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How To Set Your Pricing – 6 Ways To Consider Pricing Your Product or Service

Pricing a product is one of the most challenging tasks startups face. Most of them initially want to keep it low to attract an impressive customer base and never raise it for fear of losing valued customers. You will often find a correlation that suggests that growth is stunted due to monetization.

While your competitor’s pricing strategies are a good indicator, it may not necessarily be what is right for you. Assess your product and create an impressive strategy that facilitates the revising of your product/service prices periodically.

Now this is easier said than done, invariably there are a lot of factors to take into account. Operations, resource usages, sub-costs, competition and plethora of parameters will ultimately affect your cost.

Therefore, it is usually best to not put all of your eggs in one basket, but instead opt in for a number of tried and tested pricing strategies, before you strike gold.

In order to adopt these strategies, it’s best to look at things with a broader perspective:

A successful strategy is a combination of marketing techniques, Web messaging, PR, sales pitch and above all your intuition, leading to increased sales and happy customers. You need to be sharp, intuitive and analytical to figure out what suits your company and its products. Here are some examples of tested and effective strategies:

  1. Introductory: This is often followed by companies that are exploring a new market and in this the price is usually kept low to understand customer needs and behaviour.

Example : Uber’s first ‘free’ ride. The personal transport aggregator offers a free ride (usually a discounted ride up to a certain amount, but calls it a free ride) to its first-time customers. This allows for the customer to solely focus on the services and it’s advantages without weighing them against the amount of money paid.

  1. Skimming: In this, introductory price is high but is gradually reduced. This is often noticed in the case of hi-tech products (phones, tabs etc.) which initially start with a high price but are gradually lowered, when competitors raise their price bar. Margins are often reduced to create a better flow of stock.

Example : Commonly seen with mid to high range smartphones, the price of a leading model with the topmost specs is lowered when an upgraded version of the phone is released. This ensures that the next set of adopters are able to stay in the tech wave rather than missing out because of expensive pricing. In turn, they continue to aspire for the higher range of technologies and  repeat customer cycle is established.

  1. Odd-ending: Sometimes, you notice prices set at $2.99. This has an impact on the buyer’s psyche and compels purchase. This phenomenon is called psychological pricing. You will see a very high rate of adoption when it comes to this strategy – In 1997, a study published by the Marketing Bulletin suggested that over a little over 60% of advertising material mentioning costing had the ending digit as 9 i.e. .99 is some way.
  1. Once price for all items: As observed in the dollar store, all products are set at the same price. Even Amazon has the 99, 199, 299, 499 store. This allows for customers to create a mental value system in relation to these products. Sometimes, a product that they perceive is out of their budget will sell, just because it is placed with other products with the same price.


  1. Bundling: In this you form combos and make them cheaper than when purchased separately. Examples are abundant at all eating joints. This helps increase average sales. It’s also a great way of reducing the strain on the customer when it comes to making choices. You would also be able to promote your products and see what your customer makes of it.


  1. Competition-led: Observe your competitor’s strategy and set up prices to pull your customers away from the competitors. You can set your prices higher in case your products are distinct or lower if they are the same. It is important to understand the value your product holds in the minds of the customers, referred to as the perceived value.
    If the sales are slow, it doesn’t necessarily mean that the prices need to be slashed. It could also mean that the gap between the price and its perceived value has increased.


Remember, no two customers will view your products equally. In fact, while making a purchase they fall back on a judgement they’ve already made rather than analysing too much on buying something new (snap judgement). Therefore, you may think it is overpriced, while others may be willing to pay extra for additional features. Understand how customers use your product and what compels them to pay for additional features. LinkedIn, for instance, introduced power search and ability to contact other members as part of it premium account plans which brought in huge profits for the company.


The list of pricing strategies is exhaustive and one needs to use a combination over time to achieve success. The key however, is planning. Make sure you understand your customers well—their perceived and snap judgements well before taking the plunge. This will ensure that your business thrives.