Types Of Market Pricing Strategy

Etima Aaron
Etima Aaron December 12, 2022
Updated 2022/12/12 at 2:43 PM
market pricing strategy
market pricing strategy

In today’s economy, many market platforms establish their prices without giving any attention to the market pricing strategy. 

The good news is that by making the effort to properly price your products, you may create a potent growth lever. 

Giving prices for your products and services can be very stressful and difficult to determine. If you set your prices too high, you’ll miss out on valuable sales. And if you also set them too low, you miss out on valuable revenue. 

Thanks to today’s market setting, there are various pricing types and strategies that can help you better understand how to set the right price for your customers.

What is pricing 

The amount of money that you charge for your items is what could be referred to as “pricing,” but there is much more to it than that.

How much you value your brand, product, and customers is seen in your pricing for the benefit of potential customers. 

It’s one of the first factors that determine whether a customer will purchase your goods or not. A customer’s decision on whether to purchase your goods or not is a result of your price tags. 

What is market pricing?

A “market pricing strategy” is the set of procedures and methods that businessmen and marketers use to determine the prices for the goods and services they offer. 

A product and market pricing strategy is a process by which you decide what to charge for your products and if the price tag charged for them is suitable for the product. 

There are various market pricing strategies available, but some of the most important ones are listed below:

  •  A Price skimming
  • A Dynamic pricing
  •  A Value-based pricing
  • A Cost-plus pricing
  • A Competitive Pricing
  • A Penetration pricing
  • An Economy pricing

Types of market pricing strategies

1. Penetration pricing

The penetration pricing strategy is when you offer a new product or service at a lower rate than the initial price, just to attract more customers’ attention to your business than others. 

The goal is to get as many customers as you can into your business with the low and high sales you get from your competitors. But remember to set your price to a standard so you do not end up losing money trying to impress the market.

At this first stage, you have to lose your gains in higher sales volume, market share, and brand recognition. 

This method can only be used to kick-start your business in the new market. But in the long run, it may not be favorable to your business, so it is okay to change your strategies.

Everyone likes less expensive things, so as you change your price in the long run, prepare yourself to lose some sales as they go in search of the cheapest option. 

But you can bring in other exciting strategies to encourage new customers to stay loyal.

2. Skimming pricing

Companies or any business frame that charge the highest price feasible for their new products and then gradually drop the price over time are said to be engaging in price skimming.

When items reach the end of their useful lives and become irrelevant, costs decrease under this type of pricing strategy. 

Companies that provide novelty or high-tech products commonly use price skimming.

3. High-low pricing

Skimming and high-low pricing are similar, but the price declines happen at different rates. 

When using the high-low pricing strategy, a product’s price is drastically reduced all at once rather than over time. 

Seasonal retail enterprises generally employ a high-low strategy, frequently using a deal to get rid of inventory that won’t be around for much longer.

4. Premium pricing

When prices are set higher than those in the general market in order to generate a perception of value, quality, or luxury, premium pricing is taking place.

You may frequently charge a premium price for your high-quality, branded products if your business has a strong brand reputation and devoted customers.

This kind of pricing approach excels in particular when your target market consists of early 

adopters who enjoy being in the lead. 

Especially in the fashion or tech industries. businesses that sell luxury, high-tech, or exclusive products sometimes employ a premium pricing approach.

5. Psychological pricing

The buyer’s psychology is subtly changed by psychological pricing strategies by subtly altering the price, the placement of the items, or the product packaging. 

Psychological pricing tactics include giving discounts like “buy two, get one half off” or setting the price at $9.99 rather than $10 (“Well, people feel $9.99 is cheaper than $10, it is tho”). 

Furthermore, some businesses use fake time constraints, such as one-day or limited-time discounts, to draw customers into their stores.

Although any business can employ this strategy, restaurants, retail outlets, and gas stations are the most likely to do so because it gives customers the idea that they are getting a discount.

6. Bundle pricing

This type of pricing, known as “bundle pricing,” involves the sale of two or more similar products or services that are similar for a single price. 

Adding value to clients’ purchases or upselling them additional products is effective when done through bundling. 

Restaurants, lounges, spas, and some retail outlets are just a few of the numerous companies or business vendors that use this kind of pricing strategy.

7. Competitive pricing

 If your company operates in a crowded market, the pricing of all other products in your sector determines it, which helps you maintain a competitive edge. 

Your products or services will be priced using a competitive pricing approach at the going rate in the marketplace. 

As long as it remains within the price range established by all of your competitors in your business, you are free to select to price your products above or below the market rate.

Since the emergence of e-commerce, consumers can easily check prices before making a purchase, and about  96% of them do so. 

This presents you with the chance to attract more customers by offering a price that is below the industry standard.

8. Cost-plus pricing

Cost-plus pricing is simply the calculation of the final price by adding a certain percentage to the cost of producing the good to get the known amount at the producer’s profit. 

By deciding how much you want to make from each product sold first, you may work backward to get your markup percentage. 

9. Dynamic pricing

Dynamic pricing adjusts its price to meet a product’s current market demand. 

This market pricing strategy also known as demand pricing is used most often when the product in question meets these criteria.

10. Economy pricing

This pricing invariably undercuts competitors in efforts to generate a profit through significant sales volumes. 

Low production costs are typically associated with this kind of pricing strategy. It is employed by businesses like Walmart and Costco, and its effectiveness in the market is based on the basics.

11. Freemium pricing

This pricing method gives users access to products or services for free, which encourages customers to upgrade to the premium version to access more features. 

Potential customers get a taste of what the product or service can do for them and gain an understanding of your company. 

Software companies and membership-based organizations or companies mostly use this pricing strategy.

12. Loss-leader pricing

With this method of market pricing strategy, customers will come to the store to buy goods with high discounts.  

While they’re there, they might likely buy other goods at full price that they didn’t plan on. 

This will help to make up for the loss of the original product that was sold at a high discount.

How to choose a market pricing strategies

Whether you want to implement the first or the last pricing strategy, let’s see how we can create a pricing strategy that will work perfectly for your business or company. 

  • Understand your costs
  • and make sure you understand the cost of the product. Before you figure out your product pricing strategy, 

You’ll need to add up all the costs involved with the production process and bringing your product to market.

How much does a bundle of raw materials used for production cost? How many goods can be made from it?

Some costs you may likely see are:

  • Production time
  • Cost of goods sold (COGS)
  • Short-term costs like loan repayments
  • Promotional or advert materials
  • Packaging
  • Shipping

Your product pricing must consider all these costs to make your business successful and profitable. 

  • Define your commercial objective

 If you consider your commercial objective to be your business’ pricing policy, you can use it to guide your way through any pricing choices and keep you moving in the right direction. 

In the end, what am I hoping to achieve with a particular product? Do I want to work for a high-end brand, or do I want to launch a trendy, current company like Anthropologie? 

As you decide on your pricing, identify this goal and keep it in mind.

  • Identify your customers

This step is parallel to the previous one. Your objective should be not only identifying an appropriate profit margin but also determining what your target market is willing to pay for the product. After all, your hard work will go to waste if you don’t have potential customers. 

Consider the disposable income your customers have. For example, some customers may be more price-sensitive when it comes to clothing, while others are happy to pay a premium price for specific products.

  • Find your value proposition

What makes your business genuinely different? To stand out among your competitors, you’ll want to find the best market pricing strategy to reflect the unique value you’re bringing to the market. 

For example, the direct-to-consumer mattress brand Tuft & Needle offers exceptional, high-quality mattresses at an affordable price. Its pricing strategy has helped it become a known brand because it was able to fill a gap in the mattress market. 


Thinking about everything that goes into pricing can make your head spin: competitors, production costs, customer demand, industry needs, profit margins… the list is endless. Thankfully, you don’t have to master all of these factors at once.

Simply sit down, calculate some numbers (like your COGS and profit goals), and figure out what’s most important for your business. Start with what you need, and this will help you pinpoint the right kind of market pricing strategy to use.

More than anything, though, remember that pricing is an iterative process. It’s highly unlikely that you’ll set the right prices right away—it might take a couple of tries (and lots of research), and that’s OK.  remember that

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