All About Pricing Strategy Detail (14 Ultimate Guide)

Introduction To Pricing Strategy Detail

It is the method that establishes the market fit price of goods and services. To market the goods and services, it is necessary to have some marketable value for the products after considering all the expenses. Wondering to know all about different pricing strategies, read the full article on Pricing Strategy Details below.

Let’s Dive In!

What is a Pricing Strategy

List of Pricing Models
List of Pricing Models

A pricing strategy is a systematic approach used by businesses to set and determine the optimal prices for their products or services. It involves considering various factors such as production costs, market demand, competitor pricing, and perceived value to establish a price point that maximizes profitability and competitiveness. Different pricing strategies exist, including cost-plus pricing, where a markup is added to production costs, and value-based pricing, which focuses on the perceived value of the product or service to customers.

Psychological Pricing Hourly Pricing High-Low Pricing Freemium Pricing
Cost-Plus Pricing Dynamic Pricing Geographic Pricing Skimming Pricing
Bundle Pricing Value-Based Pricing Penetration Pricing Project-Based Pricing

Additionally, dynamic pricing allows for flexible adjustments based on market conditions. Effective pricing strategies align with a company’s overall business objectives, target market, and positioning within the industry, contributing to successful market penetration, revenue generation, and sustainable business growth.

Why is a Pricing Strategy Important

Pricing is one of the most important elements of your product. It is mandatory to have optimal pricing for both the seller and the buyer. The consumer is supreme in the market, they must conceive it as their ideal purchasing price. There are n number of factors that influence deciding product price. It broadly includes internal factors and external factors

Determinants of Pricing

Cost of the product Government policies Objective of pricing Organizational factor
Product Differentiation Method of Marketing  Competition in the market Demand & Utilities
Determinants of Pricing
Determinants of Pricing

With the increasing competition price sensitivity comes into effect. With a small change in the price, you will find a large impact on revenue collection because consumers’ purchasing behavior shifts to its nearest competition. 

To overcome such hardships there are a few pricing models developed over time by various research scholars, we will go through each in detail in the topic What are the types of pricing strategies

What are the Types of Pricing Strategies?

We will discuss each type of pricing strategy in detail below:

Psychological Pricing

Psychological pricing refers to a strategic marketing practice that seeks to leverage the psychological tendencies of consumers to influence their perception of the product’s value. In other words, psychological pricing aims to create an illusion of a bargain or exclusive deal in the minds of consumers, thereby increasing the likelihood of a purchase.  

Cost-Plus Pricing

In this pricing model, the whole emphasis is on the cost of goods sold(COGS), Its simple profit margin is added to the cost of production. It depends on how much percentage of profit the producer wants to hold. 

E.g.- The cost of production for mobile is Rs 10,000/- and the producer wants 40% profit. The markup price will be 10,000 + 4,000 = Rs 14,000/-

Bundle Pricing

Under this pricing model, more than one product is grouped together to make a single bundle and is sold collectively at a single lowered price.

E.g- Product A Costing Rs 500/-  and Product B costs Rs 400/-

Both are bundled and sold at a collective single price of Rs 880/-

Premium Pricing

It is also known as luxury pricing and prestigious pricing. The price of such a product is not based on the original cost of production instead it is based on the perceived value of the product. And its perceived value depends on the brand awareness of such a product.

E.g- A winter jacket purchased from a street vendor costs Rs 1,000/- and a similar kind of product at a Gucci Store costs Rs 2,50,000/- (quality may vary)

Freemium Pricing

This pricing model is the combination of two words “free” and “premium” collectively known as freemium pricing. As the name suggests free product or service is offered at the initial stage hoping to convert to premium pricing at a later stage.  This kind of pricing is mostly seen in SaaS-based companies.

Penetration Pricing

It is a pricing model that is used to make a space in the existing market share of the product. The new entrant in the market keeps their price of products low intentionally from their competitor to grab the market share. But in the long run, It is not a sustainable strategy. 

Geographic Pricing

This is a pricing model in which the price of the same product varies depending on the geographical location.

Say a water bottle costs Rs 20/- in a supermarket and the same water bottle costs Rs 50/- at a music festival. 

Pricing Strategy Details
Pricing Strategy Details

Hourly Pricing

In this model, the pricing is based on Hours worked. This pricing is mainly seen with professional services like consultants, freelancers, and contractors. It is a breakdown of a big project into small chunks.

Dynamic Pricing

It is a pricing model in which prices fluctuate based on demand and supply. This pricing is also known as time-based pricing and surge pricing. 

It’s flexible pricing, which is commonly seen in service-based industries e.g. airline, travel, and sports. 

Value-Based Pricing

This is a pricing model in which seller price their product and services based on the buying capacity of the purchaser. Sometimes companies set higher prices considering the buying behavior of the consumers. 

Skimming Pricing

It refers to the price where the new product is priced at its maximum. And the price is lowered as the product gets less popular. This type of pricing is mainly seen with digital products like smartphones, laptops, and electronic goods.

Competition-Based Pricing

It is also known as competitor-based pricing or competition-based pricing. In this pricing model price of the competitor is taken as a benchmark to set the price. The price of the product is slightly lowered than the competitor’s price to gain a competitive advantage.

Project-Based Pricing

This pricing model is the opposite of hourly pricing, this pricing is based on a flat project basis. The project budget is estimated before taking on the project. This pricing is commonly used by contractors.

High-Low Pricing

Under this pricing strategy company initially sells the product at a high price later it lowers its price when the product loses its relevance in the market. Sale, discount, and stock clearance are an example of high-low pricing.

Psychological Pricing Advantages and Disadvantages

Psychological pricing is a strategy that leverages human psychology to influence consumer perceptions of product prices. Advantages of psychological pricing include.


Perceived Value Odd pricing (e.g., $9.99) can create the perception of a lower price, making the product seem more affordable and attractive.
Consumer Appeal Prices ending in odd numbers are often perceived as friendlier, appealing to consumers’ emotions and impulse buying tendencies.
Pricing Perception Using techniques like charm pricing ($9.99 instead of $10.00) can create a sense of getting a deal, driving higher sales.


Credibility Concerns Some consumers may see odd pricing as a manipulative tactic, potentially harming a company’s credibility.
Complexity Managing and updating prices with odd figures can be administratively complex and may lead to errors.
Not Universally Effective Cultural differences and market segments may respond differently to psychological pricing, making it less universally effective in diverse markets.


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