Price strategy examples: the same product priced eight ways, and what each way does to the arithmetic

Named pricing strategies are easy to read about and hard to compare, because the examples are always about different products. So here is one product taken through eight of them with the numbers written out. The product is a service or item that costs you 40 dollars to deliver and that you currently sell for 100, which gives you 60 dollars of gross margin and a 60 per cent margin rate. Every example below changes the price and nothing else, and the only question asked each time is how many units it then takes to earn the same money. That question is what a pricing strategy actually is, and it is the one most pricing discussions skip.

The eight, with the arithmetic done

Baseline: cost 40, price 100, margin 60 per unit. Assume you currently sell 100 units a month, so the baseline earns 6,000 a month in gross margin. Replace every number with your own before using any of this.

Strategy	What you charge	Margin per unit	Units needed to match 6,000	What it is really buying
Cost plus	Cost times a set multiplier, say 2.5, so 100	60	100	Predictability. It ignores what the buyer thinks it is worth
Value based	140, because the buyer saves 400 using it	100	60	Margin. Needs you to know and state the saving
Competitive	95, matched to the nearest rival	55	110	Nothing, unless your product is genuinely interchangeable
Penetration	70, deliberately low to win share fast	30	200	Volume and habit. Doubling units is the real condition
Skimming	180 at launch, falling over time	140	43	Early margin from buyers who want it first
Loss leader	45 on this item, to sell something else	5	1,200, or the attached sale carries it	Traffic. Only works if the attach rate is measured
Bundle	170 for this plus a 60 cost add on	70 on a 100 cost bundle	86	A higher order value and a harder comparison for rivals
Freemium or free trial	0 for a limited version, 100 for the full one	60 on conversions only	100 conversions, plus the cost of serving free users	Reach. The free tier is a marketing cost with a server bill

Read the fourth column before the second. Penetration at 70 is a 30 per cent price cut and it needs you to double your unit volume to stand still. That is the whole decision, and it is invisible until somebody does the division.

The two rows people misread

• Competitive pricing at 95 looks like a small move and costs you about 8 per cent of your gross margin. Dropping 5 dollars off 100 takes 5 dollars off a 60 dollar margin, so you need ten more units a month to break even on a decision that felt like rounding. Matching a competitor is the most expensive thing on this list relative to how little thought it usually gets.
• The loss leader at 45 is not a pricing decision, it is a bet on the attach rate. At 5 dollars of margin you would need 1,200 units to replace the baseline, which is not happening. It only works if a measured share of those buyers also buy something profitable, and the number to know before you start is what proportion that is and what it earns. If you cannot measure the attached sale, you are running a discount and calling it a strategy.

What each one turns into if you leave it alone

Pricing strategies drift, and the drift is predictable.

• Penetration turns into your price. A low introductory number held for two years becomes what the market believes the thing is worth, and raising it later is a repricing exercise rather than an end date.
• Skimming turns into a fairness problem. Early buyers paid 180 and later ones pay 120, and the early ones find out. Decide in advance what the first cohort gets to keep.
• Competitive turns into a race nobody wins. If both sides price off each other, the only direction available is down, and the one with the lower cost base decides where it stops.
• Bundling turns into a hiding place. Once everything is sold together, nobody knows which component the buyer actually wanted, so the next pricing decision is made blind. Keep at least one unbundled line.
• Freemium turns into a cost centre. Free users have a real cost to serve, and a tier that converts poorly is an advertising budget you did not approve. Track cost per free user and conversion rate as one pair.

Choosing between them, on your own three numbers

You need three figures and they are all in your own records.

• Your gross margin per unit, honestly. Price minus everything that varies with making one more: materials, delivery, payment fees, the hours of the person who does the work. Not overheads.
• Your realistic volume ceiling. The most units you could serve next month without hiring. Penetration and loss leaders both assume headroom, and a business already at capacity gains nothing from a strategy that buys volume.
• What the buyer saves or earns by using it. If you can state that figure, value based pricing is available to you and nothing else on the list beats it. If you cannot, the honest options are cost plus and competitive until you can.

Then set the rule before the number. Which of those three figures is allowed to decide your price is the standing decision behind every example above, and the four reference points that can hold that job, along with how to raise a price without losing your existing customers, are set out in strategic pricing strategy. This page is the worked arithmetic; that one is the decision frame it sits inside.

Where a discount is a promotion rather than a price

A temporary price cut with an end date is a promotional mechanic, not a pricing strategy, and it carries a second cost beyond the money given away: it teaches the buyer what the product is worth and makes the next full price look expensive. Each mechanic and the cost that follows it is in sales promotion examples and what each one costs you after the sale. The test is the end date: if there is one and you honour it, it is a promotion. If there is not, you have repriced.

Pricing strategy examples: the questions that follow

Which pricing strategy is best?

Value based, whenever you can state what the buyer gains in a number they recognise, because it is the only one of the eight that raises margin without needing more volume. When you cannot state that number, cost plus with a deliberate multiplier beats guessing, and competitive pricing is the fallback for genuinely interchangeable products.

What is an example of penetration pricing?

Launching the 100 dollar product at 70 to win customers quickly. On a 60 dollar baseline margin that cut takes you to 30, so the strategy needs double the volume to earn the same money. It suits habitual, repeat purchase products where early share compounds, and it suits one off purchases very badly.

What is the difference between skimming and premium pricing?

Skimming is temporary and premium is permanent. Skimming launches high and comes down as the early buyers are served. Premium pricing holds a high price indefinitely because the product, the service around it or the brand supports it. Starting with skimming and never lowering the price is premium pricing arrived at by accident.

Can I run two pricing strategies at once?

Yes, across different offers, and that is normal: a loss leader on one line and value based pricing on another. What fails is two strategies on the same product, because the reference point changes depending on who is in the room and the price moves without a decision being made.

How do I know if my price is too low?

Three signs, and they arrive in this order: almost nobody questions the price, you are busy and the bank balance is not moving, and buyers choose you on cost and leave on cost. A price nobody argues with is usually a price with margin left in it.

How often should I change price?

Set a review date rather than a change date, once or twice a year, and change when the review says to. Prices that move constantly are hard to advertise and hard to sell against, and prices that never move fall behind your own costs without anybody deciding that they should.

The price a buyer sees before your page

Every example above assumes the buyer reaches your pricing and reads it. A growing share now asks ChatGPT, Gemini, Perplexity or Claude who to use and what it costs, and gets back three or four companies with a sentence each, assembled from whatever has been published about them. For a business that has just repriced, that is the slowest surface to update, and an old figure repeated confidently costs more than no figure at all. Worth reading what your own category currently returns, with your name left out of the question. AI Knows Us asks those buying questions across the main assistants and records who gets named and what the answers were built from.