Pricing is the only lever in your business that generates revenue without incurring a cost. Yet most businesses set their prices once, based on gut feel or a quick competitor check, and revisit them only when something goes wrong. That is leaving serious money on the table and, in many cases, actively pushing buyers away before the sales conversation even begins.
Key Takeaways:
A pricing strategy is a structured method a business uses to set the price of its products or services, balancing production costs, market conditions, the competitive landscape, and perceived customer value.
It is the long term framework that guides every pricing decision your business makes, from initial launch through to:
It is not the same as a pricing tactic, which is a short term adjustment like a promotional discount or a time limited offer. Tactics operate within a strategy; they do not replace it. A business without a defined pricing strategy is effectively operating on pricing tactics alone, reacting to circumstances rather than shaping them.
Understanding what is a pricing strategy also means understanding the distinction between a pricing strategy and a pricing model. The strategy is your positioning choice, how and why you price the way you do.
The model is the billing mechanism:
Most businesses need both, and confusing the two is one of the most common reasons pricing frameworks fail in practice.
The right pricing strategy varies by industry, business model, product maturity, and the length of your sales cycle, which is exactly why there is no universal answer.
According to research published by MDPI on SME pricing strategy, businesses that frequently modify their pricing in response to market conditions and technological change show significantly better performance than those that treat pricing as a static decision.
Pricing is a living model, not a set and forget number.
There is no one size fits all approach here. The best pricing model depends on your product, your market position, and what your buyers actually care about.
Here are the main pricing strategy types every sales team should understand.
|
Pricing strategy |
Best for |
Key risk |
|
Cost plus |
Manufacturing, agencies, predictable cost structures |
Ignores market value and competitor positioning |
|
Competitive |
Crowded comparison markets |
Price wars that erode margins industry wide |
|
Value based |
Differentiated B2B products with quantifiable ROI |
Requires strong research and buyer persona clarity |
|
Penetration |
New market entrants, SaaS displacing incumbents |
Attracts price sensitive customers who churn on price rise |
|
Premium |
Established brands, high touch services, luxury |
Only works when the product genuinely delivers at that level |
|
Dynamic |
Airlines, e-commerce, usage based SaaS |
Buyer backlash if price changes feel unpredictable or manipulative |
|
Tiered |
SaaS, services with defined feature sets |
Complexity can confuse buyers if tiers are not clearly differentiated |
|
Bundle |
Multi product businesses, SaaS platforms |
Perceived value must exceed individual component pricing clearly |
|
Skimming |
First to market innovations, consumer electronics |
Competitors quickly close the gap, reducing the window for high margins |
|
Freemium |
SaaS apps, tools with a strong viral loop |
Requires high conversion rate to cover the cost of free users |
Now, let's break down each one to gather more insights.
The cost plus pricing strategy sets price by adding a fixed markup percentage to total production cost. It is simple to calculate, easy to defend internally, and works well for businesses with predictable, stable cost structures, such as:
The limitation is significant: it ignores what the market will actually bear and what competitors charge. A business using only cost plus pricing is essentially pricing in a vacuum.
TSIA's analysis of cost plus pricing found that for technology companies, continued reliance on cost plus models poses real risks, including loss of market share to competitors who price against customer value rather than internal cost.
The competitive pricing strategy sets prices based on competitors' prices, at, above, or below the market rate. It is the default approach in crowded markets where buyers comparison shop heavily, such as:
There are three sub-approaches within competitive pricing: match the market, undercut it, or premium position above it. Each sends a different signal to buyers.
The risk is that undercutting can trigger price wars that erode margins for everyone in the category, including you.
According to SBI's State of B2B SaaS Pricing report, competitor based pricing is currently the most common strategy at 38% of companies, but it is also the least differentiated position to occupy.
The value based pricing strategy sets price according to the perceived value delivered to the customer, not the cost to produce or what competitors charge.
It's the most profitable approach when executed well, requiring:
A CRM that saves a sales rep 10 hours a week can command a significantly higher price than a basic contact manager — because the value is quantifiable.
Research from McKinsey cited by Vayu shows that companies adopting value based pricing enhance return on sales by an average of 5 to 10 percent.
Value based pricing is also the most common strategy among SaaS companies earning over $100 million ARR, a signal that it becomes the dominant approach as businesses mature and their value proposition becomes more clearly defined.
The penetration pricing strategy enters the market at a deliberately low price to gain traction quickly, with the intention of raising prices over time as the customer base grows. It is commonly used by new SaaS entrants trying to displace established players or businesses trying to build volume fast in a competitive market.
The risk is attracting price sensitive customers who churn the moment prices normalize. The long game requires loyalty and brand familiarity to outweigh the initial revenue sacrifice, which only works if your product genuinely retains users once they are inside.
The premium pricing strategy sets prices deliberately above the market average to signal quality, exclusivity, or superior outcomes. It is most effective for established brands with strong reputations, high touch service industries, or differentiated products with clear proof of results.
Premium pricing only works when the product genuinely delivers. In wealth management, enterprise software, and high end consulting, a premium price is not just acceptable, it's often expected. Buyers in those markets use price as a proxy for quality, and underpricing can actually undermine credibility.
The dynamic pricing strategy adjusts prices in real time based on demand, competition, time of day, or other variables. It is most visible in airlines, hotels, ride sharing, and e-commerce.
In B2B, it is growing in relevance through usage based SaaS pricing and surge billing for seasonal service businesses.
The key consideration is transparency. Buyers who feel manipulated by unpredictable pricing will churn and talk about it. Dynamic pricing works best when the logic behind price changes is visible and understandable to the buyer.
The tiered pricing strategy offers multiple price points for different levels of access, features, or usage, letting buyers self select based on their needs and budget. It captures a wider range of customers without undervaluing the full product, and gives sales teams a natural upsell path: start customers at a lower tier and grow them over time.
The most common structure is Basic, Pro, and Enterprise, or an equivalent three tier model, where each level bundles a progressively richer set of capabilities.
Here's a breakdown.
|
Tier |
Monthly price |
Key features |
Best for |
|
Basic |
$49 |
Core CRM, 1 user, 500 contacts |
Solo operators and freelancers |
|
Pro |
$99 |
Full CRM, 5 users, 5,000 contacts, automation |
Growing sales teams |
|
Enterprise |
Custom |
Unlimited users, API access, dedicated support |
Large or complex organizations |
The bundle pricing strategy packages multiple products or services together at a combined price lower than purchasing each individually. Buyers love it for the perceived savings and simplified decision making.
Sellers love it because it:
A customer using three bundled tools is far harder to churn than one using a single point solution.
A CRM bundled with SMS automation and local presence dialling, for example, delivers more value than each component separately and creates a switching cost that individual feature purchases do not.
B2B pricing is its own discipline. Longer sales cycles, multiple stakeholders, volume based negotiations, and ROI driven justification all change how pricing should be structured compared to consumer sales.
In B2B, pricing is often:
B2B specific considerations include procurement requirements, budget cycles, multi year contract structures, and the role of total cost of ownership in the buyer's evaluation. Transparency and predictability matter more in B2B than in almost any other context, a confusing pricing page is a genuine sales friction point that delays deals and introduces unnecessary objections.
Ringy's flat rate pricing at $119 per month is a deliberate B2B pricing strategy choice. It eliminates surprise invoices, makes budget approval straightforward for agency owners and sales managers, and removes the per seat anxiety that often slows down team expansion decisions.
If you are building out your B2B sales strategy, pricing structure is a critical input into how buyers evaluate and ultimately commit to your solution.
The skimming pricing strategy launches at a high price to capture early adopters willing to pay a premium, then gradually lowers prices as the market matures. Consumer electronics is the classic example. In services and SaaS, skimming is less common but relevant when launching a genuinely novel feature set that no competitor currently offers.
Psychological pricing uses price presentation to influence perception. $99 vs $100, "starting at" language, or anchoring with a higher tier before presenting the mid tier.
Buyers respond to framing.
Anchor with your highest value tier first so the mid tier feels like a reasonable deal rather than an expensive commitment.
Freemium offers a free base level product with optional paid upgrades.
Common in SaaS and apps, it creates a large top of funnel with a low barrier to trial. The challenge is conversion: free users can strain support resources without generating revenue.
A freemium model only works if your paid conversion rate is strong enough to cover the cost of your free base.
Economy pricing competes purely on low price with minimal frills, designed to attract volume buyers. For service businesses, cheapest is rarely a defensible position.
A slightly better priced competitor offering meaningfully more value will consistently take customers away from a pure economy player over time.
Building a resilient pricing strategy requires a careful balance between your internal financial requirements and the external value perceived by your customers.
By adhering to these fundamental practices, you can establish a dynamic framework that fosters long-term business growth and sales consistency:
Implementing these best practices transforms pricing from a static, reactive decision into a dynamic engine for sustainable growth. By aligning your pricing framework with verified market data, buyer values, and internal sales operations, you create a scalable structure that consistently captures the value your business delivers, ultimately fostering stronger, longer-term customer relationships.
Defining a pricing strategy is the strategic work.
Getting every rep to execute it consistently, on every call, in every proposal, with every objection, is the operational challenge that most businesses underestimate.
Ringy gives sales teams the infrastructure to execute pricing strategy with consistency and discipline:
Explore our sales software to see how the platform supports pricing execution at every stage of the pipeline.
A pricing strategy is your positioning choice, the long term approach that determines how and why you price the way you do. A pricing model is the billing mechanism, per user, per feature, usage based, flat fee, or subscription. Most businesses need both: a strategy to guide decisions and a model to operationalize them.
The clearest signals are consistently fast deal closures with little or no objection, customers who never ask about price, and a high volume of inbound interest that still does not translate into the revenue you expected. If buyers are saying yes without hesitation, there is a strong chance you are leaving margin on the table.
At minimum, review your pricing strategy quarterly and conduct a thorough overhaul at least once a year. Market conditions underappreciate pricing changes, and your own cost structure evolves. Businesses that treat pricing as a one time decision consistently underperform those that manage it as an ongoing discipline.
Absolutely and it is one of the most underappreciated dimensions of pricing decisions. Unpredictable or opaque pricing erodes trust after the sale. Pricing structures that do not reflect the customer's actual usage or value received create resentment at renewal. A well designed pricing strategy, particularly one built on value based or tiered principles, reinforces the customer's sense that they are getting fair value throughout the relationship, not just at the point of purchase.
A well-executed pricing strategy is the foundation of long-term profitability and sustainable growth. By aligning your business model with market realities and clear customer value, you set the stage for consistent success.
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