Any business or brand sells products and services to earn maximum profit from the marketplace. But obtaining the desired revenue is not always as easy as it seems. 

Along with providing quality products and services, brands also need to develop the perfect pricing strategy to retain their customers and, in the meantime, generate the expected revenue.

Figuring out the right price for your product and services is essential for the growth of your business. This article will discuss the seven best-proven pricing strategies to help you make the best business decision.  

What is a Pricing Strategy?

A pricing strategy can be defined as a tool used to determine and settle the pricing of products and services offered by a business organisation. Companies take various parameters into consideration for determining the price strategy, such as resource consumption, the demand-supply ratio, the urgency of the product, whether it is a regular item or an occasional product etc. After all, the main objective of pricing strategy is to fix the right price at the right time for the right customers within the right context. 

Types of Pricing Strategies for Your Business

For assisting newbie entrepreneurs, a good number of pricing strategies and price models are available, which could serve as a perfect guideline for them to get started. The guideline below would give an idea to create the pricing strategies for new products. 

1. Competitive Pricing

Also known as competition-based pricing, a competitive pricing strategy based on the price offered by your competitors for similar products and services. No other pricing factors, for instance, customer demand, cost of production, etc., are considered while deciding the final price of the products and services.

Competitive pricing is suited chiefly for fast-moving consumer goods (FMCGs) such as toiletries, over the counter drugs, beverages, cosmetics and many more. If you are introducing any product or service with competitive pricing, it would be a smart move to keep the price of your products slightly lower than that of your competitors.

2. Cost Plus Pricing 

The cost-plus pricing strategy focuses on earning profit after covering the cost of producing the products or services (COGS). The price solely depends on how much profit the manufacturer wants to make after acquiring the production cost.

Though a majority of the companies do not follow this strategy because it neglects how much the consumers are willing to pay for the products and services, it is best suited for products that involve a lot of raw material and labour in the production, for example, energy, mining, oil, and gas extraction, steel and iron manufacturing, construction, etc.

3. Dynamic Pricing 

Dynamic pricing strategy, also known as time-based pricing, is a flexible pricing strategy in which the price fluctuates depending on the market demand of the product and services. Other than the market demand, the companies also review factors before changing the prices are the competitors’ price and supply and demand ratio. 

If you are a traveller, you would know that hotels and airlines increase or decrease their fare depending upon the best or not-so-best season for tourists to visit places. Other times, you must have experienced a sudden rise in your cab fare while you are about to book due to high demand.  

4. Skimming Pricing

The skimming pricing strategy of setting the highest possible prices for a product while launching it and then gradually decreasing the price later is called Skimming. Manufacturers or companies use this strategy mainly in the case of products, for which the hype is more when it initially enters the market and reduces over time. 

Smartphones, laptops, cars, video games, etc., are some of the products whose prices drop a lot when a new version is released. A most relevant example would be of iPhone 12, which was launched in October 2020, having a price range of INR 80,000 to INR 90,000, and currently, in 2022, the price of which is INR 50,000. 

5. Penetration Pricing

Contradictory to skimming pricing, the companies launch their products at considerably lower prices than their competitors in penetration pricing strategy. The moto behind the pricing strategy is to quickly conquer a massive chunk of the market. 

In 2007, Reliance Industries entered the Indian telecommunication sector by launching Jio. The company successfully created a user base of 95 percent of India’s population in no time just by offering free connection and keeping the recharge plans significantly less. Today, it has also expanded its business model by establishing JioMart, JioCinema, JioSaavn, JioTV, JioMeet, JioChat, etc. 

6. Premium Pricing 

Prestige pricing strategy or premium pricing is a strategy that brands utilise to create a premium or luxury image of their products and services. Product prices are set at an artificially higher level from their direct competitor to create an illusion of high quality and royalty.

Primarily premium pricing strategy works well in the fashion and lifestyle segment, automobile industry, or gadgets. Luxury brands available in India are Royal Enfield, Hidesign, Titan Eye, Apple, Jaguar cars, etc. 

7. Value-Based Pricing 

Value-based pricing follows a model where a company fixes its pricing strategy depending on what customers are ready to pay for the product or service. Before setting value-based prices, one must gather a deep knowledge about target audiences’ needs and wants. 

Companies must consider customers’ feedback during the product development phase to get an insight into their perspectives. This model is mainly suited for companies that offer products people need irrespective of their financial status, such as cooking oil, salt, sugar, rice, wheat, etc. 


Having a solid pricing strategy helps strengthen your position in the marketplace, builds a bond of trust with your customers, and helps you meet your business goals. So make your price strategy a winning one that will bring confidence in your customers and compel them to purchase your products. 

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