55 Types of Pricing

John Spacey, updated on March 15, 2023

Pricing is the art and science of setting a price that maximizes the long term profits of a firm. This is driven by the basic forces of supply and demand, behavioral factors, competition, norms, ethics and regulations. Pricing immediately hits the bottom line of a firm and has long term impacts on brand value. As such, pricing is a primary type of business strategy with a long history of innovation. The following are common types of pricing.

Cost-plus Pricing Costs + markup. Guarantees a margin but detached from market realities.	Dynamic Pricing Pricing based on data such as inventory and demand.
Bundled Pricing Discounts for multiple purchases. Particularly useful for services as if you cancel one you pay more.	Freemium Offering a free version with available upgrades.
Free Trial A free version for a limited time.	Pay-as-you-go Paying for usage beforehand whereby you can choose the amount you want to spend e.g. a prepaid mobile phone.
Time-based Pricing Charging for a unit of time such as an hour. Common for professional services and rentals.	Value-based Pricing Pricing based on customer’s perceived value. For example, a premium color for a vehicle that is little or no cost to you but high value to the customer whereby they may be willing to pay a considerable amount.
Penetration Pricing Low prices designed to build market share.	Promotional Pricing A price promotion such as a sale or coupons.
Skimming The practice of charging a high price when a much anticipated product is released and lowering the price over time.	Tiered Pricing Pricing plans for different levels of service, features or usage.
Flat-rate Pricing Charging a flat rate for something that is often usage based.	Negotiated Prices Negotiating a price with each customer.
Anchor An expensive product that acts as a symbol of your brand. May make your other products look like a value in comparison.	Variable Pricing Pricing based on conditions such as demand or time of day. The same as dynamic pricing.
Subscription Pricing Recurring payments for an ongoing service.	Loss-leader Prices Low prices intended to attract customers.
Auction Competitive bidding for limited inventory.	Reverse-auction Sellers bid for the business of a customer.
Dutch Auction An auction that starts with a high price and reduces the price until it is accepted.	Real-time Prices Pricing based on data that changes very quickly. A common way to price stocks and other investments in extremely liquid markets.
Market Prices A market where individual buyers and sellers have no influence over price such that it is set by supply and demand. For example, the market for a high volume commodity such as wheat.	Geographical Pricing Setting different prices for different geographical locations. Based on factors such as local competition and price sensitivity.
Yield Management The process of setting prices for inventory that expires at a point in time. For example, discounting hotel rooms at the last minute to prevent them from going to waste.	Differential Pricing Charging different prices based on what you know about the customer. A common example is higher prices for corporate customers.
Complementary Pricing Pricing two complementary products to maximize overall profit. For example, cheap printers that require expensive cartridges.	Try-before-you-buy Allowing a customer to trial a product and return it without charge.
Premium Pricing Developing premium versions of things for customers who are willing to pay.	Luxury Pricing Sustaining consistent high prices where discounts would generate demand but damage the luxury status of a brand.
Brand Dilution A high status brand that uses this status to greatly increase scale by offering cheaper versions of things thus damaging brand image.	Clearance Pricing Low prices design to clear excess inventory.
Channel Pricing Offering different prices for different channels. For example, cheaper prices in store than online.	Outlet Pricing A retail strategy of putting stores in non-prime locations that carry excess inventory or stock with slight defects as a means to target price sensitive customers.
Loyalty Pricing Better prices for existing customers or for regular purchases. For example, an escalating discount that goes up as you purchase more each month.	New Customer Prices Lower prices that are only available to new customers.
Early-bird Prices Low prices for trying a new product or service.	Referral Pricing Discounts for referring new customers.
Flash Sales Sales that are over quickly as a means to create a sense of urgency.	Bulk Pricing Volume based discounts.
Psychological Pricing Pricing that considers how prices are perceived by customers.	Traditional Prices Prices that have been in place for a long time such that they are difficult to change.
Sticky Prices Prices that customers are accustomed to such that they may resist change.	Price Points Price levels where demand suddenly drops if they are exceeded. For example, customers may demand 1,000 widgets at $99 but will only demand 13 widgets at $100.
Competitive Pricing Pricing based on the prices of the competition and the relative strengths of your offerings.	Package Pricing Pricing that requires customers to chose packages of multiple things such as a set menu at a restaurant.
À La Carte Allowing customers to purchase individual things.	Price Leadership Setting the lowest price to capture high volumes of sales at relatively low margin.
Everyday Low Price Setting reasonably low prices that are stable and predictable. Together with stable stock levels and convenient locations, this can generate high levels of customer loyalty.	High-low Pricing Charging a high price for new releases that decreases over time. Common in the fashion industry where clothes for a new season are initially fully price with discounts towards the middle of the season.
Seasonal Pricing Prices based on seasons such as a hotel near a ski hill that is relatively inexpensive in summer.	Predatory Prices Prices designed to put the competition out of business. An anti-competitive practice.
Price Gouging Increasing prices in response to an emergency or shortage. An unethical practice.	Price Umbrella A price set by a dominant competitor that acts like gravity on all other prices.
Price Differentiation Finding ways to charge customers based on their willingness to pay. For example, coupons that are more likely to be used by price sensitive customers.

Pricing Strategy

The guide below is a catalog of pricing strategies. Pricing has been shaped by a long history of intensive competitive battles and pressure to improve profits. As such, it is amongst the most interesting areas of business strategy or strategy in general and we have tried to capture this in this guide.

55 Types of Pricing

Pricing Strategy

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