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High 7 Product Pricing Methods Product Managers Must Know


product pricing strategies

Setting a product worth is nothing lower than a balancing act – setting it too excessive may result in lacking out on some variable gross sales, and stopping too low may result in lacking out on some helpful income. It’s thus essential for corporations to make sure that they use their most interesting sources to resolve the perfect worth for his or her services or products. Whereas the accounting, advertising, and govt administration crew play a pivotal position in pinning down the worth, product administration professionals have a say on this course of as properly. And to assist them make this choice successfully, I’ve labored on this text about product pricing methods. 

  1. What are product pricing methods?
  2. Why do Product Managers have to know product pricing methods?
  3. How you can create a Product Pricing Technique
  4. The highest 7 product pricing methods that you must know
  5. Conclusion

What are product pricing methods?

In a nutshell, it’s the course of of creating the correct product worth, which then helps maximize revenue whereas additionally taking good care of shoppers and market demand. And for this, they should handle sure elements, comparable to demand and worth of the product, opponents’ worth, and many others.

Why do Product Managers have to know product pricing methods?

Let’s settle for it: no one is aware of a product higher than a product supervisor as they’re concerned in a product’s life cycle. Completely different groups may concentrate on the points of their very own work, however it’s the product supervisor who oversees the product at each stage. Therefore, it is just pure that they’ve a say within the pricing of their product.

How you can create a Product Pricing Technique

There are a number of elements that one should take into account whereas deciding on the technique for use for product pricing. And talked about beneath are a few of them. 

1. Consider Pricing Potential

Pricing potential is the worth {that a} services or products can attain, contemplating its price, demand, and many others. Whereas deciding the pricing technique, one wants to contemplate all elements that have an effect on the potential worth and attain a quantity accordingly.

2. Know the Viewers

When deciding the product worth, one wants to contemplate why and the way prospects will use the merchandise in accordance with their wants. Another factor to be saved in thoughts is the worth that the purchasers will affiliate with the product, which can resolve how a lot they’re keen to pay for it.

3. Analyse Previous Information

Research the efficiency of the earlier product pricing methods. As soon as conscious of what has or has not labored up to now, one can take its instance and create their current technique accordingly.

4. Have a look at the Competitors

You’ll be able to’t resolve the worth of your product with out first taking a look on the competitor’s worth. When you get an concept concerning the worth distinction between your and the competitor’s merchandise/companies, you may make both of the 2 decisions to remain forward of them:

  • Beat their worth – If the competitors is charging extra for the same product, worth your product decrease than theirs.
  • Beat their worth – In case you provide extra worth than your competitor, you’ll be able to cost your product greater than the competitors, and prospects will nonetheless purchase it.

The highest 7 product pricing methods that you must know

Like a number of elements decide the worth of a product, a number of product pricing methods can be utilized to introduce a product to the market.

Talked about beneath are the highest 7 product pricing methods which were examined earlier than and have given wonderful outcomes.

  1. Worth-based Pricing Technique
  2. Premium Pricing Technique
  3. Freemium Pricing Technique
  4. Aggressive Pricing Technique
  5. Demand Pricing Technique
  6. Geographic Pricing Technique
  7. Skimming Pricing Technique

Learn on to know extra about these product pricing methods and their examples.

1. Worth-based Pricing Technique

It’s arguably essentially the most customer-centric technique because the costs are determined primarily based on what the client is keen to pay for a product. Even when the corporate needs to cost the product greater, it will be unable to take action contemplating buyer curiosity and knowledge. The largest advantage of this technique is that, if used appropriately, it has the potential to extend buyer loyalty and sentiment towards the product and/or model. However there’s a catch: Implementing this technique requires continuously being conscious of buyer profiles and shopping for behaviour to set the costs accordingly.

Instance of Worth-based Pricing Technique – Diamonds

Diamonds promote on three factors:
1. Their rarity
2. Their picture of representing a lifelong dedication
3. Their superlative qualities (hardest mineral, longest-lasting gem, and many others.)

All these factors create an impression within the patrons’ minds that they’re shopping for one thing that holds immense worth. The cash they pay for diamonds is therefore for the worth that the product holds of their minds.

2. Premium Pricing Technique

It is without doubt one of the prime product pricing methods utilized in right this moment’s digital occasions. Because the title suggests, this technique focuses on pricing the merchandise greater to showcase them as premium or luxurious. The purpose is to construct a perceived worth of the product, typically greater than its precise worth. It’s a kind of product pricing methods which rely extremely on model worth and model notion.

The technique is very efficient in pricing trend and know-how as a result of each of those will be marketed as unique, luxurious, and uncommon.

Instance of Premium Pricing Technique – Expertise

Smartphones, tablets, and computer systems are sometimes priced at greater charges than their market counterparts to make the purchasers really feel that they’re shopping for one thing premium for that more money. Whether or not that further quantity does or doesn’t add to the standard of the product is a distinct dialogue, however the buyer positive feels much more prosperous after having purchased such merchandise.

3. Freemium Pricing Technique

Freemium, a mix of free and premium, is very prevalent in pricing digital merchandise. Because the title says, this product pricing technique incorporates providing some product options or/and companies without spending a dime with the hope that the client will need to change to the premium model, as soon as the free trial ends.

By offering a free trial, a buyer will get an concept concerning the product’s performance, typically making them go for the paid model. Earlier than pinning down this technique, corporations want to make sure that they need to preserve the costs for the paid model in sync with the concept that the client is transitioning from a free trial section and therefore can’t be anticipated to pay a big quantity.

Instance of Freemium Pricing Technique – Audio/Video Streaming Platforms

The music or video streaming platforms that present free trials for a couple of days/weeks/months work on the freemium technique. Their concept is to make prospects like their product and construct your belief of their model in order that they will change to the paid variations as soon as the trial is over. 

4. Aggressive Pricing Technique

In contrast to the aforesaid product pricing methods, this one doesn’t concentrate on the client demand or product worth however somewhat on costs quoted by opponents. Companies that often use this technique are those that function in an setting the place even a slight distinction within the worth can resolve the curiosity of consumers.

It’s not at all times obligatory to cost your product beneath your competitor’s. You’ll be able to preserve them the identical as or near the worth of your opponents as properly. The thought is to be on prime of the competitors by conserving your worth dynamic and making the purchasers imagine that you’re offering them with the perfect worth for his or her cash.

Instance of Aggressive Pricing Technique – Milk

In case you go to a grocery retailer and check out the milk packets of various manufacturers, you’ll discover that there’s little or no distinction between their costs. For instance, low-fat milk from model A might be priced inside one or two rupees of low-fat milk from model B. It is because, in a market the place the client can change manufacturers for as little as one or two rupees, the manufacturers must watch out about their opponents’ costs and worth their merchandise accordingly.

5. Demand Pricing Technique

Generally often called Dynamic Pricing, Time-based Pricing, or Surge Pricing technique, it operates on buyer demand and market circumstances. This is without doubt one of the commonest product pricing methods that we will see each day within the pricing of utility-based merchandise. A number of elements resolve what the client can or can pay for a product at a sure cut-off date. Firms analyse these elements and transfer the costs of their merchandise to match the client willingness and market demand of the second.

Instance of Demand Pricing Technique – Air Tickets

Throughout competition season or round a protracted weekend, the airfares are at all times immediately associated to the willingness of individuals to journey. Airways continuously monitor their potential prospects’ pursuits and doable occasions of journey and manoeuvre their costs accordingly. Because the demand for air tickets goes up, so do the fares. It’s the most typical type of demand-based pricing technique.

6. Geographic Pricing Technique

Because the title suggests, pricing merchandise otherwise for various geographies known as Geographic Pricing Technique. A number of causes clarify how and why geographies dictate product demand and worth. For bodily merchandise, it’s principally used relying on the price the corporate must bear to get the product to the purchasers in several geographical areas. However within the context of digital merchandise, since there’s nearly no transportation price, the pricing will depend on the disparity in elements just like the economic system and wages of the purchasers.

Instance of Geographic Pricing Technique – Fruits

Everyone knows that the costs of fruits fluctuate lots in several geographies. For instance, apples might be priced decrease in greater altitude areas as in comparison with the plains or coastal areas. And this state of affairs would be the actual reverse within the case of coconuts. There might be many causes for this variation. The price of fruits often fluctuates primarily based on the next elements:
1. Availability of the fruit (relying upon the local weather, cultivability, and many others.)
2. Transportation prices
3. Demand for the fruit in a area

All these elements are nearly fully depending on the geography of the area the place fruits are grown and that of the area they’re equipped to. Therefore, we see a distinction within the costs of fruits throughout geographies. This distinction is predicated on the geographic pricing technique.

7. Skimming Pricing Technique

Skimming pricing can also be a kind of product pricing methods that purpose to maintain the worth variable. Firms cost the very best worth for his or her product when it’s launched, after which preserve decreasing the worth as the recognition of the product decreases over time. This technique can also be extremely prevalent within the pricing of digital services and products, the place the relevance of the merchandise decreases with time. Skimming pricing permits companies to proceed promoting merchandise even after their novelty is lengthy over.

Instance of Skimming Pricing Technique – Gaming Consoles

Each new launch of a gaming console sees a worth greater than the sooner, however it retains taking place with time as newer know-how, video games, and options preserve coming in. With the launch of the subsequent gaming console, whether or not from the identical model or from the competitors, the worth of the present console takes an extra dip. Therefore, a skimming pricing technique is adopted by means of the whole lifecycle of such merchandise.


We hope that the product pricing methods talked about above have given a greater concept about the way to resolve on the pricing of the product. To get intimately data about product pricing methods and varied different sides associated to product administration, enrol within the PG Program in Product Administration and Analytics. This system focuses on growing an analytical mindset in its learners, by the advantage of which they may have the ability to construct progressive merchandise.



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