Pricing Strategies to Make You Competitive and Profitable

Let's look at the best pricing strategies to help your small business succeed.

There are many aspects of a business that the owner must take care of, but pricing strategies may be the hardest.

It is usually considered one of the more difficult because many businesses are unaware of how to exactly go about determining the best pricing strategies.

Many therefore simply look at their competitors and decide to undercut that price by a small percentage. While this may seem like a good tactic, it may not be the best for your small business. In fact, it can decrease your revenues and increase your expenses.

That’s why today we’ll look at the 4 best pricing strategies you can use today to make your small business more competitive and profitable.

Competitive pricing

This pricing strategy is the most common and therefore deserves to be discussed first.

This pricing strategy works by taking the average of many, not just one, of your competitors. You can then decide if you want to go below that price or to stay at the same level and gain an advantage in other ways.

Of course, for this strategy to be effective, your business structure should closely mirror that of your competitors. If not, you could be charging too little for your products or services.


Cost plus is based on determining your business costs and then applying a set markup to come up with your price.

This means that you are looking only at what your costs are and adding the markup in order to turn a profit on your products or services.

Although this is pretty straightforward, it also means that you are ignoring the competition. If you only look at this, you may end up losing customers by not being competitive enough with your prices.

Charm pricing

Charm pricing is one of the top pricing strategies employed for businesses involved in retail. Simply put, it is a psychological pricing strategy that is dependent on reducing a price by one cent from rounded figure; i.e., going from $10 to $9.99.

This works on many levels, but the most important is that our psychology does not see the one cent decrease as much as it sees the whole dollar amount decrease. That one is stronger, and therefore we see it as being a bigger discount than what it actually is.

Prestige pricing

This is the opposite of charm pricing. Here, instead of bringing your prices down from a rounded dollar amount, you will actually take it up.

This works on another psychological level and it is beneficial for those companies involved in luxury goods. Psychologically, rounded dollar amounts present the consumers with a stronger ‘gut feeling’ that the good being offered is higher quality and therefore more prestigious.

It relies less on practicality and more on intuition and can cause a customer to make a purchase mostly on the basis of the price.

The best pricing strategies

These pricing strategies are all effective for the many businesses out there and can help prevent business failure. However, not all pricing strategies will be effective for your business. It depends, as always, on the depth of knowledge you have not only of your industry but also of your product.

With that knowledge you can make the best decisions and determine the best pricing strategies to adopt.