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Pricing Strategy

A pricing strategy is the method a business uses to set prices for its products or services. It considers costs, competition, perceived value, and market positioning.

Pricing Strategy Definition

A pricing strategy is the approach your business takes to determine what to charge for products or services. The right strategy balances profitability, competitiveness, and customer perception.

Common Pricing Strategies

  • Cost-plus — add a markup percentage to your total cost (simple, common for products)
  • Value-based — price based on the perceived value to the customer, not your cost
  • Competitive — match or undercut competitor pricing
  • Penetration — start low to gain market share, raise prices later
  • Premium — price high to signal quality and exclusivity
  • Tiered — offer multiple price points with different feature sets

    • How Pricing Affects Your Books

    Your pricing strategy directly determines your gross margin. If you're cost-plus at 30% markup, your gross margin is ~23%. Your P&L tells you whether your pricing supports your overhead.

    How to Evaluate Pricing in QuickBooks

  • Run a P&L by Product/Service to see margins per offering
  • Check Gross Margin — if it's declining, your pricing may not be keeping up with cost increases
  • Review Sales by Customer — are your biggest customers also your most profitable?

    • FAQ

    Q: How often should I review my pricing?

    A: At minimum, annually. Also review after significant cost increases, competitive changes, or when gross margin drops below target.

    Related Terms

  • Gross Margin
  • Revenue
  • Cost Of Goods Sold
  • Break Even Point

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