Pricing Strategies and Its Types

What is Pricing Strategies?

Pricing strategies are methods used to determine the pricing of the product/services.
The pricing strategies depend on the competitor's pricing, cost and expense of the product.
The different types of Pricing strategies include:

Competitor based pricing
Penetration pricing strategy
Cost plus pricing
Value-based pricing

Let's have a detailed view of each pricing strategy

Competitor-based Pricing:

As the name says, this pricing strategy totally depends on the competitor's price. It does not depend on the cost and expense of the product. Based on the available information about the competitor, you can fix your pricing. Competitor pricing does not consider how customers react to your price, instead, it focuses on what other companies are doing.

Penetration Pricing Strategy:
Penetration pricing strategy involves, offering low prices for your product/service to gain customer attention for your product.
Penetration pricing mainly focuses to build a strong customer base as your product is new to the market.

Cost Plus Pricing:

Cost plus pricing is a simple pricing strategy where you decide how much extra you will charge for a product. It is basically to get profit, by selling your product more than you spent.

Cost plus pricing: Cost + Profit margin

Value-based Pricing:

Value-based pricing is based on the value of your product or service to the customer.
It's how worth your product is. It depends on how exclusively your product benefits the customer.