Pricing is a powerful but often underused lever in business. Many teams copy a competitor, add a margin, or lock in a price early and never touch it again. But pricing plays an important role in market positioning, customer perception, and revenue, and it’s constantly changing. Below, we’ll explain how to build, test, and grow a pricing strategy that reflects the business you’re building.

What’s in this article?

• What is a pricing strategy in marketing?
  
• How do you build a pricing strategy for your business?
  
• What are the main product pricing strategies?
  
• How do pricing and marketing work together?
  
• How do you measure and improve your pricing strategy?
  
• How Stripe can help with pricing
  

What is a pricing strategy in marketing?

A pricing strategy is the plan you use to set prices that support your business goal, whether that’s maximizing revenue, acquiring new customers, or reinforcing the way customers view your brand.

Even a small pricing change can have an outsize effect on your profit. Set the right price and you can expand your reach, move faster, and stay aligned with what your customers are willing to pay. Set the wrong one and even great products can face difficulties. A 2021 report shows that pricing or cost issues are a top reason startups fail.

A pricing strategy helps you discover where your value, margin, and customers’ expectations meet.

How do you build a pricing strategy for your business?

Pricing signals to your customers what kind of product you’re selling, whom it’s for, and why it matters. Here are the questions you need to ask to build the right strategy for your business.

What are your goals?

Building a pricing strategy starts with understanding your goals.

Are you trying to:

• Grow fast and get your product into as many hands as possible?

• Make each sale count because you don’t have a high-volume business?

• Edge out a competitor?

• Show that your product belongs in a different category?

Price sends a message and you want that message to match what you’re building.

What are your costs?

How much does it cost you to make, support, deliver, and maintain your product? Know your floor—the absolute lowest you can charge without operating at a loss.

What are competitors charging?

What are people paying for similar products? What are your closest substitutes priced at and how are they positioned? Are they priced low because they’re aiming for scale or priced high because they’re premium?

What is your product worth to your customer?

What are customers trying to accomplish by buying your products? How painful is the problem? How much better is your version than what they’ve got now? The more meaningful your value is to them, the more room you have to charge a price that reflects that value.

How do you want people to pay?

Do you want to:

• Charge a flat rate?

• Break things into tiers?

• Charge monthly, annually, per seat, based on usage, or per project?

• Bundle things together?

A good pricing structure helps your loyal customers say yes more easily without scaring off the ones who are less sure.

How do these prices work in the real world?

You don’t need a giant sample size or a complicated model to learn something useful.

Try:

• A different anchor price

• A premium tier

• A small discount for up-front payment

• A higher-priced option that makes the middle tier look more reasonable

Take note of the customer response and use this information to make decisions. Are customers buying less of your product? Are they buying more?

Are these prices still working now?

What worked a year ago might not now. Costs and customer expectations shift, and you might expand into new markets, offer new features, and accept new kinds of buyers. Even if you find something that feels solid, stay curious and keep checking in. The best pricing strategies are the ones that adapt.

Pricing reflects what your business is about, what kind of customers you want to attract, and what kind of business you want to run. The better you get at asking the right questions, the more control you have over the end result.

What are the main product pricing strategies?

There are some tried-and-true product pricing strategies that show up across industries, each with its own logic and trade-offs. Businesses typically end up combining a few of these strategies over time and adjusting as they go.

Cost-plus pricing

You add up everything it takes to make the product (labor, materials, and overhead) and then add a margin. It’s simple, predictable, and works well if your costs are stable and you don’t need to think too much about demand. But it’s also disconnected from what customers are willing to pay so you could end up overpricing yourself out of the market or underpricing and missing out on revenue.

Value-based pricing

You figure out what your product is worth to the customer. If you’re solving a painful problem or driving a clear result (especially in B2B transactions), this gives you room to charge well above cost. It takes more research and you need a sharp understanding of your customer’s priorities, but it usually leads to stronger margins.

Competitor-based pricing

You match your price to what similar products cost in the market. You can price a little below to undercut them, match to stay in the mix, or go above if you’re providing something clearly better. This strategy works best in crowded categories where customers are already trained on what products “should” cost. Competitor-based pricing keeps you in the conversation, but it can turn you into a reactive business if you’re always adjusting based on what another business is doing.

Penetration pricing

You start with a low price to attract customers quickly, maybe even below what you’d consider sustainable, then raise prices later once you’ve built trust or scaled up. This can help you enter mature markets or shake up entrenched ones, but you need a clear path to profitability. And when it’s time to raise prices, know that some customers will probably leave.

Price skimming

You start high and target early adopters who will pay more to be first in line, then gradually lower the price to reach broader segments. This can work well for new tech, limited releases, or anything that’s highly anticipated or scarce. If your product is genuinely new and valuable, you can maximize early revenue and recoup research and development costs faster. But the strategy works only if there’s real differentiation.

Dynamic pricing

You adjust prices in real time based on demand, timing, or customer behavior. Think airline tickets, hotel rooms, and rideshare surge pricing. This is flexible and driven by data. It can boost revenue, but it requires significant infrastructure and can backfire if customers feel like they’re being manipulated.

With each strategy, you should know why you’re choosing it, what trade-offs you’re accepting, and how it fits into the bigger picture of your business.

How do pricing and marketing work together?

Pricing is marketing. It tells people what kind of product you’re selling, whom it’s for, and how much they should care.

When done right, pricing and marketing reinforce each other. They shape how people see you, how they compare you to others, and whether they decide to act. Here’s how that works.

Brand story

If you’re charging a premium, your product needs to look and feel like a premium product. Your branding, copy, visual identity, and customer experience all need to match the price point. If you’re selling on affordability, everything from your positioning to your packaging should reflect that value-first mindset.

Customer conversion

Good marketing can generate leads, clicks, and hype. But pricing is often the final filter between attention and conversion. If people get to the checkout page and flinch, something’s not working. Maybe the price is too high, the structure is confusing, the tiers don’t make sense, or the value hasn’t been made clear. If customers abandon their carts at the final step, that could point to a wider communication problem.

Marketing budget

If your margin is strong, you can afford to invest more in paid acquisition, promotions, and marketing experiments. If it’s razor-thin, your marketing must accomplish more with less. Either way, pricing and marketing are linked at the budget level.

A higher price might lower your conversion rate but give you more room to spend per lead. A lower price might lead to higher volume but leave less available to pay for the traffic. That trade-off is core to every marketing decision, whether you’re running ads, hiring a sales team, or launching a referral program.

Customer segmentation

Businesses often have more than one kind of buyer and you can’t serve all of them with the same messaging and price. Segmented pricing (e.g., student plans, enterprise tiers, volume discounts) works only if marketing knows who those segments are, where to find them, and how to pitch them. If marketing is reaching totally different audiences, pricing needs to offer each one a path that makes sense.

This is where freemium models, pricing tiers, and add-ons come into play. Marketing can attract a wide range of users, and pricing can help sort them based on what they need and what they’re willing to pay.

Moving with the market

If competitors raise prices or shift their models, that impacts how people perceive your offer. If customer expectations change, your old price might feel too high or too low. Marketing tends to feel those changes first, but pricing is often what needs to adjust.

Sometimes that’s a small shift, such as repackaging tiers to match how people actually use the product. Sometimes it’s a full reset, such as raising prices to reflect improved quality or demand. Pricing and marketing both need to stay responsive, or they risk falling out of sync with your market.

How do you measure and improve your pricing strategy?

Pricing is a moving target—something you test, watch, and recalibrate as your product develops, your costs shift, and your customers change.

Here’s how to evaluate whether your pricing is working and how to improve it without starting from scratch.

Watch customer behavior

Customer feedback is helpful, but behavior tells the real story. If your conversion rate falls sharply after a pricing change or no one touches your top pricing tier, that’s useful information. If people consistently upgrade before their trials end or opt in to an annual plan over a monthly one, that’s useful to know too.

Your job is to watch the patterns:

• Are customers drawn to the plan you expected?

• Is your best tier the one most people buy or the one everyone skips?

• Are price-sensitive users leaving faster than high-value ones?

• Is a feature you thought was niche actually driving most conversions?

All of that information is data that can help you understand what’s working and what’s not.

Track certain metrics

Pick a few core metrics and track them over time.

Start with:

• Revenue and margin per customer

• Conversion rate from lead to paid

• Churn rate, especially around pricing events

• Customer lifetime value

• Upgrade or downgrade behavior between plans or tiers

If you’re testing a pricing change, compare these metrics before and after the change. Did the new price raise revenue but hurt retention? Did it improve average order value without affecting acquisition? Pricing always comes with trade-offs. The goal is to make those trade-offs visible so you can make smarter decisions next time.

Assess price sensitivity

How much do your customers care about the number? Will a 10% increase cause a mass exodus or will most people barely blink? This is where price elasticity comes in: how much demand shifts as price changes.

You can model this by using historical data (e.g., what happened when you raised prices last year) or by running small, targeted tests, such as A/B testing with prices on your site, regional rollouts, limited-time promos, and trials for a new tier.

If demand holds steady through a price bump, you have room to raise the price. If it drops fast, you’ve hit a ceiling. Either way, it’s important information to have.

Monitor competitors

Pricing doesn’t exist in a vacuum. If a competitor lowers prices, launches a freemium version, or switches to usage-based billing, your pricing suddenly looks different, even if you haven’t touched it. Regularly scan the market: what’s changed in your category? What’s changed for your customers? What’s changed in your own costs or the value you’re delivering?

If your product has improved but your pricing hasn’t moved in two years, you’re probably undercharging. If demand is cooling off and churn is creeping up, pricing structure might be a pressure point.

Run small, fast experiments

Don’t overhaul your entire pricing model every time something feels off. Run a test. Try a new anchor tier. Bundle differently. Launch a limited discount. Shift messaging regarding a price point and see how people respond.

The businesses that do pricing well are the ones that pay attention, ask the right questions, and aren’t afraid to keep improving.

How Stripe can help with pricing

Stripe Billing lets you bill and manage pricing the way that works for you, from simple recurring billing to usage-based billing and sales-negotiated contracts. 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 do the following:

• Offer flexible pricing: Respond to user demand with flexible pricing models, including usage-based, tiered, flat-fee plus overage, and more. There’s built-in support for coupons, free trials, proration, and add-ons.
  
• Roll out changes fast: Do A/B tests on different price points, launch a new plan in a specific market, and create limited-time discounts or time-bound upgrades, with minimal code.
  
• Expand globally: Increase conversions by offering customers’ preferred payment methods. Stripe supports more than 100 local payment methods and more than 135 currencies.
  
• Increase revenue and reduce churn: Improve revenue capture and reduce involuntary churn with Smart Retries and recovery workflow automations. Stripe’s 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.
  
• Scale up: Grow your business without switching providers, whether that means doing enterprise invoicing or supporting usage-based pricing at scale. Stripe supports businesses of all sizes.
  

Learn more about Stripe Billing, or get started today.