Pricing Strategy Examples and Types to Win Customers

Setting the right price is one of the toughest choices you can make. Go too low and you cut into profits. Go too high and customers may turn to competitors.

These decisions are not easy, and this is why studying your pricing strategy gives you practical insight into what works and what does not.

Pricing influences how customers see your brand and whether they’ll stick around. Even with a solid strategy, success depends on keeping customers engaged and aware of your offers.

In this article, we will explore a variety of pricing strategy examples, how each one works, and highlight the benefits and risks you should consider. You will also see how text message advertising can turn these strategies into stronger sales and long-term growth.

Why Pricing Matters for Business Image and Profit

Customers view price as a signal of quality. If something is priced higher, they assume it must be more valuable or reliable.

A PwC study found that 43% of consumers are willing to pay more for greater convenience, and 42% would spend more for a welcoming experience. This shows how pricing not only affects sales but also influences brand image.

Profit is also tied closely to pricing. A lower price may attract quick attention, but can cut too deep into earnings. Higher prices without proof of extra value often drive buyers away.

At the same time, pricing shapes customer behavior. A low entry price can attract new buyers, while a premium price can appeal to those who want exclusivity.

Over time, customers begin to associate your brand with the strategy you choose, whether that is budget-friendly, high-end, or somewhere in between. This consistency reinforces your market position and creates expectations in the minds of buyers.

The value of getting pricing right goes beyond revenue today. It protects your market position and provides flexibility to grow. When you treat pricing as a financial and branding decision, you can strengthen customer relationships while keeping long-term profits sustainable.

Types of Pricing Strategies (With Examples)

Pricing plays a major role in how you attract and retain customers. The approach you choose can shape buying behavior and influence how your brand is viewed.

Below, we’ll look at several pricing strategies and real examples of how companies use them in practice.

Cost-Based Pricing

Cost-based pricing can be a reliable starting pricing method. You can start by adding up the full cost of producing your product or service, such as raw materials, labor, and overhead costs. Then add a markup that reflects your desired profit margins.

Every expense is covered, and the markup pricing builds in earnings. For instance, if it costs $40 to produce an item and you apply a 50% markup, the selling price becomes $60.

Still, this method has limits. It doesn’t consider how much your target customers are willing to pay, and it overlooks competitors’ pricing. If buyers are price sensitive, relying only on this model may force you into a price war or reduce your market share.

You can strengthen this approach by testing price reactions before setting your final price point. An SMS marketing platform lets you reach your customer base with targeted promotions. It lets you track responses, adjust pricing to balance costs, buyer expectations, and long-term profit margins.

Value-Based Pricing

Value-based pricing sets your selling price based on the perceived worth of your product or service in the eyes of your target market. Instead of focusing mainly on production costs, you set prices around what customers believe the offering is worth.

Think about Apple as an example. The cost of producing an iPhone is far lower than its retail price. But customers see the device as high-quality and stylish. 

That perceived value allows Apple to charge a high price point while still attracting more new customers who are loyal to the brand.

This method can be powerful because it allows you to capture the full value your customer base is willing to pay. It’s less about being the cheapest and more about showing why your product solves a problem better than the competition.

To succeed, you need to know your target customers’ needs, pain points, and what they see as worth paying for. You can also set up an SMS mailing list so you can send SMS campaigns to different groups of buyers and test premium versus entry-level offers before committing.

Textellent’s SMS segmentation tools let you segment your audience by behavior, purchase history, or preferences. For example, one group might respond well to a premium offer, while another reacts best to an entry-level package.

Try it for free!

Competitive Pricing

A competitive pricing strategy lets you set prices based on what other businesses in your space are charging. This approach is common in industries where many players sell similar products and customers can easily compare prices.

Take airlines or gas stations as examples. When a competitor drops prices, others often follow to avoid losing their customer base.

But you can stand out even if your price is similar to a competitor’s. Sending targeted offers, automated text reminders, or loyalty rewards gives buyers a reason to choose you over another option. Here are a few examples:

• Send a special coupon to price-sensitive customers to match a competitor’s deal
• Highlight benefits that justify your selling price (better service, faster delivery, or bonus features)
• Reach out quickly when you need to adjust pricing in response to changes in the market

However, when everyone is focused on competitive pricing, it often triggers a price war. If you and your rivals keep lowering prices, you risk damaging your brand image by training buyers only to expect discounts.

In extreme cases, this can even look like predatory pricing, which undermines long-term value.

Penetration Pricing

Penetration pricing strategy is designed to gain market penetration by starting with low prices. The goal is to attract as many buyers as possible, build a solid customer base, and create strong brand awareness.

Once you’ve earned trust and loyalty, you can gradually increase prices to move closer to your desired profit margins.

A classic penetration pricing example is Netflix. When the company first launched, it charged a low price point compared to traditional DVD rentals.

It’s easier to attract customers who are tired of late fees and store visits. Over time, Netflix grew its sales volume, gained millions of subscribers, and then raised rates while still keeping loyal users.

The downside is that this method can strain your profits in the short term. If you’re not careful, you might train price-sensitive customers only to buy when the price is low. This makes it harder when you eventually raise prices.

Competitors may also react by slashing their own numbers, sparking a price war that reduces value across the market. If you’re a new business, the strategy can still be useful because it builds a customer base quickly, but it must be managed carefully.

Skimming Pricing

Price skimming takes the opposite approach of penetration pricing. Rather than entering the market with low prices, you set a high price point at launch and then lower it gradually as competition increases.

A good price skimming strategy example is seen in the tech industry. When new smartphones, gaming consoles, or smart devices hit the market, they launch with high prices. The initial buyers, often loyal fans, don’t mind paying extra because they value being first.

Once demand slows and more competitors enter, the selling price drops to capture more customers who were waiting for a better deal.

Skimming can bring in strong profit margins at the start. It also helps recover development or launch costs faster. But dropping prices too quickly can upset your early adopters.

That’s why proactive customer communication is key. If you explain why your product is priced higher at launch and when changes may come, your buyers will see the logic behind your pricing decisions.

Dynamic Pricing

Dynamic pricing is about changing your selling price based on live conditions such as demand, supply, time, or customer behavior. You’ll see this approach in industries like travel, ride-hailing, hotels, and online retail.

An example is Uber’s surge pricing. When ride requests spike, fares rise. Airlines also apply this system, charging more during peak seasons and less during slower periods. Online retailers like Amazon update prices several times a day, often reacting to competitors’ pricing or stock levels.

This pricing strategy helps you stay flexible. You can capture higher earnings when demand is strong or move stock by offering discounts when demand drops. It also allows you to reach different groups within your target market, giving each an optimal price.

However, if you change prices too often, price-sensitive customers may feel treated unfairly, which can hurt brand loyalty.

Psychological Pricing

Psychological pricing is built on the idea that buyers don’t always make decisions logically. Small changes in numbers can make a big difference in how your product or service is perceived.

Charm pricing is a common example, like $9.99 instead of $10. Customers often read it as a bargain even though the difference is only one cent. This approach works well for price-sensitive customers because it makes offers feel more affordable. 

Fast-food restaurants rely on this method to attract customers while keeping sales volume high.

For example, using SMS marketing for restaurants makes your deals even more attractive. Sending a quick text promoting a “$9.99 lunch special” is far more persuasive than advertising it as $10 flat.

Another part of psychological pricing is creating tiers. When you place a high-priced option next to a mid-range one, you make the mid-range product look more reasonable. This is a strategy for your business if you want to nudge buyers toward the middle ground while still protecting margins.

Freemium Pricing

Freemium pricing is a model where you offer a basic version of your product or service for free, while charging for advanced features, upgrades, or premium support. The free tier helps you attract a large customer base quickly, while the paid version is what drives your profit margins.

Spotify is one of the best-known examples. Users can stream music for free with ads and limited skips. But those who want ad-free listening, offline downloads, and unlimited skips pay for the premium version.

The freemium model can be a strong way to attract customers without the barrier of a low price point. People are more willing to try your innovative product when there’s no cost upfront. Over time, if the free version delivers enough value, many will convert to paid plans.

But the challenge here is balance. If the free plan gives too much away, you’ll struggle to push users toward paying. On the other hand, if the free tier feels too limited, customers may not see enough reason to upgrade.

Tracking how many customers buy after trying the free plan will help you know if you’re reaching your desired profit margins. You can also use direct outreach, such as running promotional SMS to remind free users of the added value in paid tiers.

Bundle Pricing

Bundle pricing is when you sell several items or services together for a single price that is lower than the total if each were purchased separately. This works well for companies focused on value-driven models, such as an economy pricing strategy.

Fast-food combo meals are a classic example. A burger, fries, and a drink cost less as a set than if ordered one by one. Cable and internet providers also use bundles, combining TV, phone, and internet into one plan.

This method works well if you have complementary products or services that fit naturally together. Customers feel they are getting more value for their money, while you boost overall sales volume.

Even if the profit margins on one product are smaller, the combined sale often makes up for it. Bundling also builds loyalty, since buyers feel they’re getting a better deal.

Premium Pricing

Premium pricing lets you set a high price point to position your product or service as exclusive, high-quality, or luxury. You compete on image, status, and perceived value.

Luxury brands like Rolex, Louis Vuitton, or Tesla rely on this model. The cost of producing the items may not justify the price alone, but buyers associate the brand image with prestige and quality.

That makes them more willing to pay extra, even when alternatives are available at a low price.

Premium pricing can strengthen your market position if you have an innovative product, strong branding, or unique features that set you apart. It can also deliver higher profit margins when supported by consistent branding and customer experience.

The main challenge is credibility. If your selling price is far above competitors’ but your value proposition doesn’t match, price-sensitive customers will turn elsewhere.

Geographic Pricing

Geographic pricing is when you charge different prices for the same product or service depending on location. Customers in one region may be more willing to pay than in another, or costs like shipping, tariffs, and taxes may vary by market.

For example, software companies often adjust subscription fees by country. A plan may cost more in the U.S. than in a region with lower income levels.

Retailers also follow this model by factoring in transport expenses and local demand. This approach helps achieve greater market penetration without hurting profit margins.

Geographic pricing can be useful if you operate across regions with different spending power. Flexibility allows you to stay competitive and connect with price-sensitive customers while keeping stronger profit margins.

How to Choose the Right Pricing Strategy

If you don’t know what it takes to produce and deliver your product or service, it’s easy to set prices too low and cut into your profit margins, or too high and lose price-sensitive customers.

Your costs generally fall into three main categories:

1. Fixed costs: Expenses that don’t change, no matter how much you sell (rent, salaries, and insurance)
2. Variable costs: Prices that rise or fall with production (raw materials, packaging, or direct labor)
3. Overhead costs: Shared expenses that keep the business running (utilities, marketing, or software tools)

When you add these together, you have the base cost of your product or service. From there, you can decide how much markup you need to cover these costs and still hit your desired profit margins.

For example, if it costs $50 to produce a product and you want a 40% markup, your selling price should start at $70. That’s the minimum number you need before layering on strategies like cost plus pricing, value-based pricing, or premium pricing.

Pricing isn’t just about covering expenses. You should also understand what your target customers are willing to pay and how they make buying decisions.

Research can take many forms. Customer surveys, interviews, and feedback from sales teams are great starting points. Reviews on Google or competitor analysis also give you clues about how buyers respond to different pricing strategies.

Segmenting your market is just as important. Not every customer has the same budget or expectations. Some are early adopters who will pay a high price point for an innovative product, while others wait for discounts.

The Role of SMS Marketing in Promotion Strategy

No matter which pricing strategy you choose, communication with your customer base is what makes it work as part of your broader marketing strategy and business model.

SMS marketing is personalized and direct, which makes it a strong channel for testing offers, announcing changes, and keeping your target customers engaged. Here are a few ways SMS can add value:

Announce Discounts

When you run short-term price cuts or seasonal promotions, texts let you share them with your customer base right away.

The speed of SMS boosts engagement during limited windows and can help you frame the value of an initial price against a discount. 

You can also highlight savings by showing the selling price before and after the deal, or by referencing the manufacturer’s suggested retail price when relevant.

SMS also allows you to segment your target customers so they see the best deal. For instance, you might send exclusive rewards to loyal buyers while offering special promotions to price-sensitive customers who need an extra push.

Promote Bundles and Packages

Bundles are a proven way to increase sales volume by combining products or services at a price lower than if bought separately.

The challenge, however, is making sure your customer base knows about the offer and understands the savings as you choose a pricing strategy for each segment.

SMS marketing for retail creates awareness, and because customers often read them within minutes, you can drive immediate action. 

You can send a short message explaining what’s included in the bundle, highlight the price point, and emphasize the total value compared to purchasing items individually.

This works well if your business relies on bundle pricing models, such as gyms promoting membership packages or ecommerce stores pairing popular products with slow-moving inventory.

Drive Urgency with Limited-time Offers

When customers know a deal won’t last, they are more likely to act quickly instead of waiting. SMS is the perfect channel for this type of promotion.

For example, you can announce a 24-hour flash sale or a weekend-only discount through SMS, which immediately grabs attention. Adding urgency with phrases like “Ends Tonight” or “Only 12 Hours Left” makes the offer harder to ignore.

Another advantage of SMS is that you can send reminders as the deadline approaches. Using an SMS scheduling tool, you can send a quick follow-up message a few hours before the offer expires to catch buyers who were interested but hadn’t acted yet.

Offer Exclusives to Loyal Buyers

Loyal customers are the most valuable part of your customer base, and rewarding them with exclusive deals is a smart way to keep them engaged. 

Text marketing is one of the best tools for this because it delivers personal communication that feels more like a privilege than a bulk SMS.

For example, if you run a premium pricing strategy, you could send VIP customers an invitation to purchase before the general public. Restaurants and retail stores can use SMS to share “members-only” offers or invite loyal buyers to limited seating events or private sales.

Remind Customers of Expiring Deals

Deadlines drive action. Many shoppers plan to buy, then forget. A short reminder near the end of a promo window brings them back and turns interest into orders.

A simple “Sale ends tonight” message with a direct link to the product page reduces steps and gets customers to checkout quicker.

Timing also matters. You can send an early reminder halfway through the offer, then a final “last chance” message a few hours before it ends. Keep copy short by including the name of the deal, stating the savings, and including the end time.

If you have multiple segments, you can send stronger reminders to past buyers and lighter nudges to new subscribers so you don’t cause opt-outs.

Drive Conversions With Better Engagement—Start Texting With Textellent!

You can spend time perfecting a pricing strategy, but even the best plan fails if customers never see the offer. Discounts, bundles, or premium offers only work when your audience knows they exist.

With Textellent, customer engagement becomes easier to build and maintain. It lets you segment your audience, send targeted messages, and connect with customers in a personal way. 

The stronger the engagement, the more likely your pricing strategies will translate into loyalty and sales.

Every pricing decision works better when your customers stay involved. Textellent keeps your audience connected, engaged, and ready to respond.

Sign up for a free trial or request a demo consultation and see how better engagement supports your pricing strategies!

FAQs About Pricing Strategy Examples

What is an example of a pricing strategy?

One of the simplest examples is market penetration pricing. This is when a company introduces a new product at a very low price to attract customers quickly.

Netflix used this approach when it first entered the market by charging far less than traditional DVD rental stores. This allowed the brand to build loyalty before gradually adjusting rates to an effective pricing strategy that balanced growth and sustainability.

What are the four pricing strategies?

The four core strategies often mentioned in business are:

1. Cost-based pricing: Adding a markup on top of production costs
2. Competitive pricing: Setting prices based on what competitors charge
3. Value-based pricing: Aligning prices with the customer’s perceived value
4. Premium pricing: Charging more to position a product as exclusive or high-end

Each can serve as the right pricing model depending on your market, goals, and customer base.

What are the five most common pricing strategies?

The five most common approaches are cost-based pricing, competitive pricing, value-based pricing, premium pricing, and price skimming.

Cost-based adds markup pricing to cover expenses. Competitive looks at what rivals charge. Value-based sets prices based on customer perception. Premium pricing positions products as high-end. Price skimming starts high, then lowers later to attract new customers.

When it comes to pricing strategy, choosing the right pricing model depends on your business goals. Some options help you maximize profits, while others focus on growth or building loyalty.

What are the 5 C’s of pricing?

The 5 C’s provide a framework for setting prices:

• Company objectives: What the business wants to achieve
• Costs: Both fixed and variable, which define the baseline price
• Customers: Their needs, preferences, and willingness to pay
• Competition: How rivals in the market are pricing similar products
• Channels: The distributors, partners, or retailers involved in delivering the product

When you apply the 5 C’s, you can find the best pricing strategy for your market and make adjustments to maximize profits while staying competitive.