The 10 Most Common Pricing Strategies Examples (With Real-World Examples)

Pricing isn’t just about picking a number — it’s one of the most powerful levers you have to influence your business’s success. A well-crafted pricing strategy can boost your profits, position your brand, and even determine how your customers perceive your product. On the flip side, poor pricing decisions can leave money on the table or drive potential buyers away.

Whether you’re launching a startup, growing a small business, or reevaluating your current pricing model, understanding different pricing strategies — and when to use them — is crucial.

In this guide, we’ll explore some of the most common pricing strategies used by successful companies. You’ll find practical definitions, real-world examples, and tips to help you identify the best approach for your business.

What is Pricing?

Pricing is the process of determining how much you will charge customers for your product or service. But it’s more than just assigning a dollar amount — pricing reflects the value you offer, the position you want to hold in the market, and the behavior you want to encourage in your buyers.

A pricing decision influences how your brand is perceived. Are you a premium product or a budget-friendly alternative? Are you offering a one-time purchase or encouraging long-term relationships through subscriptions?

Pricing also plays a central role in your business strategy. It directly affects your revenue, profit margins, and overall growth potential. That’s why smart businesses use pricing as a strategic tool — not just a financial one.

Whether you’re selling software, physical products, or services, choosing the right pricing strategy can help you stay competitive and sustainable in the long term.

10 Pricing Strategies Examples

Cost-Plus Pricing

Cost-plus pricing is one of the simplest and most widely used pricing strategies. It involves calculating the total cost to produce a product or deliver a service, then adding a fixed percentage markup to determine the final selling price.

Cost-Plus Pricign Formula: Selling Price = Cost + (Cost × Markup Percentage)

When to use it: This strategy is ideal when you have predictable, stable production costs and want to ensure a consistent profit margin. It’s commonly used in manufacturing, retail, and food service industries.

Practical Example of Cost-Plus Pricing: Let’s say you run a handmade furniture business. It costs you $200 to build a table (materials, labor, overhead). If you apply a 50% markup, the selling price would be: $200 + ($200 × 0.50) = $300

Companies that use Cost-Plus Pricing:

• Walmart (in some categories): While Walmart often uses competitive pricing, it still relies on cost-plus principles for certain private label or bulk products to ensure margins.
• Supermarkets and grocery chains: Many use cost-plus pricing on commodities like dairy, produce, and packaged goods, where they apply a fixed markup to wholesale prices.
• Defense contractors (e.g., Lockheed Martin): In government contracts, especially in cost-reimbursable agreements, a cost-plus pricing model is common — ensuring costs are covered with a guaranteed profit margin.

Cost-plus pricing ensures you always cover your expenses, but it doesn’t factor in customer demand or competitor pricing — which can limit your potential profits in competitive markets.

Competitive Pricing

Competitive pricing — also known as market-oriented pricing — involves setting your price based on what your competitors are charging for similar products or services. The goal is to match, slightly undercut, or position yourself above the competition depending on your brand and offering.

When to use it: This strategy works best in saturated markets where many businesses sell similar products, and customers can easily compare prices. It’s commonly used in ecommerce, retail, hospitality, and travel industries.

Formula (simplified): Your Price = Market Average Price ± Positioning Adjustment

Practical Example of Competitive Pricing: If most local coffee shops charge $3.50 for a cappuccino, you could match that price, go slightly lower to win price-sensitive customers, or charge $4.00 if you’re offering a better ambiance or organic beans.

Companies that use Competitive Pricing:

• Amazon: Constantly monitors competitor prices and uses automated pricing tools to stay competitive across millions of products.
• Delta, United, and other airlines: Regularly adjust ticket prices based on competitors’ offers, especially on overlapping flight routes.
• Uber and Lyft: Monitor each other’s fares and apply price matching or slight undercutting in real-time.

Competitive pricing can help attract customers in a crowded market, but it also puts pressure on your margins. To stand out, it often needs to be paired with a clear differentiation strategy.

Value-Based Pricing

Value-based pricing is a strategy where prices are set primarily on the perceived value of a product or service to the customer, rather than on cost or competitor pricing. It’s focused on what the customer believes the product is worth — especially when it solves a specific pain point or delivers unique benefits.

When to use it: This strategy works best when your product offers a distinct competitive advantage or strong brand equity or delivers exceptional results. It’s common in SaaS, luxury goods, consulting, and healthcare.

Practical Example of Value-Based Pricing: A project management software helps a company save 20 hours per month in team productivity. The software provider charges $99/month, which is far below the value it creates, but high enough to reflect its effectiveness and maintain strong margins.

Companies that use Value-Based Pricing:

• Apple: Prices its products based on brand value, design, and user experience — not just manufacturing costs.
• Salesforce: Tailors pricing to the size of the client and the value the platform delivers to their sales pipeline.
• Louis Vuitton: Charges premium prices based on craftsmanship, exclusivity, and brand perception — not materials alone.

Value-based pricing enables high profit margins and positions your brand as premium, but it requires a deep understanding of your customers and strong brand trust.

Penetration Pricing

Penetration pricing is a strategy where a business introduces a new product or service at a low price to quickly attract customers and gain market share. Once a loyal customer base is established, the company may gradually raise prices over time.

When to use it: This strategy is ideal for entering competitive or price-sensitive markets, especially with new or disruptive products. It works well when the goal is to acquire users fast and build brand awareness.

Formula (simplified approach): Launch Price = Significantly Lower Than Competitors (with a plan for gradual increase)

Practical Example of Penetration Pricing: A new streaming platform launches at $4.99/month — undercutting competitors like Netflix and Disney+. After gaining a large subscriber base, the company increases the price to $9.99 while adding new features.

Companies that use Penetration Pricing:

• Spotify: Initially offered free or $0.99 promotions for its premium plan to build a massive user base.
• Netflix (early days): Entered the market with low subscription prices compared to cable, slowly raising prices over the years.
• Xiaomi: Entered global smartphone markets by pricing high-quality phones significantly lower than Samsung or Apple.

Penetration pricing helps break into crowded markets quickly, but it can be risky if the low prices don’t cover your costs or if customers leave when prices go up.

Price Skimming

Price skimming is a strategy where a business launches a new product at a high price to target early adopters who are willing to pay a premium. Over time, the price is gradually lowered to attract more price-sensitive segments of the market.

When to use it: This strategy works best for innovative or tech-forward products with few initial competitors and high perceived value. It’s ideal when the product has a short lifecycle or when recovering R&D costs quickly is important.

Practical Example of Price Skimming: A new smartphone is launched at $999 to capture early adopters. Six months later, the price drops to $799, then $599 after a year — allowing the company to maximize profits across different customer segments.

Companies that use Price Skimming:

• Apple: Frequently launches new iPhones and MacBooks at premium prices, gradually reducing the cost as newer models come out.
• Sony & Microsoft (gaming consoles): Both have used this strategy with PlayStation and Xbox consoles, starting high at launch and lowering prices over time.
• Tesla (early years): Launched the Roadster and early Model S at high prices, then introduced more affordable models like the Model 3 later.

Price skimming captures high-margin sales early on and rewards innovation, but it can frustrate early customers if price drops happen too quickly.

Dynamic Pricing

Dynamic pricing is a flexible strategy where prices are adjusted in real-time based on market demand, customer behavior, competitor pricing, or even time of day. This approach is powered by algorithms and data analysis to optimize revenue.

When to use it: Dynamic pricing is best suited for industries with fluctuating demand, perishable inventory, or high competition. It’s commonly used in e-commerce, travel, entertainment, and ride-sharing.

Practical Example of Dynamic Pricing: An airline ticket might cost $250 on Monday morning but jump to $400 by the evening if seats are selling fast. Similarly, ecommerce platforms may raise prices during holidays or flash sales when demand spikes.

Companies that use Dynamic Pricing:

• Uber: Uses surge pricing during high-demand periods, increasing fares in real-time.
• Amazon: Changes prices on thousands of products multiple times a day, depending on demand, stock levels, and competitor prices.
• Airbnb: Hosts can use automated pricing tools to adjust rates based on seasonality, local events, or booking trends.

Dynamic pricing maximizes revenue by capturing what customers are willing to pay in each moment — but it can backfire if perceived as unfair or unpredictable.

Freemium Pricing

Freemium pricing offers a basic version of a product or service for free, while charging users for access to advanced features, premium tools, or extended usage. The goal is to attract a large user base and convert a percentage into paying customers over time.

When to use it: This strategy works well for digital products, especially SaaS tools, mobile apps, and platforms where usage can be scaled. It’s most effective when the free version is genuinely useful — but the paid version delivers significantly more value.

Practical Example of Freemium Pricing: A design tool offers free access to templates and basic editing features. To unlock high-resolution exports, team collaboration, and branding tools, users must upgrade to a $12/month plan.

Companies that use Freemium Pricing:

• Spotify: Offers free access to music with ads and limited skips, with premium features like offline listening and no ads behind a paywall.
• Canva: Provides core design tools for free, but charges for premium templates, brand kits, and advanced collaboration tools.
• Dropbox: Gives users 2GB of free cloud storage, with higher storage and business tools available through paid plans.

Freemium models drive rapid user growth and allow users to experience your product before committing — but converting free users into paying customers can be challenging.

Subscription Pricing

Subscription pricing is a model where customers pay a recurring fee — monthly, quarterly, or annually — to access a product or service. It emphasizes long-term customer relationships and predictable revenue rather than one-time transactions.

When to use it: This strategy is ideal for businesses offering ongoing value, such as content platforms, software services, consumable products, or exclusive communities. It aligns well with the subscription business model, which focuses on delivering continuous access and benefits over time.

Practical Example of Subscription Pricing: A language learning app charges $15/month for unlimited access to lessons, progress tracking, and personalized exercises. Users stay subscribed as long as they find value and are progressing toward their goals.

Companies that use Subscription Pricing:

• Netflix: Charges users monthly for unlimited access to its streaming library, constantly updating content to retain subscribers.
• Adobe Creative Cloud: Moved from a one-time software purchase model to a subscription business model, offering access to Photoshop, Illustrator, and more through monthly plans.
• Dollar Shave Club: Delivers razors and grooming products through monthly subscription boxes.

Subscription pricing ensures steady cash flow and deeper customer engagement — but it requires maintaining high value over time to minimize churn.

Bundle Pricing

Bundle pricing is a strategy where multiple products or services are sold together at a combined price that’s lower than the total cost of purchasing them individually. It’s designed to increase perceived value, boost average order size, and move less popular items by pairing them with bestsellers.

When to use it: This strategy is ideal for ecommerce, SaaS, digital products, and retail — especially when products are complementary or frequently purchased together.

Practical Example of Bundle Pricing: A productivity software suite offers a bundle including a task manager, calendar tool, and note-taking app for $29/month — while each product costs $12/month if purchased separately.

Companies that use Bundle Pricing:

• McDonald’s: Combines burgers, fries, and drinks into value meals at a lower price than buying items separately.
• Microsoft Office: Offers bundled access to Word, Excel, PowerPoint, and more for a single subscription fee.
• Apple: Sells product bundles like iPhone + AirPods with accessory discounts during seasonal campaigns.

Bundle pricing increases perceived value and encourages customers to buy more — but if not managed carefully, it can reduce the profitability of premium products.

Psychological Pricing

Psychological pricing is a strategy that uses pricing tactics designed to influence customer perception and behavior. It taps into human psychology to make prices seem more attractive or create a sense of urgency or exclusivity.

When to use it: This strategy is useful in retail, e-commerce, and DTC (direct-to-consumer) businesses where purchasing decisions are often driven by emotion or habit.

Common techniques include:

• Charm pricing: Ending prices in .99 or .95 to make them feel lower (e.g., $9.99 instead of $10).
• Price anchoring: Displaying a higher “original price” next to a discounted price to increase perceived savings.
• Scarcity and urgency: Limited-time offers or low-stock warnings to encourage faster decisions.

Practical Example of Psychological Pricing: An online store lists a product for $49.99 instead of $50, making it feel more affordable. They also show a “$79.99 original price” crossed out to anchor the perception of savings.

Companies that use Psychological Pricing:

• Amazon: Frequently uses .99 pricing and shows original prices alongside discounts to enhance perceived value.
• J.C. Penney (historically): Relied heavily on charm pricing before switching to a no-sales strategy (which later backfired).
• Booking.com: Uses urgency messages like “Only 2 rooms left!” or “Booked 3 times today” to push conversions.

Psychological pricing can subtly shape buying behavior — but overuse can erode trust if customers feel manipulated.

Pros and cons of different pricing strategies

Here is a table that shows the pros and cons of each pricing strategy mentioned in this article.

Benefits of Implementing an Effective Pricing Strategy

A well-designed pricing strategy does more than cover costs — it positions your business, communicates value, and drives sustainable growth. Here are some of the key benefits:

1. Improved Profit Margins

Choosing the right pricing approach helps you capture more value from each sale. For example, value-based pricing or bundling can significantly increase your margins compared to cost-based pricing alone.

2. Stronger Brand Perception

Your price tells a story. Premium pricing can reinforce your positioning as a high-quality or luxury brand, while competitive pricing can signal affordability and accessibility.

3. Competitive Advantage

By aligning your prices strategically, you can stand out in a crowded market — either by undercutting the competition or by offering a unique value that justifies a higher price.

4. Better Customer Segmentation

Techniques like tiered pricing or freemium models allow you to serve different customer segments — from budget-conscious users to high-value power users — all under one pricing structure.

5. Predictable Revenue Growth

Recurring revenue models like subscriptions or usage-based pricing lead to more stable and forecastable income, making it easier to plan ahead and reinvest in your business.

6. Increased Customer Lifetime Value (CLV)

Smart pricing can encourage repeat purchases, upgrades, and long-term loyalty — especially when paired with strong customer experience and retention strategies.

How to Find Your Ideal Pricing Strategy for Your Business

There’s no one-size-fits-all pricing strategy. The right approach depends on your industry, audience, brand positioning, and business goals. Here’s a step-by-step guide to help you find (or refine) your ideal pricing strategy:

1. Understand Your Costs

Before anything else, know your numbers. Calculate your fixed and variable costs to ensure your pricing covers expenses and leaves room for profit. Even if you’re not using cost-plus pricing, this gives you a baseline.

2. Know Your Customer’s Willingness to Pay

Talk to customers, run surveys, or test different pricing tiers to find out what your audience values and how much they’re willing to pay for it. Value-based pricing depends heavily on this insight.

3. Analyze Your Competitors

Look at how similar businesses price their products. Are they competing on price or value? This will help you decide whether to undercut them, match them, or charge a premium based on differentiation.

4. Define Your Positioning

What story do you want your price to tell? If you want to be seen as a premium solution, your pricing should reflect that. If you’re aiming for mass market adoption, competitive or penetration pricing may be more appropriate.

5. Test and Optimize

Don’t be afraid to experiment. A/B test different pricing tiers, offer limited-time bundles, or try launching with a lower price and gradually increasing it. Track metrics like conversion rate, churn, and customer lifetime value.

6. Consider Hybrid Strategies

You don’t have to stick with just one strategy. Many successful businesses combine models — for example, offering a freemium plan with value-based upgrades, or using bundle pricing within a subscription business model.

Pricing Strategy FAQ

To wrap things up, here are some frequently asked questions that can help clarify common doubts about choosing and implementing the right pricing strategy: