Pricing strategies are a sometimes-overlooked part of the marketing mix. They can have a large impact on profit, so should be given the same consideration as promotion and advertising strategies. A higher or lower price can dramatically change both gross margins and sales volume. This indirectly affects other expenses by reducing storage costs, for example, or creating opportunities for volume discounts with suppliers.

Other factors also determine your optimal pricing strategy. Consider the five forces that influence other business decisions: your competitors, your suppliers, the availability of substitute products, and your customers. Positioning how you want to be perceived by your target audience is also a consideration. Price a premium item too low, for example, and customers will not believe the quality is good enough. Conversely, put too high a selling price on value lines and customers will purchase competitors’ lower-price items.

Some pricing strategies to consider are:

Competitive pricing

Keeping your prices in relation to your competitors is the best way to do business. Stay alert about how much your next-door competitor is pricing their products and then price yours similar or lesser to theirs.

Cost plus mark-up

The complete reverse of the previous mode of tactics, this aims at fixing your prices according to your wish, as per the gain percent you want to keep and not the market. But just as this has the advantage of gaining you lots through setting cheap prices, this may also work adversely under certain circumstances. So think and decide wisely before setting the price.

Loss Leader

Another effective strategy to woo customers and raise sales considerably is to sell relatively cheap items at a lower price to customers who have the potential to buy more expensive things. But this is a relatively temporary arrangement and can often prove to be a gamble.

Close out

This is an interesting technique to try when you are clearing out your stock. This method involves selling your extra goods at extremely cheap rates in order prevent losses.

Membership or Trade Discounting

Know your customers. Short list the ones who can reap you profits and give them special offers so that they end up getting wooed into buying more from you and also keep coming back. So reduce prices, give discounts, do what it takes to get them back into your shop.

Bundling and quantity discounts.

The simple one plus one free also works great. So give select customers a considerable discount on bulk purchases, either of the same kind, as in 5 shirts, or similar or related items. And to avoid losses, put offers on old stock or team up one new with old to clear out excess goods.


Putting different versions of the same basic product and then offering lower prices for the more basic models is a good way to not only get rid of those models to average people. But one can also team up offers like free servicing for a period with the higher priced ones to work as incentive for the high purchasing customers.

So go ahead and use these tactics to get the level of profit you’ve always desired.

If you are trying to sell something, pricing your services/ products would be the single most important decision you will take. Since, the Internet provides thousands of alternatives to the customers, you need to be at par with the competition. The prices that you quota will determine how long you can stay in the market.

You need to acquire a clear cut idea about pricing. To what extent can you push it? How often do you need to review the prices? A lot would depend on how you handle this stage of business.

You have to pinpoint a consumer group to begin with and then estimate how much they would be willing to pay for your services or products.

But besides that you also have to ensure that you make some profit for yourself. And quite often these two demands can be in conflict with each other. Different people use different techniques to set the prices of their products. Some of them have a scientific basis and some do not. Given below is one such procedure which works with an understanding of the production cost, customer expectations and other players in the field.

Cost is defined as the sum total of the expenses that you incur when making a product. Expenses include cost of raw material, machinery, packaging, delivery etc. Price is amount customers have to pay for per unit of you product /service.

For you to make a profit, the price should be more than the cost. Your prices should be consistently above the cost if you are planning to run your company for a long time, except in special cases. Sometimes you can lower the prices, to gain entry into a market for example. Starting with prices which are lower than your competitors would make people notice you. And once you collect a decent number of customers you can gradually increase prices!

How much would customers pay for your services is directly proportional to significant and valuable they think your product is. Of course your marketing strategies and reputation in the market will play a significant role in this regard.

Between these two numbers, your cost and the price your customers are willing to pay for your product lies your ideal price. If your price is a little lower than what your customers are willing to pay for your services, it would definitely work in your favor in the long run.

If your price is higher that what is fair in the eyes of the customer you would end up losing your appeal and market and gradually your viability. 

Setting a price for your product or services, especially when you are trying to sell online, can be the most crucial business decision. Setting a price is not as simple as it might sound. If you are looking to make profit your price should be more than your cost but it has to be lower than the ‘price the market can bear’, i.e. the price your customers expect to pay for your service. You must keep these things in mind when pricing your products.

There are elaborate pricing plans that you should understand and be able to work with. What pricing plan you want to work with would depend on your business model.

Like the ‘Pricing to Penetrate’ plan. This plan would work for you if your aim is to penetrate the target market, quickly. To achieve this objective, you will have to price your product low.

But it’s important to decide how low you can go without hitting the bottom. You need to figure out the lowest you can go without running into debts and heavy losses. You should not have reservations about incurring initial losses if you will get long term customers in return.

But how do you determine the lifetime value of any customer?

Lock in your regular customers and make sure you take measures to make them stick to your brand. Penetration pricing is useful if you are going to make a long-lasting impression. It can also be useful in circumstances where a lot of new players are jumping into the market.

Your product should be the ultimate ‘sticky product’ which the customer can let go of. Online brokers for example, are so much more convenient that once hooked people don’t even think about alternatives.

Another way to ensure that the customer returns is to manufacture an exceptional product. When selling books online for example, a great book with a good price would ensure your instant popularity. for example is the leading player among online bookstores because of their heavily subsidized rates. Even though this business tactic might have cost them many a thousand dollars, but they have managed to create a solid customer base which they can now bank upon.

Another viable example in real life is how companies that manufacture razors hit upon the idea that it would be much more profitable to resell razor blades than handles, and the rest as they say is history.