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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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    Related Terms

    Earned Revenue

    Earned revenue is income that your business has legitimately recognized by delivering goods or services to customers. It's revenue you've actually "earned" through performance, not just money you've collected. On accrual basis, earned revenue appears on your P&L when the work is completed, regardles

    Break-Even Point

    The break-even point is the sales level at which your total revenue exactly equals your total costs — you're not making a profit, but you're not losing money either.

    Accrual Basis

    Accrual basis accounting records revenue when it's earned and expenses when they're incurred — regardless of when cash actually changes hands. It's the opposite of cash basis, where you only record transactions when money moves. Most businesses over $25 million in revenue are required to use accrual

    Chart of Accounts

    A chart of accounts (COA) is the complete list of every account in your accounting system — organized by category. It's the framework that determines where every transaction gets recorded. Think of it as the filing system for your finances: every dollar in and out gets filed into one of these accoun

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