Pricing strategies

There are many different pricing strategies you can use to sell your products and services. You may use more than one strategy at a time, depending on what you are trying to achieve.

Before deciding which strategies are right for your business, you may want to take the following factors into consideration:

  • Industry — Any emerging trends? What is the current cost of materials, labour, overhead, etc.?
  • Market segment — Who is your targer audience? What role does pricing play in their decision to buy?
  • Marketing objectives — Are you introducing something new, trying to increase sales of existing buyers, or gain new customers?
  • Distribution channels — Are you able to deliver on what you promise, or meet changes in demand?
  • Customer base — How will your pricing strategy impact loyal customers? Will it allow you to attract new customers?
  • Competitive situation — What are your competitors charging?

Pricing isn't an exact science, and it may take some trial and error to find a strategy that works for your business. There is often a delicate balance between sales, profits, and what your competition is doing. When demand is high, you can charge more than when demand is lower; however, you don't want to change your prices too often because it could negatively affect how your customers perceive the value of your offerings.

Loss leaders

You may choose to offer a product or service at an exceptionally low price (often below cost) in order to lead customers to your business, then entice them with other, higher-priced items.

You may decide to price one component of a multi-component system as a loss leader, in order to stimulate sales of the other components. If executed with care, this strategy could result in a larger customer base and increased sales. Be aware that some customers will stockpile the loss leaders and ignore other products.

Multiple-unit pricing and bundling

By offering more than one product for one attractive comprehensive price (3 for $5.00 instead of $1.99 each), you may tempt your customers to buy more than they intend. It's a good way to increase sales when you need to reduce inventory. Some customers perceive economic advantage when buying in bulk.

However, implementing this strategy too often might encourage your customers to wait for this type of deal instead of paying the full price for a single item.

Bundling is another version of this type of pricing, but one that is often used for items of higher value. When opting for this type of strategy, you offer a less popular item along with a more desirable one, all for a price that is less than it would be if the items were purchased separately.

Differential pricing

You may charge a variety of prices for the same product, if you group your customers into categories.  An example of differential pricing is movie ticket pricing; you may charge seniors, children or students, less on certain days of the week.

Customers who take the time to redeem coupons or wait for sales events also profit from differential pricing.


You could offer different versions of a product at different price points to appeal to a wider range of customers. Entry-level customers might choose a good or service of a lower value; eventually they may prefer an increased level of quality and/or value.

Volume discounts

One way of encouraging your customers to buy more is to offer a discount only once they have reached a pre-determined quantity. Your regular customers are thus rewarded for buying more.

You can link other quantity discounts to marketing strategies or promotions such as loyalty or rewards programs.

Legal requirements for competitive pricing

Be sure to check that your sales pricing policies fall within the legal requirements set out by the Competition Bureau.

It is important to understand that when you set a sale price, you must have already sold a reasonable quantity at the ordinary selling price or offered the item at the ordinary selling price for a reasonable amount of time. Misleading customers about a regular price is prohibited, as is advertising a sale price and not having enough stock available.

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