About Product Pricing Strategy!

Interested in suggestions for a product pricing strategy? What procedures are followed at your company? is there a set way or strategy? Would you mind explaining step-by-step for clarity? By the way, I’m referring to pricing competitive analysis. Thanks!!!


Hey @MaireHamilton, a very interesting query/post/thread. Here’s my little knowledge I gained with experience over the years.

Product pricing strategy is a key aspect of a company’s marketing plan that involves determining the optimal price for a product to maximize revenue and profits. There are several pricing strategies that companies can adopt, including:

  1. Cost-plus pricing: This involves adding a markup to the cost of the product to determine the price.
  2. Value-based pricing: This involves setting the price based on the perceived value of the product to the customer.
  3. Penetration pricing: This involves setting a low initial price to quickly attract a large number of customers and gain market share.
  4. Premium pricing: This involves setting a high price for a product to reflect its quality and exclusivity.
  5. Psychological pricing: This involves using pricing techniques such as odd pricing or anchoring to influence a customer’s perception of the value of a product.

When determining a pricing strategy, companies should consider factors such as the target market, competition, production costs, and the value that the product provides to customers. I hope that helps.


Although it sounds extremely simple, I remember learning in business school that you should strive for a price that at least covers your marginal costs, with your customer’s willingness to pay determining the higher end of the range. In addition, you should consider pricing that is competitive and try to find the best combination of demand and profit margin. In order to further support your target market’s premium consumer perception, you should also connect pricing with your overall marketing strategy. Hope that was useful.


Yeah! I guess it’s more of competitive analysis I’m looking for! Can someone please elaborate or explain what competitive analysis is?


Sure. Putting it simply, in competitive analysis pricing, a company compares its prices to those of its competitors to determine the optimal price for its product. Here is a step-by-step approach to competitive analysis pricing:

  • Identify competitors: Identify the main competitors in the market that offer similar products to the one being considered.

  • Gather information: Collect information on the prices, product features, and target market of each competitor. This can be done through online research, market surveys, or direct contact with the competitor.

  • Analyze the information: Compare the prices and features of the competitors’ products to the company’s own product, and determine any pricing gaps or opportunities.

  • Consider the target market: Consider the target market and determine how price sensitive they are, and what factors influence their purchasing decisions.

  • Set the price: Based on the competitive analysis, set the price for the company’s product to remain competitive and maximize revenue and profits.

  • Monitor and adjust the price: Continuously monitor the market and competitors’ prices and adjust the company’s price as needed to remain competitive and respond to changes in the market.

It’s important to keep in mind that the results of a competitive analysis can vary depending on the market and industry, and that the optimal price for a product can change over time.


I don’t have a lot of experience in particular pricing strategies, but I can tell you (just from school background, econ/business/engineering/entrepreneurship type classes) that pricing is often a trial and error game. What data do you have to make your decision? If you have quantitative data on how consumers respond to something, then use that to form a foundational strategy. If you only have qualitative data, try to find a way to transfer that into something quantitative and start learning by experimentation. Startup mentality would say don’t start with low prices, even if you don’t have a complete product / only have a m.v.p.

Of course, specific decisions on how you do it really depends on the product/industry/consumer. Without more info this is the best tip I can give. Again, don’t have professional experience on this specifically, but this was off the cuff stuff I’ve learned from classes.


This has always been an iterative process and conversation with sales, in my experience. Sometimes highly sophisticated involving additional market research, competition analysis, and try and error. Other times very basic like “Hey, what can you sell this for.” It depends on the use cases you’re addressing, the initial cost of developing the product, and just keeping it up and running. Knowing your ICP’s willingness to pay as well as the size of your TAM is important because both will have a significant impact on price. If your TAM is little, you should probably charge more for it. You might need to charge less if your ICP is price sensitive.


Is there a resource you recommend to study market research and competitive analysis and all of the above that you just mentioned?


There are many resources available to study market research and competitive analysis, including books, online courses, and industry reports. Here are some recommendations:

  1. Books:
  • “Marketing Research: An Applied Orientation” by Naresh K. Malhotra
  • “Competitive Strategy: Techniques for Analyzing Industries and Competitors” by Michael E. Porter
  • “Pricing Strategy: Setting Price Levels, Managing Price Discounts & Establishing Price Structures” by Mark Stiving
  1. Online courses:
  • Coursera offers several courses on marketing research and pricing strategy, such as “Marketing Analytics” and “Pricing Strategy and Tactics.”
  • Udemy offers courses such as “Competitive Analysis and Market Research: A Complete Guide.”
  1. Industry reports:
  • The market research firm, Forrester, provides research and analysis on a range of industries and topics, including pricing strategy.
  • Gartner is another market research firm that provides insights and analysis on a range of industries, including technology and marketing.

In addition to these resources, attending industry conferences and networking with professionals in the field can also be helpful in gaining a deeper understanding of market research and competitive analysis.


Not exactly. I would start with thinking about your product like a house. How do you know how much a house is worth? It’s a factor of the neighborhood it’s in, rooms, finishings, etc. Start with the neighborhood, how much are homes selling for in that neighborhood? Do they have more rooms(features)? How refined are those rooms? Now ask yourself, who wants to buy this house? Are there a lot of interested buyer are there just a few? Are there a lot of similar houses? All of these same questions play a role in pricing your product till you have a refined idea.

Now you have a rough number in mind, try to go sell it! Did people say it was too much? Consider lowering the price. Did they buy it without thinking? Raise the price.


If you do surveys you can test different hypotheses you have around different price points and their ranges.

See van westendorp’s price sensitivity meter


Yes @JoelSchulman, Van Westendorp’s Price Sensitivity Meter (PSM) can be a useful tool in market research and price testing. PSM is a survey technique that measures customers’ perceptions of the price of a product and helps determine the price range that would be acceptable to them. The survey asks participants to indicate the price at which a product would be considered:

  1. Too cheap
  2. Cheap
  3. Expensive, but reasonable
  4. Too expensive

By analyzing the results of the survey, a company can determine the price range that would be acceptable to its target market and make informed decisions about its pricing strategy. PSM can be particularly useful for new products, where there is limited information about customer preferences, or for products that are being repriced.


There is no step by step that I am familiar with. I happen to have been through the process on a couple of products in the existing market, but without direct competition to the product itself. In such cases it becomes “what market can bear” exercise. If you have competing products you’ll end up having to justify your existence in the market :slight_smile:


There is no single set way to determine a product pricing strategy, as the optimal approach can vary depending on a number of factors. However, here is a general process that companies can follow to develop a product pricing strategy:

  1. Conduct market research: This involves analyzing the target market, competition, and customer needs and preferences to understand the pricing expectations for the product.
  2. Determine the cost structure: This involves calculating the cost of producing the product, including direct costs (such as raw materials and labor) and indirect costs (such as overhead and marketing expenses).
  3. Select a pricing strategy: Based on the market research and cost structure analysis, a company can choose a pricing strategy that aligns with its goals and objectives, such as cost-plus pricing, value-based pricing, or penetration pricing.
  4. Set the price: Based on the chosen pricing strategy, the company can determine the optimal price for the product.
  5. Monitor and adjust the price: The company should continually monitor sales and market conditions, and adjust the price as needed to remain competitive and maximize revenue and profits.

It’s important to note that the process of developing a product pricing strategy can be iterative, and companies may need to adjust their approach as market conditions change or new information becomes available.


This veers a little bit off topic, perhaps. I think it’s important to start with packaging. Packaging and pricing are always done in tandem. How many price tiers will there be, and why? Volume-based pricing is convenient but may restrict your business’s expansion. If you can package the multiple product tiers to distinct market segments and relate them to their tasks to be completed, combining feature tier based/product staircase based pricing is good.

Real-world pricing is mostly a test-and-learn exercise. Try not to dramatically undercut competitors’ or the market’s equivalent prices when setting your price. Depending on your sector, low costs can give the impression that you are “cheap” and unreliable.

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Read stuff from Patrick McKenzie - https://www.kalzumeus.com OR https://twitter.com/patio11

Patrick McKenzie, also known as patio11, is a well-known software developer, entrepreneur, and writer who provides valuable insights on pricing strategy, business development, and technology. His blog and Twitter account are great resources for learning about pricing and business development.

His perspective on pricing is often focused on the importance of experimentation and data-driven decision making, and he provides practical advice and real-world examples that can be applied to a variety of business scenarios. He also advocates for charging a fair price for your products and services, and using metrics and data to inform your pricing decisions.

If you’re interested in learning more about pricing strategy and business development, I would definitely recommend reading his blog and following his Twitter account. He provides valuable insights and practical advice that can help you make more informed decisions about pricing and grow your business.

His perspective on pricing is the best I’ve found and put into practice, and it’s helped me in dozens of critical meetings.

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