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Pricing your products isn’t only about calculating costs and adding a mark-up. What you need to consider above all else is how much your customers are willing to pay for it.

So what pricing strategy should you use to become more profitable?

Here are the common types of pricing strategies that may be applicable to your business.


1. Cost-plus pricing

Best for selling physical retail products. 

It’s the sum of your capital plus the mark-up or the amount added to the base price to cover overhead and profit.

2. Competitive pricing

Best when you’re competing in a highly saturated market.

As the term suggests, it uses your competitors’ prices as the basis of pricing your goods. You can either price your products slightly lower, equal, or slightly higher than your competitions.

3. Price skimming

Best for technology and fashion products and other trendy consumer products.

You can use this if your target markets are high-income shoppers and trendsetters. This pricing strategy lets you charge high prices for trendy products and lower it over time as it loses popularity.

4. High-low pricing

Best during clearance sales, discounts, promotions, year-end sales, or markdowns.

For this strategy, you can sell your product at its regular price, lower it for a certain period (like Christmas sale), then bring it back again to its regular price once the promotion period ended.

5. Penetration pricing

Best used when you’re offering a new product or you’re trying to saturate a competitive market.

This strategy lets you offer your goods for an extremely low price and then raise them once you achieve your target market share. It should be only used for a short run to prevent hurting your bottom line.

Your prices can convince your customers whether they should buy your products or not. Before putting a price tag on your offers, always think about your target consumers’ expectations and capabilities. By doing so, you’ll be a step closer to becoming a more profitable business.

If you want to learn more about the different pricing strategies in business, you can read this article: Pricing it Right: Knowing the Pricing Strategies in Business. We also discussed other cost pricing strategies there that you may find helpful.