What Is a Pricing Strategy? 10+ Pricing Strategies for Business

Choosing a price that fits your business direction is very important. Using the wrong pricing tactic can directly affect the sales you want to reach. That is why, before applying any pricing strategy to a specific product or service, you need to understand the role of pricing strategies in Marketing. Then you can choose the strategy that best fits your business direction. If you are still not sure about the concept of what a pricing strategy is? Or about the pricing strategies in common use today, let's MONA Media go through them now.

What is a pricing strategy?

Pricing strategy sets the direction for the price of a specific product or service over a defined period in order to reach marketing goals. These could include increasing boost market share, boosting sales and maximizing profit,…

A pricing strategy also depends on many factors such as business goals, brand positioning, target customers, marketing purpose and product attributes. Pricing is also affected by external factors such as competitor prices, user demand and market trends. These strategies are also applied in every marketing campaign. That is why knowing what a pricing strategy is matters greatly for every business and business project today.

≫Further reading: What is dynamic pricing?

How do a pricing strategy and a pricing method differ?

When learning about pricing strategies, you also need to understand what a pricing method is. These two marketing terms are similar, so they are easily confused.

The role of pricing strategy in business marketing

Pricing strategy plays an important role in business activity. Here are some reasons why you need to build a pricing strategy into your marketing campaigns.

Raise the conversion rate

Consumers are quite sensitive to price, so before deciding to buy a product or use a service, they look at the price first. A pricing strategy that fits consumer psychology therefore helps a business attract potential customers. That makes it easier to persuade them to become the business's customers.

Create a competitive advantage

As competition grows fiercer, businesses face difficulties not only from consumers but also from competitors. A reasonable price for a product or service helps a business gain an edge over others in the same industry.

Reflect brand value

If a business's product or service is very good but priced cheaply, consumers may doubt its quality. On the other hand, if the price its products is too high and the quality does not match what customers expect, the product will likely not sell.

So setting a price that matches the value the business provides reflects the true value of its brand. In turn, customers trust the product or service more.

10+ pricing strategies widely used in marketing today

Ideas for building a pricing strategy for products and services keep getting more varied. Each type has a different purpose and delivers different results. Here, MONA goes through the top 10 pricing strategies in marketing that large brands use most today.

Market-penetration strategy

Market-penetration pricing sets a low price for a product in the early period after a new launch. A low price helps stimulate market needs, then earns high profit through a large market scale.

The goal of this strategy is to put pressure on competitors and win a certain market share. Once the share target is met, the business needs to reposition the price to recover its investment and earn a profit.

Market-penetration strategy suits fast-moving consumer goods that keep growing in demand, such as laundry detergent and soap.

Example: Coca-Cola applied market-penetration pricing successfully (even though it came after Pepsi) by setting a market-share target, lowering its selling price to introduce its “taste” to target customers, and distributing even through street-vendor carts. 

Combo pricing strategy

Combo pricing combines products that are similar or can be used together. Combos usually cost less than buying each item separately. The aim is to encourage consumers to buy several products at once.

Price-skimming strategy

Price skimming sets the highest price for a newly launched product in order to earn maximum profit from the group of customers willing to pay for it.

Applying price skimming to a new product is really about affirming the product's quality and increasing competitiveness in the industry. This strategy especially suits technology products with short life cycles.

Example: Apple's technology products are priced quite high at launch, then the price falls gradually as the same approach starts again with the next generation.

Psychological pricing strategy

Strategies that play on customer psychology tend to deliver high marketing results. Among them, the “you get what you pay for” mindset is the one businesses use most in pricing.

The reason is that customers often assume a higher-priced product has better quality. Understanding this, many businesses price their products higher than similar products from competitors.

Product-line price adjustment strategy

The purpose of this strategy is to give customers more choices. From one base product, the business creates several versions, usually ranked from lowest to highest value, with prices rising along with the value.

Example: With each iPhone generation, Apple releases a model in several storage versions such as 64GB, 128GB, 256GB or 516GB.

Competitor-based pricing strategy

If you are a small business in the market, setting product prices based on competitors is a fitting approach. Its advantage is that the business does not spend much on price research yet still arrives at a reasonable price.

Pay-later and installment strategy

In recent years, buying in installments has become popular with many users. With attractive installment policies, customers can buy quickly when they need something but cannot yet pay the full price.

Promotional pricing strategy

Offering promotions is a pricing tactic most businesses use today. Promotions such as discounts, vouchers, coupon or gifts encourage customers to buy, and the business sells more.

Bundled-product strategy

This is another pricing strategy many businesses use to raise revenue and make things more convenient for consumers. There are two kinds of add-on products: optional and mandatory.

A mandatory add-on must complement the main product to be useful. For optional add-ons, brands often offer deals to make the main product more competitive and to clear inventory effectively.

Pricing by geographic region

With this strategy, the business sets a different price for each region to match local income and spending levels. That makes the product or service easier for customers to reach.

How to choose the right pricing strategy

A pricing strategy is successful when it meets the business's marketing goals and makes good use of its existing resources. So, to choose the right product pricing strategy for any business, you need to be clear on the following factors:

• The business's marketing goal for the product: Does the business want to expand the market, maximize profit, or balance the two?
• Target customers' financial capacity: What is the most and the least the target customer group can pay for the product or service?
• The business's financial capacity: How long can the business absorb losses? Are shareholders and investors willing to put in capital?
• Stage in the product life cycle: Which stage is the product in now (introduction, growth, maturity or decline)?
• Product positioning: In which market segment does the business position its product? Budget or premium?
• Level of competition: How many competitors in the market offer products similar to the business's?

Once these points are clear, the business has about a 70% chance of choosing a suitable pricing strategy for its product or service. The remaining 30% depends on other external factors such as changes in the macro environment, including political, social, cultural, technological and demographic factors.

This article has introduced the pricing strategies used in marketing and how to choose a pricing adjustment strategy that fits any field or your own business. It is one of the important factors that help you turn campaigns into revenue and profit and increase the customer conversion rate. We wish you success with your campaigns!