service. Normally the bigger players move first and the smaller ones follow. Businesses successfully using this pricing strategy benefit from a strong branding and marketing strategy. Creating a positive brand perception and communicating the values are extremely important when it comes to be noticed in front of the crowd.

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5. Contribution Pricing

This cost-based method sets prices to cover both variable and fixed costs and achieve a target profit. It’s commonly used for break-even analysis. Example: A business with $100,000 in fixed costs, variable cost per unit of $25, and goal to sell 10,000 units would need a minimum price of $35 per unit.

Formula: Price = (Fixed Costs + Variable Costs × Volume) / Target Sales Volume

Pros:

• Ensures all costs are covered
• Supports financial planning

Cons:

• Ignores market demand and perception
• Risk of uncompetitive pricing if costs are high

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6. Markup Pricing

The marketing pricing strategy is in establishing a fixed percentage of income that you expect to earn from the sale of 1 unit. In other words, according to this method, the price for a product or service must ensure receipt of a fixed level of profitability at the existing level of variable costs.

Pros:

• Easy to implement and understand
• Ensures consistent profitability

Cons:

• Doesn’t consider customer willingness to pay
• Ignores competitor pricing and perceived value

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Tip: Speaking of fixed costs, we could not omit the idea of flat rate pricing. This means having a consistent price per unit regardless of the amount purchased. It works perfect for online subscriptions like the ones to Netflix and Spotify. Also, can be applied to services, which online ecommerce businesses offer, i.e., fixed prices for shipping.

7. Dynamic Pricing

Dynamic pricing is a strategy where prices are adjusted in real time based on demand, competition, time of day, or customer behavior. It's widely used in industries with high fluctuation in demand such as travel, hospitality, and eCommerce. For example, Amazon frequently updates its product prices multiple times a day based on competitor prices, stock levels, and browsing behavior to maximize sales and profit.

Pros:

• Maximizes revenue by capturing value at peak demand
• Allows flexibility based on market changes

Cons:

• Can confuse or frustrate customers if prices change too often
• Requires advanced data tracking and pricing software

8. Bundle Pricing

Bundle pricing involves offering multiple products together at a discounted price compared to buying each item individually. This strategy increases perceived value and average order value. McDonald’s and Microsoft Office are classic examples — combo meals or software packages are priced lower than the total of the separate components.

Pros:

• Boosts average transaction size
• Helps clear out slow-moving inventory

Cons:

• Might reduce profit margin per item
• Customers may only want part of the bundle

9. Freemium Pricing

Freemium pricing is a model where the core product is offered for free, while users can pay to access premium features, services, or content. It’s popular in SaaS and digital products. Spotify offers a free version with ads and limited skips, while users can upgrade to Premium for ad-free listening and downloads.

Pros:

• Attracts a large user base quickly
• Creates an easy entry point for new customers

Cons:

• Conversion from free to paid users can be low
• Free users still incur costs (hosting, support, etc.)

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FAQ

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When might companies opt for a market penetration pricing strategy?

Among othr price strategies in marketing, the market penetration strategy is typically opt for in crowded markets that lack a first-mover advantage. It's utilized to draw in consumers already captured by competitors.

How does one formulate a pricing strategy?

Developing a pricing strategy is contingent upon each company's unique circumstances. However, key factors to consider include corporate image (whether positioned as offering affordable or luxury goods), geographic considerations, discounting capabilities, and understanding the price sensitivity of the target consumer base.

Which pricing strategy is most suitable?

The optimal pricing strategy varies depending on your business model. For Software as a Service (SaaS) and subscription-based companies, among others, we advocate for value-based pricing.

How do you establish product selling prices?

Among various psychological pricing tactics, start with selecting a pricing strategy that aligns with your business model and product. While pricing strategies vary, each offers clear guidelines on determining prices.

What's the most straightforward pricing strategy?

Cost-plus pricing stands out as the simplest pricing method since it involves calculating the product's cost and adding a predetermined percentage to it.

What defines a pricing curve?

A pricing curve is a graphical representation illustrating the willingness of consumers to pay specific prices for a product.

What are the different pricing methods in marketing management?

Pricing methods in marketing management refer to specific strategies used to set prices effectively. These methods include:

• Markup Pricing – Adding a fixed percentage to the cost of a product.
• Bundle Pricing – Offering multiple products together at a discounted price.
• Subscription Pricing – Charging customers on a recurring basis for continued access to a product or service.
• Freemium Pricing – Providing basic services for free while charging for premium features.

What are the primary pricing strategies?

Value-based, competition-based, cost-plus, and dynamic pricing are the four main strategies frequently utilized, with their selection dependent on the industry and business model.

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