What Are Some Pricing Strategy

Examples?

1. Cost-Plus Pricing Strategy Example

In “cost-plus pricing,” businesses can charge a higher price for their goods or

services than they pay to create or deliver them. Profit margins can vary from

company to company based on production cost.

For example, a company that sells sunglasses and wants to use the cost-plus

approach to price their product may come up with the following:

Expenses incurred in the manufacture of goods: To get to a total production cost

of $357.00, the corporation adds its $220.10 in material expenses, $56.15 in

labor costs, and $80.75 in allocated overhead.

The price per unit: The next step is to divide the total cost of manufacturing by

the amount of product produced. They made 20 pairs of sunglasses in this case.

$357.00 divided by 20 equals $17.85.

The expense of selling: Using a 30% markup, the sunglasses company may

multiply the unit price by 1 x.30 to come up with $23.21. Based on this figure, a

pair of sunglasses will set you back $23.50.

Thus, $23.50 is the amount of a pair of sunglasses after implementing the

cost-plus pricing strategy.

2. Competitor-Based Pricing Strategy Example

In competitive pricing, a product’s price is established by its competitors’ prices.

Amazon’s price of popular items serves as a real-world illustration. The retail

behemoth gathers competitive pricing knowledge and uses it to provide the

lowest price on the market at any given moment.

Before making a purchase, most people use the internet to compare prices. As a

result, internet retailers keep tabs on each other’s prices to stay on top of the

market.

However, not everyone wants to be known as the most affordable.

Take a look at the Fitbit.

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Next, look at a similar business that offers wearable tech and is also available on

Amazon.

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Fitbit, being a well-known brand, can demand a higher price in this instance.

Consumers are ready to spend far more for a famous brand than they would for a

lesser-known one.

3. Value-Based Pricing Strategy Example

Value-based pricing is a pricing strategy based on how valuable a consumer

believes the product or service is.

When it comes to pricing, Apple’s strategy revolves around the customer. In this

case, the brand name is more important than the product itself.
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Initially, their pricing mirrored the simplicity of their products and the ease with

which customers could use them. Over the years, this was an exercise in gaining

market share and establishing a devoted consumer base.

To do this, they created an operating system that was easy to use, putting it

ahead of the competition. Apple goods now account for most personal

computers, cellphones, smartwatches, MP3 players, and other electronic devices

in the United States.

Essentially, Apple has given up market research to build and retain brand loyalty,

and its revenues have reflected this shift in strategy.

Recommended Reading: How to Follow Apple’s Marketing Strategy And Become

a Beloved Brand
4. Loss Leader Pricing Strategy Example
Using a pricing strategy known as “loss leader pricing,” a company tries to entice

new consumers by offering items at a discount below what it costs to make them.

Microsoft released their Xbox gaming console with a relatively low-profit margin

to compete with Sony Playstation’s established players. This strategy compelled

customers to buy the console since it was so inexpensively accessible.

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However, this was not the end of the story, as the console was pointless without

any games to play.

Microsoft used its pricing strategy to compensate for the losses it incurred when

selling consoles by raising the prices of its games.

5. Penetration Pricing Strategy Example

Businesses use penetration pricing to lure customers into trying out a new

product or service by first providing it at a cheaper cost.

Regarding penetration price, Netflix is a textbook case in point. Many customers

have expressed dissatisfaction with Netflix due to rising membership costs or the

expiration of their free trial period.

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Nevertheless, despite the occasional complaints, people are satisfied with paying

the increased membership fees in exchange for the never-ending supply of

high-quality media content.

The first quarter of 2022 saw Netflix reach a global audience of around 221.64

million paying customers. Other OTT platforms are using penetration pricing to

recruit new consumers, like Netflix.

6. Everyday Low Pricing Strategy Example

Everyday low pricing strategy allows firms, brands, and retailers to provide

continuously low-priced items.

As a result of its everyday low-price approach, Walmart Inc. has become a

significant player in the retail industry. Instead of giving low prices only during

sales, the giant store gives inexpensive pricing to customers all year round.
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Following its inception, the company pursued this strategy and established itself

as the retailer that consistently provides customers with the lowest costs. Despite

the low-profit margins, the shop will profit because of the large amount of

merchandise it sells.

This pricing approach helped Walmart establish itself as a well-known, low-priced

corporation. Walmart has over 10,500 stores and clubs in 24 countries under 46

banners.
7. Economy Pricing Strategy Example
An “economy pricing” approach relies on reduced item prices due to decreased

production costs.

Source

Up & Up diapers, a 124-count pack, retail for $15.99 at Target under the Target

brand name. A 104-count package of Pampers costs $27.49. Using fewer

diapers saves you more than $11.

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The Up & Up diapers represent Target’s economy pricing. Target doesn’t need to

account for this production expense because it doesn’t market its diapers. Up

and Up is less expensive than Pampers, which might influence customers’

purchase decisions when they visit the store.

8. Premium Pricing Strategy Example

Premium pricing is a technique that involves pricing your goods more than your

direct competitors. The marketing strategy of the 7 Ps develops a successful

marketing strategy that appeals to your target audience.

Salesforce has a great heritage with premium pricing because it is one of the few

SaaS companies that has effectively implemented price skimming into its overall

strategy. Here is a peek at the price information.

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There is little denying that Salesforce’s “Unlimited” subscription is a premium

choice. Prospects can tell the difference between this more expensive choice and

the “Essentials” plan, which has a similar name but a far lower price tag.

It’s a smart move by Salesforce to provide a free trial for all plans, even the

premium ones. In addition to free trials, premium pricing also benefits from

creating brand equity through free trials.

9. Skimming Pricing Strategy Example

Price skimming is a pricing strategy in which businesses initially charge a high

price for their product or service while gradually lowering the price to attract a

more price-sensitive market segment.

Price skimming can apply to a wide range of well-known items. Many electronic

goods employ a price-skimming technique during the early stages of a product’s

lifecycle. The device’s price then reduces once competitors develop rival goods,

such as the Samsung Galaxy, to maintain their competitive edge.

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Regarding mobile phones, Samsung employs a pricing approach known as price

skimming. The pricing is chosen to maximize revenue when significant demand

for a new product release exists. After the initial frenzy and excitement dies

down, Samsung lowers the price to make the product more accessible to a

broader range of customers.

In the beginning, Samsung used price skimming to steal market share and

attention from their key competitors. For example, Samsung’s Galaxy phones

were priced to grab market share away from Apple’s popular iPhone.

10. High-Low Pricing Strategy Example

When a new product enters the market, it’s common to see high-low pricing

applied.

Smartphones are almost always launched at a high price point, then gradually

drop as the anticipation subsides. This is true for both flagship and mid-range

phones.

Although Apple was the first company to adopt this method of pricing

smartphones, it is now used by many manufacturers, including Samsung,

Google, Huawei, and others.

When you don’t have any previous sales data on which to base price decisions,

using high-low pricing is an effective pricing and marketing strategy. The

objective of most retailers is to maximize profits. Therefore, it’s logical to begin

your pricing plan with increasing gross profit.

11. Dynamic Pricing Strategy Example
Uber is a significant player in the on-demand transportation industry. Your route’s

traffic, peak hours, and current rider-to-driver demand are all factors in Uber’s

dynamic pricing algorithm.

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Despite the complaints about unfair pricing hikes, Uber stands by its algorithm

and maintains that it helps the system manage supply and demand difficulties

and provides drivers with incentives to work in challenging situations.

What Are Some Common Pricing

Tactics?

Discounts
“Discount pricing” is a broad term that encompasses a variety of pricing tactics

aimed at increasing demand, clearing out unsold inventory, or raising sales.

Discount pricing works because customers believe they’re “getting a good deal”

on a product or service.

Source

Dodocase provides a one-time discount for new customers’ initial purchases. The

offer entices customers to buy once and keep coming back.

Bundles
Bundle pricing allows small businesses to sell many items at a lesser price than

they would if they sold them separately.

Customers believe they’re getting more for their money. When a product’s life

cycle is nearing its end, many small businesses opt to use this method,

especially if the product isn’t selling well.

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Subscription-based merchants like Dollar Shave Club have used this bundle

pricing model for their own items.

Psychological
The commercial practice of putting prices lower than a whole number is known

as psychological pricing. Buyers would read the slightly lower price and treat it as

cheaper than it is. If an item costs $3.99, it is an example of psychological pricing

because shoppers see it as a better deal than $4.00.

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Belleze, a furniture company, adopts this strategy for the product listings across

their website: every item is priced so that it ends at .99.

Freemium
Two phrases are combined in freemium pricing: premium and free. It’s a pricing

structure that provides free fundamental services and premium options. By

delivering some services for free, this method piques the interest of potential

clients. Customers must pay a fee to access the other features.

It only applies to companies that provide limited free trials. MailChimp, for

example, offers a free service with a restricted set of options and functionalities.

It’s up to the user to decide whether or not they want to pay for the additional

features.

But Wait, There’s More

You may have heard this phrases like this at the end of an infomercial. This

phrase is effective if you’re offering your customer a gift with a purchase or

upgrading the size of their purchase for free.

It encourages customers to buy so they don’t miss out on a good deal. It adds

urgency to purchases by ensuring customers know they’re getting value for their
money. Commercials that offer 2 for the price of 1 or free shipping for a limited

time would benefit from using a phrase like this. For example, Granite Rock adds

a second frying pan and free shipping if you order right now, adding to the

urgency.

BOGO
E-commerce businesses can use a BOGO approach with spending limits to

control the average transaction size by incentivizing larger purchases, like

upselling. In this strategy, the goods won’t be given away for free just because

the customer hit a certain price threshold in their cart. Instead, it lets them

choose between a product and a present based on the relative worth of both the

thing and the gift they are receiving. Papa John’s does this with their “buy one get

one” pizza deal.

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Coupons
Companies and stores that provide discounts to their most loyal consumers use

coupon marketing as a technique. Customers’ desire to save money is

heightened by using coupon codes, vouchers, and other discounting methods.

Coupons that provide a percentage off of a product’s original cost are the most

popular. 74% of online buyers prefer “percentage off” coupons, according to a

study by Blippr.
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Codes
Code Marketing is the “SaaS free trial” applied to a broader range of goods,

services, and business sectors. Code Marketing allows customers to “test before

they buy,” which fosters customer confidence and reduces hassle throughout the

online purchasing process.

Regarding B2B, the SaaS (Software as a Service) segment was among the first

to embrace a digital-first strategy. Adapting this method to internet sales was part

of the plan all along.

The great thing about this strategy is that consumers become accustomed to

their software, so switching might not be cost-effective. Check out this example

from Convert Kit.

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They are encouraged to stick with it, particularly when you consider that

upgrading to the next level only costs $9 per month.

Conclusion
Your pricing strategy is influenced by your company’s financial data and external

situations. This includes:

● Knowing the price of your goods or services to help you make better
business decisions
● Maintaining a close eye on these expenses to rapidly respond to
developments and keep your business profitable in the long run
● Your consumers, the market, and your competitors
 ● Keeping abreast of changing customer tastes and market conditions, as
well as potential supply chain problems

Setting accurate prices for your inventory is one of the most important things you

can do to ensure continuing success in your business. It doesn’t matter if you

have the best product in the world, the best team, or the most attractive

storefront; if you can’t price your products efficiently and don’t have an effective

pricing strategy in place, your sales will suffer.