Freemium Pricing StrategyĪ 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. You can even A/B test dynamic pricing in real-time to maximize your profits. Your team can plan for promotions in advance and configure the pricing algorithm you use to launch the promotion price at the perfect time. Dynamic Pricing Strategy in Marketingĭynamic pricing can help keep your marketing plans on track. 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. Hotels, airlines, event venues, and utility companies use dynamic pricing by applying algorithms that consider competitor pricing, demand, and other factors. It’s a flexible pricing strategy where prices fluctuate based on market and customer demand. Dynamic Pricing Strategyĭynamic pricing is also known as surge pricing, demand pricing, or time-based pricing. Before executing this strategy, complete a pricing analysis that includes your closest competitors to make sure this strategy will help you meet your goals. It won’t help you attract new customers if your competition is working to acquire customers rather than growing profits. Cost-Plus Pricing Strategy in MarketingĬost-plus pricing works well when the competition is pricing using the same model. 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. You’d set a price of $50, which is a markup of 100%.Ĭost-plus pricing is typically used by retailers who sell physical products. The shoes cost $25 to make, and you want to make a $25 profit on each sale. To apply the cost-plus method, add a fixed percentage to your product production cost. 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. Cost-Plus Pricing StrategyĪ cost-plus pricing strategy focuses solely on the cost of producing your product or service, or your COGS. 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. Pricing your products and services competitively in the market can put your brand in a better position to win a customer’s business. Competition-Based Pricing Strategy in MarketingĬonsumers are primarily looking for the best value which isn’t always the same as the lowest price.
Whichever price you choose, competitive pricing is one way to stay on top of the competition and keep your pricing dynamic. 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. With competition-based pricing, you can price your products slightly below your competition, the same as your competition, or slightly above your competition. Businesses who compete in a highly saturated space may choose this strategy since a slight price difference may be the deciding factor for customers. Instead, a competition-based pricing strategy uses the competitors’ prices as a benchmark. 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.
Competition-Based Pricing StrategyĬompetition-based pricing is also known as competitive pricing or competitor-based pricing.
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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.ĭiscover 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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