What Pricing Strategies are there?

Competitor Pricing

Competitive pricing is the method of setting the price of your products or services relative to your competition. This strategy relies on the idea that competitors have already found the correct pricing point. In most markets very similar products the price for these products should already be at equilibrium. By setting the same price as your competitors, a newly-launched company can avoid the trial and error costs of the price-setting process.

Value-based Pricing

Value-based pricing is often called "customer-based pricing" because that is what it is. Basing a product or service's Price on how much the consumers believe it's worth. Instead of using production costs or competitors Price, value-based pricing focuses on the consumer and their perceived value of the product.

Price skimming

Price skimming is a pricing strategy where a company looks to charge the highest price that customers will pay at launch. Then as the demand is fulfilled and competition enters the market, the company reduces the Price to attract another more price-sensitive portion of the market.

Market-based Pricing

Market-based pricing is when companies set the price based on comparing similar products on the market. The company then assesses how well their product matches up to competitors.

As with Price Skimming a market-based pricing strategy allows a business to set prices higher when a product is initially introduced, and later align prices with market prices to remain competitive.

Penetration Pricing

Penetration pricing is a pricing strategy frequently used by companies when launching a new product or service. By setting a lower price, it helps a new product or service enter the market. Making a wide number of customers aware of a new product or service.

The goal is to have the customers become loyal to the product in the long term when the pricing can return to normal. Services offering one-month free, or half price for 6-months are typical examples of penetration pricing.

Dynamic Pricing

Dynamic pricing is a strategy in which companies can set elastic prices based on current market demands, causing product prices to be continuously monitored and adjusted. eCommerce companies may adjust prices in a matter of minutes, or hours depending on the type of the market.

Factors such as; Total demand product, total supply of the product, how much product varieties, How many competitors in the market? Dynamic pricing has become more accessible for eCommerce companies with advanced data collection and the speed at which prices can be adjusted.

Cost-Plus Pricing

Cost-plus pricing is the practice of calculating the cost of producing the product and then adding a markup on top of that to determine the selling price to the customer.

The cost of production could include direct labour, machinery, materials, marketing and other fixed and variable costs to determine the final cost of producing each unit. It requires these costs to be reliable and accurate so that the price can be set correctly.