Pricing strategies: types, examples, and how to price your products right

Pricing strategies are the methods a business uses to decide what to charge for a product or service. The choice carries real weight. McKinsey found that a 1% price improvement, with no change in volume, lifts operating profit by about 8% on average.

No fixed formula gets pricing right. Guides such as Shopify‘s explain the options, but the right answer depends on your costs, your market, and your customers.

This article lists the main types of pricing strategies, shows how real companies use them, and explains how to find the right pricing for your own products. It closes with a method for checking a price you already charge against your own sales data.

What are pricing strategies?

Pricing strategies give a structured way to set a price based on costs, competitors, customer value, or demand. A pricing strategy answers one question: which number goes on the price tag, and why?

Most frameworks, including Stripe’s pricing guide, start from the same three inputs: what the product costs, what competitors charge, and what customers value. Each strategy below weighs those inputs differently.

No single strategy fits every business. A store with thin margins and a software product with near-zero delivery cost need different approaches. I treat each strategy as a lens, not a rule.

Types of pricing strategies

Ten pricing strategies cover most of what businesses use in practice:

• Cost-plus pricing: Add a fixed markup to the cost of making or buying the product. It is simple and protects margin, but it ignores what customers would pay.
• Competitive pricing: Set prices relative to rivals, at, above, or below their level. It works in crowded markets where buyers compare.
• Value-based pricing: Price by the value the customer gets, not by your cost. It suits products with a clear result, such as software that saves hours of work.
• Dynamic pricing: Change prices as demand, time, or stock changes. Airlines, hotels, and ride apps use it.
• Discount (high-low) pricing: Set a higher regular price, then run sales at planned times. Retailers use it to clear seasonal stock.
• Penetration pricing: Launch low to win customers fast, then raise the price once the product has a base.
• Price skimming: Launch high to capture buyers who pay for novelty, then lower the price as demand from that group fades.
• Premium pricing: Price above the market to signal quality or status. It only holds when the product delivers on that signal.
• Economy pricing: Keep prices low by cutting costs and frills, and earn profit from volume.
• Psychological pricing: Shape how a price feels with tactics such as $9.99 endings or a crossed-out anchor price.

Psychological tactics work best as a layer on top of a base strategy. Our guide to psychological pricing covers ten of them in detail.

Pricing strategies with examples

Real companies show how each pricing strategy works in practice.

Strategy	Example	How it works
Economy (everyday low pricing)	Walmart	Keeps prices low every day instead of relying on sales, funded by low costs and high volume.
Economy with add-ons	Ryanair	Sells low base fares and earns extra from add-ons such as bags and seat selection.
Competitive	Netflix, Prime Video, Disney+, Hulu	Prices sit close together because each service watches the others.
Price skimming	Salesforce	Launched as the only cloud CRM and charged large enterprises what it wanted, then lowered prices for small businesses.
Premium	Lexus	Toyota created a separate marque to sit above its general lineup.
Dynamic	Uber and Ola	Raise fares when rider demand outruns available drivers.
Psychological	$39 vs $34 catalog test	A price ending in 9 sold better than a lower price for the same item.
Cost-plus	A $20 product with a 50% markup	Cost of $20 plus $10 markup gives a $30 price.

A few of these deserve a closer look.

Walmart sets out its approach in its own pricing overview, and Ryanair reports its add-on revenue in its FY25 results. Both build their pricing on low costs.

Paddle’s pricing strategy guide uses the streaming and Salesforce examples above. Lexus shows how premium pricing often runs through a separate brand.

Dynamic pricing has limits. India’s ride-hailing rules cap surge fares at twice the base fare, according to Outlook Business.

Simplifying prices can also backfire. JCPenney dropped coupons and frequent sales for plain everyday prices in 2012. Sales fell sharply and the CEO left in 2013, as Forbes’ account describes.

On the psychological side, Anderson and Simester’s study found that a catalog item priced at $39 outsold the same item at $34.

The cost-plus row hides one trap. A 50% markup on cost equals a 33% margin on price, so the two numbers are not interchangeable.

How to find the right pricing

Finding the right pricing takes five steps:

1. Find your floor: Add up the full cost per unit, including fees, shipping, and payment processing. No price below this makes sense for long.
2. Check competitors: Note what rivals charge for comparable products and where you sit among them.
3. Estimate customer value: Ask what problem the product solves and what the alternatives cost the buyer.
4. Choose a base strategy: Pick one of the pricing strategies above and set a price range, not a single number.
5. Test the price: Run the range past real buyers and read the results, as the testing section below explains.

Two research methods help when you launch something new. Van Westendorp’s method asks buyers at which prices the product feels too cheap, a bargain, expensive, and too expensive, then plots where the answers cross. The Gabor-Granger method asks whether they would buy at a series of prices and builds a demand curve from the answers.

Different price strategies suit different stages, so revisit the choice as the product matures. A penetration price that wins the first thousand customers rarely suits the next thousand.

Price segmentation: charging different groups differently

Price segmentation means charging different customer groups different prices for the same or a similar product. Student discounts, regional prices, and separate personal and business plans are common cases. Simon-Kucher’s explainer covers the method in depth, and economists call the broader idea price discrimination.

It works when groups differ in what they will pay and cannot easily resell across groups. Common ways to segment:

• By customer type: Students, seniors, nonprofits, or businesses.
• By location: Lower prices in markets with lower purchasing power.
• By time: Early-bird, off-peak, or seasonal prices.
• By plan or volume: Tiers and bulk discounts that let buyers choose their own level.

Check local rules before you segment by location or customer group, because some markets restrict it. Buyers who find a lower price elsewhere also feel cheated, so keep the reasons for each segment easy to explain.

Strategies to price better using your own sales data

Choosing among pricing strategies is not a one-time decision. You can change your price as the product improves or when you want to test a sales approach. If you already have an existing business, your past sales show what customers accept, and that is a better starting point than a gut call.

One simple way to analyse your pricing is by using Putler.

Find where your sales cluster by price

Putler sorts the orders in your date range into price bands and shows how many orders fall in each band. The Amount Range filter in the Sales dashboard displays them, so you can see where your price sweet spot sits.

Steps to follow in Putler:

1. Log in to Putler and open Sales from the left menu.
2. Pick the date range you want to study with the date picker at the top.
3. Find Amount Range in the Filters panel on the left. Each band shows how many orders fall inside it.
4. Tick a band to look at only the orders in that price range.

In the demo store above, 126 of 252 orders fall under $27, and the next biggest group sits between $72.68 and $162.00. The band with the most orders shows the prices your customers already accept. I would test a price inside that band, or build a discount that lands in it, before trying anything far outside it. It is a quick way to move from a gut call to a price backed by your own sales.

Check pricing by location

The same Filters panel has a Location filter. Expand a region, such as Oceania, tick a country, and the Amount Range counts show which price bands sell there. Set the date range first. The filter needs checkout address data, so it works for sources that pass it to Putler. Here is what the filter looks like:

Check pricing by season

Set the date picker to a past sale period. For example, to see which price points worked during last year’s Black Friday and Cyber Monday sales, select November 1 to November 30 and read the Amount Range counts.

The range with the most sales marks the price points that worked. Try pricing this season’s offers in the same range, and compare against a non-sale month so discount volume does not pass for real demand.

Test before you commit to a new price

A price change is a hypothesis, and so are all pricing strategies. Test a change on part of your traffic before it applies everywhere, and follow a few rules:

• Change one thing at a time: Two changes at once make the result impossible to read.
• Keep a control group: Compare the new price against the current one over the same period.
• Run a full sales cycle: Weekday and weekend buyers often behave differently.
• Compare revenue, not only orders: A higher price can cut orders and still raise revenue.

Convert’s price testing guide walks through the setup for online stores. Convert sells testing software, so read it with that in mind.

Test openly. In 2000, Amazon randomly showed different prices on 68 DVD titles, changed its policy after customer feedback, and refunded buyers who paid more, according to Amazon’s 2000 statement. Testing is what turns guesses into better pricing strategies, but shoppers accept a test far more readily when a price change looks like a change and not a trick.

Conclusion: which pricing strategies to start with

I would start with cost-plus pricing as a floor, use competitor prices as a check, and move toward value-based pricing once you have sales data to back it. Discounts and psychological tactics come last, as layers on top of a price you trust.

Pricing strategies work best as a cycle: set a price, read the sales, adjust, and test again. If you try a strategy that this article does not cover, tell us in the comments.

FAQs

What are the main types of pricing strategies?

The main pricing strategies are cost-plus, competitive, value-based, dynamic, discount, penetration, skimming, premium, economy, and psychological pricing.

Which pricing strategy is best for a new business?

None of the pricing strategies wins in every case. Cost-plus pricing is the simplest starting point because it protects margin. Penetration pricing suits a business that needs customers fast and can absorb thinner margins for a while.

What is the difference between price skimming and penetration pricing?

Price skimming starts high and lowers the price over time. Penetration pricing starts low and raises the price once the product has a customer base.

What is price segmentation?

Price segmentation is charging different customer groups different prices for the same or a similar product, for example by plan, region, or customer type.

How do I know if my price is right?

Compare your price with your costs, competitor prices, and the value you deliver. Then check where your sales cluster by price band, and test a change on part of your traffic before rolling it out.