Pricing tells a story, shapes perception and can help determine how fast your business grows and lasts. It's important to recognise pricing as the strategic tool it is. It signals value, filters customers and creates context for everything else your business does.

Below, you'll find a detailed guide to core marketing price strategy examples, how they work and how to apply them.

What's in this article?

• What are pricing strategies in marketing?
  
• How does the cost-based pricing strategy work?
  
• How does the value-based pricing strategy work?
  
• How does the competition-based pricing strategy work?
  
• How does dynamic pricing work?
  
• What are psychological pricing tactics?
  
• How Stripe can help
  

What are pricing strategies in marketing?

Pricing is one of the clearest signals a business can send to the market. It affects how customers perceive a product, how competitors react, how quickly a business gains traction and how healthy a business's margins are.

A pricing strategy is a framework for making pricing decisions based on what's important to you: profitability, growth, differentiation, market positioning or some blend of priorities.

Most pricing strategies fall into one of three core categories:

• Cost-based: What does it cost us to make or deliver this product and how much margin do we want?
  
• Competition-based: What are others charging, and where should we fall relative to them?
  
• Value-based: What is this worth to our customer, and how can we capture a fair share of that value?
  

Each model focuses on a different reference point: your business's inputs, the market's behaviour or the customer's perception. The best strategy will depend on how commoditised the product is, how differentiated the offer is and how price-sensitive the target buyer is.

Once you've established a core pricing philosophy, you need to decide how to express it. Will you start high and lower the price over time (i.e. price skimming)? Launch low to build market share (e.g. penetration pricing)? Keep it flat and simple – or layer on bundles, tiers or usage-based models? Your pricing strategy tells your customers what kind of company you are: premium or accessible, stable or experimental, commoditised or differentiated.

‍Pricing is also iterative. The "right" price today might not hold in six months. Businesses frequently refine pricing based on product maturity, customer feedback, market changes or shifting unit economics. Sometimes the strategy shifts entirely, such as moving from flat monthly fees to usage-based or from à la carte pricing to bundles as the product suite expands.

Many businesses have tools to guide these changes.

Companies use:

• A/B testing to experiment with different price points or packages
  
• Conjoint analysis to understand how customers trade off features and price
  
• Behavioural data to spot when customers are churning due to perceived pricing issues
  
• Billing infrastructure that supports fast iteration and segmentation
  

How does the cost-based pricing strategy work?

Cost-based pricing starts with your business's inputs. You tally up what it takes to make or deliver the product (materials, labour, packaging, shipping), and then add a margin. It's a straightforward, internally focused way to set prices.

There are two main types of cost-based pricing.

Cost-plus pricing

With this model, you add a fixed percentage on top of your costs. A retailer might buy a product wholesale for £10 and apply a 50% markup, selling it for £15. That extra £5 covers operating costs and contributes to profit.

Large retailers often use cost-plus logic at scale. A store might buy a 2-pint bottle of milk for £1.00 and list it for £1.20, keeping the margin slim to stay competitive. Their low prices reflect aggressive cost control and modest, consistent markups that drive volume.

Break-even pricing

Break-even pricing is more strategic. With this model, you price at the minimum needed to cover your costs. You intentionally sell at cost (or close to it) to attract customers, drive volume or undercut competitors. You're not trying to profit from the sale itself, but from what it generates: future purchases, upsells and market entry.

Startups often use this approach when launching a new product or entering a competitive space. A direct-to-consumer (DTC) brand entering a crowded market might use break-even pricing to get attention, grow fast or capture customers who'd otherwise stick with legacy brands. It's not sustainable forever, but it can help build momentum.

Pros, cons and when to use it

Cost-based pricing is simple, stable and easy to explain. But it doesn't factor in customer willingness to pay or competitors' prices. You could end up underpricing a high-value product or overpricing one that's not differentiated.

It works best when:

• Costs are predictable
  
• Products are easy to compare
  
• Margins are tight and scale matters
  

It's less effective when customer perception or competitive positioning is the bigger driver of price.

How does the value-based pricing strategy work?

Value-based pricing involves pricing your products based on what the customer thinks they're worth, not on your costs or your competitors' pricing. The goal is to match price with perceived value and capture more of it. You're selling the result your business delivers and charging accordingly.

For example:

• A B2B software company helps customers save £100,000 a year in manual labour. Pricing its product at £20,000 annually makes sense, even if it only costs the company £5,000 to deliver – because the customer sees a 5x return on investment (ROI).
  
• A top-tier consulting firm might charge £500,000 for a project that helps a company generate £10 million in revenue. That price is based on impact (rather than billable hours).
  

Pros, cons and when to use it

‍Value-based pricing often allows you to charge higher prices than cost-based pricing. But it takes more work up front. You have to understand what your customers care about, how they measure success and what they're willing to pay for it. That means investing in customer research, running pricing experiments and building a narrative that helps justify the value. It also means delivering consistently. If you charge a premium, customers expect a premium experience. Otherwise, your price becomes a liability.

Value-based pricing works best when:

• What you're selling is clearly differentiated by quality, outcomes, convenience or brand
  
• The product is high-impact or outcome-driven
  
• Customers can clearly see the ROI
  

How does the competition-based pricing strategy work?

Competition-based pricing involves using your competitors' prices as a benchmark and then deciding where you want your business to sit in that landscape. You recognise that customers are constantly comparing and considering how your price positions your business relative to other options.

There are several ways businesses apply this model.

Price matching

Offer the same price as your direct competitor or the average price in your category to take pricing out of the decision. This keeps you in the set of options customers might be considering, especially for those who are looking for a reason not to switch.

This is common in commoditised industries where differentiation is minimal and price is the main lever. For example, two gas stations across the street from each other might shift prices to match price drops in either one.

Undercutting

Set your price slightly below the market leader to look like the better deal. The difference doesn't have to be dramatic; a 5%–10% gap can be enough to convince a buyer who's undecided.

For example, a new smartphone brand might price their flagship model at £899 to undercut another brand's price of £999. This might signal similar quality for a better deal, and customers doing side-by-side comparisons can see a reason to choose the new entrant.

Price leadership

If you're the dominant competitor, you set the bar. Others watch your pricing moves closely and adjust accordingly. This position can give you some control over market dynamics, but it also gives you a responsibility to signal wisely.

For example, a software as a service (SaaS) business that leads in its market can raise prices before anyone else if they have a user base that won't switch to an inferior product.

Pros, cons and when to use it

Competition-based pricing lets you strategically play off your customers' other options, but there are limits.

If you focus too much on competitors, you risk:

• Pricing based on someone else's economics, not yours
  
• Racing to the bottom in a price war you can't win
  
• Undervaluing a product that's actually superior or valued more highly
  

Savvy businesses often use competitor pricing as a reference point (i.e. the price range customers are expecting), but then layer in other strategies. A business might match the market price for its entry-level tier, then provide premium add-ons priced based on value. Or, it might undercut on one product to drive volume, while maintaining healthy margins elsewhere.

Competition-based pricing works best when:

• Customers have lots of options and limited brand loyalty
  
• Pricing is transparent and changes frequently
  
• Products are easy to compare (e.g. electronics, airlines)
  

How does dynamic pricing work?

Dynamic pricing means prices aren't fixed. They respond to real-time conditions such as demand, inventory, time or individual customer behaviour – and they change to reflect how much the product is worth to the customer at any given moment. That could mean raising the price during a surge in demand or lowering it to move excess inventory. It's not a new idea (airlines have done it for decades), but modern data infrastructure has made it more precise, more personalised and more common across industries.

Dynamic pricing works when your business has:

• Strong demand signals in real time
  
• Limited inventory
  
• The technology to adjust prices automatically
  
• A pricing-sensitive audience and a product with flexible perceived value
  

But dynamic pricing needs to be used carefully. If customers feel your business is price gouging or treating them unfairly, you risk losing long-term loyalty. Some platforms cap surge pricing or disclose triggers to avoid backlash.

Here are some industries that commonly use dynamic pricing.

Airlines and hotels

Prices go up as availability goes down or as booking windows tighten. A Tuesday morning flight might cost £200 a few weeks out, but £450 the day before. A hotel might have a lower rate on weekdays, then raise prices during the weekend.

These companies optimise every seat or room night based on real-time demand curves, booking trends and competitor pricing.

Ride-sharing platforms

Ride-sharing apps often adjust pricing in real time based on local supply and demand. When demand spikes (e.g. during a storm or a concert), prices increase to ration rides and pull more drivers into the area. Once demand subsides or more drivers come online, prices drop again.

Surge pricing is a market-balancing tool. Without it, supply and demand would stay out of sync – frustrating riders and drivers.

E-commerce and marketplaces

Online retailers change prices constantly using dynamic pricing algorithms. They monitor competitor prices, product availability and user behaviour to nudge prices up or down. If a product is moving fast, the price rises slightly. If it's stagnating, it might get discounted (even just briefly) to jump-start conversion.

These platforms forecast demand and adjust in real time to remain a default option for customers.

Personalised pricing

In some cases, prices change based on who's looking. A logged-in customer might see a loyalty discount. A high-value customer might be shown a premium offer with extras bundled in. A repeat browser might be offered a small price cut or time-sensitive coupon to trigger conversion.

Done well, this method can be seen as customised and relevant. But done poorly, it can appear manipulative. That's why many brands keep personalised pricing subtle or opt for segmentation over true one-to-one customisation.

Transparent dynamic pricing

Some industries (especially travel) are starting to show customers specific messages about pricing changes.

They might show notifications such as:

• "Only two rooms left at this rate."
  
• "Prices are higher due to local demand during this event."
  
• "You could save £40 by shifting your check-in date."
  

These signals can help customers feel like the price isn't arbitrary.

What are psychological pricing tactics?

Psychological pricing tactics focus on how the price is presented. Customers can interpret prices through emotion, bias and context, and psychological pricing takes these factors into account.

If used effectively, these tactics can remove friction from decision-making. They help the customer feel confident they're getting a fair or compelling deal. And they're everywhere: retail shelves, SaaS pricing pages, restaurant menus, flight bookings and more.

‍Here are some widely used techniques.

Charm pricing

This is one of the oldest pricing strategies, and it remains prevalent. A price ending in ".99" can have the appearance of being noticeably lower than the next round number (e.g. £49.99 instead of £50), even though the actual difference is negligible. It can create a perception of a deal, especially in lower-ticket purchases.

This tactic shows up everywhere from app stores to supermarket aisles.

Anchoring

Anchoring uses a high "starting" price to make the actual price look more reasonable by comparison. For example, a price tag might state, "was £150, now £90." Or a restaurant might include a £300 wine bottle on a menu to make the £120 option feel affordable.

Anchors frame the purchasing decision, so that customers are comparing the price to something else, rather than evaluating it on its own. That comparison can change how customers ultimately feel about the price.

Scarcity and urgency

Creating a sense of urgency can tap into customers' aversion to loss and fear of missing out. The product hasn't changed, but the timeline or inventory status can create pressure to act.

Some examples include:

• Countdown timers on e-commerce sites
  
• Phrases such as, "Only [X number] left at this price," on travel booking platforms
  
• Limited-time discounts that expire at midnight
  

These tactics can accelerate conversion. But when they're overused, they can lose credibility, as customers can spot fake urgency.

Prestige pricing

Sometimes, the goal is to make the price have the appearance of being premium. High prices can imply quality, exclusivity or status.

Luxury brands do this deliberately by:

• Avoiding odd cents (no ".99")
  
• Using round numbers
  
• Sometimes omitting currency symbols entirely
  

For example, a £1,100 cashmere sweater might signal exclusivity and status, whereas a £35 sweater might raise doubts about material quality or sourcing. In some cases, a lower price can make the product feel less desirable.

"Free" and value framing

"Free" is powerful, even when a product is not truly free. The perceived value of getting something extra can outweigh the value of a small discount.

For example:

• "Buy one, get one free" (BOGOF)
  
• "Free gift with purchase"
  
• Adding a free bonus item to a bundle
  

Even if the economics are identical to a 50% discount, framing it as "free" can seem more generous.

‍Psychological pricing can be a way to sharpen your offer and make your pricing resonate more clearly with the way customers consider their purchases. Many businesses layer these tactics on top of a broader pricing model. For example, a business might price based on value, match the market average and still show a crossed-out anchor price to boost conversions.

Use these tools transparently and in moderation. If customers feel they're being manipulated, trust can erode quickly. But if the framing is thoughtful and considerate, these tactics can help remove hesitation and speed up decision-making for customers.

How Stripe can help

Stripe Billing lets you bill and manage pricing the way that works for you, whether that's simple recurring billing, usage-based billing, sales-negotiated contracts or something else. Start accepting recurring payments globally in minutes – no code required – or build a custom integration using the application programming interface (API).

Stripe Billing can help you:

• Offer flexible pricing: Respond to user demand faster with flexible pricing models, including usage-based, tiered, flat-fee plus overage and more. Support for coupons, free trials, prorations and add-ons is built-in.
  
• Expand globally: Increase conversion by offering customers' preferred payment methods. Stripe supports 100+ local payment methods and 135+ currencies.
  
• Increase revenue and reduce churn: Improve revenue capture and reduce involuntary churn with Smart Retries and recovery workflow automations. Stripe recovery tools helped users recover over £6.5 billion in revenue in 2024.
  
• Boost efficiency: Use Stripe's modular tax, revenue reporting and data tools to consolidate multiple revenue systems into one. Easily integrate with third-party software.
  

Learn more about Stripe Billing or get started today.