When you’re selling in a crowded market, one of the most useful things to know is the price customers expect to pay. That’s where market pricing comes in: it’s a sharp tool that helps you stay relevant without racing to the bottom or greatly decreasing your margin. Below, we’ll explore how the pricing market works and how to work with it.

What’s in this article?

• What is market pricing and how does it work?
  
• How do you use the market pricing method?
  
• What factors influence market pricing?
  
• How does market pricing vary by industry?
  
• What challenges do businesses face with market pricing?
  
• How Stripe can help with market pricing
  

What is market pricing and how does it work?

Market pricing is the practice of setting your price based on what others are charging for similar products or services. Given that 83% of customers compare prices while shopping, pricing your products or services outside the norm can scare people away. If most products like yours are selling for $100, for example, pricing yours at $300 will probably lose you customers. But if you price it at $40, people might wonder what’s wrong with it. Market pricing helps you avoid both extremes by matching your price to what customers already expect to pay.

Businesses typically pick one of three positions:

• At-market pricing: You match competitors on price and compete on features, brand, and service.

• Below-market pricing: You set a lower price to attract price-sensitive customers or break into a crowded space.

• Above-market pricing: You set a higher price, offering something clearly better, more premium, or differentiated.

Market pricing works best when your product isn’t completely one of a kind. If what you sell is new or doesn’t have many substitutes, you’ll need to use other pricing tactics. But when you’re in a space where customers can easily compare products, market pricing helps keep you competitive.

How do you use the market pricing method?

First, you need to know how other businesses are pricing their products. Research competitors so you can make informed decisions about where your price should be and why.

Here’s how to do it step by step.

Gather competitive pricing data

Consider pricing benchmarks, customer behavior patterns, sales trends, and maybe even external factors such as supply chain shifts and economic indicators. For physical products, that might mean scraping websites or checking retail shelves. For services or B2B products, that might mean reviewing quotes, price lists, or published contracts. Note which prices are high, low, or typical. If most competitors cluster between $80–$100 and one is at $60, try to find out why. Is that an intentional low-price strategy or is that business running a short-term promotion? The goal is to understand the shape of the market.

Compare what you offer

Once you have the pricing spread, compare your product against it. Are you offering something better or missing something that others include? That context will help you decide whether you belong at the high end, low end, or center. Be honest about how your product stacks up.

Choose your positioning

Are you going above the market to signal quality, pricing below it to win on cost, or sitting right in the middle to keep your price neutral and let the product convert customers? Your choice will depend on your sales and goal, whether that’s growth, margin, market share, or brand positioning.

Check against your margins

Remember your own business needs. You still have to cover costs and make a profit. If the average price in your category won’t support your margins, you’ll either need to find efficiencies or reposition entirely.

Run experiments

Sometimes the best way to find the price is to test it. Do A/B tests on your site for pricing. Offer different packages to different cohorts. Monitor conversion, retention, and margin. Market data can come from how your own customers respond in real time, too.

Keep revisiting

Competitors drop prices, demand shifts, and new players enter the space. Check the market on a cadence (e.g., monthly, quarterly) and adjust, as needed. This matters most in fast-moving categories, but even slow-moving ones can change over time.

Complement market pricing with other pricing tactics

Many businesses use market pricing as a reality check alongside other strategies. Cost-plus pricing sets the floor, value-based pricing sets the ceiling, and market pricing keeps you somewhere in the middle. In fast-moving markets such as retail, travel, and ecommerce, dynamic pricing is an important lever. There are tools that can help you track your competitors, sales velocity, times of day sales are occurring, and even local events. Prices change in real time to stay competitive or maximize margin. Even lightweight adjustments—made weekly, seasonally, or in response to stock levels—can give you an edge.

What factors influence market pricing?

Market pricing is shaped by a mix of market forces, customer behavior, and your own internal economics. Here are the factors to consider when you set your price.

Demand and saturation

If demand is high and supply is tight, prices rise. If the market has many similar products, prices fall. The nuance is in the timing. New technology can inflate prices temporarily, while oversaturation can collapse them. If your product is in a crowded category, expect to price close to the market average—or justify why you aren’t.

Price sensitivity

How much do your customers care about price? If small changes swing their decisions, you’re in a high-sensitivity market and will likely need to stick close to the average or lower. If customers care more about quality, service, or speed, you might have room to go higher. Price sensitivity varies by audience, meaning the same product might need different pricing tactics across segments.

Competitors’ pricing behavior

If a competitor drops their price, do you also drop yours, hold, or differentiate? That depends on your strategy and whether you think they’ve made a smart move or a miscalculation. Market pricing is about knowing your competitors and using their prices as data points.

Brand perception

Customers read prices as signals. A low price can make people think your product is mediocre, while a high price can suggest quality or arrogance, depending on how it’s framed. If your brand leans towards luxury, a very low price can backfire. If you’re known for accessibility, premium pricing can look inappropriate.

Cost structure

Your internal costs still matter. If the market price won’t cover your margin, you’ll likely have to sacrifice your cost base, your product scope, or your market positioning. Larger businesses often have an edge here. They can afford to match market prices and still profit. Smaller businesses need to be more precise: they must price competitively where it counts and make up margin elsewhere.

Market pricing works best when you treat it like an input. It tells you what customers see, not exactly what you should do.

How does market pricing vary by industry?

In some industries, the market price moves fast and transparently. In others, it’s slow, opaque, or driven by entirely different forces. How you apply market pricing depends on what you sell and to whom you are selling.

Retail and consumer goods

In retail, prices are visible and comparison is easy. Everyone’s watching everyone. Competitors match prices within cents. In ecommerce, prices might update hourly, with dynamic pricing tools reacting to stock levels, search volume, or competitor moves. Discounts and sales also skew perceptions: customers often treat the sale price as the real price. Staying competitive here often means tracking others’ prices and reacting constantly.

Travel, hospitality, and marketplaces

Airlines, hotels, and rideshare platforms all use real-time inputs such as demand, time of day, and competitor capacity to change prices instantly. There’s rarely a “standard” market price. If you’re in one of these markets, you need dynamic pricing tools and a tolerance for volatility.

Manufacturing and industrial goods

Here, market pricing often coexists with cost-plus pricing. Commodities and components have reference prices that are shaped by supply chains, global markets, and contracts. Many products are bought in bulk or negotiated case by case so there’s less flexibility in pricing. That said, market pricing still matters. If everyone else is selling ball bearings for $0.80, you’d better have a clear reason to charge $1.10.

Software and software-as-a-service (SaaS)

SaaS pricing is less transparent but still shaped by market norms. Per-user monthly pricing dominates, but pricing gets complex because products aren’t identical—due to tiers, feature gating, and usage-based models. Newer entrants undercut incumbents to gain share, so they often use market pricing. But established businesses rely on brand and feature depth to justify premiums, so they often use value-based pricing.

Professional services and agencies

In consulting, design, or development work, prices vary widely based on perceived expertise, specialization, and relationship. You can’t always “see” the market price. Instead, you infer it from requests for proposals (RFPs), past deals, and what clients are willing to pay. Firms need to know what the going rate is (i.e., what’s average, what’s cheap, and what’s expensive) and use that to bracket their own pricing.

Highly regulated or niche industries

Utilities, pharma, insurance, and defense often have price floors, ceilings, or regulatory constraints that override normal market logic. However, once competition increases (e.g., for generic drugs), a market price appears fast. In niche B2B markets with only a few players, pricing can be sticky or artificially high until a new entrant forces recalibration.

Fintech and payments

This is one of the few spaces where pricing has almost fully converged. Most payments platforms charge transaction fees within a tight, predictable range. It’s what the market expects, and deviating too far can cause customer hesitation. Here, price doesn’t usually win deals: product quality, integrations, and reliability do.

Some industries require constant pricing updates. Others need pricing that signals brand, trust, or specialization. But in every case, there’s a prevailing sense of what the market will tolerate. The goal is to position yourself intentionally within existing constraints and norms.

What challenges do businesses face with market pricing?

Market pricing sounds straightforward: you check what others are charging and price accordingly. But in practice, it’s easy to make mistakes. The biggest risks come from reacting without context, copying the wrong signals, or trapping yourself with your pricing.

Here’s a closer look at common issues.

Losing sight of the customer

Market pricing orients you toward competitors, not customers. That’s helpful when you need guidance, but risky if it becomes your only consideration. You might match prices that don’t make sense for your audience or ignore what they’d actually be willing to pay.

Racing to the bottom

Once one business lowers its price, the others feel pressure to follow. Before long, no one’s making a profit. This can happen fast in saturated markets, especially when businesses can’t afford to differentiate. The more you rely on market pricing alone, the harder it is to avoid being dragged into price wars.

Assuming competitors know what they’re doing

Just because a competitor charges a certain price doesn’t mean it’s working for them. Maybe they’re running a promotion, decreasing margin to gain share, or they’ve simply mispriced. If you copy them without understanding the context, you could repeat their mistakes or miss opportunities they didn’t see.

Struggling to find the “right” number

Sometimes the market doesn’t offer a clear signal. You might see a wide pricing spread and no obvious benchmark. You might be launching a new product or service with no direct competitors. Or the data you have might be outdated. Even with good information, using it to find a specific price can feel more like an art than a science.

Undercutting your own value

Low prices can worsen customers’ perceptions. If your price is way below the market price, people might assume your product is of lower quality, even when it’s not. But if you price too high without justifying your move, it can erode confidence just as quickly.

Staying up-to-date

Markets shift, competitors revise prices, and customer behavior changes. To use market pricing effectively, you need ongoing data, as well as someone to analyze it and know when to act. That’s not always easy, particularly for smaller teams without dedicated pricing operations.

Avoiding legal and ethical pressure points

In some industries, matching the market price can raise warning signs, especially if prices are unusually uniform. Meanwhile, pricing aggressively low to gain share can look predatory. In times of crisis or scarcity, simply “following the market” can lead to accusations of price gouging, even if that wasn’t the intent.

If you follow the market carelessly, you can end up undercutting your value, relying on bad data, or playing someone else’s pricing game. The smart move is to treat market pricing as one input among many, always filtered through strategy, brand, and customer reality.

How Stripe can help with market pricing

Stripe Billing lets you bill and manage pricing however you want—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:

• Offer flexible pricing: Respond to user demand faster with flexible pricing models, including usage-based, tiered, flat-fee plus overage, and more. It has built-in support for coupons, free trials, proration, and add-ons.
  
• 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 minimize churn: Improve revenue capture and minimize 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 management tools to consolidate multiple revenue systems into one. You can integrate it with third-party software easily.
  

Learn more about Stripe Billing, or get started today.