Top 7 pricing strategies and when to use them

At a glance

Picking a price is a gut check dressed up as a math problem.

Price it too high, and you lose customers. Price it too low, and you leave revenue on the table.

Price optimization is the process of finding your best possible price using real customer data. Even once you have picked a pricing strategy, you still need this data to choose the actual number.

A price questionnaire replaces the gut check with real answers, so you can set a price based on what your market will actually pay.

Below, we cover how to run one, plus the seven pricing strategies worth knowing before your next launch.

Launch at a high price, then lower it over time. This captures early adopters willing to pay a premium, helps recover your development costs fast, and can sustain sales as later buyers wait for the price to drop. It works best when you are first to market with a breakthrough product, or selling into a fast-moving trend.

Launch low, then raise the price as you gain traction. Customers who feel like they got a deal early tend to stick around, and you build brand awareness fast. Reach for this strategy when you are entering a new market or launching in a new region.

Track what competitors charge, then price to match or beat them. This only works if your costs are under control, since you are pricing to the market instead of to your margin. It fits saturated categories where products are hard to tell apart, like milk or gas.

Set a high price to signal quality. Customers who buy for status and aspiration respond well to this, but only if the product actually delivers on that promise. Get the quality wrong, and the price just highlights the gap.

Sell one item below cost to drive traffic and sales of higher-margin items elsewhere. Retailers use this both as a short-term way to pull in new customers, and, for some business models such as liquidators, as a long-term strategy.

Use tactics like charm pricing (ending a price in .99), a smaller font for the cents, or showing an original price next to a sale price, to change how a price feels rather than what it is. It works well with price-sensitive shoppers, less so with luxury buyers who are not chasing a deal.

Set your price to match what customers believe the product is worth. When the product delivers on that value, this approach drives strong satisfaction and repeat purchases, and it shows up often in retail promotions.

Price optimization is the process of finding your best possible price using real customer data. Even once you have picked a pricing strategy, you still need this data to choose the actual number with a price questonnaire.

A price questionnaire is a short survey that asks customers what they would pay for your product before you set a price. Instead of guessing, you ask directly, using a method like the Van Westendorp Price Sensitivity Meter, to map out the range between too cheap and too expensive.

A good price questionnaire asks customers to react to:

The Price Optimization solution from SurveyMonkey LaunchPad builds this questionnaire for you, using the Van Westendorp method, so you go from question to price range without designing the study yourself.

Practice Better product manager Tabitha Wills said, “It made me, a first-time user of Van Westendorp, able to execute a model I knew nothing about initially.”

If you would rather build your own from scratch, start from the price testing survey template instead.

Price optimization is not a guessing game. Here is what to gather before you set a price:

Beyond your everyday pricing, run this research on three specific price types:

So, what do you need to optimize for? In addition to your basic, everyday pricing, we recommend performing price optimization for the following three types of price strategies:

If you’re just starting out with optimizing prices, take into consideration the following tips and guidance:

Offer a price that conveys value for money, and that customers are willing to pay (as well as a price that covers your costs!) and you’ve reached an optimal price. You’ll never be able to achieve that fine balance unless you get to know your customers. 

What is value in the minds of your customer? This is actually a pretty difficult question to answer. The best way to answer this, of course, is to ask them directly. Using tools like the Van Westendorp Price Sensitivity Meter, you’ll learn a lot about what customers consider to be too cheap, what they consider a bargain, and what they think represents value for money.

Customer demands, needs, expectations, and their willingness to pay your prices are not static, and as a consequence, your pricing should be dynamic. Make it a habit to continually analyze data in order to make sure your pricing is always optimal. 

After reviewing your data and adjusting your prices, make sure you monitor impact. Did that discount land effectively? Did that promotional sale help you acquire new customers, and how many? Price optimization is a long-term process so don’t forget to keep an eye on the consequences. 

Adjust your price, then watch what happens, before making the next change. For the full walkthrough, see our price sensitivity analysis guide.

You do not need an agency or a spreadsheet full of guesses to price with confidence. Run a price questionnaire with the Price Optimization solution and see your acceptable price range as responses come in. Explore our market research solutions to see what else you can validate before you launch.