The 7 Best Pricing Strategies Used in Small Businesses

Pricing your product or service is one of the most important decisions you will have to make as a small business owner. If you do it right, you will be able to maximize sales while maintaining steady revenue levels. But if you get it wrong, you will have to struggle to make profits or expand your business.

So, how do you find the right pricing strategy for your business? It is all about understanding your customers’ needs and how much they are willing to pay for your product or service. You will also need to consider market conditions, competitor activity, trading margins, and input costs, among other factors.

Best Pricing Strategy vs Poor Pricing Strategy:

The best pricing strategy

  • depicts the value
  • Convince your customers to buy
  • It gives your customers confidence in your product

Weak pricing strategy

  • Do not accurately portray the value of your product
  • It makes customers feel unsure about purchasing
  • Targeting the wrong customers

To help you make the best pricing decisions for your business, here are seven key strategies to keep in mind:

1. Value-Based Pricing:

This is a common strategy for SaaS companies, as it takes into account customers’ perceptions of the value of a product or service. If you offer unique or high-value features, you can use value-based pricing to set prices based on what customers think your product is worth.

2. Competitive prices:

Also known as competition or competition-based pricing, this strategy sets prices based on what competing firms charge for similar goods. This is a great strategy for newly established companies looking to gain a foothold in the market. Just remember to consider only publicly available information about your competitors’ pricing, and don’t forget to factor in your own costs and desired profit margins.

3. Skim Pricing:

Also known as price skimming, this strategy is ideal for products with different life cycle lengths. For example, you might launch a new product at a high price to attract early adopters, then gradually lower the price as competitors enter the market. Skim pricing works well for new products like laptops, smartphones, or cars.

4. Cost Plus Pricing:

This strategy, also known as cost-based pricing or mark-up pricing, involves calculating the cost of production and adding a desirable profit margin to determine the final price of the product. This pricing approach is simple and straightforward, but it may not take into account customer demand or willingness to pay.

5. Penetration Pricing:

This strategy involves setting an initial low price for a new product or service in order to attract customers and gain market share. Once your brand is established, you can gradually increase the price. This strategy is often used by new companies looking to break into a competitive market.

6. Economy Pricing:

Economic pricing is a pricing strategy that allows companies to price their products at lower prices due to lower production costs in order to attract bargain customers. This method of pricing is similar to competitive pricing in that it lowers the prices of products to attract customers. On the other hand, economy pricing is primarily aimed at customers who are willing to give up quality for a lower price. This basically enables companies to price products based on their manufacturing cost. For example, products from generic grocery store brands are often priced lower than name-brand products because they do not incur the costs associated with out-of-store advertising and promotion.

7. Dynamic Pricing:

Dynamic pricing is also referred to as real-time pricing, time-based pricing, snap pricing, and demand pricing. This strategy enables the firm to set a price for a product or service that is highly adaptable to market demands. For example, the algorithm behind this pricing method automatically adjusts prices based on buying activity. Customers expect prices to vary depending on the project and conditions, so dynamic pricing works well for small businesses. This pricing structure allows for multiple opportunities to take advantage of market shifts and customer needs.


Pricing your product or service is an important part of running a successful small business. By understanding your customers’ needs and using the right pricing strategies, you can increase sales and revenue while still turning a profit.


Hello, I am the author of an article entitled The 7 Best Pricing Strategies Used in Small Businesses which was published on January 24, 2023 at Best CRM Software

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