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In this blog you will learn about the importance of choosing the right pricing strategy for a successful business plan.

Why is a pricing strategy important for a business plan?

A business plan is a written document outlining a company’s core business practices – from products and services offered to marketing, financial planning and budget, but also pricing strategy. This business plan can be very lengthy, outlining every aspect of the business in detail. Or it can be very short and lean for start ups that want to be as agile as possible.

This plan can be used for external investors and relations or for internal purposes. A business plan can be useful for internal purposes because it can make sure that all the decision makers are on the same page about the most important aspects of the business.

A 1% price increase can lead to an 8% increase in profit margin.

A business plan could be very lengthy and detailed or short and lean, but in all instances, it should have a clear vision for how pricing is tackled. A pricing strategy ultimately greatly determines the profit margin of your product or service and how much revenue the company will make. Thorough research of consultancy agencies also show that pricing is very important. McKinsey even argues that a 1% prices increase can lead up to an 8% increase in profits. That is a real example of how small adjustments can have a huge impact!

It is clear that each business plan should have a section about pricing strategies. How detailed and complicated this pricing strategy should be depends for each individual business and challenges in the business environment. However, businesses should at least take some factors into account when thinking about their pricing strategy.

What factors to take into account?

The pricing strategy can best be explained in the marketing section of your business plan. In this section you should describe what price you will charge for your product or service to customers and your argumentation for why you ask this. However, businesses always balance the challenging scale of charging too much or too little. Ideally you want to find the middle, the optimal price point.

The following questions need to be answered for writing a well-structured pricing strategy in your business plan:

What is the cost of your product or service?

Most companies need to be profitable. They need to pay their expenses, their employees and return a reasonable profit. Unless you are a well-funded-winner-takes-all-growth-company such as Uber or Gorillas, you will need to earn more than you spend on your products. In order to be profitable you need to know how much your expenses are, to remain profitable overall.

How does your price compare to other alternatives in the market?

Most companies have competitors for their products or services, only few companies can act as a monopoly. Therefore, you need to know how your price compares to the other prices in the market. Are you one of the cheapest, the most expensive or somewhere in the middle?

Why is your price competitive?

When you know the prices of your competitors, you need to be able to explain why your price is better or different than that of your competitions. Do you offer more value for the same price? Do you offer less, but are you the cheapest? Or does your company offer something so unique that a premium pricing strategy sounds fair to your customer? You need to be able to stand out from the competition and price is an efficient differentiator.

What is the expected ROI (Return On Investment)?

When you set your price, you need to be able to explain how much you are expeciting to make. Will the price you offer attract enough customers to make your business operate profitable? Let’s say your expenses are 10.000 euros per month, what return will your price get you for your expected amount of sales?

Top pricing strategies for a business plan

Now you know why pricing is important for your business plan, “but what strategies are best for me?” you may ask. Well, let’s talk pricing strategies. There are plenty of pricing strategies and which ones are best for which business depends on various factors and the industry. However, here is a list of 9 pricing strategies that you can use for your business plan.

• Cost-plus pricing
• Competitive pricing
• Key-Value item pricing
• Dynamic pricing
• Premium pricing
• Hourly based pricing
• Customer-value based pricing
• Psychological pricing
• Geographical pricing

Most of the time, businesses do not use a single pricing strategy in their business but rather a combination of pricing strategies. Cost-plus pricing or competitor based pricing can be good starting points for pricing, but if you make these dynamic or take geographical regions into account, then your pricing becomes even more advanced!

Pricing strategies should not be left out of your business plan. Having a clear vision on how you are going to price your product(s) and service(s) helps you to achieve the best possible profit margins and revenue. If you are able to answer thoughtfully on the questions asked in this blog then you know that you have a rather clear vision on your pricing strategy.

If there are still some things unclear or vague, then it would be adviceable to learn more about all the possible pricing strategies . You can always look for inspiration to our business cases. Do you want to know more about pricing or about SYMSON? Do not hesitate to contact us!

Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!

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Discover how to properly price your products, services, or events so you can drive both revenue and profit.

FREE SALES PRICING CALCULATOR

Determine the best pricing strategy for your business with this free calculator and template.

Updated: 08/16/23

Published: 08/16/23

Pricing your products and services can be tough. Set prices too high, and you miss out on valuable sales. Set them too low, and you miss out on valuable revenue.

Thankfully, pricing doesn’t have to be a sacrifice or a shot in the dark. There are dozens of pricing models and strategies that can help you better understand how to set the right prices for your audience and revenue goals.

That’s why we’ve created this guide.

Whether you’re a business beginner or a pricing pro, the tactics and strategies in this guide will get you comfortable with pricing your products. Bookmark this guide for later and use the chapter links to jump around to sections of interest.

Pricing Strategy

Types of pricing strategies, how to create a pricing strategy, pricing models based on industry or business.

Conducting a Pricing Analysis

Pricing Strategy Examples

A pricing strategy is a model or method used to establish the best price for a product or service. It helps you choose prices to maximize profits and shareholder value while considering consumer and market demand.

If only pricing was as simple as its definition — there’s a lot that goes into the process.

Pricing strategies account for many of your business factors, like revenue goals, marketing objectives, target audience, brand positioning, and product attributes. They’re also influenced by external factors like consumer demand, competitor pricing, and overall market and economic trends.

It’s not uncommon for entrepreneurs and business owners to skim over pricing. They often look at the cost of their products (COGS) , consider their competitor’s rates, and tweak their own selling price by a few dollars. While your COGS and competitors are important, they shouldn’t be at the center of your pricing strategy.

The best pricing strategy maximizes your profit and revenue.

Before we talk about pricing strategies, let’s review an important pricing concept that will apply regardless of what strategies you use.

Free Sales Pricing Strategy Calculator

• Cost-Plus Pricing
• Skimming Strategy
• Value-Based Pricing

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Determine the Best Pricing Strategy For Your Business

Fill out this form to access the free template., price elasticity of demand.

Price elasticity of demand is used to determine how a change in price affects consumer demand.

If consumers still purchase a product despite a price increase (such as cigarettes and fuel) that product is considered inelastic .

On the other hand, elastic products suffer from pricing fluctuations (such as cable TV and movie tickets).

You can calculate price elasticity using the formula:

% Change in Quantity ÷ % Change in Price = Price Elasticity of Demand

The concept of price elasticity helps you understand whether your product or service is sensitive to price fluctuations. Ideally, you want your product to be inelastic — so that demand remains stable if prices do fluctuate.

Cost, Margin, & Markup in Pricing

To choose a pricing strategy, it’s also essential to understand the role of cost, margin, and markup — especially if you’d like your pricing to be cost-based . Let’s dive into the definition for each.

Cost refers to the fees you incur from manufacturing, sourcing, or creating the product you sell. That includes the materials themselves, the cost of labor, the fees paid to suppliers, and even the losses. Cost doesn’t include overhead and operational expenses such as marketing, advertising, maintenance, or bills.

Margin (in this case, gross margin) refers to the amount your business earns after you subtract manufacturing costs.

Markup refers to the additional amount you charge for your product over the production and manufacturing fees.

Now, let’s cover some common pricing strategies. As we do so, it’s important to note that these aren’t necessarily standalone strategies — many can be combined when setting prices for your products and services.

• Competition-Based Pricing
• Dynamic Pricing
• High-Low Pricing
• Penetration Pricing
• Skimming Pricing
• Psychological Pricing
• Geographic Pricing

Now, let's dive into the descriptions of each pricing strategy — many of which are included in the template below — so you can learn about what makes each of them unique.

Discover how much your business can earn using different pricing strategies with HubSpot's free sales pricing calculator so you can choose the best pricing model for your business.

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1. competition-based pricing strategy.

Competition-based pricing is also known as competitive pricing or competitor-based pricing. This pricing strategy focuses on the existing market rate (or going rate ) for a company’s product or service; it doesn’t take into account the cost of their product or consumer demand.

Instead, a competition-based pricing strategy uses the competitors’ prices as a benchmark. Businesses who compete in a highly saturated space may choose this strategy since a slight price difference may be the deciding factor for customers.

With competition-based pricing , you can price your products slightly below your competition, the same as your competition, or slightly above your competition. For example, if you sold marketing automation software , and your competitors’ prices ranged from $19.99 per month to $39.99 per month, you’d choose a price between those two numbers.

Whichever price you choose, competitive pricing is one way to stay on top of the competition and keep your pricing dynamic.

Competition-Based Pricing Strategy in Marketing

Consumers are primarily looking for the best value which isn’t always the same as the lowest price. Pricing your products and services competitively in the market can put your brand in a better position to win a customer’s business. Competitive pricing works especially well when your business offers something the competition doesn’t — like exceptional customer service, a generous return policy, or access to exclusive loyalty benefits .

2. Cost-Plus Pricing Strategy

A cost-plus pricing strategy focuses solely on the cost of producing your product or service, or your COGS . It’s also known as markup pricing since businesses who use this strategy “markup” their products based on how much they’d like to profit.

To apply the cost-plus method, add a fixed percentage to your product production cost. For example, let’s say you sold shoes. The shoes cost $25 to make, and you want to make a $25 profit on each sale. You’d set a price of $50, which is a markup of 100%.

Cost-plus pricing is typically used by retailers who sell physical products. This strategy isn’t the best fit for service-based or SaaS companies as their products typically offer far greater value than the cost to create them.

Cost-Plus Pricing Strategy in Marketing

Cost-plus pricing works well when the competition is pricing using the same model. It won’t help you attract new customers if your competition is working to acquire customers rather than growing profits. Before executing this strategy, complete a pricing analysis that includes your closest competitors to make sure this strategy will help you meet your goals.

3. Dynamic Pricing Strategy

Dynamic pricing is also known as surge pricing, demand pricing, or time-based pricing. It’s a flexible pricing strategy where prices fluctuate based on market and customer demand.

Hotels, airlines, event venues, and utility companies use dynamic pricing by applying algorithms that consider competitor pricing, demand, and other factors. These algorithms allow companies to shift prices to match when and what the customer is willing to pay at the exact moment they’re ready to make a purchase.

Dynamic Pricing Strategy in Marketing

Dynamic pricing can help keep your marketing plans on track. Your team can plan for promotions in advance and configure the pricing algorithm you use to launch the promotion price at the perfect time. You can even A/B test dynamic pricing in real-time to maximize your profits.

4. High-Low Pricing Strategy

A high-low pricing strategy is when a company initially sells a product at a high price but lowers that price when the product drops in novelty or relevance. Discounts, clearance sections, and year-end sales are examples of high-low pricing in action — hence the reason why this strategy may also be called a discount pricing strategy.

High-low pricing is commonly used by retail firms that sell seasonal items or products that change often, such as clothing, decor, and furniture. What makes a high/low pricing strategy appealing to sellers? Consumers enjoy anticipating sales and discounts, hence why Black Friday and other universal discount days are so popular.

High-Low Pricing Strategy in Marketing

If you want to keep the foot traffic steady in your stores year-round, a high-low pricing strategy can help. By evaluating the popularity of your products during particular periods throughout the year, you can leverage low pricing to increase sales during traditionally slow months.

5. Penetration Pricing Strategy

Contrasted with skimming pricing, a penetration pricing strategy is when companies enter the market with an extremely low price, effectively drawing attention (and revenue) away from higher-priced competitors. Penetration pricing isn’t sustainable in the long run, however, and is typically applied for a short time.

This pricing method works best for brand new businesses looking for customers or for businesses that are breaking into an existing, competitive market. The strategy is all about disruption and temporary loss … and hoping that your initial customers stick around as you eventually raise prices.

(Another tangential strategy is loss leader pricing , where retailers attract customers with intentionally low-priced items in hopes that they’ll buy other, higher-priced products, too. This is precisely how stores like Target get you — and me.)

Penetration Pricing Strategy in Marketing

Penetration pricing has similar implications as freemium pricing — the money won’t come in overnight. But with enough value and a great product or service, you could continue to make money and scale your business as you increase prices. One tip for this pricing strategy is to market the value of the products you sell and let price be a secondary point.

6. Skimming Pricing Strategy

A skimming pricing strategy is when companies charge the highest possible price for a new product and then lower the price over time as the product becomes less and less popular. Skimming is different from high-low pricing in that prices are lowered gradually over time.

Technology products, such as DVD players, video game consoles, and smartphones, are typically priced using this strategy as they become less relevant over time. A skimming pricing strategy helps recover sunk costs and sell products well beyond their novelty, but the strategy can also annoy consumers who bought at full price and attract competitors who recognize the “fake” pricing margin as prices are lowered.

Skimming Pricing Strategy in Marketing

Skimming pricing strategy can work well if you sell products that have products with varying life cycle lengths. One product may come in and out of popularity quickly so you have a short time to skim your profits in the beginning stages of the life cycle. On the flip side, a product that has a longer life cycle can stay at a higher price for more time. You’ll be able to maintain your marketing efforts for each product more effectively without constantly adjusting your pricing across every product you sell.

7. Value-Based Pricing Strategy

A value-based pricing strategy is when companies price their products or services based on what the customer is willing to pay. Even if it can charge more for a product, the company decides to set its prices based on customer interest and data.

If used accurately, value-based pricing can boost your customer sentiment and loyalty. It can also help you prioritize your customers in other facets of your business, like marketing and service.

On the flip side, value-based pricing requires you to constantly be in tune with your various customer profiles and buyer personas and possibly vary your prices based on those differences.

Value-Based Pricing Strategy in Marketing

Marketing to your customers should always lead with value, so having a value-based pricing model should help strengthen the demand for your products and services. Just be sure that your audiences are distinct enough in what they’re willing to pay for — you don’t want to run into trouble by charging more or less based on off-limits criteria .

8. Psychological Pricing Strategy

Psychological pricing is what it sounds like — it targets human psychology to boost your sales.

For example, according to the " 9-digit effect ", even though a product that costs $99.99 is essentially $100, customers may see this as a good deal simply because of the "9" in the price.

Another way to use psychological pricing would be to place a more expensive item directly next to (either, in-store or online) the one you're most focused on selling . Or offer a "buy one, get one 50% off (or free)" deal that makes customers feel as though the circumstances are too good to pass up on.

And lastly, changing the font, size, and color of your pricing information on and around your products has also been proven, in various instances, to boost sales.

Psychological Pricing Strategy in Marketing

Psychological pricing strategy requires an intimate understanding of your target market to yield the best results. If your customers are inclined to discounts and coupons, appealing to this desire through your marketing can help this product meet their psychological need to save money. If paying for quality is important to your audience, having the lowest price on the shelf might not help you reach your sales goals. Regardless of the motivations your customers have for paying a certain price for a product, your pricing and marketing should appeal to those motivations.

9. Geographic Pricing Strategy

Geographic pricing is when products or services are priced differently depending on geographical location or market.

This strategy may be used if a customer from another country is making a purchase or if there are disparities in factors like the economy or wages (from the location in which you're selling a good to the location of the person it is being sold to).

Geographic Pricing Strategy in Marketing

Marketing a geographically priced product or service is easy thanks to paid social media advertising. Segmenting by zip code, city, or even region can be accomplished at a low cost with accurate results. Even as specific customers travel or permanently move, your pricing model will remain the same which helps you maintain your marketing costs.

Download our free guide to creating buyer personas to easily organize your audience segments and make your marketing stronger.

Like we said above, these strategies aren’t necessarily meant to stand alone. We encourage you to mix and match these methods as needed.

Below, we cover more specific pricing models for individual products.

Pricing Models

While your pricing strategy may determine how your company sets fees for its offerings overall , the below pricing models can help you set prices for specific product lines. Let's take a look.

1. Freemium

A combination of the words “free” and “premium,” freemium pricing is when companies offer a basic version of their product hoping that users will eventually pay to upgrade or access more features.

Unlike cost-plus, freemium is a pricing model commonly used by SaaS and other software companies. They choose this model because free trials and limited memberships offer a peek into a software’s full functionality — and also build trust with a potential customer before purchase.

With freemium, a company’s prices must be a function of the perceived value of their products. For example, companies that offer a free version of their software can’t ask users to pay $100 to transition to the paid version. Prices must present a low barrier to entry and grow incrementally as customers are offered more features and benefits.

Freemium Pricing in Marketing

Freemium pricing may not make your business a lot of money on the initial acquisition of a customer, but it gives you access to the customer which is just as valuable. With access to their email inboxes, phone number, and any other contact information you gather in exchange for the free product, you can nurture the customer into a brand loyal advocate with a worthwhile LTV .

2. Premium Pricing

Also known as prestige pricing and luxury pricing, a premium pricing model is when companies price their products high to present the image that their products are high-value, luxury, or premium. Prestige pricing focuses on the perceived value of a product rather than the actual value or production cost.

Prestige pricing is a direct function of brand awareness and brand perception. Brands that apply this pricing method are known for providing value and status through their products — which is why they’re priced higher than other competitors. Fashion and technology are often priced using this model because they can be marketed as luxurious, exclusive, and rare.

Premium Pricing in Marketing

Premium pricing is quite dependent upon the perception of your product within the market. There are a few ways to market your product in order to influence a premium perception of it including using influencers, controlling supply, and driving up demand.

3. Hourly Pricing

Hourly pricing, also known as rate-based pricing, is commonly used by consultants, freelancers, contractors, and other individuals or laborers who provide business services. Hourly pricing is essentially trading time for money. Some clients are hesitant to honor this pricing strategy as it can reward labor instead of efficiency.

Hourly Pricing in Marketing

If your business thrives on quick, high-volume projects, hourly pricing can be just the incentive for customers to work with you. By breaking down your prices into hourly chunks, customers can make the decision to work with you based on a low price point rather than finding room in their budget for an expensive project-based commitment.

4. Bundle Pricing

Bundle pricing is when you offer (or "bundle") two or more complementary products or services together and sell them for a single price. You may choose to sell your bundled products or services only as part of a bundle, or sell them as both components of bundles and individual products.

This is a great way to add value through your offerings to customers who are willing to pay extra upfront for more than one product. It can also help you get your customers hooked on more than one of your products faster.

Bundle Pricing in Marketing

Marketing bundle deals can help you sell more products than you would otherwise sell individually. It’s a smart way to upsell and cross-sell your offerings in a way that is beneficial for the customer and your revenue goals.

5. Project-Based Pricing

Project-based pricing is the opposite of hourly pricing — this approach charges a flat fee per project instead of a direct exchange of money for time. It is also used by consultants, freelancers, contractors, and other individuals or laborers who provide business services.

Project-based pricing may be estimated based on the value of the project deliverables. Those who choose this pricing model may also create a flat fee from the estimated time of the project.

Project-Based Pricing in Marketing

Leading with the benefits a customer will derive from working with your business on a project can make project-based pricing more appealing. Although the cost of the project may be steep, the one-time investment can be worth it. Your clients will know that they’ll be able to work with you until the project is completed rather than until their allotted hours are depleted.

6. Subscription Pricing

Subscription pricing is a common pricing model at SaaS companies, online retailers, and even agencies who offer subscription packages for their services.

Whether you offer flat rate subscriptions or tiered subscriptions, the benefits of this model are endless. For one, you have all but guaranteed monthly recurring revenue (MRR) and yearly recurring revenue. That makes it simpler to calculate your profits on a monthly basis. It also often leads to higher customer lifetime values .

The one thing to be wary of when it comes to subscription pricing is the high potential for customer churn . People cancel subscriptions all the time, so it's essential to have a customer retention strategy in place to ensure clients keep their subscriptions active.

Subscription Pricing in Marketing

When marketing your subscription products, it's essential to create buyer personas for each tier. That way, you know which features to include and what will appeal to each buyer. A general subscription that appeals to everyone won't pull in anyone.

Even Amazon, which offers flat-rate pricing for its Prime subscription, includes a membership for students. That allows them to market the original Prime more effectively by creating a sense of differentiation.

Now, let’s discuss how to build a pricing strategy of your own liking.

1. Evaluate pricing potential.

You want to make a strategy that is optimal for your unique business. To begin, you need to evaluate your pricing potential. This is the approximate product or service pricing your business can potentially achieve in regard to cost, demand, and more.

Some factors that can affect your pricing potential include:

• Geographical market specifics
• Operating costs
• Inventories
• Demand fluctuations
• Competitive advantages and concerns
• Demographic data

We’ll dive deeper into demographic data in the next step.

2. Determine your buyer personas.

You have to price your product on the type of buyer persona that’s looking for it. When you look at your ideal customer, you’ll have to look at their:

• Customer Lifetime Value
• Willingness to Pay
• Customer Pain Points

To aid in this process, interview customers and prospects to see what they do and like, and ask for your sales team’s feedback on the best leads and their characteristics.

3. Analyze historical data.

Take a look at your previous pricing strategies. You can calculate the difference in closed deals, churn data , or sold product on different pricing strategies that your business has worked with before and look at which were the most successful.

4. Strike a balance between value and business goals.

When developing your pricing strategy, you want to make sure the price is good to your bottom line and your buyer personas. This compromise will better help your business and customer pool, with the intentions of:

• Increasing profitability
• Improving cash flow
• Market penetration
• Expanding market share

5. Look at competitor pricing.

You can’t make a pricing strategy without conducting research on your competitors’ offerings. You’ll have to decide between two main choices when you see the price difference for your same product or service:

• Beat your competitors’ price - If a competitor is charging more for the same offering as your brand, then make the price more affordable.
• Beat your competitors’ value - Also known as value-based pricing , you can potentially price your offering higher than your competitors if the value provided to the customer is greater.

To see the competition’s full product or service offering, conduct a full competitive analysis so you can see their strengths and weaknesses, and make your pricing strategy accordingly.

So we’ve gone over how to create a pricing strategy, now let’s discuss how to apply these steps to different businesses and industries.

Not every pricing strategy is applicable to every business. Some strategies are better suited for physical products whereas others work best for SaaS companies. Here are examples of some common pricing models based on industry and business.

Product Pricing Model

Unlike digital products or services, physical products incur hard costs (like shipping, production, and storage) that can influence pricing. A product pricing strategy should consider these costs and set a price that maximizes profit, supports research and development, and stands up against competitors.

👉🏼 We recommend these pricing strategies when pricing physical products : cost-plus pricing, competitive pricing, prestige pricing, and value-based pricing.

Digital Product Pricing Model

Digital products, like software, online courses, and digital books, require a different approach to pricing because there’s no tangible offering or unit economics (production cost) involved. Instead, prices should reflect your brand, industry, and overall value of your product.

👉🏼 We recommend using these pricing strategies when pricing digital products: competition-based pricing, freemium pricing, and value-based pricing.

Restaurant Pricing Model

Restaurant pricing is unique in that physical costs, overhead costs, and service costs are all involved. You must also consider your customer base, overall market trends for your location and cuisine, and the cost of food — as all of these can fluctuate.

👉🏼 We recommend using these pricing strategies when pricing at restaurants: cost-plus pricing, premium pricing, and value-based pricing.

Event Pricing Model

Events can’t be accurately measured by production cost (not unlike the digital products we discussed above). Instead, event value is determined by the cost of marketing and organizing the event as well as the speakers, entertainers, networking, and the overall experience — and the ticket prices should reflect these factors.

👉🏼 We recommend using these pricing strategies when pricing live events: competition-based pricing, dynamic pricing, and value-based pricing.

Services Pricing Model

Business services can be hard to price due to their intangibility and lack of direct production cost. Much of the service value comes from the service provider’s ability to deliver and the assumed caliber of their work. Freelancers and contractors , in particular, must adhere to a services pricing strategy.

👉🏼 We recommend using these pricing strategies when pricing services: hourly pricing, project-based pricing, and value-based pricing.

Nonprofit Pricing Model

Nonprofits need pricing strategies, too — a pricing strategy can help nonprofits optimize all processes so they’re successful over an extended period of time.

A nonprofit pricing strategy should consider current spending and expenses, the breakeven number for their operation, ideal profit margin, and how the strategy will be communicated to volunteers, licensees, and anyone else who needs to be informed. A nonprofit pricing strategy is unique because it often calls for a combination of elements that come from a few pricing strategies.

👉🏼 We recommend using these pricing strategies when pricing nonprofits: competitive pricing, cost-plus pricing, demand pricing, and hourly pricing.

Education Pricing Model

Education encompasses a wide range of costs that are important to consider depending on the level of education, private or public education, and education program/ discipline.

Specific costs to consider in an education pricing strategy are tuition, scholarships, additional fees (labs, books, housing, meals, etc.). Other important factors to note are competition among similar schools, demand (number of student applications), number and costs of professors/ teachers, and attendance rates.

👉🏼 We recommend using these pricing strategies when pricing education: competitive pricing, cost-based pricing, and premium pricing.

Real Estate Pricing Model

Real estate encompasses home value estimates, market competition, housing demand, and cost of living. There are other factors that play a role in real estate pricing models including potential bidding wars, housing estimates and benchmarks (which are available through real estate agents but also through free online resources like Zillow ), and seasonal shifts in the real estate market.

👉🏼 We recommend using these pricing strategies when pricing real estate: competitive pricing, dynamic pricing, premium pricing, and value-based pricing.

Agency Pricing Model

Agency pricing models impact your profitability, retention rates, customer happiness, and how you market and sell your agency. When developing and evolving your agency’s pricing model, it’s important to take into consideration different ways to optimize it so you can determine the best way to boost the business's profits.

👉🏼 We recommend using these pricing strategies when pricing agencies: hourly pricing, project-based pricing, and value-based pricing.

Manufacturing Pricing Model

The manufacturing industry is complex — there are a number of moving parts and your manufacturing pricing model is no different. Consider product evolution, demand, production cost, sale price, unit sales volume, and any other costs related to your process and product. Another key part to a manufacturing pricing strategy is understanding the maximum amount the market will pay for your specific product to allow for the greatest profit.

👉🏼 We recommend using these pricing strategies when pricing manufacturing: competitive pricing, cost-plus pricing, and value-based pricing.

Ecommerce Pricing Model

Ecommerce pricing models are how you determine the price at which you’ll sell your online products and what it'll cost you to do so. Meaning, you must think about what your customers are willing to pay for your online products and what those products cost you to purchase and/or create. You might also factor in your online campaigns to promote these products as well as how easy it is for your customers to find similar products to yours on the ecommerce sites of your competitors.

👉🏼 We recommend using these pricing strategies when pricing ecommerce: competitive pricing, cost-based pricing, dynamic pricing, freemium pricing, penetration pricing, and value-based pricing.

Pricing Analysis

Pricing analysis is a process of evaluating your current pricing strategy against market demand. Generally, pricing analysis examines price independently of cost. The goal of a pricing analysis is to identify opportunities for pricing changes and improvements.

You typically conduct a pricing analysis when considering new product ideas, developing your positioning strategy, or running marketing tests. It's also wise to run a price analysis once every year or two to evaluate your pricing against competitors and consumer expectations — doing so preemptively avoids having to wait for poor product performance.

How to Conduct a Pricing Analysis

1. determine the true cost of your product or service..

To calculate the true cost of a product or service that you sell, you’ll want to recognize all of your expenses including both fixed and variable costs. Once you’ve determined these costs, subtract them from the price you’ve already set or plan to set for your product or service.

2. Understand how your target market and customer base respond to the pricing structure.

Surveys, focus groups, or questionnaires can be helpful in determining how the market responds to your pricing model. You’ll get a glimpse into what your target customers value and how much they’re willing to pay for the value your product or service provides.

3. Analyze the prices set by your competitors.

There are two types of competitors to consider when conducting a pricing analysis: direct and indirect.

Direct competitors are those who sell the exact same product that you sell. These types of competitors are likely to compete on price so they should be a priority to review in your pricing analysis.

Indirect competitors are those who sell alternative products that are comparable to what you sell. If a customer is looking for your product, but it’s out of stock or it’s out of their price range, they may go to an indirect competitor to get a similar product.

4. Review any legal or ethical constraints to cost and price.

There’s a fine line between competing on price and falling into legal and ethical trouble. You’ll want to have a firm understanding of price-fixing and predatory pricing while doing your pricing analysis in order to steer clear of these practices.

Analyzing your current pricing model is necessary to determine a new (and better!) pricing strategy. This applies whether you're developing a new product, upgrading your current one, or simply repositioning your marketing strategy.

Next, let’s look at some examples of pricing strategies that you can use for your own business.

Dynamic Pricing Strategy: Chicago Cubs Freemium Pricing Strategy: HubSpot Penetration Pricing Strategy: Netflix Premium Pricing: AWAY Competitive Pricing Strategy: Shopify Project-Based Pricing Strategy: Courtney Samuel Events Value-Based Pricing Strategy: INBOUND Bundle Pricing: State Farm Geographic Pricing: Gasoline

Pricing models can be hard to visualize. Below, we’ve pulled together a list of examples of pricing strategies as they’ve been applied to everyday situations or businesses.

1. Dynamic Pricing Strategy: Chicago Cubs

I live in Chicago five blocks away from Wrigley Field, and my friends and I love going to Cubs games. Finding tickets is always interesting, though, because every time we check prices, they’ve fluctuated a bit from the last time. Purchasing tickets six weeks in advance is always a different process than purchasing them six days prior — and even more sox pricing at the gate.

This is an example of dynamic pricing — pricing that varies based on market and customer demand. Prices for Cubs games are always more expensive on holidays, too, when more people are visiting the city and are likely to go to a game.

(Another prime example of dynamic pricing is INBOUND , for which tickets get more expensive as the event nears.)

2. Freemium Pricing Strategy: HubSpot

HubSpot is an example of freemium pricing at work. There's a free version of the CRM for scaling businesses as well as paid plans for the businesses using the CRM platform that need a wider range of features .

Moreover, within those marketing tools, HubSpot provides limited access to specific features. This type of pricing strategy allows customers to acquaint themselves with HubSpot and for HubSpot to establish trust with customers before asking them to pay for additional access.

3. Penetration Pricing Strategy: Netflix

Netflix is a classic example of penetration pricing : entering the market at a low price (does anyone remember when it was $7.99?) and increasing prices over time. Since I joined a couple of years ago, I’ve seen a few price increase notices come through my own inbox.

Despite their increases, Netflix continues to retain — and gain — customers. Sure, Netflix only increases their subscription fee by $1 or $2 each time, but they do so consistently. Who knows what the fees will be in five or ten years?

4. Premium Pricing: AWAY

There are lots of examples of premium pricing strategies … Rolex, Tesla, Nike — you name it. One that I thought of immediately was AWAY luggage .

Does luggage need to be almost $500? I’d say no, especially since I recently purchased a two-piece Samsonite set for one-third the cost. However, AWAY has still been very successful even though they charge a high price for their luggage. This is because when you purchase AWAY, you’re purchasing an experience. The unique branding and the image AWAY portrays for customers make the value of the luggage match the purchase price.

5. Competitive Pricing Strategy: Shopify

Shopify is an ecommerce platform that helps businesses manage their stores and sell their products online. Shopify — which integrates with HubSpot — has a competitive pricing strategy.

There are a number of ecommerce software options on the market today — Shopify differentiates itself by the features they provide users and the price at which they offer them. They have three thoughtfully-priced versions of their product for customers to choose from with a number of customizable and flexible features.

With these extensive options tailored to any ecommerce business' needs, the cost of Shopify is highly competitive and is often the same as or lower than other ecommerce platforms on the market today.

6. Project-Based Pricing Strategy: Courtney Samuel Events

Anyone who's planned a wedding knows how costly they can be. I'm in the midst of planning my own, and I've found that the bundled, project-based fees are the easiest to manage. For example, my wedding coordinator Courtney charges one flat fee for her services. This pricing approach focuses on the value of the outcome (e.g., an organized and stressless wedding day) instead of the value of the time spent on calls, projects, or meetings.

Because vendors like Courtney typically deliver a variety of services — wedding planning, day-of coordination, physical meetings, etc. — in addition to spending time answering questions and providing thoughtful suggestions, a project-based fee better captures the value of her work. Project-based pricing is also helpful for clients and companies who'd rather pay a flat fee or monthly retainer than deal with tracked hours or weekly invoices.

7. Value-Based Pricing Strategy: INBOUND

While INBOUND doesn't leave the ultimate ticket price up to its attendees, it does provide a range of tickets from which customers can choose. By offering multiple ticket "levels," customers can choose what experience they want to have based on how they value the event.

INBOUND tickets change with time, however, meaning this pricing strategy could also be considered dynamic (like the Cubs example above). As the INBOUND event gets closer, tickets tend to rise in price.

8. Bundle Pricing: State Farm

State Farm is known for its tongue-in-cheek advertisements and its bundle deals for home and auto insurance. You can receive a quote on one or the other, but getting a quote on both can save you money on your premiums.

State Farm benefits from bundle pricing by selling more policies, and consumers benefit by paying less than they normally would if they used two different insurance providers for home and auto coverage.

9. Geographic Pricing: Gasoline

Gasoline is notorious for having a wide range of prices around the world, but even within the United States, prices can vary by several dollars depending on the state you live in. In California for example, gas prices have consistently hovered around $3 in the summer months for the past 10 years. On the other hand, gas prices in Indiana have been in the $2 range during the same time period. Laws, environmental factors, and production cost all influence the price of gasoline in California which causes the geographic disparity in the cost of the fuel.

Get Your Pricing Strategy Right

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 pricing strategy to use.

More than anything, though, remember 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.

Editor's note: This post was originally published in March 2019 and has been updated for comprehensiveness.

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Pricing Strategy in a Business Plan: Deep Dive

• March 21, 2024
• Business Plan , How to Write

In this blog post, we’re diving into how to choose and explain your pricing strategy in your business plan. We’ll cover different pricing models like penetration, premium, and value-based. We’ll also dive into how to present your pricing strategy in your business plan.

Whether you’re starting a new business or preparing a business plan for an existing company, getting your pricing right is key to attracting customers and making a profit. Let’s break down how to make your pricing strategy clear and effective. Let’s dive in!

What are the different pricing strategies?

Different pricing strategies can significantly influence demand, profitability, and market positioning for businesses. Here’s an overview of some common pricing strategies:

• Cost-Plus Pricing: Adds a markup percentage to the cost of producing a product or delivering a service. It’s simple to calculate and ensures a profit margin.
• Value-Based Pricing: Sets prices based on the perceived value to the customer rather than the cost of production. This strategy focuses on the benefits and value the product or service brings to the customer.
• Competitive Pricing: Prices are set based on competitors’ pricing structures. Businesses might price their products slightly lower than competitors to gain market share or at a similar level to match the market rate.
• Penetration Pricing: Involves setting lower prices to enter a competitive market and attract customers quickly. The goal is to gain market share and then gradually increase prices.
• Premium Pricing: Setting the price of a product or service higher than the competitors. This strategy is used to signal superior quality or exclusivity to justify the higher cost.
• Dynamic Pricing: Adjusting prices in real-time based on market demand, competition, and other factors. Common in industries like hospitality and airlines.
• Freemium Pricing: Offering a basic product or service for free while charging for premium features. This strategy is often used by software and service companies to attract users.
• Bundle Pricing: Combining several products or services and selling them at a single price, often lower than the total cost of buying each item separately. This can increase the perceived value and encourage sales.

How to choose a pricing strategy

Here’s how to come up with an efficient pricing strategy:

Align Pricing with Market Strategy

Begin by articulating how your pricing strategy complements your overall market strategy. If you’re aiming for market penetration, explain how your pricing is designed to attract a large volume of customers by being more affordable than competitors.

For a premium pricing strategy, discuss the exceptional quality, exclusivity, or unique value your offerings bring, justifying higher price points.

If you’re adopting a value-based pricing model instead, illustrate how your pricing directly correlates with the perceived value to the customer, possibly through superior benefits or cost savings they provide.

Relate Pricing to the Target Market

Your pricing strategy should be closely tied to your understanding of your target market .

For instance, if your target market highly values sustainability and is willing to pay more for eco-friendly products, your pricing should reflect this. Similarly, if you’re targeting a price-sensitive segment, explain how your pricing strategy enables you to offer competitive value while maintaining profitability.

Consider the Competitive Landscape

A comprehensive pricing strategy also considers the competitive landscape . Analyze your competitors’ pricing and how your strategy positions you within this context.

Are you offering a more affordable alternative to premium products, or are you introducing a higher-quality option in a market segment dominated by low-cost competitors?

Discuss how your pricing strategy gives you a competitive edge, whether it’s by filling a gap in the market, offering better value, or challenging the status quo with innovative pricing models.

Where to include your prices in your business plan?

In your business plan, prices should be detailed under “Products or Services” within the Business Overview section of your business.

This part of the plan not only describes what you are offering but also provides an ideal opportunity to outline your pricing strategy and the specific prices or price ranges of your products or services.

Here, you can explain how your pricing fits into the market and aligns with your overall business strategy, giving potential investors or lenders a clear understanding of your approach to generating revenue.

Remember your pricing strategy should align with your financial projections (projected income statement, cash flow statement, and balance sheet). Indeed, you will need to give some high-level explanation of how you came up with these financial projections, based on your pricing strategy too.

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19 Pricing Strategies (+ Pricing Strategy Examples)

Published June 15, 2023

Published Jun 15, 2023

REVIEWED BY: Meaghan Brophy

WRITTEN BY: Katie-Jay Simmons

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This article is part of a larger series on Retail Management .

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• 1 Keystone Pricing
• 2 Cost-plus Pricing
• 3 Manufacturer’s Suggested Retail Price (MSRP)
• 4 Psychological Pricing
• 5 Value-based Pricing
• 6 Discount Pricing
• 7 Loss-leader Pricing
• 8 Price Anchoring
• 9 Competitive Pricing
• 10 Penetration Pricing
• 11 Bundle Pricing
• 12 Project-based Pricing
• 13 Hourly Pricing
• 14 Premium Pricing
• 15 Price Skimming
• 16 Freemium Pricing
• 17 High-low Pricing
• 18 Dynamic Pricing
• 19 Geographical Pricing
• 20 Pricing Strategies Frequently Asked Questions (FAQ)
• 21 Bottom Line

Pricing strategies are the methods and formulas that businesses use to determine the cost of their products. A good pricing strategy finds the sweet spot between what customers are happy to pay and what makes your business money. It should also adapt to changes in the market or economy.

Here’s a list of 19 effective pricing strategies—from using the manufacturer’s suggested price to aligning with your competitors’ pricing to changing pricing in real time based on events—with examples of how to use them.

1. Keystone Pricing

What Is It: Doubling the product cost to get the selling price Commonly Used By: Retailers and ecommerce sellers

Keystone pricing is a strategy in which the asking price is double the product’s wholesale cost, or close to a 50% profit margin. It’s the default pricing strategy across both retail and ecommerce due to its simple application and ability to yield profits.

Occasionally businesses will use keystone pricing as a base markup on most goods, then apply higher markups or discounted pricing to certain items based on demand, volume, and competition. It’s a particularly common strategy in fashion, consumer goods, and grocery sectors.

For example , say you run a jewelry store. You purchase a birthstone ring from a wholesaler for $90. To maintain a keystone pricing strategy, you set the retail price for the ring at $180, ensuring a consistent 100% markup. This approach allows you to cover your costs, account for operating expenses, and generate a reasonable profit while offering the product to customers at a perceived fair market value.

Keystone pricing may not be the best strategy for every type of product. If your goods have low turnover rates, involve high shipping and handling costs, or are unique or rare, you may be undervaluing them by using keystone pricing. However, if your products are widely available and easily replaceable, keystone pricing may put them at too high of a price to generate sales.

Check out our guide on how to price your products for step-by-step instructions.

2. Cost-plus Pricing

What Is It: Applying a standard markup percentage on top of your cost of goods sold (COGS) Commonly Used By: Wholesalers, manufacturers, artisans, and private label sellers

Cost-plus pricing (also known as markup pricing ) involves calculating the total fixed and variable costs associated with your product (labor, marketing, shipping, etc.), and then adding a markup to achieve your desired profit margin. Most retail brands aim for a 30%–50% margin, which means roughly a 40%–100% markup.

Cost-plus pricing works well for companies that sell labor-intensive products or large amounts of similar products. Here are some examples of how wholesalers, manufacturers, artisans, and craftsmen typically use cost-plus pricing:

• Wholesalers: Wholesalers usually add a flat percentage markup to all goods that pass through their hands. A common wholesale or middleman markup on most consumer goods is 20%, but that can vary depending on your industry.
• Manufacturers: Manufacturers use different cost-plus prices depending on the buyer. A manufacturer might sell bulk goods to wholesalers at a cost-plus of 100%, just like a keystone markup—but then also sell single units directly to consumers on its website at a 200% markup (generating a 67% margin). This way, it makes more money per unit on smaller sales.
• Artisans and Craftsmen: Labor is the cornerstone of artisanal and craft works, so the cost-plus price represents the value of the labor and the product. For example, if you have a wooden chest built by an artisan, the cost-plus markup might be 70%. The base price represents materials and hours, and the 70% markup represents the value of the labor and finished product.

Use this formula to calculate cost-plus pricing based on the markup you want:

Item Cost x (1 + [Markup/100]) = Selling Price

So, if you are a craftsman who spent $150 making that wooden chest we mentioned above and wants to sell it at a 70% markup, your calculation would be:

150 x (1 + [70/100] 150 x (1 + 0.70] 150 x 1.70 Selling price = $255

3. Manufacturer’s Suggested Retail Price (MSRP)

What Is It: Using the price that product manufacturers recommend for their goods Commonly Used By: Retailers and ecommerce sellers

The MSRP pricing strategy is popular among retailers that purchase goods rather than making the products themselves. The MSRP often matches the Keystone price, but there can be exceptions.

Some retailers may have the flexibility to adjust the MSRP, but certain manufacturers or brands strictly prohibit alterations to their suggested prices. This is called MAP or Minimum Advertised Pricing , and it’s commonly used by brands like Apple to maintain their products’ value. Because of this, it’s crucial to know the pricing terms before you start working with a manufacturer to avoid legal trouble.

The downside of using MSRP as your pricing strategy is that you’ll have the same prices as your competitors. So, you’ll have to differentiate your store in other ways—for example, offering free shipping for ecommerce sellers and exceptional in-store promotions for retailers.

Some brands print the MSRP on their product packaging to ensure retailer compliance. If you choose to use a different pricing strategy in these cases, you’re likely to upset your customers as well as the manufacturer. (Source: Reddit)

4. Psychological Pricing

What Is It: Using prices that end in an odd number (typically 9, 5, or 7) to give the impression of a lower price and a good deal Commonly Used By: Retailers, ecommerce sellers, big box stores, and discount chains

Have you ever walked into a store or viewed an infomercial and noticed that all of the prices end in 99 cents? That’s psychological pricing at work.

A store may price a product at $199 instead of $200 or $4.95 instead of $5. With psychological pricing, the theory is that customers put a greater emphasis on the first digit of a product price, so $199 seems like a much better value than $200, even though the actual price difference is minimal.

By providing customers with the sense that they’re getting a bargain or paying less, psychological pricing reduces the psychological pain of loss that customers experience when parting with their money. This incentivizes shoppers to buy, especially in impulsive scenarios. It also gives them the sense that they’re walking away with a good deal.

An ad from Food Lion shows all the deals that it is currently offering and gives us a great example of a retailer creating the illusion of a deal with psychological pricing. (Source: Pinterest)

Psychological pricing is also a great “bang for your buck” pricing strategy, where only a few cents can inspire customers to make much larger purchases. For example, at my boutique, we decided to re-price our jeans from $70 to $69.99. Immediately, we saw a massive uptick in denim purchases, simply due to the 1-cent price change.

Many retailers choose to mark all their goods with 99-cent endings. Some, however, will reserve the power of psychological pricing exclusively for their sale pieces to incentivize faster turnover of old merchandise. Other common prices that retailers use to make a more appealing sticker price are 95 cents, 89 cents, and 69 cents.

Steer clear of psychological pricing techniques if you sell high-value items, as it may decrease the perceived worth.

5. Value-based Pricing

What Is It: A strategy in which pricing is based on perceived value or how much the customer believes the product is worth Commonly Used By: Specialty stores, luxury stores, sellers of rare and unique goods

The value-based pricing strategy works best for merchandise with high brand recognition, luxury goods, and unique products that have exclusive features that set them above the competition. It does not work well for businesses that sell commoditized goods or products that lack exclusive features (such as grocery or convenience retailers).

As a value-based pricing strategy example, say you own a shop that sells vintage luxury handbags. The value of your products is not represented by doubling the production cost price or by any MSRP. In this case, you would use a value-based pricing system that accounts for the exclusivity of designer labels and the rarity of the bags to reflect perceived value.

To implement a value-based pricing strategy, you have to analyze three things:

• Your Customers: Conduct surveys, research locally, and understand your target market so that you can learn their value system (and set prices accordingly).
• Your Market: Research industry trends and national consumer patterns to understand the value-based price that the greater population is willing to pay for your products.
• Your Competitors: Look to competing sellers to see how they are pricing their products. Successful businesses in your industry can help you understand the pricing that is helping them prosper, as well as what prices will allow you to compete.

6. Discount Pricing

What Is It: A strategy of regularly selling goods at prices under competitors’ Keystone or MSRP prices Commonly Used By: Retailers, ecommerce seller, big box stores, and discount chains

Discount pricing drives entire business models—think Dollar Store, Big Lots, and Home Goods. It’s best for volume-driven businesses that can get lower prices from suppliers by purchasing large quantities.

Be sure customers know they’re getting a deal by clearly displaying your discount or even including the undiscounted MSPR/Keystone price on the tag. This shows customers exactly how much they are saving.

Mark your racks and tags with the discount you are offering so customers know just how much they are saving. (Source: Crazy Coupon Lady)

For the small retailer, an overall discount pricing strategy can leave you with razor-thin profits that easily dip into losses. But running occasional sales, markdowns, seasonal specials, and coupons is an excellent way for small businesses to move through old products and attract new shoppers.

Plus, small businesses can use discount pricing strategies to kick-start drooping sales, unload stale stock, and take advantage of seasonal shopping trends.

To ensure that you don’t sacrifice your bottom line, run your numbers and determine whether a discount will leave you with healthy margins before applying this strategy.

7. Loss-leader Pricing

What Is It: A strategy that sets prices below production costs to attract new customers or increase sales Commonly Used By: Retail, ecommerce sellers, convenience stores, big box stores, and discount chains

Loss-leader pricing is when you sell select products at extremely low prices to draw customers in and then get them shopping for more profitable goods as well.

A good loss-leader pricing strategy example is Costco, a popular wholesale grocery membership club that sells rotisserie chickens for $4.99 each. Costco states that it actually loses money on each chicken sold, but they function as a loss leader that inspires people to sign up for memberships and shop the rest of their store.

Take a note out of Costco’s book and place your loss leaders in the back of your store . This will force shoppers to go through your entire space and be exposed to lots of other products before they reach the deal.

Loss-leader pricing is a great strategy for grocers and other stores where people make multi-item purchases, but it can be a risky pricing strategy for small businesses. The strategy relies on the fact that the profits you lose from your loss leader will be made up by profits of other items. This is difficult to ensure if you don’t sell many items per ticket or if your margins on other goods are small. Be sure that you run the numbers and know your typical units per ticker (UPT) before introducing a loss leader to your pricing strategies.

Units per ticket (UPT): A popular retail metric that tells you the average number of items in each transaction over a certain period of time. Also called IPC or Items Per Customer.

UPT formula:

UPT = total units sold / total number of transactions

8. Price Anchoring

What Is It: A strategy that involves displaying a higher anchor price alongside your product price to make it look like a better deal to customers Commonly Used By: Retail stores, ecommerce stores, discount chains, secondhand stores

There are two primary ways that you can implement an anchor pricing strategy. This first is when you display a regular or MSRP price and your lower price on the same tag. Stores like Marshalls, TJ Maxx, and other discount, consignment, and antique stores use this pricing strategy storewide.

TJ Maxx, a popular discount store, shows the “compare at” price on all their tickets so shoppers know just how much they are saving. (Source: Consumer Products Safety Commission)

Another anchoring strategy that you can use is to display multiple models of the same product together so that the cheaper model seems like a good deal. For example, if you have ever had to choose a new phone or computer, you’ve seen that the cheaper models are typically displayed together with the most expensive model acting as the anchor price. In effect, when a customer chooses one of the less expensive models they feel as though they are getting a good deal compared to the anchor price.

Anchor pricing can work well for small sellers. It’s especially useful if you sell in a niche that has a lot of competition, but not so much that you have to substantially lower your price to compete. Often, a standard storewide 5% to 10% anchor pricing discount is enough to create a memorable sense of value that brings shoppers back for more.

9. Competitive Pricing

What Is It: A pricing strategy in which you use competitors’ prices to set the price of your same or similar products Commonly Used By: Convenience stores, big box chain stores, discount stores, gas stations, retail stores

Competitive pricing ensures that your goods are priced low enough to compete with other sellers. It’s a smart option for products that are common and easily attainable elsewhere. It’s also a useful strategy to use when testing new products that are similar to competitor’s.

Alternatively, you can use this strategy to set yourself a step ahead by making your prices lower than the competition.

In the age of Amazon and other large-scale retailers, competitive pricing is particularly important. If a shopper could just as easily buy your product on Amazon, it’s crucial to have a better price. If that’s not attainable, consider creating value in other ways—like offering free shipping or a free gift with purchase.

10. Penetration Pricing

What Is It: A pricing and marketing strategy that involves temporarily selling at a lower price to attract customers and increase brand recognition Commonly Used By: Retailers with membership options, discount stores, and big box retailers

Penetration pricing is a smart way to introduce a product to new customers, build brand recognition, and foster customer loyalty .

It works particularly well for promoting new products or things that you have to buy on a subscription or membership basis. The idea is that the low price will penetrate the market and get customers to make an initial purchase. Then, once hooked, they will continue purchasing the item as its price increases (or buying for other products from your store).

Penetration pricing strategy examples include:

• Offering a free month of membership upon sign-up
• Selling a new product at a steep price to drum up hype
• Offering a limited-time deal

For example, Fabletics, a fitness clothing membership retailer, offers new customers two bottoms for $24 and 70% off everything when they sign up. This is a deal that really gets people excited and willing to sign up for the $50 monthly subscription. The catch? The deals that reeled you in are only available for your first purchase, and after that, prices are back to their normal rates.

Fabletics has mastered the art of penetration pricing with its enticing sign-up offers. (Source: Fabletics)

11. Bundle Pricing

What Is It: A pricing strategy that offers a discount when two or more products are purchased together, rather than buying them separately Commonly Used By: Discount retailers, beauty supply, office supply, and grocers

Bundle pricing is a pricing strategy in which retailers sell multiple items together at a lower price than if purchased individually. This type of pricing typically has two objectives: giving customers a sense that they are getting a bargain and selling more products.

The benefit behind bundle pricing is that retailers are able to sell more items and increase their transaction sizes while customers walk away feeling like they got a deal.

Fast food restaurants famously take advantage of bundle pricing by offering discounted combo meals. (Source: Burger King)

In retail, bundle pricing is primarily used by discount stores or businesses that sell a lot of complementary products, like beauty or craft stores. It is also sometimes used around the holidays to promote gift baskets.

12. Project-based Pricing

What Is It: When you charge a flat fee for a specific service Commonly Used By: Service providers, freelancers

Project-based pricing is a service pricing strategy in which you set your pricing based on the service/project provided, not based on an hourly rate. This is a great way for service-based businesses to create security in the minds of their customers because it allows them to know the price upfront.

Some businesses will set a time limit on the project-based price and then upcharge or set an hourly rate for the additional time the project requires.

This strategy works best for businesses that provide services with set parameters and few potential variables, and should not be used for more creative projects. For example, nail salons charge a set price for manicures and pedicures or a tire shop offers the same price for wheel removal. Home improvement projects, on the other hand, have more variability, so hourly pricing may be better suited here.

13. Hourly Pricing

What Is It: When your price is based on an hourly rate that correlates to the length of a project Commonly Used By: Service industries that offer creative or highly variable services

This pricing strategy is the flip side of project-based pricing. It’s typically used for projects with more creative elements or less controllable or consistent parameters. This strategy is usually less favorable than project-based pricing in the eyes of the customers, but it’s more practical for most service-based industries.

For example, consider if a company charged a flat “landscaping” fee for their landscaping projects. This pricing structure would not make sense, as there are countless types of landscaping services and as well as sizes of yards and gardens. In this case, the company would have been better off using an hourly pricing strategy, so it could charge accordingly for the variability of the work and make a fair profit based on labor, resources, and time.

14. Premium Pricing

What Is It: The practice of setting a high price to give the impression that a product is superior or high quality Commonly Used By: Luxury retailers, specialty shops, antique goods, and tourist shops

Premium pricing is when retailers artificially inflate prices to create a sense of value among customers. This is a practice commonly used by luxury retailers and specialty stores to help them demonstrate the value of their goods. In other words, the price of the good creates its perceived value, which increases its demand, and, in turn, justifies its price.

Retailers that sell established brands (or are established brands themselves) can use premium pricing on all their products. However, it is also a popular strategy to select only one or a few goods to set at a premium. The products with premium pricing will raise your entire brand’s perceived value and make customers willing to pay more all-around.

For example, say that you own a specialty pool store, and Walmart sells the same pool floaties that you carry. Rather than pricing your floaties equal to or lower than Walmart’s, you can price them slightly higher to reflect your expertise, personalized service, and unique value proposition.

15. Price Skimming

What Is It: Selling a product with a higher-than-usual markup and then lowering the price over time Commonly Used By: New product launches, subscription-based businesses, retailers with membership options

Price skimming (also known as skim pricing) is a strategy that involves charging the highest initial price that customers will pay for your product then lowering it over time. The main goal is to generate the highest possible revenue by targeting customers who are willing to pay premium prices. Then, as consumer demand fades and new competitors enter the market, you reduce the price and attract more cost-conscious customers.

This strategy doesn’t work in every scenario. Price skimming is usually used when:

• There is enough demand from prospective customers who are willing to pay a high price
• There is no direct competition that would deter buyers
• A high price can effectively contribute to the item’s perceived value
• You need to recoup development and/or production costs

A classic price skimming example is the iPhone. When Apple launches a new model, they sell it at a high price to plenty of loyal, price-insensitive customers who value having the latest technology. Then, as new versions and competing devices are introduced, the company drops the price to capture more sales.

Price skimming can also be used by businesses that require recurring payments (like subscriptions and memberships). It helps foster loyalty by rewarding long-term customers with better prices. The strategy can even help with the initial signup by creating an incentive to “earn” the better rate.

16. Freemium Pricing

What Is It: A model that provides a free basic service with the option to upgrade to a paid premium version for additional features Commonly Used By: Subscription-based businesses, retailers with membership options, service providers, software-as-a-service companies

Freemium pricing is when a business will offer a base-level service, plan, or membership tier for free, as well as the option to upgrade to a premium or paid version with enhanced features, advanced functionality, or additional benefits.

By offering a free option at the forefront, the freemium pricing structure helps businesses reel in customers and get them interested in their products or services. You may be familiar with this pricing model from streaming services like YouTube or Spotify.

In both of these companies’ freemium pricing structures, there is a free service where you can play music or videos without charge. But, to listen to the entertainment without advertisements or breaks, you have to join their monthly subscription.

Another form of freemium pricing is offering a free trial . The free initial product also serves to get customers interested in your business and makes them more likely to sign up for your paid service.

Generally, you use freemium pricing on services and products that are low-cost and need to be sold in high volumes. A popularly cited stat says that there is between a 1% and 10% conversion rate from free trials to paid services through freemium pricing. If you’re thinking about using this pricing structure, be sure that your product’s overhead and marketing costs are low so you don’t end up digging yourself into an unprofitable situation.

Shipping software companies (like ShippingEasy, pictured here) use a freemium pricing model to offer a low-volume base plan. When the customer’s business grows and sales increase, they must upgrade to a paid plan to meet their order volume.

17. High-low Pricing

What Is It: When a company alternates between offering high prices and promotional discounts to attract customers Commonly Used By: Discount stores, electronics stores, clothing brands, supermarkets

High-low pricing is a strategy in which retailers alternate between discounted promotional prices and prices that are or above the product’s MSPR. This is accomplished by having frequent sales during which prices are lowered for a short time.

This strategy establishes the value of a product then uses limited-time promotions to deliver a bargain— which drives bursts of high-volume sales. Similar to loss-leader pricing, the high-low strategy works to drive store traffic and encourage customers to buy additional items once they’re in store. It also uses the same structure as price skimming to capture sales from multiple target markets by using different price points.

But, unlike price skimming, hi-low pricing can retain the product’s perceived value after the promotion as long as you’re careful. Too many sales and discounts will result in shoppers perceiving your sale prices as the actual value, which dilutes your brand.

One example of high-low pricing is the fashion retailer Zara, which frequently introduces new collections at regular prices and then offers promotional discounts during seasonal sales. This strategy helps Zara attract customers with the initial higher-priced items and later bring in price-conscious shoppers with discounted prices. It also creates a sense of urgency and drives sales.

18. Dynamic Pricing

What Is It: A strategy where prices are adjusted in real time based on factors such as demand, supply, competitor pricing, and market conditions Commonly Used By: Hospitality, tourism, transportation, entertainment, and utilities

Dynamic pricing is when a business changes its pricing based on the seasons or other demand-shift indicators (weather, day of the week, political climate, etc.). It takes into account things like competitor pricing, supply and demand, and other external market factors in setting its prices. This pricing strategy works best for services in the hospitality and transportation industry and essential goods like gas and electricity.

This strategy can help companies maximize their profits in industries with a lot of volatility in terms of traffic and demand. For example, a resort might charge $300 for a room during the peak season and $220 for the same room during the offseason. This type of pricing helps the business owners capitalize on busy times when demand is high, and use lower prices to incentivize offseason purchases.

To use dynamic pricing, be sure to understand your industry and its peaks and valleys in demand. Then assign higher prices during peaks and lower pricing during valleys. It’s important that your dropped prices can still generate enough revenue to cover your costs, or, alternatively, profits acquired during peak prices can cover profits lost from low prices.

19. Geographical Pricing

What Is It: The practice of adjusting an item’s price based on the location of the buyer Commonly Used By: Multilocation retail stores, franchise businesses, ecommerce sellers, luxury brands

Geographical pricing is a strategy that adjusts the price of a product based on the buyer’s location. This pricing strategy takes into account several factors— including shipping costs, local market conditions, economic status, and buying habits of different geographical areas. Sometimes, it also considers the cost of living and the average income of people in a specific region.

For example, a multilocation clothing store might charge different prices for the same item in New York City versus a rural town in Kansas. In the city, the price could be higher due to increased demand, higher average income, and a higher cost of living. This higher price also helps to offset the inflated cost of the retailer’s rent and other utilities. On the other hand, in a rural town where income levels and cost of living are lower, the seller may opt for a lower price to match the local market’s purchasing power.

Pricing Strategies Frequently Asked Questions (FAQ)

What is the most used pricing strategy.

The most popular and common pricing strategies are:

• Cost-plus pricing: calculating your costs and adding a markup
• Keystone pricing: doubling the wholesale price
• Competitive pricing: setting your price based on what competitors charge
• Value-based pricing: pricing your goods based on what the customer thinks they’re worth

These pricing strategies are used by businesses throughout a number of industries, from small companies and startups to enterprise-level companies. They’re popular because they’re simple to use across large inventories and generate profit while attracting customers.

Can You Combine Pricing Strategies?

You can combine multiple pricing strategies to find the best (and most profitable) ways to price and market your products.

For example, a handcrafted furniture business might use cost-plus pricing for a table that costs $200 to make. They add a 50% profit margin and sell it for $300. That business can then combine bundle pricing by offering a living room set that features the table along with a bookshelf and a chair. Bought separately, these items would cost $950, but as a bundle they sell for $850.

Another example of combined pricing strategies could be a retailer using high-low pricing to attract customers with promotional deals, while also implementing geographical pricing to adjust prices based on the location of their stores. This allows them to attract a wide range of customers while accounting for local market conditions and cost variations.

How Do You Determine the Selling Price of a Product?

Setting the perfect price for your products means you need to understand your costs, know how much your customers are willing to pay, and keep an eye on your competitors. With this information, you can choose from a variety of pricing strategies to set a price that will be attractive to customers and still make you a profit.

It may take some experimentation to find the best prices for your goods. Even once pricing is dialed in, most businesses continuously test and adjust their pricing strategies based on market conditions and customer feedback.

Bottom Line

With nearly 20 pricing strategies to choose from, there are a lot of options when it comes to pricing your products. The best thing you can do to sell through your products and maximize your profits is to use a mix of pricing strategies based on what works for each individual item you sell. Whatever you choose, be sure to continuously monitor their success and ability to generate sales and profits, so you can make adjustments and continue to maximize your retail business.

About the Author

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Katie-Jay Simmons

Katie-Jay Simmons aims to put answers in the hands of small business owners by leveraging more than 10 years of retail and hospitality experience. Informed by a background in jewelry and gemology, she specializes in ecommerce with a focus on fulfillment and global sourcing. Her scope of expertise ranges from traditional brick-and-mortar businesses to innovative, high-volume ecommerce operations.

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15 pricing strategies and how to set yours

Hopefully, you enjoy what you do, and that's why you do it. But unfortunately, business isn't just about doing what you love—it's also about making money. And of course, making money means pricing your products or services correctly.

For your business to be sustainable, you'll need a pricing strategy that generates adequate income while also being attractive to customers.

Here's a guide to creating a pricing strategy that will keep your profits moving up and to the right.

What is a pricing strategy?

A pricing strategy is a plan for setting the best price for your products or services. The goal is to set a price that will entice customers to buy, but that isn't so low that you're not making a profit. 

Sure, you could just trial-and-error a bunch of prices until you find the price that maximizes profit without deterring potential customers—and there will probably still be some of that even after you choose a pricing strategy for your business. But you'll spend a lot less time and money starting with a pricing analysis than you will taking a complete shot in the dark.

15 common pricing methods and examples

Your core pricing strategy has to do with what you're selling: a luxury, a bargain, or just a good product for a good price. Once you have that figured out, you'll move on to choosing a pricing method, which is the how of your pricing strategy.

Pricing methods are sort of like plays in a playbook. Your product probably isn't going to switch from being a luxury to a bargain and back again, but you can (and, in some cases, should) switch up the pricing method you're using to better meet your market demands.

Here, we'll look at 15 of the most common pricing methods, plus how and when to use them.

1. Value-based pricing

The first pricing method is probably the one you're most familiar with: value-based pricing. You might think of it as the "default" pricing method since it consists of finding what the customer is willing to pay (the WTP price), making sure it's higher than the cost of production, and setting your price somewhere in between.

If you need to make a price adjustment, you can do so as long as the new price falls within the WTP range. If the new price surpasses this range, you'll need to explore avenues to expand the WTP range. You can do this by incorporating additional value into your product or service to increase the customer's willingness to pay the new price.

Takeaway: Charge what you can without turning off the customer to your product. 

2. Cost-plus pricing

A very similar method to value-based pricing is cost-plus pricing. Instead of basing prices on what the customer is willing to pay, businesses set prices by determining the cost of production and their ideal profit margin. For example, if a product costs $100 to make and a company's target margin is 15%, then the product will sell for $115. 

Cost-plus prices still need to fall within the WTP range, but they're not chosen based specifically on what the customer is willing to pay. If the cost-plus price falls outside the WTP range, the company either needs to adjust its target margin or find a way to lower production costs.

Takeaway: Ensure all costs are covered and don't keep you from reaching your desired profit margin.

3. Competitive pricing

When Norm McLaughlin formulated the pricing model for his business, Norm's Computer Services , he decided that he wanted to be considered competitive but not cheap. That meant his pricing was on par with his peers, but he avoided the use of any terminology like "budget," "cheap," or "cheapest" in his small business's marketing .

One of the things he tried early on was offering the first 15 minutes of work free of charge—if he solved the issue within that first quarter of an hour, the job would be completely free. It worked. Clients told him they wanted to pay even if he solved the issue in under 15 minutes because they didn't feel good about paying nothing for a service that involved someone coming to their home. It was an attractive offer that increased his competitive edge without negatively impacting his bottom line.

Takeaway: Maintain or gain market share from your competitors.  

4. Economy pricing

Similar to competitive pricing, economy pricing involves setting the lowest prices among your competitors to attract bargain buyers. But unlike competitive pricing, economy pricing specifically targets people who will consciously sacrifice quality in exchange for a cheaper price. Knowing this, you can source cheaper supplies, eliminate extra features, and make other changes to lower your production costs so that you can offer extremely low prices while continuing to make a profit. 

The fast fashion industry is infamous for its reliance on economy pricing. Clothes are created quickly using cheap (and often ethically questionable) labor, and they wear out quickly. This allows stores to sell highly trend-conscious clothing, since customers need to replace their clothes more frequently. Unfortunately, it also causes major environmental damage —and usually doesn't even save customers money compared to buying more expensive but longer-lasting clothing.

Takeaway: Attract price-sensitive customers while achieving high sales volume and cost efficiencies.

5. Penetration pricing

As a new business , you may find that you need to set your prices toward the lower end of the spectrum. Penetration pricing is when a business sets the price of a product or service low at the beginning, then raises the price once the company is more established.

Businesses that provide a service can draw customers in with low pricing, then win their loyalty with great service. Introductory offers can be a great way to entice new clients or customers. For example, you could offer a fixed price or percentage off the first job, or a portion of free labor. At least one of Norm's competitors offered a 10% reduction on labor for returning customers. In Norm's view, a better approach to customer retention was to offer them that 10% off the first job—and then do such good work that they wouldn't mind paying the full price for subsequent jobs.

Takeaway: Gain market share and attract customers quickly with low initial prices, then raise prices once you've established a strong customer base. 

6. Dynamic pricing

Have you ever pulled out your phone intending to grab a rideshare on a busy weekend night or (I wince just thinking about it) a holiday? Those jaw-dropping price surges are the result of what's called dynamic pricing, or pricing that changes fluidly according to availability and demand.

Truly dynamic pricing requires an algorithm that can automatically adjust prices according to purchasing activity. Uber's CEO isn't sitting behind a Wizard of Oz curtain declaring price surges; the app automatically increases prices when demand is higher than the number of drivers on the road. A less immediate version of dynamic pricing can be seen at the gas pump, where prices change frequently in response to demand but aren't automatic (in some states, like New Jersey, they can't change more than once per day). 

For small businesses, dynamic pricing works best with services or custom products that require a price quote, since customers expect prices to be different depending on the project and circumstances. If your prices are listed on your site and you change them constantly, you'll drive away potential customers who perceive you as unpredictable or unreliable.

Takeaway: Maximize revenue while adjusting for real-time factors like demand, competition, and market conditions. 

7. Price skimming

Price skimming is the opposite of penetration pricing, where you start by setting the maximum price and gradually lower it over time. This strategy works best with products that have major releases, like laptops or cars. By price skimming, you'll be able to capture early buyers willing to pay top dollar for the latest and greatest; then, as you gradually lower the price, you'll be able to sell the maximum number of products at each price before dropping it again. 

One of the most well-known price skimmers is Apple, which has made its product launches into full events with tickets and fans to build as much hype as humanly possible. Mega-fans buy the newly unveiled products the moment they're available, even waiting in lines overnight outside Apple Stores to do so. As each new product is released, the older models get shunted down the pricing ladder to capture buyers with lower WTP points. 

Takeaway: Capture early adopters and maximize revenue with high initial prices before gradually reducing prices to attract more price-sensitive customers.

8. Hourly pricing

Often used in service-based industries, hourly pricing establishes prices based on the time spent on a particular task or service. This aligns the price directly with the effort or resources dedicated to the project. It's a straightforward method for you and the client to understand and agree upon the service's value.

Having said that, if your projects' complexity or required resources vary quite a bit, a flat hourly rate may not be best for your business.

Takeaway:   Ensure customers are billed fairly based on the actual hours worked.

9. Project-based pricing

Project-based pricing is also common in service-based industries. This method determines prices based on the scope, complexity, and resources required for each project. Rather than charging a fixed or hourly rate, companies assess the unique needs of each project and provide a tailored quote. That way, businesses are accounting for factors like resources, expertise, and time commitment required to complete the project successfully.

This pricing model is common for architects. When a client approaches an architecture firm with a request to design and construct a building, the firm will assess the project's scale, complexity, materials, and other specific requirements to provide a project-based quote. Obviously, the process and requirements for designing a public bathroom vs. a skyscraper will be very different, beyond just time discrepancies. 

Takeaway: Make sure profitability and effort are accounted for in your pricing structure.  

10. High-low pricing

I've taught all my loved ones that we don't walk into Michael's without a coupon or buy anything at JOANN that hasn't been marked down to at least 40% off.

These stores use high-low pricing, where they offer products or services at a higher price initially and periodically discount them. This approach attracts price-sensitive customers who are motivated by discounts (me) while also maximizing revenue from customers willing to pay higher prices to get their hands on the product before it starts flying off the shelves once it's been discounted.

Companies can maintain a balance between profitability and reaching a larger range of customers by driving traffic to their stores or websites during promotional periods.

Takeaway: Create a perception of value to encourage customer purchases. 

11. Bundle pricing

You've probably seen the Progressive commercials practically begging you to bundle your car and home insurance for a better deal. Or maybe you bundled your cable and phone services back in the day. 

Bundle pricing is when a company combines multiple products or services and offers them at a lower overall price than what each item would individually cost. This creates a perception of added value, convenience, and savings for customers. If you sell a lot of small items or are trying to spread the love to an overlooked service, this pricing strategy may help you increase your sales.

Takeaway: Sell items together in a package deal that's slightly cheaper than if you were to sell the items individually to increase sales and customer satisfaction.

12. Geographic pricing

I follow a candy shop on TikTok with the most delicious-looking candy I've ever seen. They're located in the U.K. and I'm in the U.S., which means I'd have to pay outrageous prices to account for the shipping costs.

Geographic pricing involves setting prices based on different geographic regions or markets, considering factors like local market conditions, competitive landscape, and transportation costs like shipping. While this strategy makes it harder for a candy lover like me to get their hands on some delectable sweets, if you want to expand outside of your own geographic region, this strategy may be inevitable to keep your profits stable.

Takeaway: Maintain profitability across all your geographic markets by adjusting for variable factors.

13. Psychological pricing

A book priced at $20? I'll pass. A book for $19.99? I'll take 10. This common phenomenon that we all fall for time and time again is called psychological pricing. Also known as charm pricing, this strategy leverages consumers' perceptions and emotions to make them think they're getting a better deal than they actually are. 

Making the price seem more appealing or affordable to customers effectively influences customer behavior and increases sales, even if the price difference is negligible (and even if the customer knows in their heart of hearts that it's negligible). You can combine this strategy with another method since it's a common standard in many industries.

Takeaway: Create the illusion of a lower price so customers perceive your price as fairer.  

14. Freemium pricing

If you're like me, you started out with the free version of Spotify until the ads were so grating on your soul that you gave in and shelled out the cash for the paid ad-free version. This method of offering a basic version of a product or service for free and charging for additional premium features or advanced functionality is called freemium pricing. 

By offering a free version, companies can give customers a taste of the value their product or service offers, build brand awareness, and create a larger user base. They then monetize their user base with an enhanced experience for a subscription fee or one-time purchase. If you're new to the market, this is a great way to get buy-in from people who would otherwise be unwilling to convert.

Takeaway: Attract a large user base and convert some into paying customers. 

15. Premium pricing

Some people enjoy the prestigious vibe and social appearance of luxury brands. For example, luxury car companies, like BMW or Mercedes-Benz, position their vehicles as high-end, offering advanced technology, luxurious interiors, and superior performance. (Although I'd love to see what they have that my Honda CR-V doesn't.) 

With those high-end features comes a high-end price tag, otherwise known as premium pricing. This strategy positions the company as exclusive and superior in value in comparison to lower-priced competitors. It appeals to a target market willing to pay a premium for the perceived benefits. If that's your target market, then this is your ticket.

Takeaway: Target affluent customers and generate higher profit margins. 

Factors to consider when pricing a product

You likely know off the bat that you'll need to consider your own business costs and competitor prices so that you can find a price that earns a profit but isn't so high that it drives potential customers to other businesses with better deals. But unfortunately, it's not that simple: there are a lot of factors you'll need to consider in order to determine the best pricing strategy for you.

I know I just said cost wasn't the only factor to consider, but it is the most important one to start with. If your prices aren't higher than your costs, you'll be out of business before you even get your company off the ground.

When calculating costs, make sure you include:

Product materials

Employee wages (that includes what you pay yourself!)

Overhead costs (rent, insurance, utilities, taxes, etc.)

Software and services for things like accounting, marketing, and legal

Shipping and transportation

Economic factors

When costs change, your prices will have to change in order to stay competitive and keep making a profit. Businesses that rely directly on commodities as supplies—so things like lumber, oil, and metals—will be most vulnerable to economic fluctuations , but all industries are affected in some way or another by global, political, and social changes. 

Conduct thorough research to identify what economic conditions your business thrives in, and recession-proof your business . Be proactive about anticipating events that could affect your supply and demand . You especially need to incorporate a safety net into your profit margins to ensure you have enough funds to stay in business during slow periods if you're in a more temperamental industry.

Competitor pricing

Your prices don't always need to be lower than your competitors', but if they're higher, you need to be able to justify it with added quality. Your products don't always need to be quality, but if they're low-quality, you'll need to be able to justify it with lower prices. Where you fall on either side of this trade-off determines your value position , which we'll discuss in a bit. But no matter how you decide to position your product, you'll need to stay up-to-date on what your competitors charge, pricing trends in your industry, and what pricing models work best for your market.

It's usually not difficult to find out what your competitors charge—either by visiting their websites or by calling them to ask. As you gather information for your competitor analysis , keep a spreadsheet where you can record prices and note things like introductory offers, loyalty programs, and discounts.

Positioning

It's a common misconception that businesses have to sell good-quality products to be successful. There are buyers at every price and quality level; what matters is how your product quality and price are positioned with respect to each other.

One of the easiest industries for demonstrating this concept is the airline industry, because there's no way to mistake the difference between a high- and low-quality purchase when there's a literal curtain dividing them. Normally, price and quality will align with one another. First-class tickets offer high quality at a high price, economy tickets offer low quality at a low price, and everyone else gets piled into coach. 

Value prices occur when quality is higher than price—when you fly during off-peak times or get upgraded to first class for free. When demand is high and seats are limited, the airlines can afford to charge higher prices for lower-quality seats, counting on the fact that you'll pay full price for a terrible seat if it's your only option.

When you apply this to your own pricing, ask yourself what kind of value your product or service offers. Are you solving an urgent problem , or is your product more for comfort and enjoyment? If you sell a first-class product, you'll lose money by selling it at economy prices. If you sell an economy product, you'll need to sell it for a bargain price.

As you start off in business, it's important to remember that you can change your pricing strategy as you go along. This is a marathon, not a sprint, so it's more about building a client base of satisfied customers who will come back to you again and again than it is to make as much money as possible as quickly as possible. 

And the good news is that you don't have to get everything right from the very beginning. You can try different approaches and make adjustments as you go until you're achieving the outcomes you want. To continue optimizing for success, learn how you can automate your small business .

Related reading:

The best eCommerce website building platforms for online stores

Optimizing your small business product mix

The best CRMs for small businesses

The best project management software for small businesses

This article was originally published in December 2020 by Norm Mclaughlin. It was most recently updated in July 2023.

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Cecilia Gillen

Cecilia is a content marketer with a degree in Media and Journalism from the University of South Dakota. After graduating, Cecilia moved to Omaha, Nebraska where she enjoys reading (almost as much as book buying), decor hunting at garage sales, and spending time with her two cats.

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12 real-world pricing strategy examples.

Pricing your products and services is one of the most daunting yet most crucial parts of doing business. The goal of strategic pricing is to maximize your profit. It’s a lot more complicated than raising your prices or increasing your profit margins.

Every business is different. They have different products, different customers and different market share. It makes sense that there isn’t a one-size-fits-all pricing strategy. So how do you make the most out of your sales without alienating a potential customer? And how does your pricing align with the brand identity you want to convey?

Read on for our full guide on how to price your product or service. This includes 12 common pricing strategies and real-life examples you can learn from

In this article, we’ll cover:

What Is a Pricing Strategy/Pricing Model?

The four cs of pricing your product, the four main pricing strategies you should know, other kinds of pricing strategy, pricing strategy benefits, key takeaways.

Most marketing guides use pricing strategy and pricing model interchangeably. There are some key differences that you should keep in mind.

A pricing strategy is how the seller uses pricing to achieve a certain business objective. It deals with the psychological reaction that a consumer has towards certain kinds of prices.

A pricing model, on the other hand, is how the seller goes about implementing the pricing strategy. Pricing models are usually specific and quantitative in nature. Here are some of the most common pricing models:

• Hourly: You charge an hourly rate (e.g., $40/hour) and then bill the client for the total number of hours worked.
• Project-based: You charge a flat rate for the entirety of the project (e.g., $5,000 for a website).
• Retainer: You charge a monthly fee for on-going deliverables (e.g., $300/month for search engine optimization).
• Performance-based: You charge a rate based on the results you produce (e.g., $100 per key performance indicator reached).
• Cost-plus pricing: You charge for the production costs (e.g., $10 to make a shirt) plus a profit markup (e.g., 100%, or total $20).

Pricing strategies work best when they take into consideration the four major pillars of pricing. These are customers, current positioning, competitors and costs. Keep the four Cs in mind when choosing the best pricing approach for your business.

Who is your target market ? What is your ideal customer’s disposable income range? How much would that customer be willing to pay for your products and service? Will pricing your products/services impact your customers’ purchasing behavior or attitude towards your brand? What kind of pricing strategy speaks to your target customer the best? How does it align with your brand image and what type of value does it communicate?

Current Positioning

What is your brand identity? Which parts of the market are you catering to with your marketing efforts? Are you known as a budget or low-cost alternative, or are you a luxury business with elite clients? Are you a relatively unknown startup, or does your company already have a hold on the market? Your products and services need to be priced accordingly. The more luxury your offerings (or the more established you are as a company), the more you can demand from your customers. This is not to say you should necessarily “price high.” Your product and pricing need to work together in order to create the image that you want.

Competitors

How much are your competitors charging? If your competitors raise or lower their prices, how would that affect your sales? Are your products/services comparable, or do you offer something special for the same cost? You can use your competitors’ prices as a benchmark. Always take note of any major differences that allow you to be more flexible on your price.

It’s simple math—you can’t profit if you’re spending more than you bring in. Always take into consideration production costs (how much it costs to produce a product or service) and fixed costs. (What you have to pay regardless of how many units you sell—e.g., marketing, rent, staffing, other operating expenses , etc.). A common method for this using cost plus pricing. Determine your costs, then determine how much additional you want to charge on top of that.

There are dozens of strategies in existence. There are four basic strategies that provide the foundations for more complex pricing. These are: economy pricing, penetration pricing, price skimming and premium pricing.

Pricing Strategy Examples: #1 Economy Pricing

Under the economy pricing strategy, your company charges as little as possible to entice the largest number of potential customers. This works by lowering operating and production costs as much as you can. Because your profit margins are usually lower, you also have to focus on volume.

This pricing approach is most commonly seen at dollar stores. It’s also common at chain supermarkets like Target or Walmart. However, if you’re a small business, this tactic is a bit tricky. You may not have the volume, market share, or brand awareness to set your products and services at the lowest possible price to reach that target customer.

Pricing Strategy Examples: #2 Penetration Pricing

If you’re a relatively new business, you may want to consider pricing for optimum market penetration. This means that you initially sell your product or service at a low introductory price. This will attract new customers. Then raise prices one you’ve secured your share in the market.

You can see this pricing strategy at work with telecommunications or cable companies. They’ll initially charge a lower-than-market rate for the first month or so. This will entice customers to sign up for their services. There are two potential downsides to this strategy. First, your profits will take a hit. Second, some customers may not buy into the higher price.

Pricing Strategy Examples: #3 Price Skimming

Think of price skimming as the opposite of penetration pricing strategy. You start with a higher initial cost, and then lower the price over time. This occurs as consumer demand falls and newer goods take over the market. This is a great way to cover production and marketing costs early. It also reinforces the idea that your brand is one of quality and luxury.

Price skimming is very common in the tech/electronics industry. Whenever a new flagship phone from Apple or Samsung comes out, prices are high. However, if a customer buys the same phone a year or even just a few months later, they could get it at a much lower price.

Pricing Strategy Examples: #4 Premium Pricing

It may seem counterintuitive to price your product at a premium price point. Customers can actually respond positively to higher prices. Because only a few people can afford them, expensive products create the illusion of exclusivity, status and quality.

You can opt for a premium price if your product or brand has a competitive advantage. The trade-off is that though your business will likely sell fewer units. The high profit margin should be able to make up for loss of volume. Premium pricing can be found in most industries. This includes restaurant and hospitality to automotive to fashion.

While economy, penetration, skimming and premium pricing are the most common pricing strategies, they’re not the only ones you can use. Below are eight more approaches that could benefit your business.

Psychological Pricing

Also known as charm pricing, psychological pricing takes advantage of the fact that humans are emotional by nature. We respond to things emotionally and impulsively rather than logically.

The biggest example of this is when sellers mark their prices as $0.99 or $0.75. This is rather than rounding up to the nearest whole number—like when an item costs $99.99 instead of $100. This is because we see and react to the first set of numbers. We immediately think it is cheaper, even though there’s a negligible difference in cost.

Bundle/Product Line Pricing

If you have a range of products or services that complement each other, you can bundle together products.  This may allow you to charge a lower price than if customers bought them individually. This is called bundle pricing. This is a great way to get rid of stock, move products and encourage more spending.

Retail brands will bundle together related items. Service providers have package deals if you get multiple services at one time. The tricky part of product line pricing is that you have to make sure that your profit loss doesn’t outweigh how much you earn by pushing multiple products at the same time.

Promotional Pricing

Promotional pricing is also known as discount pricing. You sell your products or services at a discounted rate for a short period of time. This could involve slashing off a percentage of the price. This provides vouchers or coupons, launching two-for-one deals or giving away free items with every purchase.

Promo pricing follows the idea that some profit is better than no profit. We recommend using this strategy on high-volume periods (e.g., the holidays). It also works at the end of the season when moving products out of inventory is a higher priority than pure profit.

Geographical Pricing

If you are a local business, then geographical pricing isn’t for you. But if you’re an international company that sells all over the world, then this pricing approach is very relevant.

With geographical pricing, you price your goods and services according to geographical factors such as cost of living, average income, legislation, taxes, and of course, supply and demand. For example, gas stations in a busy urban area are likely to have different prices than similar stations in a rural town.

Captive Product Pricing

This pricing strategy works best if customers have to keep buying from you to continue using your products. Examples of this are shaving products and subscription services like the Dollar Shave Club. Once you buy a razor from a particular brand, the customer will have to keep buying blades and other accessories from you since other brands won’t be compatible.

You can charge a low price for the initial buy-in (e.g., razor handles, printers), and then make up for any profit loss through the renewables (e.g., blades, printer ink).

Optional Product Pricing

You might be familiar with optional product pricing through another term: upselling. With upselling, you can tack on extra services or products for a slightly higher cost. You see airlines using this strategy all of the time, with extra charges for optional services such as baggage, priority check-in, in-flight meals and exit row seats. The idea behind this is that it’s easier and more profitable to convince a current customer to spend more than it is to try and attract a new customer.

Value Pricing

Value-based pricing means basing your prices off how much value your customers feel they are getting when they buy your product or service, instead of deciding prices based on how much a product or service costs to make. The idea behind this is that customers are willing to spend more money on something that they feel is worth it and provides them with value.

For example, a T-shirt may cost just $5 or $10 to produce. But because there’s some value attached to the style and brand, some companies may charge as much as hundreds or even thousands of dollars for it.

Dynamic Pricing

Dynamic pricing is a pricing strategy that’s variable instead of fixed. This means that, depending on the time or other external factors, prices can and will fluctuate. You see this often in the tourism industry—hotels and airlines usually charge higher rates during peak season and will lower their rates when there is less consumer demand.

Flexible pricing systems often use technology to generate the best rates depending on market factors. While this makes it easier to maximize profits, gathering the data necessary to implement dynamic pricing may be too time-consuming or expensive for small businesses.

There are several benefits to using pricing strategies like the ones above. Some of these benefits include:

• Allowing for increased margins on higher priced items. In the case where your margins are based on the initial sale only, using a pricing strategy that encourages recurring purchases will yield higher profits.
• Increasing competitiveness. When everyone else in your industry is jacking up prices and cutting discounts to maximize short-term profits, it might be time to rethink your approach. Using a pricing strategy that entices customers to keep buying from you will make your business more competitive and increase customer loyalty.
• Price flexibility. By using geographical pricing, captive product pricing and dynamic/flexible pricing, you can charge customers different prices based on certain criteria.
• Simplifying your marketing messaging. If your marketing message focuses on value and benefits rather than price, you can make it easier for customers to understand and trust your brand.
• Reducing customer price resistance. When your customers feel that they’re getting a good deal, they’ll be more likely to trust and buy from you.

There are many benefits to having a good pricing strategy. By using one or more of the pricing strategies discussed above, you can increase your profits and grow your business.

The right pricing strategy will help you get more customers and increase your profits. But what works for one company may not necessarily work for you—even if they’re in the same industry. It’s important to take a look at your specific marketing strategy and circumstances before choosing the most effective price strategy. Check out our resource hub for more information!

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What Is a Pricing Strategy? + How To Choose One for Your Business

Explore different pricing strategies, what they offer buyers and sellers, and the steps to making the best pricing decision for your business, products, and brand.

What is a pricing strategy?

Price, one of the 4 Ps of marketing , refers to how much is charged for a product or service. A pricing strategy is the process and methodology used to determine prices for products and services. 

As we’ll explore in this article, different pricing strategies work for different products and business models. A good pricing strategy can enable several things for a business: 

Convey value to customers

Attract customers

Inspire customer trust and confidence

Boost sales

Increase revenue

Improve profit margins

But a bad pricing strategy can target the wrong customers, make them feel uncertain about trusting and buying your product, and inaccurately portray the value of your product. We'll guide you through a few ways to determine your pricing strategy to inspire your approach.

Watch the following video from IE Business School’s Marketing Mix Implementation Specialization to learn more about pricing strategy.

Types of pricing strategies 

There are several common pricing strategies to choose from to price products and services. The first step in choosing a pricing strategy is to examine the different types, review pricing strategy examples, and understand how they differ. 

How to choose your pricing strategy 

Now that you know the different types of pricing strategies, your next step is to choose one for your business. Make an effective pricing strategy with this guide.

1. Determine your value.

A value metric refers to how a company determines the value of one product unit for sale. For example, if you sell footwear, then you would determine the value of one pair of shoes. If you sell a monthly service subscription, then you would determine the value of the services and features that a customer can access during a one-month period. 

To establish your value metric, identify the basic unit of the product or service you sell. If you were to sell just one unit of your product or service to one customer, what would this be? 

2. Evaluate pricing potential.

Pricing potential refers to the approximate price you can charge for your product or service. To evaluate the pricing potential for your product or service, consider factors such as your operating costs, consumer demand, and competitive products. 

3. Review your customer base.

Another important consideration when it comes to pricing strategy is how your current customer base has responded to prices thus far. How much have they been willing to pay for products and services? Have any changes in price discouraged or boosted sales?  

Use these insights to refine your buyer personas. Creating fictional versions of your ideal customer segments can help you determine pricing.

4. Determine a price range.  

Price range refers to prices for a product or service that fall within what a customer and seller find appropriate. To determine price range, ask yourself these questions: 

What is the minimum price you can charge for a product or service and still make a profit based on the cost of production, marketing, and any overhead costs? 

What is the maximum price you can charge for a product or service without alienating your target customers? 

5. Check out your competitors.

Another factor in pricing is taking a look at your competitors’ pricing. Make a list of competitive products and how they are priced. Then, decide whether you want to beat competitors’ prices (set your products at a lower price) or communicate more value than competitors and price your products higher. 

Read more: What Is Competitor Analysis? Definition + Step-by-Step Guide

6. Consider your industry.

Different pricing strategies work for different industries, so it’s a good idea to investigate the most common ones used in your industry. For example:  

In the SaaS industry, freemium pricing with different price tiers to purchase more features is a common strategy to offer customers a path to upgrade as their software needs increase. 

In the restaurant industry, luxury brands might use premium pricing to create an image of higher quality.  

In the service provider industry, designers, consultants, and other service providers might use project-based pricing to customize the service outcomes and the price for individual customers.  

7. Consider your brand.

In addition to your industry, your brand and business model are important factors in pricing your offerings. A brand identity can affect consumers’ perception of the brand and quality of the offerings, so make sure your pricing strategy corresponds to the brand.   

For example, a brand that focuses on affordability could choose economy pricing, while a brand that offers innovative products could succeed with a price-skimming strategy.  If you are still working to build brand equity , penetration pricing could make it easier to enter a market and build a customer base. 

8. Gather feedback from customers.

When considering how to price an existing or new product, customer feedback can be invaluable. Survey current and potential customers with questions such as: 

What do you think is an appropriate price for this product? 

How much would you be willing to pay for this product?

If this product were on sale for [example price], how likely would you be to buy it?

What price is so low that you’d question its value?

What price is so high that you'd consider it too expensive? 

Conducting user research can provide quantitative insights, such as what customers currently pay, but also qualitative data. You'll be able to understand the why, such as their beliefs, opinions, and behaviors around pricing.

9. Experiment with pricing. 

Conduct a few live experiments to gather data on how your products will perform at different prices. For example, you could A/B test—introduce a product at two different prices to separate audiences—to find out which price is favored. You could also position your products next to competitive products in your marketing messaging, to find out how consumers respond. 

Live experiment results combined with feedback from customers can supply you with insights for successful product launches. You may even be able to reduce the trial and error that often comes with introducing offers to the marketplace. 

Optimize your pricing strategy with UVA

Taking online courses can be a great way to learn more about pricing strategies, marketing, business operations, and career opportunities. The University of Virginia's Darden School of Business has partnered with Boston Consulting Group to deliver a Pricing Strategy Optimization Specialization that will show you how to increase price realization and maximize your profits in approximately four months.

Keep reading

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Everything You Need to Know About Pricing Strategies in Business Planning

By henry sheykin, introduction.

Pricing is an essential component of any business plan, and it’s important that you carefully consider your pricing strategy when writing your business plan. A successful pricing strategy can mean the difference between having an effective business plan or one that leads you to an unsuccessful outcome. In this blog post we will discuss the importance of coming up with the right pricing strategy when writing your business plan, and provide tips and advice on how you can go about developing the most effective plan for your business.

Assess What You’re Offering

Pricing your product or service is a critical element of your business plan. You must clearly assess what you’re offering and what it’s worth before setting a price. Here are some key steps to creating a successful pricing strategy:

Calculate Cost of Goods and Services

The starting point for setting prices is to calculate the cost of the goods or services you're providing. This involves looking at the cost for production materials, along with the cost of human labor and any other related costs. This is the amount you need to charge to make sure your product covers expenses, and it will be the lower end of your price range.

Consider Time, Resources and Materials Required

When calculating your costs, it's important to consider the resources and materials needed to complete the project and the time it will take to do so. You may need to pay subcontractors or hire additional staff, and you may need to account for any special tools or equipment required. Be sure to factor in all of these expenses when pricing your product.

Evaluate Pricing Points and Marketplace Factors

Once you've calculated your costs, you can start to consider other variables in the marketplace. This includes your competition, overhead costs, and any other relevant economic or demographic factors. Ultimately, you’ll have to decide if the price you set will be attractive enough to your customers.

• Consider competitors’ prices when evaluating your pricing.
• Evaluate overhead, such as utilities, rent, and payroll.
• Think about market trends and fluctuations that might change pricing.
• Determine the quality of your product or service and adjust pricing accordingly.

Analyse the market and competition

Review the demographics of potential customers.

When developing a pricing strategy for your business plan, it's important to analyze the demographics of potential customers, i.e. their age, location, gender, and income. This will help you decide which price points are most suitable for each type of customer and understand what features they need and prefer. To get a better understanding of their demographic profile, consider conducting surveys, market research, and focus groups.

Examine competitors’ prices and services

Another important step in developing a pricing strategy is examining competitors’ prices and services. While looking at their prices, it's important to consider the quality of their services as well as the overall cost. Try to get as much information as possible about their products and services, such as quality, customer service, delivery times and shipping costs. Once you have collected all the information, you will be able to make an accurate comparison between services and decide if your business plan should provide higher or lower prices.

Compare services between competitors

Once you have gathered all the necessary information from competitors and potential customers, it's time to compare the features and services that they offer. This will help you decide which features will be most valuable to customers and which ones are not worth including in your business plan. Make sure you compare the same type of services and features, such as delivery times, product quality, customer service, etc. By analyzing the different features offered by each competitor, you will get an accurate understanding of the market and choose the right pricing strategy for your business plan.

4. Understand Pricing Strategies

When it comes to pricing, there are many strategies businesses can use to set prices, research data, and even adjust prices as needed. It is important to understand the strategies involved, as these techniques can play an essential role in a business plan.

A. Illustrate Strategies for Setting Prices

In order to find the right price for a product or service, businesses must consider the cost of production, the value relative to others on the market, and the target customer base. A few common pricing strategies that businesses use include cost plus pricing (adding a marked-up price to recoup costs), value-based pricing (pricing that reflects the value that customers place on the product or service), and competition-based pricing (adjusting prices based on the competition).

B. Describe Research and Gathering of Data for Pricing

In order to effectively price a product or service, businesses must be mindful of the data they are using to set prices. This data is often easy to find, as customers are always providing feedback either directly or through market research. Businesses should regularly seek out feedback from potential customers and their markets to understand what they are willing to pay for different products and services.

C. Explain Strategies for Raising or Lowering Prices

Once a business has determined the right price for its product or service, it can use different techniques to adjust the price as needed. Increasing prices is a common tactic for businesses looking to increase their revenue. When businesses raise prices, they should communicate the change clearly and in a timely manner to ensure customers don't feel like their loyalty is being taken for granted. On the other hand, businesses can also lower prices to increase their customer base. Discounts and special offers can be effective tactics for attracting customers who may not have otherwise considered the business.

Implement changes

Once you have refined your pricing strategy for your business plan, it's time to implement the changes. To help get you started, consider the following variables that may be incorporated into your pricing structure.

A. Explain variables such as rates, bundle pricing and discounts

Rates, bundle pricing and discounts are all strategies to consider when setting your prices. Rate pricing is when you charge based on the amount of time or quantity of a product. For example, if you are a photographer, you might offer a rate of $50/hour for each photo shoot. If you are a consultant, you might offer a rate of $150/hour for consultation services.

Bundle pricing is when you offer multiple products or services in one package for a single fee. This allows customers to get more value for their money. As an example, if you own a restaurant, you could offer a bundle platter with an entree, salad and a drink for one discounted price. This will give customers the ability to select their own items while getting a discounted rate.

Discounts are another way to incentivize customers to purchase your products or services. Discounts can include items such as free shipping, special offers or a percentage off the total cost. For example, you could offer a 10% discount off the total purchase price if customers order in bulk.

B. Estimate budget to set price

Before you officially set your prices, you need to determine what your budget is. This will help ensure you are pricing your products or services correctly in order to make a profit. The budget should include both fixed and variable costs associated with running your business. That includes items such as wages, utilities, rent, materials, and marketing, as well as taxes and licenses.

C. Account for change over time

As your business grows, customer needs may also change. It's important to monitor the market and your pricing strategies to make sure you remain competitive. You also want to be mindful of potential external changes such as legislation or customer trends that could affect your prices.

As you move forward with your pricing strategy, keep in mind that it may need to be adjusted over time. That could include increasing or decreasing your prices to remain competitive. It's also important to note that your customer’s preferences may change over time, so remain open to experimenting with different pricing strategies.

Maximize Price and Service

Having a clear understanding of the costs associated with running your business is essential to building a successful pricing strategy. It is important that you understand what expenses you could incur that would impact the pricing of your products and services to manage margins accordingly. Furthermore, creating multiple variations of your product or service can help you maximize profits as you are able to tailor pricing and features to different segments.

When it comes to controlling costs, it is important to understand the marketplace and develop a strategy to ensure you remain competitive in order to maximize profits. Every decision you make about pricing should be backed up with data to ensure sound decision-making. Additionally, consider cost-reducing methods such as utilizing cost-effective production methods and managing operating costs such as marketing and overhead.

The use of technology can also play a key role in optimizing prices. With automated systems, you can eliminate redundant and manual tasks to save on labor costs. Automation can also allow you to save money through accurate predictive analysis, allowing you to adjust prices and prevent losses. Additionally, you can offer dynamic pricing, enabling you to adjust prices depending on changes in supply and demand.

Explaining How to Create the Best Pricing Versions

Having a comprehensive understanding of your customer segments is paramount when it comes to creating an effective pricing strategy. It is important for your pricing strategy to be tailored to different customer segments so that you can maximize profits through differentiating features and price points. This is why it is important to thoroughly research your customer segments and understand the value they place on your products and services.

By knowing your customers, you can determine what would be the best pricing strategy for each segment. You could potentially offer discounts and incentives to certain segments to increase the perceived value of your products and services. This can help to increase the average sale size. Furthermore, you can use pricing tools such as bundles and subscriptions to increase the value of your products and services.

Illustrating Techniques for Controlling Cost

The key to controlling cost is understanding your market thoroughly. This means having an understanding of both the direct and indirect costs that accompany your products and services. Understanding the costs and associated margins will enable you to determine the pricing of your products and services based on how well you must price in order to remain competitive.

Additionally, you should focus on cost-reducing techniques to get the most out of your pricing strategy. Implementing cost-saving measures in production settings can help keep prices competitive. This can involve using more affordable materials and cost-efficient production techniques. Ensuring that operating costs, such as marketing and overhead, remain low can also help keep prices competitive.

Show How to Use Technology to Optimize Prices

In today’s digital age, automation is essential when it comes to optimizing prices. Automation can help eliminate manual tasks, allowing your team to focus on more important tasks. Predictive analysis can be used to assess customer needs in order to optimize the pricing of your products and services, reducing the risk of losses.

Dynamic pricing is another key technique that enables you to adjust pricing depending on changes in the supply and demand. This can help to keep you competitive in the market. Additionally, it is important to ensure that your pricing system is optimized for mobile platforms such as smartphones and tablets, as customers expect to be able to access your product or service on any device.

Developing a pricing strategy for a business plan is an incredibly important tool for achieving sustainable profitability and growth. Knowing the various pricing strategies and techniques can help business owners make informed decisions about how to price their products or services and which strategies best fit their customers, resources, goals, and objectives.

To recap, it is important for business owners to understand that a well-crafted pricing strategy should go beyond simply setting a price. It requires them to dig deeper into customer segments, competition, industry benchmarks, distribution channels, cost of goods, and other related topics. Additionally, they should continually research and explore potential strategies, cycle and bundle their products, employ pricing models to manage customer expectations, and adjust to changing consumer behaviors.

Finally, it is important to recognize that pricing strategies, like business strategies, should not be a static decision. As market and consumer trends change, it is beneficial to continue surveying and researching pricing strategies in order to remain competitive and remain profitable.

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Pricing Strategy Template

What is a Pricing Strategy?

A pricing strategy is a plan that outlines the objectives, actions and measure to ensure you successfuly set prices for your products or services. It takes into account factors like the cost of production, the target market, and market competition. Properly implemented, pricing strategies can help to maximize profits, increase market share, and establish a competitive advantage.

What's included in this Pricing Strategy template?

• 3 focus areas
• 6 objectives

Each focus area has its own objectives, projects, and KPIs to ensure that the strategy is comprehensive and effective.

Who is the Pricing Strategy template for?

This pricing strategy template is designed to help businesses of all sizes and industries optimize their pricing strategy. By following the step-by-step process outlined in the template, businesses can create a comprehensive and effective plan to their pricing architecture and ensure it is successfuly executed.

1. Define clear examples of your focus areas

A focus area is a part of the business that requires specific attention and improvement. Examples of focus areas related to pricing strategy could include pricing optimization, promotions, and pricing analytics. Once you have identified which focus areas are relevant to your business, you can move on to defining objectives and actions.

2. Think about the objectives that could fall under that focus area

Objectives are the goals that you want to achieve in each focus area. Examples of objectives for pricing strategy could include optimizing pricing for ROI, increasing average order value, increasing sales, and increasing customer loyalty. Objectives should be specific and attainable.

3. Set measurable targets (KPIs) to tackle the objective

KPIs, or Key Performance Indicators, are measurable targets that can help you track progress towards your objectives. Examples of KPIs related to pricing strategy could include increasing customer response rate, increasing average order value, increasing sales conversions, and increasing customer retention rate. For each KPI, you should set an initial value, a target value, and a unit of measurement.

4. Implement related projects to achieve the KPIs

Projects, or actions, are the steps that you take to achieve your objectives. Examples of projects for pricing strategy could include analyzing pricing structure, aligning prices with customer segments, implementing promotional campaigns, and offering loyalty rewards. Each project should be specific, measurable, and achievable.

5. Utilize Cascade Strategy Execution Platform to see faster results from your strategy

Cascade Strategy Execution Platform is a powerful tool to help businesses reach their goals faster. Cascade combines strategy planning, project management, and analytics into one platform, giving you the insights you need to optimize your pricing strategy.

• Product management
• Pricing strategies (Kotler)

Refine your pricing strategy and understand the value that you offer

About the pricing strategies template

How do you know if your product is priced competitively? It starts with understanding the pricing landscape within your industry. Kotler's pricing strategy, associated with well-known marketer and professor Philip Kotler, aims to help businesses determine an effective pricing approach.

The idea is to find a balance between maximizing profitability and meeting customer expectations — with an understanding of market demand and what competitors are currently charging. Be sure to keep an eye on competitor pricing changes, promotions, and any value-added services they offer.

Adjust the template to meet your needs and then share with internal stakeholders. Having transparent conversations about pricing strategies and models can help you better understand your product's position in the market. Whether you are positioned as a premium, mid-range, or budget option, clarity in pricing supports this positioning.

Best practices

Determine the best pricing strategy for your products and services.

Understand your market and customers Start by conducting thorough pricing research to understand your target market, customer preferences, purchasing behavior, and willingness to pay. Consider your business goals so you can can align your pricing with your long-term objectives.

Study your competitors Identify your top competitors. For each, evaluate their pricing strategy and position them on the grid based on quality vs. price — ranging from superb value in the top left to rip-off in the bottom right.

Understand your value Gauge the perceived value of your product or service and visualize how your offering stacks up against the competition. Use these insights to determine the right price.

Adjust as needed Regularly review your pricing strategies to remain competitive and profitable in your industry — potentially testing different strategies to see what resonates best with your target audience.

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Pricing structure: Tips, definition, and examples

What is a pricing structure.

• Pricing structure vs. strategy
• The importance of pricing structures

Using pricing as a growth lever

• 7 pricing structure examples
• Tips for a strong structure

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Here at Paddle, we’re pretty keen on pricing. We’re always available to talk about pricing. Doesn’t matter who you are or what you’re selling, if it’s pricing, we’re interested. That’s because your pricing structure is absolutely definitive for your business. Where you go with pricing structure will define not only your approach to your price points but also your packaging and discounts throughout your business. Developing a solid pricing structure is the first step to optimizing your pricing, and optimized pricing can be a wicked (and often overlooked) growth lever for your business.

Your pricing structure defines your pricing setup for products or services, including your core price points plus discounts, offers, and strategy. It fundamentally answers the question, “How much do I charge for my product?” by helping you figure out the relationship between the value of your product or service (and especially how your customers perceive that value) and the costs incurred to create and provide it. Your pricing structure is powerfully influential over how your company is perceived from the outside and how fast it’s likely to grow. A company with a solid grasp of their buyer personas and the competitive value of their product charges a fair price. That equals big growth. Every pricing structure begins with a pricing objective. Change the objective, and you’ll have to change the structure, too. Whether you’re attempting to break into a competitive field, hawking a high-value and very innovative product, catering to a broad array of buyer personas, or playing to a narrow field, adapt your pricing structure accordingly.

Pricing structure vs. pricing strategy: What’s the difference?

You might expect to see written below a whole host of pricing strategy buzzwords: penetration pricing ,  price skimming , product line pricing. However, a  pricing strategy  is  not  the same as a pricing structure.

Pricing structure

Involves your whole approach to pricing across your company but with a specific emphasis on how your pricing relates to the features of your product being made available and how it affects customer use of your product.

Pricing strategy

Less concerned with your customers than it is with the competitiveness of your product in the market. Even with original products that have value, you will almost certainly have competition in the market. Pricing strategy concerns the method of setting your price points in a way that establishes your product as competitive in the eyes of potential buyers.

Unsurprisingly, the terms are related. Pricing strategy is the market-facing part of your pricing structure and (as we’ll see below) should complement your pricing structure. You can find out more about pricing strategy  here .

Why pricing structures are so important

Once your product is ready for market, your first priority is to ensure that the right customers are made aware of its value, and that, once those customers buy-in, they can benefit from the value they’ve paid for. A good pricing structure can do both.

It is complementary to your pricing strategy

Understanding who you’re selling to and how to package your product are key parts of your pricing structure and play a major role in the development of your pricing strategy, too. Cornering your market share has a lot to do with understanding how your product features appeal to your buyer personas. The word ‘features’ is important — unless your product has a very narrow focus, and you’re only catering to a niche buyer, it’s likely that different features of your product will appeal to different potential customers. That’s particularly true when you’ve got a very broad-use product, like Paddle's ProfitWell Metrics (our software helps you achieve faster recurring revenue growth) or  Wistia  (provides simple software for creating, managing, and sharing videos for business). Developing a crack  product pricing strategy  requires knowing just who finds your product appealing.

It can pull or push away customers

It’s easier, and more helpful even, to think of your pricing structure as a method of presentation. It strongly influences the way your customer will perceive the value of your business. A well-developed pricing structure will attract the right kind of customers: those who find your product/service useful. It repels those who are likely to cancel a month after signing up upon discovering that they need something else. For example, if you’re using  tiered pricing , a good pricing structure will not only divide feature availability according to buyer personas, it will also make the distinctions between tiers clear. Below is the pricing page for Hubstaff.

The page clearly shows what features are available in which tier. They have a very wide user base, so a little more explanation on how each tier could benefit each potential buyer persona would make this already-effective demonstration of their pricing structure even  more  appealing. Plus, a clear pricing structure that lets your buyer know exactly what to expect makes onboarding — one of the most high-risk stages of the customer journey — go smoothly. It’s even more important in making sure the customer gets all the value out of your product that they paid for. Think of a good pricing structure as an anti-churn device!

Monetization is much more than just a way of positioning your product -  it’s one of the most important pricing levers in business today, and yet this fact is seldom recognized. The amount of businesses talk about acquisition compared to retention and monetization illustrates that clearly (see chart left).

Finding the right pricing structure will pay off big time. The average SaaS company spends less than 10 hours updating its pricing every year — but more time invested in pricing can give you huge returns.

If the pricing’s right, your product can fully make the most of its inherent value.

Shopify has the right number of tiers to simultaneously give them coverage of different buyer types and provide room for upselling later, all the while maintaining focus on serving the key areas of their market base. It’s true that having a higher number of tiers can lead to certain empirical advantages, like a higher ARPU, as we can see here.

C ompanies with more than five plans are seeing 40-50% higher ARPU on a relative basis than those companies with fewer than five plans. However, that doesn’t necessarily mean you should swamp a prospect with a 10-tiered structure. Too much choice, especially if your feature range is narrower or your buyer personas not as numerous, can actually turn off a potential buyer. Consider simplifying the initial conversion with two to three tiers on your new customer pricing page, and then give them a wider array of options when they’re upgrading later.

3. Variable pricing

Variable pricing is on offer if part of a company’s selling line involves words to the effect of “Contact us for more information on pricing.” A company working from a variable pricing model seeks to negotiate a specific price for each customer who needs their services. This pricing structure is most useful for specific software or software that comes at a financial premium. Similarly, if your product is in-demand in areas that require deployments of varied scale — for instance, if you’re approached by companies with five employees as well as those with 500 — you might find variable pricing useful for both maintaining a broad market appeal and getting the most out of larger clients. Variable pricing is not to be confused with “usage pricing,” which we’ll be covering shortly.

4. Tiered and variable

A company employing this hybrid pricing structure uses tiering as a basis for pricing with ‘regular’-sized customers. The benefits of tiered pricing are retained. Meanwhile, the addition of a variable option gives the business room to negotiate rates and cut customized deals with customers who fall outside of their usual range. The tiered and variable pricing structure is the most complex on our list, but it can be effective when you have a consumer-facing product that is also used by specific business fields. Consumers have a range of options to choose from, while bigger businesses can negotiate for rates and even specific feature packages.

5. Per-user pricing

Per-user pricing is a simple, highly popular pricing structure that is extremely well-liked among SaaS subscribers. In per-user pricing, a single user pays a fixed monthly price. They may then add another user to their plan, and the baseline price increases (it might double, for instance); a third user increases the price by the same token, and so on. Its main virtue — being linear — is why per-user pricing is best suited for simpler products with a smaller feature array. It’s easy for customers to understand what they're paying for in this instance, and just as easy for companies to manage and predict their revenue. As with  flat-rate pricing , however, it's not easy to tap into the value of differing buyer needs to maximize your growth potential.

6. Usage-based pricing

This pay-as-you-go type model relates the cost of a SaaS product to its usage. This is particularly effective for infrastructure- and platform-related software, such as Amazon Web Services and other services where companies are charged for smaller transactions within the product (e.g., API requests, transactions processed, or data used). Usage-based pricing  is for companies working in  price sensitive  market areas, as customers will always be able to  justify the change in price . From the perspective of a subscription company, usage-based pricing is not ideal. It makes it difficult, however, for companies using it to make concrete revenue forecasts.

7. Freemium

Ah yes, freemium. Hugely popular with meteorically successful SaaS companies, from Dropbox and Slack to Yammer and Skype, freemium dovetails excellently with the tiered pricing model. Entry-level access to product features is kept free, with increasing restrictions on higher-level features to incentivize upgrading. It’s particularly good for very sticky products (like those mentioned) that get customers eager to upgrade, even though it requires taking an initial financial hit. Freemium is a versatile pricing structure: restrictions can be made on the basis of feature or capacity and use case. Plus, there are  seven different types of freemium structures .

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4 tips for building a strong structure

1. understand your product’s value before determining price.

Never decide on your pricing before you have a finished product. Let the product speak for itself; be reactive to the behavior and feedback of your initial customers before changing your monetization approach. Remember, differing features within your product will be defined by customers’ perception of them — just because Feature A and Feature B are in the same package doesn’t mean that they’re equivalent in value or in customers’ willingness-to-pay (WTP) for them. Observe early patterns and adjust accordingly.

2. Make it simple

When drawing up your pricing structure, think about the last time you had all those different membership options down at the gym presented to you, then do the exact opposite of that. Keep it  simple . Clearly outline your tiers, their content, and help guide your different buyer personas towards the tier that’s best for them. As noted above, nesting tiers — a base range for new customers, more for upgrading customers — can ease the process. Ensure that the steps from purchase to onboarding are also well-laid-out. You know your pricing strategy is successful when happy customers eagerly inquire about upgrading, not when they hit ‘Purchase’ the first time.

3. Be flexible

Flexibility, re-evaluation, and a sense of dynamism when dealing with pricing strategy are fundamental. Your strategy is not totemic — it has to change as your product does. We’ve seen it proven that companies that switch up price points every six months  see notable ARPU  increases compared to those that evaluate pricing once per year or less. Make sure your pricing scales alongside your product’s own improvements. A vastly expanded product with new and improved features  and  last year’s price points will actually be losing you revenue per sale relative to its value — don’t be afraid to increase your price points!

4. Make it scalable

Young subscription businesses can sometimes be overeager to please a customer base they haven’t even won yet. To a degree, the truism that low price = good value applies in the SaaS world, too. However, your pricing structure needs to value your product every bit as much as it needs to be realistic for your customers. If you begin with a low, fixed price, you may find yourself missing out on additional revenue from customers with a higher-willingness-to-pay who value your product at a higher rate than its pricing. Alternately, a static pricing option may harm your product’s credibility (if the pricing’s too low) or turn off a prospect who only needed part of your functionality (if it’s too high).

The success of your product does not solely depend on the quality of service you’re bringing with it. It’s your pricing structure that will present your product’s value to customers in a way that they’ll understand; it’s not something to leave to chance, and yet it’s something so many businesses neglect. Analyze your product’s position in the market and who you want to target, and plan your pricing structure accordingly. Getting the balance right between a price that drives you forward and a price that customers can’t resist is never easy — but with the right time and care, it’s possible.

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Five good pricing strategy examples and how to benefit from them

• Jonas Timonen
• April 19, 2021

Pricing strategies are the main profit drivers in eCommerce.  As price is the key detail consumers compare in eCommerce, pricing strategies should be your number one focus area. Building winning pricing strategies is easy: find out how your customer value is delivered and ensure your pricing is part of it.  In this article we introduce five best  pricing strategy examples  that are simple to follow and implement.

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Does your pricing strategy deliver customer value?

Are your customers in search of low prices or a premium service and experience?  Customer value is the core of your pricing and you should integrate your  pricing strategy  into your marketing strategy. 

Let us assume you are an eCommerce company. You have decided your position in the market, you are clear on  customer value  and how your pricing delivers it. Now you must consider some tactics to make your prices and strategy work. You can consider aspects like competitor actions, market conditions, consumer trends, and other variables, including product costs, to account for the pricing model of your goods. It is vital and something we have seen multiple times: sticking to a simple pricing strategy works best if it delivers the value the customer wants. You can easily win your competitors over by creating a simple, understandable pricing plan that includes customer value at the core. 

As a retailer or an e-commerce player, you must decide right pricing strategies before advertising products to customers. In the list below, we will review five most common pricing approaches. You need to determine the best pricing strategy for your business.

Need Expert Guidance on Your Pricing Strategy?

Explore our pricing solutions to enhance your ecommerce strategy., 1. competition-based pricing strategy.

Competition-based pricing utilizes pricing data of competitors for similar products to set a base price for their products. Rather than focusing on production costs or the item’s value for the customer, this pricing method relies heavily on market data.

Think of it in this way. You have five competitors who sell the same product as you, and you categorize the products from the most high-end brand to the affordable brands. Then, you decide where you fit in.

What is the ideal situation for using competition-based pricing?

The reason companies rely on competition-based pricing or market pricing is simple. Market-based pricing strategy is an easy strategy, and you have complete control over your market position. In addition, market information gathered on competitors can give more insights than just pricing, which you can implement in your brand to replicate similar results.

The disadvantages are that it is hard for companies to sustain only competitive pricing if they are not actively adding value to customer experience and are lacking quality products. Also, one of the major pitfalls is that selling based on a competitor’s pricing can undermine your product and cost you revenue.

Analyse competitor pricing strategies

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2. Cost-plus pricing strategy

Cost-plus pricing strategy or cost-based pricing strategy is an essential strategy that takes into account the total cost of making a product and adds a markup to that to determine the real price of a product. Although it is a good and straightforward strategy, as a business owner, you must understand the costs involved in production : material, labor, warehousing, machinery, utilities and such.  The markup price added to the top of production cost is what the company makes in profit.

Here’s how cost-plus pricing works:

• Step 1 : calculate the entire production cost for x units of a product.
• Step 2 : divide the cost by x units to get the unit cost.
• Step 3 : multiply unit cost by markup percentage. If unit cost is $10 and markup percentage is 20, then the profit margin is $10 X 20/100 = $2. The price of the product is $12.

Based on the products that are offered, they can charge different markups. However, this is not ideal for example software service companies and music producers as the product price is significantly higher than the product cost.

Understand your pricing

Get valuable insights on how different discounting techniques, costs and marketing will affect your profitability.

3. Dynamic pricing strategy

The simplest way to describe  dynamic pricing is that your prices are not static but they change based on other factors. These factors can be, for example, segments, time, market changes or competitor prices. In eCommerce, the use of dynamic pricing in  market-based pricing strategies  is very common.

Dynamic pricing in different segments

Companies use algorithms and Dynamic Pricing Software to derive their prices for different groups based on statistics. Let’s look at an example. Y ou own a car rental company and use AI-algorithms for pricing. You designed those to raise prices at locations with many pubs and bars. If this sounds highly illegal and impractical, we can assure you it is not. We are just describing Uber. Dynamic pricing, also known as adaptive pricing, is standard practice to raise profitability.

Dynamic pricing by time

Sales-based companies, like a car or insurance dealerships, are in a rush to close deals at the end of the month. As a result, dealers offer lower prices on products to match the sales quota compared to the start of the month. In today’s world, we see this happen all the time. For example, Amazon, Uber, and aviation companies use dynamic marketing based on supply and demand.

Read our latest post on dynamic pricing

Read  “How to use competitor pricing to improve your profitability” and use our 15-step guide to get started and better understand your competition. 

4. Penetration price strategy

Penetration pricing is used to  capture market share by setting product prices at a below-market level to gain customers. Once you get a sizeable market share, you readjust your pricing accordingly.

Here’s how penetration pricing works

Let’s look at an example of penetration pricing. Consider company X, a small to a medium-sized soap maker, that sells lavender soap bars at $10. An international company Y, with a higher production capacity, enters the market and begins to sell a similar lavender soap bar at  $5. 

The goal of Y is to run the small-sized competitor X out of business even if at $5 company Y makes a low minimal profit. Still company Y is confident that company X cannot match their prices . As customers begin to buy from Y, X will eventually run out of business. This extreme form of penetrative pricing is also often called predatory pricing.  World-renowned Walmart is known for relying on this practice  and has been the bane of smaller local businesses due to their unmatchable price. 

Learn how to build pricing strategies

With the help of our article on an introduction to pricing strategies, easily fine-tune or build your pricing strategy from scratch.

5. Price skimming strategy

The practice of charging a higher price point for a product when launching it is known as price skimming.  Instead of this, you can leverage market demand and then lower or readjust the price based on price elasticity later.

We see this often at the launch of celebrity product lines or new product launches from a reputed brand. In these cases, customers are willing to pay considerably higher prices. Whether the price reflects the actual value of the product is not essential. Customers want the anticipated product, w hether it is Rihanna’s Fenty Beauty or the newest Playstation, when the demand is high.

Lowering the price of products attracts price-sensitive customers . Therefore, you can charge the maximum amount for each customer segment by skimming off the top of these customer segments and  get higher profits as a business owner. Monitor if you need to lower the price in a few months.

Most frequent questions and answers​

Businesses can effectively combine multiple pricing strategies by carefully analyzing their target market, competition, and product offerings. For example, they may use cost-plus pricing to ensure profitability while incorporating dynamic pricing to adjust prices based on market conditions and customer demand. By understanding customer value and market dynamics, companies can tailor their pricing strategies to maximize profits while remaining competitive.

Ethical considerations and potential drawbacks associated with certain pricing strategies should indeed be carefully evaluated by businesses. While penetration pricing can help capture market share, predatory pricing practices can harm competition and lead to antitrust issues. You should ensure that your pricing strategies comply with legal regulations to avoid negative consequences and maintain trust with customers and stakeholders.

One tip we have is you should make sure your master data is formalized and as well completed as possible. Additionally, with software you can conduct thorough testing and analysis to optimize pricing strategies and ensure accurate and efficient price adjustments that align with your business objectives and customer expectations.

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Home » Blog » Tips » 5 Pricing Strategy Examples For Different Businesses

5 Pricing Strategy Examples For Different Businesses

by Erin Ollila | Oct 14, 2015 | Tips | 0 comments

5 pricing strategy examples that will boost your profits and put your business ahead of the competition

For infant businesses, mapping out a price plan will give you a clear vision of what road you’re preparing to travel through.

A pricing strategy is what a business uses to label the cost of their products (or services) so they can gain as much profit from their sales as possible.

Sometimes it means pricing things at an expensive rate to gain profit, other instances require businesses to lower prices so that customers will flock towards them. Whether your business is a start-up, or you’re an established company that’s offering a new product or service, you’ll benefit tremendously from price plans.

Think about what customers search for during the shopping process.

All shoppers look for the best possible bargain–but do some think that an expensive product or service means the quality is better than a competitors? Or if you implement a fair and affordable increase in a popular product, will customers be accepting of this change?

~ ~ ~ ~ ~ ~

Let us help you put these pricing strategies to work.    Sign up with Blitz today for a 30-day free trial  of our lead management software and use our sales follow up system to turn more leads into customers.

5 pricing strategy examples that will help you create your own

1. Discounted pricing

This is probably difficult to do if you’re a newborn company; but if it’s executed properly, the benefits will far exceed your expectations. The basic idea behind a discount promotional strategy is to lower your prices in order to gain new customer, but not gain a large profit.

The products you sell are at a price that’ll generate enough funds so you can break even and maintain your business, but you’ll appeal to a large pool of customers. For example, this is one of the pricing strategy examples that works best for businesses like a grocery or convenient store that offers a variety of products at an inexpensive rate. Combining discounted products and regular-priced products in one location will draw customers into the business for a discount, but indirectly encourages impulse purchasing on regular-priced products.

2. Premium pricing plans

On the flip side, a premium pricing plan will attract an exclusive pool of customers because products and services are given at an expensive rate. Think of Apple, who never discounts or has sales. They maintain their status as a premium product this way. Using premium pricing plans limits your potential buyer pool, but offers a larger profit margin, and the ability to produce a higher quality product. Psychologically, higher-priced products have a higher perceived value by customers.

3. Inverted strategy

A list of pricing strategy examples without an inverted strategy would be incomplete, even though it can be problematic for many companies. What this price plan does, is take a product or service of high quality and put it at a low (say, $1 for the first six months), or free price. Although it seems like you’re devaluing the cost of your product, the inverted strategy is a great marketing tool–especially for new businesses who simply need to build a list of customers to market to. Software-as-a-Service (SaaS) businesses can most easily use this strategy, because it costs almost as much to have 100 customers as it does to have 1.

4. Competitor’s strategy

Like all of the above mentioned price plans, the value you put on your product or service has to be the best fit for your customers. When you have steep competition, some businesses concentrate on pricing your business services at the lowest possible rate. That’s not to say it will be inexpensive, but you want to beat your competitors. You’ve probably seen this strategy at gas stations that are across the street from one another. This strategy isn’t the easiest for most small business who need to profit to survive, however, if you’re a bigger business with many competitors, give your customers and leads a reason to step onto your turf.

With this strategy, if you’re selling the same exact product as the competition, there’s a great chance that they’ll ask why your prices are different. Make an effort to understand and break the pricing down for them, and show why your company is worth it. On the other hand, you could offer the same exact pricing as your competitor rather than driving down prices and perceived value in your industry, a common issue in creative service industries like design and photography.

5.  Internal pricing plan

Of all the pricing strategy examples, this one is the only price plan that is competing with itself. With the internal strategy, you’ll have to check out your inventory and see what products are similar to each other. Say you own a shoe store and hold two types of shoes that (essentially) are identical. You’ll have to price them differently so they sell. Maybe they’re the same shoe from the same designer, but one pair has rhinestones on it and the other doesn’t. Offer the shoe with the rhinestones at a higher price and leave the modest one as it was intended to cost. By comparison, the shoe without the studs on it will seem reasonably priced for people looking for an affordable shoe. If both shoes are priced individually, they’ll be more appealing to your customers.

Are there any pricing strategy examples that you use for your business? Share your answers in the comments!

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7 Pricing Strategy Business Plan Tips and Its Importance

If you price your offer too low, you will lose money. If you overprice it, you may lose sales that could have made your year. Finding the best price entails deciding on a pricing strategy that is appropriate for your company’s situation. The following article explains pricing strategy business plan and its importance .

Read also: Top 5 Business Strategy Examples to Increase Sales Faster

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Why Determining Pricing Strategy Is Important for Business?

A business plan is a written document that details a company’s core business practices, such as products and services offered, marketing, financial planning and budgeting, and pricing strategy. This business plan can be very detailed, outlining every aspect of the company. For start-ups that want to be as agile as possible, it can be very short and lean.

This plan can be used for both external investors and relationships as well as internal purposes. Internally, a business plan can be useful because it ensures that all decision makers are on the same page about the most important aspects of the business.

Read also: 5 Top Elements of a Business Plan That Determines Success

A business plan can be long and detailed or short and lean, but it should always have a clear vision for how pricing will be handled. A pricing strategy marketing ultimately determines the profit margin of your product or service as well as the amount of revenue generated by the company. Pricing is also very important, according to extensive research of consulting firms. 

A 1% increase in price can result in an 8% increase in profit margin. That is a prime business plan pricing strategy example of how minor changes can have a significant impact!

Each business plan should clearly include a section on pricing strategies. The level of detail and complexity in this pricing strategy should be determined by each individual business and the challenges in the business environment. But businesses should consider some factors when developing their pricing strategy.

Pricing Strategy Business Plan

When making a marketing plan in business plan, you also need to consider pricing strategy marketing plan. Choose the most suitable marketing plan price. There are a lot of marketing plan pricing strategy examples available on the internet which can be used as a reference. Here are pricing strategies for business plan.

Price Skimming

Skimming is the practice of initially charging a high price for a product and then gradually lowering the price as more competitors enter the market. This type of pricing strategy for new business is ideal for companies entering emerging markets. 

It allows businesses to capitalize on early adopters and then undercut future competitors as they enter an already-developed market. A successful skimming strategy is heavily dependent on the market you want to enter.

Pricing for Market Penetration

Pricing for market penetration is the inverse of price skimming. Instead of starting with a high price and gradually lowering it, you take over a market by undercutting your competitors. When you have a solid customer base, you can raise your prices. Netflix is an example of penetration pricing: it enters the market at a low price and gradually raises prices.

Many factors go into deciding on this strategy, such as your company’s ability to take losses upfront in order to establish a strong footing in a market. It is also critical to cultivate a loyal customer base, which may necessitate additional marketing and branding strategies.

Premium Pricing

Premium pricing is reserved for businesses that create high-quality products and market them to rich consumers. The key to this pricing strategy is to create a high-quality product that customers will regard as valuable. To appeal to the right type of consumer, you’ll most likely need to develop a “luxury” or “lifestyle” branding strategy. There are numerous instances of premium pricing strategies, such as Nike, Rolex, and Tesla.

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Economy Pricing

An economy pricing strategy focuses on customers who want to save as much money as possible on the product or service they’re buying. Big-box retailers such as Walmart and Shopify are prime business plan pricing examples of economy pricing models. 

For example, Shopify distinguishes itself through the features it offers users and the prices it charges for them. Customers can choose from three thoughtfully priced versions of their product, each with a number of customizable and flexible features. Adopting an economy pricing model, like premium pricing, is determined by your overhead costs and the overall value of your product.

Pricing for Bundles

Bundle pricing occurs when a company groups several products together and sells them for less money than they would individually. Product mix pricing strategies are an effective way to move a large amount of inventory quickly. Profits on low-value items outweigh losses on high-value items included in a bundle in a successful bundle pricing strategy. 

Pricing Based on Value

Premium pricing is similar to value-based pricing. A company’s pricing in this model is based on how much the customer believes the product is worth. This pricing model is best suited to merchants who sell unique products rather than commodities.

How do you know how much a customer thinks a product is worth? It’s difficult to get an exact price, but you can use marketing techniques to understand the customer’s point of view. During the product development phase, collect customer feedback or hold a focus group. Investing in your brand can also assist you in increasing the “perceived value” of your product.

Dynamic Pricing

Dynamic pricing allows you to adjust the price of your products based on market demand at any time. The surge pricing implemented by Uber is an excellent pricing example business plan of dynamic pricing. 

A customary pricing example of Uber during low seasons can be a very cost-effective option. However, if a rainstorm hits during morning rush hour, the price of an Uber will skyrocket due to increased demand. Pricing strategy for small business can also do this, depending on seasonal demand for your product or service.

Pricing strategies must be included in your business plan. Having a clear vision for how you will price your products and services allows you to maximize profit margins and revenue. 

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How to create a business plan: examples & free template.

This is the ultimate guide to creating a comprehensive and effective plan to start a business . In today’s dynamic business landscape, having a well-crafted business plan is an important first step to securing funding, attracting partners, and navigating the challenges of entrepreneurship.

This guide has been designed to help you create a winning plan that stands out in the ever-evolving marketplace. U sing real-world examples and a free downloadable template, it will walk you through each step of the process.

Whether you’re a seasoned entrepreneur or launching your very first startup, the guide will give you the insights, tools, and confidence you need to create a solid foundation for your business.

Table of Contents

How to Write a Business Plan

Embarking on the journey of creating a successful business requires a solid foundation, and a well-crafted business plan is the cornerstone. Here is the process of writing a comprehensive business plan and the main parts of a winning business plan . From setting objectives to conducting market research, this guide will have everything you need.

Executive Summary

The Executive Summary serves as the gateway to your business plan, offering a snapshot of your venture’s core aspects. This section should captivate and inform, succinctly summarizing the essence of your plan.

It’s crucial to include a clear mission statement, a brief description of your primary products or services, an overview of your target market, and key financial projections or achievements.

Think of it as an elevator pitch in written form: it should be compelling enough to engage potential investors or stakeholders and provide them with a clear understanding of what your business is about, its goals, and why it’s a promising investment.

Example: EcoTech is a technology company specializing in eco-friendly and sustainable products designed to reduce energy consumption and minimize waste. Our mission is to create innovative solutions that contribute to a cleaner, greener environment.

Our target market includes environmentally conscious consumers and businesses seeking to reduce their carbon footprint. We project a 200% increase in revenue within the first three years of operation.

Overview and Business Objectives

In the Overview and Business Objectives section, outline your business’s core goals and the strategic approaches you plan to use to achieve them. This section should set forth clear, specific objectives that are attainable and time-bound, providing a roadmap for your business’s growth and success.

It’s important to detail how these objectives align with your company’s overall mission and vision. Discuss the milestones you aim to achieve and the timeframe you’ve set for these accomplishments.

This part of the plan demonstrates to investors and stakeholders your vision for growth and the practical steps you’ll take to get there.

Example: EcoTech’s primary objective is to become a market leader in sustainable technology products within the next five years. Our key objectives include:

• Introducing three new products within the first two years of operation.
• Achieving annual revenue growth of 30%.
• Expanding our customer base to over 10,000 clients by the end of the third year.

Company Description

The Company Description section is your opportunity to delve into the details of your business. Provide a comprehensive overview that includes your company’s history, its mission statement, and its vision for the future.

Highlight your unique selling proposition (USP) – what makes your business stand out in the market. Explain the problems your company solves and how it benefits your customers.

Include information about the company’s founders, their expertise, and why they are suited to lead the business to success. This section should paint a vivid picture of your business, its values, and its place in the industry.

Example: EcoTech is committed to developing cutting-edge sustainable technology products that benefit both the environment and our customers. Our unique combination of innovative solutions and eco-friendly design sets us apart from the competition. We envision a future where technology and sustainability go hand in hand, leading to a greener planet.

Define Your Target Market

Defining Your Target Market is critical for tailoring your business strategy effectively. This section should describe your ideal customer base in detail, including demographic information (such as age, gender, income level, and location) and psychographic data (like interests, values, and lifestyle).

Elucidate on the specific needs or pain points of your target audience and how your product or service addresses these. This information will help you know your target market and develop targeted marketing strategies.

Example: Our target market comprises environmentally conscious consumers and businesses looking for innovative solutions to reduce their carbon footprint. Our ideal customers are those who prioritize sustainability and are willing to invest in eco-friendly products.

Market Analysis

The Market Analysis section requires thorough research and a keen understanding of the industry. It involves examining the current trends within your industry, understanding the needs and preferences of your customers, and analyzing the strengths and weaknesses of your competitors.

This analysis will enable you to spot market opportunities and anticipate potential challenges. Include data and statistics to back up your claims, and use graphs or charts to illustrate market trends.

This section should demonstrate that you have a deep understanding of the market in which you operate and that your business is well-positioned to capitalize on its opportunities.

Example: The market for eco-friendly technology products has experienced significant growth in recent years, with an estimated annual growth rate of 10%. As consumers become increasingly aware of environmental issues, the demand for sustainable solutions continues to rise.

Our research indicates a gap in the market for high-quality, innovative eco-friendly technology products that cater to both individual and business clients.

SWOT Analysis

A SWOT analysis in your business plan offers a comprehensive examination of your company’s internal and external factors. By assessing Strengths, you showcase what your business does best and where your capabilities lie.

Weaknesses involve an honest introspection of areas where your business may be lacking or could improve. Opportunities can be external factors that your business could capitalize on, such as market gaps or emerging trends.

Threats include external challenges your business may face, like competition or market changes. This analysis is crucial for strategic planning, as it helps in recognizing and leveraging your strengths, addressing weaknesses, seizing opportunities, and preparing for potential threats.

Including a SWOT analysis demonstrates to stakeholders that you have a balanced and realistic understanding of your business in its operational context.

• Innovative and eco-friendly product offerings.
• Strong commitment to sustainability and environmental responsibility.
• Skilled and experienced team with expertise in technology and sustainability.

Weaknesses:

• Limited brand recognition compared to established competitors.
• Reliance on third-party manufacturers for product development.

Opportunities:

• Growing consumer interest in sustainable products.
• Partnerships with environmentally-focused organizations and influencers.
• Expansion into international markets.
• Intense competition from established technology companies.
• Regulatory changes could impact the sustainable technology market.

Competitive Analysis

In this section, you’ll analyze your competitors in-depth, examining their products, services, market positioning, and pricing strategies. Understanding your competition allows you to identify gaps in the market and tailor your offerings to outperform them.

By conducting a thorough competitive analysis, you can gain insights into your competitors’ strengths and weaknesses, enabling you to develop strategies to differentiate your business and gain a competitive advantage in the marketplace.

Example: Key competitors include:

GreenTech: A well-known brand offering eco-friendly technology products, but with a narrower focus on energy-saving devices.

EarthSolutions: A direct competitor specializing in sustainable technology, but with a limited product range and higher prices.

By offering a diverse product portfolio, competitive pricing, and continuous innovation, we believe we can capture a significant share of the growing sustainable technology market.

Organization and Management Team

Provide an overview of your company’s organizational structure, including key roles and responsibilities. Introduce your management team, highlighting their expertise and experience to demonstrate that your team is capable of executing the business plan successfully.

Showcasing your team’s background, skills, and accomplishments instills confidence in investors and other stakeholders, proving that your business has the leadership and talent necessary to achieve its objectives and manage growth effectively.

Example: EcoTech’s organizational structure comprises the following key roles: CEO, CTO, CFO, Sales Director, Marketing Director, and R&D Manager. Our management team has extensive experience in technology, sustainability, and business development, ensuring that we are well-equipped to execute our business plan successfully.

Products and Services Offered

Describe the products or services your business offers, focusing on their unique features and benefits. Explain how your offerings solve customer pain points and why they will choose your products or services over the competition.

This section should emphasize the value you provide to customers, demonstrating that your business has a deep understanding of customer needs and is well-positioned to deliver innovative solutions that address those needs and set your company apart from competitors.

Example: EcoTech offers a range of eco-friendly technology products, including energy-efficient lighting solutions, solar chargers, and smart home devices that optimize energy usage. Our products are designed to help customers reduce energy consumption, minimize waste, and contribute to a cleaner environment.

Marketing and Sales Strategy

In this section, articulate your comprehensive strategy for reaching your target market and driving sales. Detail the specific marketing channels you plan to use, such as social media, email marketing, SEO, or traditional advertising.

Describe the nature of your advertising campaigns and promotional activities, explaining how they will capture the attention of your target audience and convey the value of your products or services. Outline your sales strategy, including your sales process, team structure, and sales targets.

Discuss how these marketing and sales efforts will work together to attract and retain customers, generate leads, and ultimately contribute to achieving your business’s revenue goals.

This section is critical to convey to investors and stakeholders that you have a well-thought-out approach to market your business effectively and drive sales growth.

Example: Our marketing strategy includes digital advertising, content marketing, social media promotion, and influencer partnerships. We will also attend trade shows and conferences to showcase our products and connect with potential clients. Our sales strategy involves both direct sales and partnerships with retail stores, as well as online sales through our website and e-commerce platforms.

Logistics and Operations Plan

The Logistics and Operations Plan is a critical component that outlines the inner workings of your business. It encompasses the management of your supply chain, detailing how you acquire raw materials and manage vendor relationships.

Inventory control is another crucial aspect, where you explain strategies for inventory management to ensure efficiency and reduce wastage. The section should also describe your production processes, emphasizing scalability and adaptability to meet changing market demands.

Quality control measures are essential to maintain product standards and customer satisfaction. This plan assures investors and stakeholders of your operational competency and readiness to meet business demands.

Highlighting your commitment to operational efficiency and customer satisfaction underlines your business’s capability to maintain smooth, effective operations even as it scales.

Example: EcoTech partners with reliable third-party manufacturers to produce our eco-friendly technology products. Our operations involve maintaining strong relationships with suppliers, ensuring quality control, and managing inventory.

We also prioritize efficient distribution through various channels, including online platforms and retail partners, to deliver products to our customers in a timely manner.

Financial Projections Plan

In the Financial Projections Plan, lay out a clear and realistic financial future for your business. This should include detailed projections for revenue, costs, and profitability over the next three to five years.

Ground these projections in solid assumptions based on your market analysis, industry benchmarks, and realistic growth scenarios. Break down revenue streams and include an analysis of the cost of goods sold, operating expenses, and potential investments.

This section should also discuss your break-even analysis, cash flow projections, and any assumptions about external funding requirements.

By presenting a thorough and data-backed financial forecast, you instill confidence in potential investors and lenders, showcasing your business’s potential for profitability and financial stability.

This forward-looking financial plan is crucial for demonstrating that you have a firm grasp of the financial nuances of your business and are prepared to manage its financial health effectively.

Example: Over the next three years, we expect to see significant growth in revenue, driven by new product launches and market expansion. Our financial projections include:

• Year 1: $1.5 million in revenue, with a net profit of $200,000.
• Year 2: $3 million in revenue, with a net profit of $500,000.
• Year 3: $4.5 million in revenue, with a net profit of $1 million.

These projections are based on realistic market analysis, growth rates, and product pricing.

Income Statement

The income statement , also known as the profit and loss statement, provides a summary of your company’s revenues and expenses over a specified period. It helps you track your business’s financial performance and identify trends, ensuring you stay on track to achieve your financial goals.

Regularly reviewing and analyzing your income statement allows you to monitor the health of your business, evaluate the effectiveness of your strategies, and make data-driven decisions to optimize profitability and growth.

Example: The income statement for EcoTech’s first year of operation is as follows:

• Revenue: $1,500,000
• Cost of Goods Sold: $800,000
• Gross Profit: $700,000
• Operating Expenses: $450,000
• Net Income: $250,000

This statement highlights our company’s profitability and overall financial health during the first year of operation.

Cash Flow Statement

A cash flow statement is a crucial part of a financial business plan that shows the inflows and outflows of cash within your business. It helps you monitor your company’s liquidity, ensuring you have enough cash on hand to cover operating expenses, pay debts, and invest in growth opportunities.

By including a cash flow statement in your business plan, you demonstrate your ability to manage your company’s finances effectively.

Example:  The cash flow statement for EcoTech’s first year of operation is as follows:

Operating Activities:

• Depreciation: $10,000
• Changes in Working Capital: -$50,000
• Net Cash from Operating Activities: $210,000

Investing Activities:

•  Capital Expenditures: -$100,000
• Net Cash from Investing Activities: -$100,000

Financing Activities:

• Proceeds from Loans: $150,000
• Loan Repayments: -$50,000
• Net Cash from Financing Activities: $100,000
• Net Increase in Cash: $210,000

This statement demonstrates EcoTech’s ability to generate positive cash flow from operations, maintain sufficient liquidity, and invest in growth opportunities.

Tips on Writing a Business Plan

1. Be clear and concise: Keep your language simple and straightforward. Avoid jargon and overly technical terms. A clear and concise business plan is easier for investors and stakeholders to understand and demonstrates your ability to communicate effectively.

2. Conduct thorough research: Before writing your business plan, gather as much information as possible about your industry, competitors, and target market. Use reliable sources and industry reports to inform your analysis and make data-driven decisions.

3. Set realistic goals: Your business plan should outline achievable objectives that are specific, measurable, attainable, relevant, and time-bound (SMART). Setting realistic goals demonstrates your understanding of the market and increases the likelihood of success.

4. Focus on your unique selling proposition (USP): Clearly articulate what sets your business apart from the competition. Emphasize your USP throughout your business plan to showcase your company’s value and potential for success.

5. Be flexible and adaptable: A business plan is a living document that should evolve as your business grows and changes. Be prepared to update and revise your plan as you gather new information and learn from your experiences.

6. Use visuals to enhance understanding: Include charts, graphs, and other visuals to help convey complex data and ideas. Visuals can make your business plan more engaging and easier to digest, especially for those who prefer visual learning.

7. Seek feedback from trusted sources: Share your business plan with mentors, industry experts, or colleagues and ask for their feedback. Their insights can help you identify areas for improvement and strengthen your plan before presenting it to potential investors or partners.

FREE Business Plan Template

To help you get started on your business plan, we have created a template that includes all the essential components discussed in the “How to Write a Business Plan” section. This easy-to-use template will guide you through each step of the process, ensuring you don’t miss any critical details.

The template is divided into the following sections:

• Mission statement
• Business Overview
• Key products or services
• Target market
• Financial highlights
• Company goals
• Strategies to achieve goals
• Measurable, time-bound objectives
• Company History
• Mission and vision
• Unique selling proposition
• Demographics
• Psychographics
• Pain points
• Industry trends
• Customer needs
• Competitor strengths and weaknesses
• Opportunities
• Competitor products and services
• Market positioning
• Pricing strategies
• Organizational structure
• Key roles and responsibilities
• Management team backgrounds
• Product or service features
• Competitive advantages
• Marketing channels
• Advertising campaigns
• Promotional activities
• Sales strategies
• Supply chain management
• Inventory control
• Production processes
• Quality control measures
• Projected revenue
• Assumptions
• Cash inflows
• Cash outflows
• Net cash flow

What is a Business Plan?

A business plan is a strategic document that outlines an organization’s goals, objectives, and the steps required to achieve them. It serves as a roadmap as you start a business , guiding the company’s direction and growth while identifying potential obstacles and opportunities.

Typically, a business plan covers areas such as market analysis, financial projections, marketing strategies, and organizational structure. It not only helps in securing funding from investors and lenders but also provides clarity and focus to the management team.

A well-crafted business plan is a very important part of your business startup checklist because it fosters informed decision-making and long-term success.

Why You Should Write a Business Plan

Understanding the importance of a business plan in today’s competitive environment is crucial for entrepreneurs and business owners. Here are five compelling reasons to write a business plan:

• Attract Investors and Secure Funding : A well-written business plan demonstrates your venture’s potential and profitability, making it easier to attract investors and secure the necessary funding for growth and development. It provides a detailed overview of your business model, target market, financial projections, and growth strategies, instilling confidence in potential investors and lenders that your company is a worthy investment.
• Clarify Business Objectives and Strategies : Crafting a business plan forces you to think critically about your goals and the strategies you’ll employ to achieve them, providing a clear roadmap for success. This process helps you refine your vision and prioritize the most critical objectives, ensuring that your efforts are focused on achieving the desired results.
• Identify Potential Risks and Opportunities : Analyzing the market, competition, and industry trends within your business plan helps identify potential risks and uncover untapped opportunities for growth and expansion. This insight enables you to develop proactive strategies to mitigate risks and capitalize on opportunities, positioning your business for long-term success.
• Improve Decision-Making : A business plan serves as a reference point so you can make informed decisions that align with your company’s overall objectives and long-term vision. By consistently referring to your plan and adjusting it as needed, you can ensure that your business remains on track and adapts to changes in the market, industry, or internal operations.
• Foster Team Alignment and Communication : A shared business plan helps ensure that all team members are on the same page, promoting clear communication, collaboration, and a unified approach to achieving the company’s goals. By involving your team in the planning process and regularly reviewing the plan together, you can foster a sense of ownership, commitment, and accountability that drives success.

What are the Different Types of Business Plans?

In today’s fast-paced business world, having a well-structured roadmap is more important than ever. A traditional business plan provides a comprehensive overview of your company’s goals and strategies, helping you make informed decisions and achieve long-term success. There are various types of business plans, each designed to suit different needs and purposes. Let’s explore the main types:

• Startup Business Plan: Tailored for new ventures, a startup business plan outlines the company’s mission, objectives, target market, competition, marketing strategies, and financial projections. It helps entrepreneurs clarify their vision, secure funding from investors, and create a roadmap for their business’s future. Additionally, this plan identifies potential challenges and opportunities, which are crucial for making informed decisions and adapting to changing market conditions.
• Internal Business Plan: This type of plan is intended for internal use, focusing on strategies, milestones, deadlines, and resource allocation. It serves as a management tool for guiding the company’s growth, evaluating its progress, and ensuring that all departments are aligned with the overall vision. The internal business plan also helps identify areas of improvement, fosters collaboration among team members, and provides a reference point for measuring performance.
• Strategic Business Plan: A strategic business plan outlines long-term goals and the steps to achieve them, providing a clear roadmap for the company’s direction. It typically includes a SWOT analysis, market research, and competitive analysis. This plan allows businesses to align their resources with their objectives, anticipate changes in the market, and develop contingency plans. By focusing on the big picture, a strategic business plan fosters long-term success and stability.
• Feasibility Business Plan: This plan is designed to assess the viability of a business idea, examining factors such as market demand, competition, and financial projections. It is often used to decide whether or not to pursue a particular venture. By conducting a thorough feasibility analysis, entrepreneurs can avoid investing time and resources into an unviable business concept. This plan also helps refine the business idea, identify potential obstacles, and determine the necessary resources for success.
• Growth Business Plan: Also known as an expansion plan, a growth business plan focuses on strategies for scaling up an existing business. It includes market analysis, new product or service offerings, and financial projections to support expansion plans. This type of plan is essential for businesses looking to enter new markets, increase their customer base, or launch new products or services. By outlining clear growth strategies, the plan helps ensure that expansion efforts are well-coordinated and sustainable.
• Operational Business Plan: This type of plan outlines the company’s day-to-day operations, detailing the processes, procedures, and organizational structure. It is an essential tool for managing resources, streamlining workflows, and ensuring smooth operations. The operational business plan also helps identify inefficiencies, implement best practices, and establish a strong foundation for future growth. By providing a clear understanding of daily operations, this plan enables businesses to optimize their resources and enhance productivity.
• Lean Business Plan: A lean business plan is a simplified, agile version of a traditional plan, focusing on key elements such as value proposition, customer segments, revenue streams, and cost structure. It is perfect for startups looking for a flexible, adaptable planning approach. The lean business plan allows for rapid iteration and continuous improvement, enabling businesses to pivot and adapt to changing market conditions. This streamlined approach is particularly beneficial for businesses in fast-paced or uncertain industries.
• One-Page Business Plan: As the name suggests, a one-page business plan is a concise summary of your company’s key objectives, strategies, and milestones. It serves as a quick reference guide and is ideal for pitching to potential investors or partners. This plan helps keep teams focused on essential goals and priorities, fosters clear communication, and provides a snapshot of the company’s progress. While not as comprehensive as other plans, a one-page business plan is an effective tool for maintaining clarity and direction.
• Nonprofit Business Plan: Specifically designed for nonprofit organizations, this plan outlines the mission, goals, target audience, fundraising strategies, and budget allocation. It helps secure grants and donations while ensuring the organization stays on track with its objectives. The nonprofit business plan also helps attract volunteers, board members, and community support. By demonstrating the organization’s impact and plans for the future, this plan is essential for maintaining transparency, accountability, and long-term sustainability within the nonprofit sector.
• Franchise Business Plan: For entrepreneurs seeking to open a franchise, this type of plan focuses on the franchisor’s requirements, as well as the franchisee’s goals, strategies, and financial projections. It is crucial for securing a franchise agreement and ensuring the business’s success within the franchise system. This plan outlines the franchisee’s commitment to brand standards, marketing efforts, and operational procedures, while also addressing local market conditions and opportunities. By creating a solid franchise business plan, entrepreneurs can demonstrate their ability to effectively manage and grow their franchise, increasing the likelihood of a successful partnership with the franchisor.

Using Business Plan Software

Creating a comprehensive business plan can be intimidating, but business plan software can streamline the process and help you produce a professional document. These tools offer a number of benefits, including guided step-by-step instructions, financial projections, and industry-specific templates. Here are the top 5 business plan software options available to help you craft a great business plan.

1. LivePlan

LivePlan is a popular choice for its user-friendly interface and comprehensive features. It offers over 500 sample plans, financial forecasting tools, and the ability to track your progress against key performance indicators. With LivePlan, you can create visually appealing, professional business plans that will impress investors and stakeholders.

2. Upmetrics

Upmetrics provides a simple and intuitive platform for creating a well-structured business plan. It features customizable templates, financial forecasting tools, and collaboration capabilities, allowing you to work with team members and advisors. Upmetrics also offers a library of resources to guide you through the business planning process.

Bizplan is designed to simplify the business planning process with a drag-and-drop builder and modular sections. It offers financial forecasting tools, progress tracking, and a visually appealing interface. With Bizplan, you can create a business plan that is both easy to understand and visually engaging.

Enloop is a robust business plan software that automatically generates a tailored plan based on your inputs. It provides industry-specific templates, financial forecasting, and a unique performance score that updates as you make changes to your plan. Enloop also offers a free version, making it accessible for businesses on a budget.

5. Tarkenton GoSmallBiz

Developed by NFL Hall of Famer Fran Tarkenton, GoSmallBiz is tailored for small businesses and startups. It features a guided business plan builder, customizable templates, and financial projection tools. GoSmallBiz also offers additional resources, such as CRM tools and legal document templates, to support your business beyond the planning stage.

Business Plan FAQs

What is a good business plan.

A good business plan is a well-researched, clear, and concise document that outlines a company’s goals, strategies, target market, competitive advantages, and financial projections. It should be adaptable to change and provide a roadmap for achieving success.

What are the 3 main purposes of a business plan?

The three main purposes of a business plan are to guide the company’s strategy, attract investment, and evaluate performance against objectives. Here’s a closer look at each of these:

• It outlines the company’s purpose and core values to ensure that all activities align with its mission and vision.
• It provides an in-depth analysis of the market, including trends, customer needs, and competition, helping the company tailor its products and services to meet market demands.
• It defines the company’s marketing and sales strategies, guiding how the company will attract and retain customers.
• It describes the company’s organizational structure and management team, outlining roles and responsibilities to ensure effective operation and leadership.
• It sets measurable, time-bound objectives, allowing the company to plan its activities effectively and make strategic decisions to achieve these goals.
• It provides a comprehensive overview of the company and its business model, demonstrating its uniqueness and potential for success.
• It presents the company’s financial projections, showing its potential for profitability and return on investment.
• It demonstrates the company’s understanding of the market, including its target customers and competition, convincing investors that the company is capable of gaining a significant market share.
• It showcases the management team’s expertise and experience, instilling confidence in investors that the team is capable of executing the business plan successfully.
• It establishes clear, measurable objectives that serve as performance benchmarks.
• It provides a basis for regular performance reviews, allowing the company to monitor its progress and identify areas for improvement.
• It enables the company to assess the effectiveness of its strategies and make adjustments as needed to achieve its objectives.
• It helps the company identify potential risks and challenges, enabling it to develop contingency plans and manage risks effectively.
• It provides a mechanism for evaluating the company’s financial performance, including revenue, expenses, profitability, and cash flow.

Can I write a business plan by myself?

Yes, you can write a business plan by yourself, but it can be helpful to consult with mentors, colleagues, or industry experts to gather feedback and insights. There are also many creative business plan templates and business plan examples available online, including those above.

We also have examples for specific industries, including a using food truck business plan , salon business plan , farm business plan , daycare business plan , and restaurant business plan .

Is it possible to create a one-page business plan?

Yes, a one-page business plan is a condensed version that highlights the most essential elements, including the company’s mission, target market, unique selling proposition, and financial goals.

How long should a business plan be?

A typical business plan ranges from 20 to 50 pages, but the length may vary depending on the complexity and needs of the business.

What is a business plan outline?

A business plan outline is a structured framework that organizes the content of a business plan into sections, such as the executive summary, company description, market analysis, and financial projections.

What are the 5 most common business plan mistakes?

The five most common business plan mistakes include inadequate research, unrealistic financial projections, lack of focus on the unique selling proposition, poor organization and structure, and failure to update the plan as circumstances change.

What questions should be asked in a business plan?

A business plan should address questions such as: What problem does the business solve? Who is the specific target market ? What is the unique selling proposition? What are the company’s objectives? How will it achieve those objectives?

What’s the difference between a business plan and a strategic plan?

A business plan focuses on the overall vision, goals, and tactics of a company, while a strategic plan outlines the specific strategies, action steps, and performance measures necessary to achieve the company’s objectives.

How is business planning for a nonprofit different?

Nonprofit business planning focuses on the organization’s mission, social impact, and resource management, rather than profit generation. The financial section typically includes funding sources, expenses, and projected budgets for programs and operations.

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Pricing Strategy

Use this Pricing Strategy form to help you calculate your costs in assigning a price to your products.

Sample text from Pricing Strategy:

Having trouble deciding how to price your product(s)? Use this worksheet to help make it a little clearer. Add your own categories if necessary.

Item Cost Labor Materials Utilities Equipment depreciation Advertising Packaging Insurance Postage Wholesale Total

Conventional wisdom now says to take that wholesale total and increase it by 50 or 100 percent. Also consider the competition. If you charge a great deal more for the same product, you will have a difficult time getting business. So make the retail price enough to cover all your expenses, plus profit, and be prepared to change that price if it becomes necessary.

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Pricing Strategy

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Coffee Shop Business Plan Pricing: Setting the Right Price

Starting a coffee shop is an exciting venture that requires careful planning and strategizing. One crucial aspect of developing a comprehensive business plan is determining the pricing strategy for your coffee shop. Pricing plays a vital role in your profitability, customer perception, and overall achievement.

Pricing for menu items should consider factors like ingredient costs, labor expenses, overheads, desired profit margins, and market competition. Conducting a cost analysis and market research will help you find the right balance. Find the right balance between costs, competition, and customer value.

In this article, I will explore key considerations and strategies to help you develop an effective pricing plan for your coffee shop business.

Table of Contents

Understanding Cost Structure

Before implementing pricing strategies for your coffee shop business plan, it is crucial to have a solid understanding of its cost structure. This entails carefully examining the various expenses associated with running your coffee shop. Consider factors such as rent, utilities, employee wages, ingredient costs, equipment purchases or leases, marketing expenses, and overhead costs. 

To determine the optimal pricing for your products, conduct a thorough analysis of your fixed and variable costs. Fixed costs include expenses that remain constant regardless of your sales volumes, such as rent or monthly subscriptions. Variable costs, on the other hand, fluctuate with your sales volumes, like ingredient costs or wages based on staff hours. By clearly identifying these costs, you can calculate the minimum amount required to cover expenses and establish a baseline for pricing.

Additionally, consider other factors that may impact your pricing decisions, such as profit margins, desired return on investment, and market competition. Balancing these factors will help you determine the appropriate pricing range that aligns with your business goals while remaining attractive to your target market.

Taking the time to thoroughly analyze your cost structure will provide you with valuable insights for setting prices that not only cover your expenses but also contribute to your coffee shop’s profitability and long-term success.

Read more about: Business Plan Introduction for Coffee Shop: The Essential Elements

Market Research and Competitive Analysis

Market research is an essential component when it comes to establishing and growing a successful business. It serves as a compass, guiding you toward understanding your target market, their preferences, and the competitive landscape you’ll be navigating. When it comes to the world of coffee shops, delving into the pricing strategies of other local establishments can provide valuable insights into the ever-changing market dynamics and customer expectations.

Take a moment to sip on this: by analyzing the pricing strategies of neighboring coffee shops, you can gain a deeper understanding of how they position themselves in the market. Pay attention to factors such as the quality of their offerings, the ambiance they create, the strategic location they’ve chosen, and the specific target audience they cater to.

This thorough analysis will serve as the grounds for positioning your coffee shop. Armed with knowledge about the market landscape, you can confidently determine a competitive pricing strategy that sets you apart while appealing to your desired customer base.

Remember, in this aromatic world of coffee, finding the right balance between pricing and value is paramount. So, grab a fresh brew, put on your entrepreneurial hat, and let market research be your guiding star on this caffeine-fueled journey!

Value-Based Pricing

Value-based pricing revolves around recognizing and capitalizing on the perceived value your products or services hold for your customers. In the case of your coffee shop, it’s crucial to consider the unique selling points that set you apart from the competition. Whether it’s the aromatic allure of specialty coffee, the use of organic ingredients, a commitment to sustainable practices, or an unwavering dedication to exceptional customer service, these aspects contribute to the value your coffee shop delivers.

By aligning your pricing strategy with the value you provide, you can establish a strong foundation for success. A value-based approach empowers you to charge premium prices that reflect the quality and distinctiveness of your offerings. Customers who recognize and appreciate the added value you bring to the table are more likely to embrace and support your pricing decisions.

Value is more than just the product itself; it encompasses the overall experience and satisfaction your coffee shop offers. So, embrace the essence of your unique selling points and let them guide your pricing strategy, allowing you to create a pricing model that speaks to the hearts and taste buds of your discerning customers.

Cost-Plus Pricing

Cost-plus pricing is a straightforward approach that involves determining the total cost of producing a cup of coffee and adding a desired profit margin to arrive at the selling price. To implement this strategy, carefully calculate all the costs involved in the coffee-making process, such as the cost of ingredients, labor, and overheads. Once you have a clear understanding of your costs, you can determine the profit margin you aim to achieve and set your prices accordingly.

However, it’s important to keep a few considerations in mind. While cost-plus pricing provides a practical and transparent method, it’s essential to be aware of the market competition and customer expectations. Simply relying solely on this pricing strategy may not always lead to maximizing profitability. Factors such as market demand, perceived value, and customer willingness to pay should also be taken into account.

Pricing decisions should be a delicate balance between covering costs and generating profit while remaining competitive in the market. By incorporating a comprehensive understanding of costs, competition, and customer expectations, you can develop a pricing strategy that strikes the right chord, allowing your coffee shop to thrive in the caffeinated world of business.

Read more about: Business Plan Introduction About a Coffee Shop: Fueling Your Entrepreneurship Spirit

Competitive Pricing

Competitive pricing is a strategic approach that involves setting your prices by the prevailing rates in the market. It requires a thorough analysis of your direct competitors to ensure your prices are in line with theirs. By doing so, you aim to attract price-conscious customers and gain a competitive edge in the market. However, it’s important to tread carefully and avoid getting caught up in destructive price wars that could erode profitability.

While competitive pricing is essential, it’s equally crucial to differentiate your coffee shop from the competition beyond just price. Highlighting additional value factors can set you apart and create a strong brand identity. Focus on aspects such as product quality, unique offerings, or exceptional customer experiences to showcase the added value customers receive when choosing your coffee shop.

Remember, price is just one element in the overall equation. By emphasizing the distinctive qualities of your offerings, you can cultivate customer loyalty and draw in those who value more than just the lowest price. By striking the right balance between competitive pricing and value differentiation, you can carve out a niche for your coffee shop, attracting a loyal customer base that appreciates the overall experience you provide. So, brew up your unique selling points, pour in some creativity, and let your coffee shop shine in the sea of competition!

Dynamic Pricing

Dynamic pricing is a strategic approach that involves flexibly adjusting prices in response to real-time factors like demand, time of day, or seasonality. By implementing this pricing strategy, you can optimize revenue and maximize the potential of your coffee shop. One effective method is to establish different pricing tiers for peak and off-peak hours. During busier periods, when demand is high, slightly higher prices can be set to capture the willingness of customers to pay more. Conversely, offering discounts or promotions on certain products during slower periods can help attract customers and stimulate sales.

To successfully implement dynamic pricing, it’s important to leverage technology. Utilize advanced point-of-sale systems or data analytics tools to track sales patterns, monitor customer behavior, and gain valuable insights. These insights will enable you to make informed pricing decisions, identifying the most opportune moments to adjust prices and capitalize on market dynamics.

However, it’s crucial to strike a balance. Dynamic pricing should not be used excessively or unfairly. It’s essential to maintain transparency and ensure that customers perceive the value they receive for the prices they pay.

Bundling and Upselling

Ah, the power of bundling and upselling! These clever strategies have the potential to take your customer satisfaction to the next level while simultaneously giving your average transaction value a delightful boost. Imagine the joy on your customers’ faces as they enjoy the perfect pairing of coffee with a delectable pastry or other complementary items.

Bundling is the name of the game here. By offering irresistible bundled deals that combine the comforting warmth of a cup of coffee with mouthwatering pastries or other enticing add-ons, you’re enhancing the overall customer experience and encouraging them to explore and indulge in more of what your coffee shop offers. It’s a win-win situation that leaves taste buds tingling and wallets happily opened.

And let’s not forget the art of upselling! Empower your staff with the know-how to suggest additional products or tempting upgrades to customers. Whether recommending a scrumptious specialty beverage or highlighting a delectable seasonal treat, upselling can transform an ordinary purchase into an extraordinary experience. With a well-trained and enthusiastic team, you can effortlessly guide customers toward discovering new favorites and indulging in a little something extra.

Read more about: Business Plan for Selling Coffee Online: From Farm to Digital Cup

Monitoring and Adjusting Prices

Keeping a close eye on the performance of your pricing strategy is crucial to staying ahead in the game. Regular monitoring, coupled with gathering customer feedback, allows you to gain valuable insights into the effectiveness of your pricing decisions. Dive into your sales data, scrutinize your profit margins, and pay attention to your customers’ responses. These pieces of the puzzle hold the key to identifying areas where adjustments can be made to enhance your strategy.

By analyzing your sales data, you can spot trends and patterns that reveal the impact of your pricing choices. Are there certain products or services that consistently outperform others? Are there particular price points that attract more customers? This information can guide you in refining your approach and capitalizing on the strengths of your offerings.

Customer feedback is another invaluable resource. Listen to what your customers have to say about your pricing, whether it’s through surveys, reviews, or direct conversations. Their perspectives can shed light on how well your pricing aligns with their expectations and perceived value. Take note of any concerns or suggestions, and use this feedback to fine-tune your strategy.

Developing an effective pricing strategy for your coffee shop is a critical component of your overall business plan. It requires carefully balancing your cost structure, market dynamics, and customer expectations. Pricing is not a one-time decision. Continuously monitor and evaluate your pricing strategy, and be open to adjustments based on market conditions and customer feedback. Adaptability and flexibility will help your coffee shop thrive in a competitive industry.

With a well-crafted pricing strategy tailored to your coffee shop’s unique strengths and market positioning, you can set the stage for a successful and profitable business venture.

Frequently Asked Questions

Q: Should I offer discounts or promotions to attract customers?

A: Offering discounts or promotions can effectively attract new customers and increase sales during slower periods. However, ensure that the discounts don’t undermine your profitability and consider the long-term impact on your brand image.

Q: How can I differentiate my coffee shop’s pricing from competitors?

A: Differentiate your pricing by focusing on value factors beyond price. Emphasize the quality of your coffee, unique offerings, exceptional customer service, ambiance, or sustainability practices. Create a distinctive experience that justifies premium pricing.

Q: How often should I review and adjust my pricing strategy?

A: Regularly monitor your pricing strategy’s performance and gather customer feedback. Evaluate your pricing strategy quarterly or annually, considering market conditions, changes in costs, and customer preferences. Flexibility and adaptability are crucial to maintaining competitiveness.

To learn more on how to start your own coffee shop, check out my startup documents here.

Disclaimer: The information provided by  StartMyCoffeeShop.com  (“The Site”) is for general informational purposes only. All information on the Site is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information on the Site. Under no circumstance shall we have any liability to you for any loss or damage of any kind incurred as a result of the use of the Site or Reliance on any information provided on the Site. Your use of the Site and reliance on any information on the Site is solely at your own risk. This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs. Terms and Conditions. ( https://startmycoffeeshop.com/terms-and-conditions/ )

Hi! I’m Shawn Chun

My adventure in coffee began when I first launched my first coffee shop back in the early 2000s. I had to figure out so many things on my own and to make it worse within 2 years of opening two large corporate coffee chains moved in just blocks away from me!

As I saw smaller and even some larger coffee shops in the neighborhood slowly lose customers to these giant coffee chains and slowly close up shop, I knew that I had to start getting creative…or go out of business.

I (like you may be) knew the coffee industry well. I could make the best latte art around and the foam on my caps was the fluffiest you have ever seen. I even had the best state-of-the-art 2 group digital Nuova Simonelli machine money could buy. But I knew that these things alone would not be enough to lure customers away from the name brand established coffee shops.

Eventually, through lots of trial and error as well as perseverance and creativity I did find a way to not only survive but also thrive in the coffee/espresso industry even while those corporate coffee chains stayed put. During those years I learned to adapt and always faced new challenges. It was not always easy, however, in the end, I was the sole survivor independent coffee shop within a 10-mile radius of my location. Just two corporate coffee chains and I were left after that year. All told the corporate coffee chains took down over 15 small independent coffee shops and kiosks and I was the last one standing and thriving.

Along the years I meet others with the same passion for coffee and I quickly learned that it is not only “how good a barista is” that makes a coffee shop successful, but the business side of coffee as well.

Hence why I started this website you are on now. To provide the tools and resources for up and coming coffee shop owners to gain that vital insight and knowledge on how to start a coffee shop successfully.

Stick around, browse through my helpful blog and resources and enjoy your stay! With lots of LATTE LOVE!

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10 Restaurant Pricing Strategies to Build a Profitable Menu

One of the most overlooked details of restaurant management is menu pricing. No matter how great your concept and how excellent your food is, it won’t matter much if your customers don’t think your menu prices are worth paying.

While it’s only natural that you want your prices to be profitable, being too aggressive with your pricing strategy can scare customers away. On the other hand, being too meek can make you lose out on valuable profits.

In other words, your pricing strategy is something that you shouldn’t neglect. Small details can go a long way to encourage your customers to spend more without feeling forced.

In this article, we will discuss restaurant pricing strategies that will boost your sales and keep your customers happy at the same time.

Table of Contents

1. Don’t Put Currency Signs

2. write the description first, price last, 3. increase value with charm pricing, 4. employ cost-plus pricing, 5. present your menu with relative pricing, 6. increase sales with bundle pricing, 7. increase accessibility with portion pricing, 8. generate interest with special pricing, 9. add more variety with the rule of three pricing, 10. create a perception of luxury with premium pricing, implementing the best restaurant pricing strategies.

Perhaps the most basic yet impactful restaurant pricing strategy you can try out is not placing a currency sign next to your prices.

A currency sign is a subconscious reminder for customers that they are spending money. In 2009, one study showed that customers actually spend around 8.15% less when they see a currency sign on the menu. 

Even if they genuinely want the food, seeing the currency sign makes them subconsciously think about how much they might end up spending on their meal, which makes them more hesitant to spend money.  Removing the currency sign will remove this psychological hindrance.

An exception to this restaurant pricing strategy is if your restaurant caters to foreign guests who use other currencies. In these situations, not having a currency sign next to your prices might cause confusion and should be avoided.

Written descriptions of your dishes are essential for all choices in your menu.

Descriptions are there to enhance the appeal of your food. By writing about ingredients, cooking methods, and other background information about the dish, the customers will get a vivid idea of how they might experience it themselves.

The description must be the first thing that the customers notice after the name, way before the price. Doing so will build up the customer’s appetite and expectations, which will result in them not minding the price as much when they finally read it after the description, preferably in smaller font size .

Do you ever wonder why you see uneven prices everywhere, such as $9.99 or $19.99? It’s actually a time-tested pricing strategy called charm pricing, also known as psychological pricing.

Charm pricing utilizes a useful psychological phenomenon common in all humans: automatically deciphering information and attaching meaning even without our conscious thought. This kind of works like a shortcut for the human mind to reduce our mental burden. After all, it would simply be too exhausting to consciously think of everything all the time.

In other words, when people see the first number in a price, their brains automatically attach value to it and assume the value for the rest of the numbers. Brains don’t see $29.99 as $30 minus one cent. Instead, they see it as $20-something. 

Cost-plus pricing is one of the most common pricing strategies around. This strategy provides a solid guideline for how you price your food items, and it’s very easy to do, too.

All you have to do is to compute all the expenses that go into making a dish and add the desired profit margins.

The list of expenses should include fixed costs, such as rent, utility, and the wages paid to the cooks and other staff, in addition to the prices of the ingredients. Once calculated, simply divide the cost among all of the dishes served in your restaurant. You can then add your preferred markup percentage to this amount to get the final price.

For example, let’s say the cost of a certain dish is $10, and 30% is your preferred markup percentage. 30% of $10 is $3, so the price of your dish should be at least $13. 

Cost of dish = $10.00

Markup percentage = 30%

Markup price = $10 x (30/100) = $3

Cost + markup = $10 + $3

Final price = $13

For best results, you can even combine this strategy with other strategies, like charm pricing. The final menu price will be $12.99, which is more attractive to customers than $13.00.

Relative pricing is when you create a distinct contrast between two items to tilt the customer’s perception of a product.

This is best employed by placing expensive food items next to cheaper but more high-profit food items. When customers see the stark price difference between the two, they are more likely to opt for the more affordable items, even if they are actually more high-profit for your restaurant.

Bar and Restaurant KPI Excel Spreadsheet

Download this restaurant KPI spreadsheet in Excel format to calculate key metrics such as gross profit, inventory turnover, variance, and more.

You may be familiar with this pricing strategy because marketers and business owners everywhere also use it to price their items.

Bundle pricing is when you combine several products into one prepackaged set. This pricing strategy not only introduces your customers to multiple products at once, but it also increases the sales of related food items. 

To make it more attractive, some items may only exist as a unique addition to that particular bundle. You can also offer the bundle at a special discounted rate.

One of the best examples of this can be found in the fast-food industry. Fast food restaurants are notorious for offering all kinds of bundles, such as burger-and-fries combos. Customers might not initially want fries with their burger, but when they’re sold as a set, they’re more likely to consider the deal too good to pass up and end up buying anyway.

Portion pricing, or pricing by portion, refers to the practice of adding different size options to your menu.

This restaurant pricing strategy makes your menu more accessible to a broader pool of people, including new customers who may be more hesitant to try out your food. It also makes small eaters more likely to order food items that they don’t normally get in fear of not finishing the entire thing.

To maximize its advantages, make sure to charge a higher profit margin for the smaller portion. For instance, you can charge 70% of the full-size price to the half-size version of the same dish.

Full-size (100%) price = $10 (100% of the full-size price)

Half-size (50%) price = $7 (70% of the full-size price)

This is a win-win for your restaurant for three reasons: one, it gives people an option to buy a smaller portion if they wish; two, most people are more likely to purchase the full-size option due to the minimal difference in price; and three, if they do purchase the half-size option, the restaurant actually gains more profit.

Make dishes seem more special by adding unique ingredients to your recipe and highlighting them in your menu.

For example, you can mix exotic herbs to your house curry or add vegetables to your burgers for a special flair. Don’t forget to mention these in your description to whet your customers’ appetites.

Plus, by adding new ingredients to a dish, you’re essentially creating a unique offering for your restaurant. Now that it’s considered a ‘special’ order, you can charge premium prices or even make it your restaurant’s signature dish.

There’s something about the number 3 that makes it more appealing to the mind. It can be applied in all aspects of life, from statistics to economics .

Unsurprisingly, you can also apply it to restaurant pricing, sometimes referred to as the Good-Better-Best pricing strategy.

When creating your menu, try to come up with three different variations of the same dish. For example, you can make the basic dish as the first choice, add some extras to the second, and add even more extras to the third.

For example, the first choice could be a basic pasta with premade in-house sauce, the second choice could be an upgraded pasta with locally sourced fresh ingredients, while the third choice could have various vegetables and meat options.

You can also use this strategy in combination with the bundle pricing strategy. Serve the basic meal and one drink for the ‘good’ option. Add an appetizer for the ‘better’ choice, and then add a dessert for the ‘best’ one.

One thing to note is that the middle option is typically the best-selling one since most customers consider it the best value for money. So make sure to keep that in mind when creating your dish variations.

This strategy focuses on creating perceived value by putting a high price tag on items. Due to this, it’s also known as ‘luxury pricing’ or ‘prestige pricing.’

This strategy is often used by well-known brands and is usually employed when a brand has already established itself as a provider of high-quality items and premium services. 

With the increased perception of luxury, customers will see your menu as even more exclusive and luxurious. Due to this, they will be more drawn to your restaurant and will want to eat there more in order to be associated with your brand.

However, there are some caveats when it comes to pulling off this strategy. First of all, you have to consider the public perception of your brand. If your restaurant has been around for some time and is already seen by customers as affordable and cost-effective, suddenly marketing your menu as premium might not go well.

That’s why this pricing strategy works best for new or soon-to-open restaurants. Right from the start, you can already market your product in a certain way to create a sense of luxury, such as controlling supply, driving up demand, and attaching your brand to other influences such as popular actors or events.

Second, be careful not to go overboard when pricing for luxury perception. Studies have shown that there are acceptable price ranges for premium pricing in restaurants. Anything beyond that can be seen as excessive and might even turn off your customers.

It goes to say that there are a lot more things that go into pricing than just these tips and tricks.

Remember, crafting your menu prices is not a one-and-done affair but rather an ever-evolving process that takes plenty of real-world factors into account. Before employing restaurant pricing strategies to boost your sales, you need to assess production costs, competitors, and customer demand, just to name a few.

Nonetheless, we guarantee that these best restaurant pricing strategies, when coupled with proper market research, can help you make your menu not just more appealing to customers but more profitable as well.

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Top 10 Pricing Strategy PPT Templates to Make Sure the Price Is Right

Lakshya Khurana

Many business owners don't realize that there's more to pricing than just setting it at constant and hoping for the best. You need to consider your target market, competition, and costs to make more money.

For example, if you're selling a product similar to your competitors, you'll need to price your product lower than they are to be competitive. But if you're selling a unique product that doesn't have any direct competition, you can charge a bit more.

Likewise, if your business is new and you don't have any past sales data to use as a guide, you'll need to do some market research to figure out what people are willing to pay for your product or service. There's no one "right" way to price your products or services. But by taking all of these factors into account, you can create a pricing strategy that will help make the most money possible.

When it comes to pricing the product or service, one wants to hit the right price point. One wants to ensure earning a profit but also doesn’t want to scare away potential customers. So, how to figure out the right price?

One way to approach pricing is to use a pricing strategy. A pricing strategy is a plan on how you want to set your prices. There are a lot of different pricing strategies out there, and each one has its benefits and drawbacks. Choosing the right strategy for your business and customers is important. Therefore, it’s always crucial to stay up-to-date on the latest changes in your industry. To select an effective pricing solution, let’s understand the…

The Types of Pricing Strategies

Businesses can use different pricing strategies to increase profits and grow their company. The most common strategies are cost-based pricing, market-based pricing, and value-based pricing.

With cost-based pricing , the business sets its prices based on the costs of producing and delivering the product or service. This strategy is often used in industries with high fixed costs, such as manufacturing or energy production.

Market-based pricing considers what other businesses are charging for similar products or services. Companies that produce unique or specialty products often use this strategy since they can't compete on price with larger businesses.

Value-based pricing is determined by how much the customer is willing to pay for a product or service. This strategy is often used by companies that provide high-quality products or services, charging more without losing customers.

By understanding the different pricing strategies, businesses can choose the one that best fits their products and customer expectations. This decision will further help businesses increase profits and grow their size, positioning themselves for success in the competitive marketplace.

Many businesses rely on PowerPoint templates to create effective and professional pricing presentations regarding pricing strategy. This is because templates provide a structure for the content, making it easier to organize and present ideas clearly and concisely.

Editable PPT Templates to Hit Bull’s Eye While Selecting Product Price

There are multiple reasons you might want to use a PowerPoint template for your pricing strategy. Maybe you need to create a presentation for a meeting with your boss or a client. In this case, using a pre-designed template can make it look more professional and put together. Or maybe you're just starting your own business, and you need to create certain pricing guidelines. Here, using a PowerPoint template can give you a good starting point and help stay organized. Whatever your reason is, using a PowerPoint template for your pricing strategy will turn into a big help. Just choose the right template from our collection of 10 pricing strategy templates.

Let’s explore them!

Template 1: Types of Pricing Models PowerPoint Slides

This PPT layout starts with a general overview of the various pricing models, including definitions and key characteristics. It details the most popular pricing models, such as cost-plus, value-based, and subscription-based pricing. Here, each type of pricing model is explained in clear and concise terms. Download this PowerPoint theme now.

Download this template  

Template 2: Value-Based Pricing Strategy PowerPoint Slides

This PowerPoint deck contains everything you need to get started, including slides on cost, competitors, value-based factors, and steps for data execution. This PPT preset will help you create a personalized pricing plan that takes your buyer’s data into account with stunning visuals and clear instructions. Get it now.

Grab this template

Template 3: Creating Pricing Strategy PPT Slides

This PPT design will show you the different approaches (including Premium Pricing, Penetration Pricing, Economy Pricing, Price Skimming, Psychology Pricing, Bundle Pricing, and Cost-based Pricing) to pricing and how to choose what's best for your business. These editable slides can easily customize the deck to fit your specific needs. Download it now.

Download this template

Template 4: Pricing Strategy PowerPoint Presentation Slides

With this PowerPoint template, you can plan and execute a pricing strategy that works for your company. Using this PPT template, you can easily explain the basics of pricing strategy to your team or clients. This design will help you determine demand, estimate costs, analyze competitors' prices, offers, etc. Get it now.

Template 5: Proposal for Managing Organizational Pricing Strategy PPT Slides

This PPT deck provides an overview of pricing strategies and how to effectively implement them within your organization. It includes valuable information, such as understanding the customer needs, segmenting the market, and developing a pricing strategy that aligns with the organization's goals. Download it now.

Template 6: Companys Pricing Strategies PowerPoint Slides

Check out this PPT layout, designed to help you focus on the most important issues and solutions for pricing. With clear slides on current trends, customer attrition, and the impact of pricing strategy on both customers and businesses, this PowerPoint template is perfect for anyone wanting to make a persuasive case for price optimization. Get it now.

Template 7: Price Optimization PowerPoint Slides

This PPT deck has everything you need to start, including key levers to cost management, strategic cost optimization framework, prioritizing, the three-step approach, cost reduction, cost design, and positioning. Price optimization is an important part of doing business, and this PowerPoint theme will help you make the most of your prices. Download it now.

Template 8: Product Pricing Strategy PowerPoint Slides

This PowerPoint preset will help you create a pricing strategy that increases profits and beats the competition. It is designed to help communicate your product pricing strategy effectively. With editable charts and graphs, you'll be able to show your boss exactly why your product deserves a price increase. Get it now.

Template 9: Sales Strategy Secrets and Tips PowerPoint Slides

Create a compelling sales presentation, including a value proposition, product testimonials, product traction, key product offerings, product delivery timeline, action plan, and financial dashboard. With this PPT layout, you can address your customer's needs at every stage of the sales process. Download it now.

Template 10: The Ultimate Guide to Product Pricing Models and Subscription

This PowerPoint deck is packed with information on product pricing models and how to choose the right one for your business. You can use it to learn about flat-rate pricing, usage-based pricing, commission-based pricing, subscription pricing, and more! Get it now.

To Conclude

Most business owners know the importance of having a good pricing strategy. After all, if you don't price your products or services correctly, you may not make any money at all! However, our impressive templates will surely help you create a robust pricing strategy.

When selecting a pricing template, it’s important to consider the specific needs of your business. We have featured many stunning pricing strategy templates in this guide, so take time to find the one that suits your industry and audience. Once you find the perfect template, personalize it to reflect your brand. These designs will help create a sense of consistency between your pricing strategy and other crucial aspects of the business.

Moreover, these impressive templates will help you create a cohesive and visually appealing presentation to positively impact your audience. You can use them as a powerful tool for shaping your pricing strategy.

P.S: Check out this amazing guide to product pitch templates and ensure that your pitch is executed and accepted effectively.

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10 episodes

A business podcast for ambitious, Christian entrepreneurs where ambition meets surrender. Your goal? They matter. They aren't there by accident. Your ambition is not annoying. It's beautiful and it's God-given and it's meant to be used for His glory and your good. It's time to stop playing small. It's time to stop white-knuckling. It's time to seek God's will and to trust in His perfect timing and His perfect, wonderful provision. It's time to stop believing the lie that you have to sacrifice kingdom values to reach your goals - or that your goals aren't worth reaching in the first place.

More Than Ambition | A Business Podcast for Kingdom-Minded Entrepreneurs by Dusty Hegge Dusty Hegge | Owner of Caffeinated Sites

• 5.0 • 2 Ratings
• APR 12, 2024

10. Understanding Your Ideal Client (Strategic Plan part 3)

Get your free Simple Strategic Plan Template: dustyhegge.com/strategy Today (despite audio troubles) we are covering the importance of understanding your client avatar or ideal client. There is SO much information available on this topic. That's why today I'm sharing what I believe to be the most important things to understand about your ideal client - so that you don't have to waste your time on things that won't have as big of an impact on your business. Enjoy! If you enjoyed this episode please take a moment to leave a review and rate the show. Your support means so very much to me!! Book a strategy call: dustyhegge.com/consulting Follow on Instagram: instagram.com/dustyhegge

• APR 2, 2024

9. Off the Cup: Juggling multiple projects, pricing, launching, and what we are working on

Today Christina and I chat about projects we are working on in our businesses, some reflections on all that goes into launching, more on finding joy in suffering, and a whole lot more! We hope you enjoy it! ☕️ Get your free strategic plan template: https://dustyhegge.com/strategy CONNECT WITH CHRISTINA: INSTAGRAM | SUBSTACK | HER PODCAST (Magic Like This) CONNECT WITH DUSTY: INSTAGRAM | BOOK A STRATEGY CALL Takeaways It's okay to have multiple projects or ideas, but it's important to prioritize and focus on one at a time. Money is an important aspect of entrepreneurship Building a community around shared interests Accountability and practical strategies in pursuing goals Ethical pricing and serving entry-level clients Simplify website design and focus on clarity and functionality. Chapters 00:00 Introduction and Personal Updates 03:21 Reflecting on Previous Episode 07:33 Edits and Corrections 14:32 Finding Joy in Suffering 29:10 Introduction and Background 29:40 The CS Lewis Podcast 30:25 A Prophetic Word 31:24 The Idea for the CS Lewis Podcast 33:13 Building a Book Club Community 34:08 Building a Course 37:01 Mentoring Others in Writing 38:00 Designing the Course 39:20 Building a Faith-Based Writing Blog 40:46 The Challenge of Writing Course Content 41:45 Launching the Course in Stages 43:19 Accountability and Practical Strategies 45:19 Overcoming Shame and Indulgence 49:30 Ethical Pricing and Serving Entry-Level Clients 55:45 Creating a Small Group Coaching Program 01:01:25 Offering Products and Consulting Services 01:06:37 Mapping Out Strategies for Consulting 01:07:11 Trusting Your Own Approach 01:08:19 Being Different in Your Business 01:09:17 Comparing Yourself to Others 01:10:17 Aligning with God's Calling 01:11:28 Merging Intention and Strategy 01:12:07 Simplified Website Templates 01:13:02 Offering Free Website Templates 01:14:25 Simplicity and Clarity in Website Design 01:15:27 Investing in Copywriting and Brand Photography 01:16:17 The Importance of Words on Your Website 01:18:08 Trusting Your Intuition in Business 01:19:48 The Order of Ideal Client and Product 01:23:14 Trusting Yourself in Alignment with God 01:28:00 Trusting God's Calling and Seeking His Guidance 01:31:10 Trusting Yourself in Union with Christ 01:37:20 Trusting God's Plan and His Glory 01:39:05 The Depth of Union with Christ 01:40:23 The Love and Joy of Children

• 1 hr 34 min
• MAR 25, 2024

8. 7 Simple Ways to Make Your Website More Professional (in less than one hour)

In this episode, Dusty Hegge shares seven simple ways to improve your website in 30 minutes or less. The main focus is on making your website more professional, user-friendly, and effective in serving your audience. GET THE FREE CHECKLIST: https://dustyhegge.com/7-simple-things Get Your Free Strategic Plan: https://dustyhegge.com/strategy FULL SHOW NOTES: https://dustyhegge.com/podcast/8 Dusty on Instagram: https://instagram.com/dustyhegge

• MAR 14, 2024

7. How to write the perfect mission statement for your small business (Part 2 of Strategic Plan Series)

👉🏽 GRAB YOUR FREE SIMPLE STRATEGIC PLAN TEMPLATE: https://dustyhegge.com/strategy In this episode of More Than Ambition, I break down what your mission statement is, what it isn’t, and how to write an actionable mission statement each quarter (yes, each quarter! You’ll see what I mean.) - so you can grow with intentionality and surrender. It’s gonna be fun! There are so many different approaches to mission statements. And my guess is my approach isn’t what you’re thinking it might be. A strategic plan is essential for intentional and sustainable business growth. The mission statement is a short-term goal that directly impacts the success of the business's vision. Brainstorm metrics (to be included within your mission statement) that will help you make your vision a reality. Clearly state why these metrics matter and how they will impact your business. GET BUSINESS CONSULTING: https://dustyhegge.com/consulting FOLLOW ON INSTAGRAM: https://instagram.com/dustyhegge

• MAR 12, 2024

6. What's your owner's intent? You’re probably overcomplicating it. (Part 1 of Strategic Plan Series)

Your Owner's Intent isn't the sexy reason you started your business - it's the practical one. It's not your "why" so to speak, but it will impact your "why" and every other aspect of your business. It will influence every aspect of your business. Get clear on what your owner’s intent is (and what it isn’t) and you’ll be able to build a strong business foundation that serves you and your clients. Listen to today's episode to learn more! 👉🏽 GRAB YOUR SIMPLE STRATEGIC PLAN TEMPLATE (it's free!): https://dustyhegge.com/strategy (When you subscribe & get your copy of the simple strategic plan I'll be sharing more of my own story around how exactly my Owner's Intent got me unstuck - and it's a good one!! Get the popcorn ready!) GET BUSINESS CONSULTING: https://dustyhegge.com/consulting FOLLOW ON INSTAGRAM: https://instagram.com/dustyhegge __ AI-Generated SUMMARY In this episode, Dusty Hegge introduces the concept of a strategic plan as an alternative to a traditional business plan. She emphasizes the importance of building a strong foundation for a business and provides a free template called the Simple Strategic Plan. Dusty discusses the significance of owner's intent and how it impacts the direction of a business. She encourages entrepreneurs to align their intentions with God's will and emphasizes that success as a Christian entrepreneur is obedience to the Lord. TAKEAWAYS A strategic plan is a foundational blueprint for a business's future direction. Owner's intent is the practical aspect of why a business was started and how it serves the owner. Aligning owner's intent with God's will is crucial for Christian entrepreneurs. Success as a Christian entrepreneur is obedience to the Lord. CHAPTERS 00:00 Introduction 00:29 The Difference Between a Business Plan and a Strategic Plan 01:26 The Importance of a Strategic Plan 02:21 Building a Strong Foundation for Your Business 03:14 The Significance of a Strategic Plan 03:43 Owner's Intent 04:40 Practical Aspect of Owner's Intent 06:03 Aligning Owner's Intent with God's Will 07:02 Different Approaches to Building a Business 08:25 Bringing Owner's Intent to the Lord 09:44 Conclusion

• MAR 7, 2024

5. Welcome to More Than Ambition: A Podcast for the ambitious, kingdom-minded entrepreneur

Get your (free!) Simple Strategic Plan Template Here: https://dustyhegge.com/strategy UM YOU GUYS. To say I'm excited is an understatement. I won't give away too many spoilers here, because this is a short and sweet episode - but things are shifting around here. It's not that I'm changing things, it's that I'm much more aligned with what I believe they were always meant to be. The story of how this all came to be is in the show today. I am eager to hear your thoughts! Find me on Instagram @dustyhegge and shoot me a message to let me know what you think of the new podcast name, cover, and overall refocus. (Seriously so giddy over here!!!) Hey you! Want some fun business and life and faith and probably (definitely) a lot of garden and coffee and parenting content and run-on sentences (clearly) in your inbox? Join the fun here: https://dustyhegge.com/fun And isn't my new website so pretty!!?? https://dustyhegge.com --- TIMESTAMPS 00:00 - Do not be ashamed of your ambition 02:20 - For the Christian, Everything is Ministry 03:18 - Equipping Christian Entrepreneurs 04:37 - Refocusing and Strategic Planning 06:02 - Excitement for the Future ---- EPISODE SUMMARY (AI-Generated) The More Than Ambition podcast aims to inspire Christian entrepreneurs to embrace their ambitions and seek God's will. The host, Dusty Hegge, believes that ambition is a gift from God and should be used for His glory. She encourages listeners to stop playing small and trust in God's timing and provision. Dusty emphasizes that all work, including business, is an opportunity for ministry and worship. She envisions a world where Christian entrepreneurs lead with humility, intentionality, and surrender.

• © Dusty Hegge | Owner of Caffeinated Sites

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Biden’s Plan B on Inflation: Turn It Against Trump

Price pressures aren’t easing fast enough to guarantee the interest-rate cuts the president hoped to see by November, so his message is evolving.

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By Jim Tankersley

Jim Tankersley covers economic policy at the White House.

President Biden and his economic team had high hopes about how two years of rapid inflation would play out in the months leading to the November presidential election. Price growth would continue to cool. The Federal Reserve would cut interest rates. Mortgage rates and other borrowing costs would fall. Consumer moods would improve, and so would Mr. Biden’s re-election prospects.

What’s happening instead is more problematic. The inflation fight has stalled. Consumer prices are rising more slowly than they did a year ago, but still hovering at an annual growth rate that is higher than the Fed’s 2 percent target. Investors are recalibrating their expectations for when — or even if — interest rates might start to come down this year.

Mr. Biden is recalibrating as well, as both a Fed forecaster and a politician.

On Wednesday, after the latest inflation data showed an unexpected acceleration in price gains, Mr. Biden again tried to assure voters that he is focused on bringing down the cost of groceries, housing and other staples of everyday life, saying in a statement that “fighting inflation remains my top economic priority.”

Then he waded into the thorny territory of commenting on how the Fed, which is independent of the White House, might set interest-rate policy in an election year.

“I do stand by my prediction that before the year is out there will be a rate cut,” the president said when asked about the Consumer Price Index report. “This may delay it a month or so. I’m not sure of that. I don’t, we don’t know what the Fed is going to do for certain.”

A beat later, he added a veiled shot at his Republican opponent, former President Donald J. Trump.

“We’re better situated than we were when we took office where we — inflation was skyrocketing,” Mr. Biden said. “And we have a plan to deal with it, whereas the opposition — my opposition talks about two things. They just want to cut taxes for the wealthy and raise taxes on other people.”

It is a small pivot for Mr. Biden but an important one, as he seeks to dig out of a deep hole with voters on the inflation issue.

The Consumer Price Index hit a four-decade high of about 9 percent early in Mr. Biden’s term but has fallen over the past two years to about 3.5 percent in March. Voters continue to rank inflation at the top of their list of problems facing the country, and they continue to rate Mr. Trump more highly on economic issues than Mr. Biden.

Mr. Trump oversaw relatively low price growth as president and left office with an inflation rate below 2 percent, a hangover from the pandemic recession, when consumer spending was slow to rebound after the national economy experienced an unprecedented shutdown.

Price growth was accelerating by the time Mr. Biden took office, and it surged in his first few months on the job. That inflation was spurred in part by economic stimulus legislation signed by Mr. Trump in 2020 and another round signed by Mr. Biden in the spring of 2021, including direct checks to households.

The nuances of how inflationary pressures grew have not mattered to Mr. Trump and his allies, who have hit Mr. Biden relentlessly on prices.

“No one can afford the cost of Biden’s failed economic policies,” the Republican National Committee said in a release on Wednesday, “but relief is on the way when voters elect President Trump on November 5.”

Mr. Biden has recently amplified a message that is meant to respond to dissatisfaction over inflation. He has proposed sweeping efforts to build affordable housing and new tax credits to help certain Americans afford to buy homes. His administration has taken steps billed as promoting competition, and lowering prices, across several sectors, including a Federal Trade Commission attempt to block a merger of two large grocery chains, which officials said would push up prices for shoppers.

The president has also called out snack-food makers and other companies for so-called shrinkflation — reducing the size of a product like chips or ice cream, while raising prices or holding them constant. And he has appeared in a series of events meant to highlight other proposals to lower costs of some services, like child care and home health care for older or disabled Americans.

Now, he is adding a political contrast as he tries to cast Mr. Trump and Republicans as uninterested in the actual policy work of fighting inflation and as barriers to his own proposals.

The entire exercise has been validated by surveys of voters and how they respond to economic messaging. Democratic strategists have urged Mr. Biden to blame corporate greed for persistent inflation and to hit Mr. Trump for cutting taxes for high earners while in office. Both messages consistently test well with voters, including independents and other groups that loom as critical swing blocs in November.

Democrats have also begun to attack Mr. Trump for proposing to impose new tariffs on imports from China and other countries. Research has shown that the China tariffs, while intended to punish Beijing, ultimately drove up costs for American consumers .

But there is also a sort of policy helplessness underlying the shift. Unlike Mr. Trump, who as president badgered the “boneheads” at the Fed to lower rates , Mr. Biden has stopped short of telling the independent central bank what to do. He has little hope of passing any inflation-fighting legislation in Congress this year. His aides concede that the executive actions he can take to reduce costs are probably marginal, at best, in the context of economywide price increases.

They also remain frustrated at the degree to which voters continue to focus more on inflation than on job growth, which has surged under Mr. Biden.

“Heading into the election season with mortgage and other interest rates at or near their present high levels is certainly a disconcerting prospect for the Biden administration,” said Eswar Prasad, an economist at Cornell University. “The administration is really bothered by the lack of credit for all that’s going right in the economy and the blame they’re getting for all that’s being perceived as going wrong.”

That’s one reason Mr. Biden is trying to redirect the inflation conversation in the campaign, from current conditions to what could make the economy better or worse in the future.

“They have no plan,” he said on Wednesday, referring to Mr. Trump and Republicans. “Our plan is one I think is still sustainable.”

Jim Tankersley writes about economic policy at the White House and how it affects the country and the world. He has covered the topic for more than a dozen years in Washington, with a focus on the middle class. More about Jim Tankersley