7 Common Pricing Strategies you should know

There are many different strategies to set your prices. None of these are used in our pricing intelligence software, but they are still great to know as it makes you realise the complexities of pricing. The pricing strategy we use in price agent is accurate value strategy, where we give you the exact ‘willingness to pay’.

Table of contents:
7 Common pricing strategies you should know

Competitor Pricing

This is probably one of the two most intuitive pricing strategies. No matter what the business, all of us keep an eye on the competition. This is true for more than just pricing, but it make sense to look at what your competition charge.

So, what is competitive pricing? Competitive pricing is the method of establishing the price point of your product relative to that of your competitors. This strategy frequently relies on the idea that most products in the market are covered by a long price-setting process. In any type of market where competing products are very similar, competitors should already have found the correct price point. One can set the price the same as their competitors, despite remaining within the same legal frameworks since the price of competitors are already set. Doing this, the newly-launched company avoids the trial and error costs of the price-setting process.

But there is a huge risk with this pricing strategy since you are presuming your competitors have an accurate price. But there might be no truth to this and both you and your competitor are leaving money on the table.  

Cost-Plus Pricing

The other intuitive pricing strategy is cost-plus pricing strategy, this is the pricing strategy where you look at your margins.

What is Cost-Plus pricing? Cost-plus pricing is the practice of costing the cost of production of a product and then tacking on a nicely added-on mark-up.

The costs of any product include the expense of direct labour, machinery, materials, marketing and other fixed costs so that the final cost can also be determined. To be able to set the product’s price correctly, the costs must be reliable and accurate.

Value-based Pricing

Value-based pricing is referred to as “customer-based pricing” since it is essentially basing pricing on how much the consumers believe the product and service is worth. In this method of pricing, customers are given the option to “shop around” for a product or service, and thus, companies can customize prices based on the value perceived by consumers.

Price Skimming

A price skimming approach is where a company sets its price so it can charge the highest price for a new product. Once the initial demand is satisfied, the company then reduces the price to attract another perceivably price-susceptible portion of the market.

Market-Based Pricing

Market pricing is how companies set a price for a product based on its internal examination of similar ones on the market. The company would then assess how well their product matches up to competitors.

When companies use market-based pricing strategy, they can set prices higher for their product when it is initially introduced, and align prices later with actual market prices to remain competitive. In contrast, price skimming means charging a price before it is competitive.

Penetration Pricing

“Penetration pricing”, which companies use often when launching a new product, is the oxymoron of a lower price. By lowering the price, a company attacks market share by making the customers aware of the product. Making as many as reasonably possible aware of the product.

The goal of a pricing or “spot pricing” regime is to have the clients become loyal to the product in the long term. The payment of one month free of charge, or the half price for 6-months, is a typical example of pricing if penetration.

Dynamic Pricing

Dynamic pricing is a strategy in which a company can set elastic prices, continually changing the prices. Usually, eCommerce companies choose this strategy because they have to look at their product prices very frequently in order to have the right prices for the current demand levels.

Factors such as, Total demand product, total supply of the product, how much product varieties, How much competitors in an industry? Dynamic Pricing became more affordable for eCommerce companies with advanced Data Collection and The speed at which prices should be adjusted.


There are many established pricing strategies. But what priceagent does differs from all of these – what we do is ask your customers. You get realtime price indications and actual price points, based on your targeted customer. Our software helps you target the desired customer cluster and receive accurate data – seamlessly.