Pricing Strategy

Pricing strategy refers to the way a company chooses to charge the consumers for its products or services.

Also referred to as a pricing plan — or pricing model — it takes into account the cost of production (or labor associated with providing the service), marketing expenses, trade margins, as well as the current market conditions in general.

Related terms:

  • Competition-based pricing is a tactic that draws on the prices for competing products/services to set a price for your own product/service.
  • Cost-plus pricing includes a certain markup added on top of the actual product cost.
  • Dynamic pricing is a strategy that allows the provider to change the price depending on the market conditions or demand. It is also known as surge pricing or demand pricing.
  • Freemium pricing is the strategy of offering a basic set of features/services free to all and charging for the premium or additional ones.
  • Skimming pricing is setting the highest initial price and then lowering it over time.
  • Penetration pricing is the strategy of offering a lower initial price for a limited time period to attract customers to a new product or service.
  • Premium pricing is the tactic of setting a higher price for a certain product or service to build a favorable perception of it based on its price alone.

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How to choose a pricing strategy for your business

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