Pricing doesn’t exist in a vacuum. Customers are comparing your prices to everything else on the market, often in real time, and your competitors aren’t standing still. With competitive pricing, you’re asking yourself what the smartest move is given the state of your market. It’s about knowing where you stand, what you’re trying to do, and how price supports or detracts from that goal. Below is a guide to how to use your competitors’ pricing strategies to build, implement, and improve on a pricing strategy of your own.

What’s in this article?

• What is a competitive pricing strategy?
  
• How do you analyze your competitors’ pricing strategies?
  
• How do you develop a competitive pricing strategy?
  
• What are the main types of competitive pricing strategies?
  
• How can you effectively implement competitive pricing?
  
• How Stripe Billing can help
  

What is a competitive pricing strategy?

A competitive pricing strategy involves setting your prices based on what others are charging. You actively position yourself against the rates your customers are already seeing: either below, at, or above your competitors’ prices, depending on the signal you want to send.

You might undercut your competitors to capture market share, match their prices to neutralize cost as a decisive factor, or price higher to assert your product’s quality. The idea is that your pricing is informed by the “going rate,” then adjusted based on where your product is situated in the market and what story you’re trying to tell.

This approach works best when the market is saturated and customers have options. With 68% of customers reporting that price is the most important factor when they buy products online, you want to set your price where it can win. If you’re selling budget-friendly headphones, gym memberships, software-as-a-service (SaaS) subscriptions, or delivery services, you’re in a price-sensitive space where competitive pricing can be a major advantage.

How do you analyze your competitors’ pricing strategies?

Start by identifying your competitors. List the direct ones that sell similar products to the same audience, as well as adjacent options your customers might also consider. A boutique coffee shop competes with Starbucks, but it also competes with home espresso machines and grocery store cold brew.

Once you’ve got your list, collect real pricing data. Check websites, storefronts, and marketplaces—anywhere customers would look to compare prices. Look at the full picture: shipping fees, add-ons, discounts, and what’s included in each plan or package. What’s your competitor’s pricing structure? Is it one-time, subscription, freemium, or usage-based? How many tiers do they offer and what features are included in each one? Track their promotions and discounting habits, too—are their prices stable or do they run constant sales?

From there, try to reverse engineer the strategy. Are competitors positioning themselves as the premium choice? Are they bundling products to make comparisons more difficult? Try to understand the pricing logic behind the numbers, and look at how they justify prices. If they charge more, are they justifying that with superior materials, better support, faster delivery, or a strong brand? If they charge less, is it because of fewer features, lower-touch service, or just scale advantages?

Talk to your customers. What do they say about your competitors’ pricing? Are they switching to save money or staying put because “the other one’s not worth it”? Your own support tickets and sales calls are full of pricing intel that’s waiting to be used.

Competitive pricing demands recurring research. Competitors are constantly changing their strategies, and your pricing needs to keep up. The goal of competitive pricing is to know where you stand and what kind of pricing makes the most sense for you in context.

How do you develop a competitive pricing strategy?

Your pricing shapes the perception of your product. You need to set a price that tells the right story:

• If you’re premium, does the price reflect that?
  
• If you’re budget friendly, are you avoiding the “cheap means low quality” trap?
  
• Are you pushing margins where you can afford to and pulling back where you can’t?
  

Here’s how to develop a pricing strategy that positions your product the right way.

Start with the goal

A good pricing strategy begins with intention. Before you run numbers or benchmark competitors, lock in what you’re actually trying to achieve:

• If you’re launching something new, you might need to underprice to gain traction.
  
• If you want to maximize margins, you’ll need to justify a higher price with clear value.
  
• If you want to avoid churn, you might choose to match competitors’ prices.
  

Ensure the pricing lever you’re pulling matches your goals.

Know your price range

Calculate your minimum viable price. Below that number, you’re losing money or shrinking your margin past the point of usefulness. Then, calculate your ceiling or what your customers would realistically pay based on perceived value.

The range in between is your pricing sandbox—this is where you build your model.

Choose your pricing position

If you’re priced below the competition, you’re betting on scale. If you’re at parity, you’re removing price as an obstacle and competing on features, service, or experience. If you’re more expensive than the competition, you’re selling on value, differentiation, or the brand.

Whatever strategy you choose, it should align with how you present your product in the market. Misalignment between price and positioning can undercut you faster than any competitor.

Build tiers that make sense

If you offer tiered pricing, your entry-level plan should be strong enough to drive conversion, but not so generous that no one upgrades. Your middle tier should provide most of the features and margin, while the premium tier should feel aspirational and justify its higher price.

Watch your feature gating and bundling logic. If people are downgrading because the base tier is “too good,” you’ve probably mispriced.

Plan for your competitors’ response

Before you implement your strategy, ask yourself the following:

• What are your competitors likely to do if you undercut them?
  
• What will you do if they match or beat your price?
  
• Are you ready to defend a higher price if a cheaper provider shows up?
  

Outline your next steps ahead of time to avoid being reactive under pressure.

Run pricing tests before you commit

Do A/B tests on your pricing pages or checkout flows, and consider doing a soft launch in a smaller market or channel. Compare your business’s conversion rate, churn, and customer lifetime value (LTV) across different offers. The best price isn’t always the one you pick first. Assure that the real-world response validates your strategy before you commit at scale.

What are the main types of competitive pricing strategies?

Businesses choose one of three basic competitive pricing positions in the market: below, at, or above their peers. Each path tells a different story about your product, and each comes with its own set of trade-offs. Their choice shapes customers’ perception, affects margins, and invites (or avoids) a response from other companies. Here’s a closer look at each of these strategies.

Pricing below competitors

This is the go-to move when you’re trying to break in fast, undercut incumbents, or win with price-sensitive buyers. It can work well if you have lower costs, less overhead, or need volume more than margin early on.

Pricing lower than your competitors can take several forms:

• Penetration pricing: You launch at a low price to grab attention or market share quickly. This is usually a short-term tactic to gain traction before you raise prices or expand the offer.
  
• Promotional pricing: You use temporary discounts to beat the competition during key moments such as seasonal sales, launches, and peaks in your customer acquisition cost.
  
• Loss leaders: You price a product below cost to attract customers in the hope of making it up with repeat purchases, add-ons, or upgrades.
  
• Everyday low pricing: You’re betting on long-term, consistently low prices instead of constant promotions. You stay cheaper than most but win through scale and repeat business.
  

This strategy hinges on making your product a worthwhile switch. You still have to deliver value, or customers might assume there’s a catch.

Pricing above competitors

Charging more is effective only when you’re giving people a reason to pay more—but the higher price needs to feel earned.

Here’s what that might involve:

• Premium or prestige pricing: You’re signaling quality, exclusivity, or expertise and charging accordingly.
  
• Price skimming: You start with a high price for something new or scarce and gradually lower it over time. Think of this as monetizing early adopters before expanding to a wider market.
  
• Captive pricing: You keep the up-front cost of the main product relatively reasonable but charge more for necessary add-ons (e.g., affordable printers with more expensive ink cartridges).
  

For this tactic to be successful, you need a clear answer to the question, “Why is this worth more?”

Pricing at parity

Matching your competitors’ prices can help you compete on features, service, values, delivery speed, and ease of use.

A few tactics work well here:

• Straight parity: You charge roughly the same as the competition and differentiate with the offer itself (e.g., better onboarding, friendlier terms, stronger outcomes).
  
• Price matching: You tell customers you’ll meet any lower price they find elsewhere, which can keep them from choosing another company while letting you maintain your standard rate most of the time.
  
• Value-loaded parity: You match the price but include more value, such as free setup, bonus features, and better support. This makes comparison harder and often more favorable to you.
  

Parity can be a great default strategy, especially when customers are used to a specific price range or expect standardization. Just assure that if your pricing doesn’t set you apart, your offer does.

Many businesses mix and match these strategies across product lines or customer segments. You might undercut competitors with your entry-level product to gain market share, price your core product at parity to stay in the conversation, and price your premium product well above competitors’ because you know it delivers more.

How can you effectively implement competitive pricing?

A pricing strategy isn’t useful until it exists in the real world: on your website, in your sales conversations, or embedded in your systems. Effective implementation ensures the right number sticks, scales, and holds up under pressure. Here’s how to get it right.

Sync with your team

Before you make prices public, everyone inside the company needs to understand the logic behind them. Your sales team should know how you compare to competitors, when to negotiate, and when to hold firm. Support needs to know what’s changed, and marketing needs to understand how to position your product without sounding defensive or vague.

Codify the logic behind your pricing decisions into guidelines, cheat sheets, and frequently asked questions (FAQs). The more internal clarity you build in advance, the fewer customer-facing issues you’ll encounter later.

Use infrastructure that can keep up

Manually changing your prices doesn’t scale. You might also need infrastructure that can support tracking multiple competitors or offering variable pricing across regions, channels, or segments.

In ecommerce, that might include real-time price monitoring tools or automated repricing systems. In SaaS, it could mean flexible billing platforms like Stripe Billing, which lets you update pricing models, change plans, or test variations without a heavy engineering lift. The system you use to implement pricing should make it easier to experiment, adjust, and grow.

Align your pricing with your positioning

Your pricing should feel intentional. If your product is $10 cheaper than the next best alternative but the difference isn’t visible or easy to understand, customers might just assume you’re missing something. If you’re charging more but can’t explain why, you’re giving people a reason to keep shopping around.

This is where marketing and pricing intersect. Make your value proposition as visible as your price. If you’re matching competitor prices but providing better onboarding, clearer contracts, or faster support, say so. Frame any temporary discounts (e.g., limited-time, seasonal promo) with care so they don’t negatively shape customers’ expectations.

Monitor the data that matters

Once your pricing strategy is live, implement a feedback loop. Track more than just your total sales: watch conversion rates, churn, average order value, upsell rates, and margins. If you made changes to compete more aggressively, did you actually bring in new customers? If you raised prices to reflect added value, are customers buying anyway?

Watch competitors’ moves, too. If their pricing changes, your strategy might need to as well.

Set boundaries in advance

Decide up front how far you’ll be willing to move on pricing. Set floors for acceptable margins, limit how long promotions run, and define where you’ll match price and where you’ll hold firm. Having these parameters prepared helps you make better calls when competitors make moves.

Competitive pricing is about creating a structure that lets you respond to the market without losing control of your margins, messaging, or brand. When it’s done strategically, it can put your business on firm footing.

How Stripe Billing can help

Stripe Billing allows you to bill and manage pricing however you want, from simple recurring billing to usage-based billing and sales-negotiated contracts. You can start accepting payments globally in minutes or build a custom integration using the application programming interface (API).

Stripe Billing can help your business do the following:

• Offer flexible pricing: Respond to demand faster 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.
  
• Expand globally: Increase conversion 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 more than $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.