In brief: Your pricing strategy defines how you price your products and services. It is a key lever for profitability, brand perception, and competitive positioning. The right pricing strategy combines customer value, cost structure, and market dynamics into a sustainable pricing model.

What is a pricing strategy?

The pricing strategy comprises all decisions related to a company’s pricing. It defines not only the price itself, but also the pricing model, discount structures, payment terms, and price communication.

Pricing is one of the most powerful levers for profitability: a price increase of just 1% can raise profit by 8–11%—significantly more than cost reductions or revenue growth. Yet in many companies, pricing is treated as an afterthought and driven by gut feeling rather than strategy.

Pricing strategy is directly linked to brand positioning and the USP: premium positioning requires premium prices, while cost leadership requires low prices.

The most important pricing models

Cost-plus pricing: costs plus margin—simple, but it ignores customer value and competition
Value-based pricing: the price is based on perceived customer value—the most profitable approach, but it requires deep customer understanding through Value Proposition Design
Competition-based pricing: prices are aligned with competitors—the result of competitive analysis
Penetration pricing: low introductory prices to quickly capture market share—typical for startups on the path to product-market fit
Skimming strategy: a high launch price that is gradually reduced—for innovative products with a unique selling point
Freemium: basic version free of charge, premium features paid—core to many digital business models
Subscription: recurring payments instead of a one-time purchase—creates predictable revenue and strengthens customer loyalty
Dynamic pricing: prices adjust in real time based on demand, timing, or customer segment

Developing a pricing strategy

A robust pricing strategy is developed in four steps:

Understand customer value: What is your offering really worth to the target group? Analyse the jobs to be done and the willingness to pay of your buyer personas.
Know your costs: fixed costs, variable costs, marginal costs—the lower bound of your price is cost coverage
Assess the competition: Where are competitors’ prices? Which pricing models do they use? How do you differentiate?
Choose a pricing model: one-time payment, subscription, usage-based, tiered? The model must fit the business model and the target group.

Test prices with real customers—A/B tests, conjoint analyses, or Van Westendorp surveys provide data-driven insights.

Pricing psychology: How customers perceive prices

Price perception is not rational. Psychological effects influence purchasing decisions:

Anchoring effect: the first price shown sets the reference frame—always show the premium package first
Loss aversion: customers feel losses more strongly than gains—“Save €500” is more compelling than “Invest only €2,000”
Decoy effect: an unattractive mid-tier makes the premium package more appealing
Price thresholds: €99 is perceived as significantly cheaper than €100—though less relevant in B2B
Bundling: packages are perceived as more valuable than individual services at the same total price

Pricing and business model innovation

Innovative pricing models can transform entire industries:

Platform economy: multi-sided pricing models—one side pays, the other uses it for free
Servitization: from product sales to a service subscription—“pay per use” instead of a one-time purchase
Scaling through pricing: tiered pricing models enable growth across different customer segments
Sustainable pricing models: circular economy and sharing models require new pricing approaches

Pricing strategy is an integral part of the Business Model Canvas and should be considered in every business model innovation.

Common pricing mistakes

Too cheap: many SMEs and mid-sized companies underestimate their value—and leave margin on the table
Cost-based only: cost-plus ignores customer value and gives away profitability
No segmentation: a single price for all customers leaves potential untapped
Price without value: raising prices without communicating additional value leads to customer churn
Discounts as a habit: permanent discounts train customers to never pay full price
No price testing: if you never test, you never optimise—data-driven pricing beats gut feeling

Would you like to optimise your pricing strategy and become more profitable?
We help you develop value-based pricing that fits your business model and your target group.

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Frequently asked questions about pricing strategy

Which pricing strategy is right for my company?

That depends on your industry, target group, and positioning. Premium-positioned brands benefit from value-based pricing. Startups often use penetration pricing or freemium. Service providers should charge based on value rather than hours. An individual analysis of your business model provides clarity.

How can I increase prices without losing customers?

Communicate the added value, not the price increase. Bundle the increase with additional services. Introduce new price tiers instead of raising existing ones. Give existing customers a transition period. And: test the increase first in a small segment.

Should I show my prices on the website?

In B2C and for standardised offerings: yes, absolutely—price transparency builds trust. In B2B with complex, customised solutions, a “from” price can be useful to indicate the entry threshold. Hidden prices deter digitally savvy customers.

What is value-based pricing and how does it work?

Value-based pricing sets the price based on perceived customer value, not costs. To do this, you need to understand the specific benefit your offering delivers—e.g., time savings, revenue growth, or risk reduction. The price is typically a fraction of the customer value.