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8 pricing strategies that will grow your business

Bianca Paraschiv
Vezi toate articolele

What is pricing policy?

Quite often, the price is the most important factor in deciding to buy a product or service. On the other hand, price also ensures your company's profit.

The pricing policy is the strategy through which a company sets the prices of its products or services, taking into account the demand, supply and competition. It is essential that the pricing strategy satisfies both parties - the seller and the buyer. Any mistake in pricing can be fatal to your company.


How to set the pricing policy?

The classic pricing formula can be summed up as follows:

Cost + Desired Profit Percentage = Final Price

However, there are many strategies that differ from this rule, thanks to creativity and thorough market research.


Types of pricing strategies

1. Premium pricing

Frequently, when we see products or services at high prices, we assume that they are high quality. This strategy is all about creating a reputation based on exclusivity, quality and luxury.

For example, major fashion houses such as Louis Vuitton or Chanel charge inflated prices, but they are still bought by wealthy people or people who simply want to create that impression. You'll most likely never find these products at sale, or not even at outlet stores - in order to maintain its exclusivity.


2. Price penetration

When companies introduce a new brand or product, they generally opt for this pricing strategy. At launch, products or services have a lower price than the competition. Once they become more popular, the sales grow and the brand establishes a steady image, the price will gradually start to rise - for example, Netflix subscriptions gradually increase.


3. Price skimming

In contrast to the previous technique, some companies prefer to launch new products at increased prices, in order to raise the interest of those who always want to be the first to try that product and become trend-setters. This strategy is often used in the smartphone industry: when they are brand new, they are priced higher. In a few years, after they lose popularity or new and better versions come out, they will become more affordable.


4. Competitive (or dynamic) pricing

Although similar to the market penetration technique, this strategy requires constant analysis of the competition. Every time a competitor lowers a price, the company using this method will lower its price slightly more in order to offer a better deal to its customers. In the long run, the strategy can be hard to maintain, but it's the only way to make sure you get the best deal.


5. Psychological pricing

Without realizing it, we've probably been fooled by this method at least once. This concerns both the price itself and how it is presented.

For example, a product costs 9.99 euros instead of 10. Odd, unrounded prices give the impression that it is a lower amount (charm pricing), and if the price displayed on the shelf has the figure 9 written larger, in a thicker font, and the eurocent is written visibly smaller, the chances of success are high.

What's more, shops can display a higher, cut-out original price alongside the actual one. This gives the customer the impression that they are saving money so they buy more (anchor pricing).


6. Value-based pricing

If your product or service brings a benefit, adds value or can be meaningful to the buyer, you can use this strategy. A wedding dress can cost hundreds or even thousands of euros, even if a regular occasion dress is much cheaper. It's all about how well that product or service makes the customer feel.

Or, if your beauty salon has much higher prices but the services are excellent, many people will prefer to go with the safe option and get a haircut there, where they know the result will be exactly how they want it.


7. Discount (or economy) prices

Who doesn't love getting the best value for money? Exactly. That's why many companies are almost continually offering deals and discounts. This strategy works especially well in markets for essential purchases. The low prices are recovered by the company due to the increased volume of purchases, so you don't have to worry about making a loss if you practice this method.


8. Payment in instalments

Goods such as cars or household appliances have high prices, but when presented as monthly instalments they seem much more affordable. Rather than paying €2000 at once, it sounds better to pay just €85 a month for 2 years. In these cases, a small commission will most likely not reduce the attractiveness of the offer, so you can make extra profit.



A pricing strategy doesn't stop at choosing one of the methods mentioned above. You need to decide the channels through which you will reach your target audience, the logistics, who is responsible for each phase and many other actions to ensure and maintain the success of your business.

If you need help choosing a pricing strategy for your company, you can always contact us.

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