Pricing Models Based on Industry
or Business
Not every pricing strategy is applicable to every business. Some strategies are better
suited for physical products whereas others work best for SaaS companies. Here are
examples of some common pricing models based on industry and business.
Product Pricing Model
Unlike digital products or services, physical products incur hard costs (like shipping,
production, and storage) that can in uence pricing. A product pricing strategy should
consider these costs and set a price that maximizes pro t, supports research and
development, and stands up against competitors.
Digital Product Pricing Model
Digital products, like software, online courses, and digital books, require a different
approach to pricing because there’s no tangible offering or unit economics (production
cost) involved. Instead, prices should re ect your brand, industry, and overall value of your
product.
Restaurant Pricing Model
Restaurant pricing is unique in that physical costs, overhead costs, and service costs are
all involved. You must also consider your customer base, overall market trends for your
location and cuisine, and the cost of food — as all of these can uctuate.
Event Pricing Model
Events can’t be accurately measured by production cost (not unlike the digital products we
discussed above). Instead, event value is determined by the cost of marketing and
organizing the event as well as the speakers, entertainers, networking, and the overall
experience — and the ticket prices should re ect these factors.
Services Pricing Model
Business services can be hard to price due to their intangibility and lack of direct
production cost. Much of the service value comes from the service provider’s ability to
deliver and the assumed caliber of their work. Freelancers and contractors, in particular,
must adhere to a services pricing strategy.
Nonpro t Pricing Model
Nonpro ts need pricing strategies, too — a pricing strategy can help nonpro ts optimize all
processes so they’re successful over an extended period of time.
A nonpro t pricing strategy should consider current spending and expenses, the
breakeven number for their operation, ideal pro t margin, and how the strategy will be
communicated to volunteers, licensees, and anyone else who needs to be informed. A
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nonpro t pricing strategy is unique because it often calls for a combination of elements
that come from a few pricing strategies.
Education Pricing Model
Education encompasses a wide range of costs that are important to consider depending
on the level of education, private or public education, and education program/ discipline.
Speci c costs to consider in an education pricing strategy are tuition, scholarships,
additional fees (labs, books, housing, meals, etc.). Other important factors to note are
competition among similar schools, demand (number of student applications), number and
costs of professors/ teachers, and attendance rates.
Real Estate Pricing Model
Real estate encompasses home value estimates, market competition, housing demand,
and cost of living. There are other factors that play a role in real estate pricing models
including potential bidding wars, housing estimates and benchmarks (which are available
through real estate agents but also through free online resources like Zillow), and seasonal
shifts in the real estate market.
Agency Pricing Model
Agency pricing models impact your pro tability, retention rates, customer happiness, and
how you market and sell your agency. When developing and evolving your agency’s
pricing model, it’s important to take into consideration different ways to optimize it so you
can determine the best way to boost the business's pro ts.
Manufacturing Pricing Model
The manufacturing industry is complex — there are a number of moving parts and your
manufacturing pricing model is no different. Consider product evolution, demand,
production cost, sale price, unit sales volume, and any other costs related to your process
and product. Another key part to a manufacturing pricing strategy is understanding the
maximum amount the market will pay for your speci c product to allow for the greatest
pro t.
Ecommerce Pricing Model
Ecommerce pricing models are how you determine the price at which you’ll sell your online
products and what it'll cost you to do so. Meaning, you must think about what your
customers are willing to pay for your online products and what those products cost you to
purchase and/or create. You might also factor in your online campaigns to promote these
products as well as how easy it is for your customers to nd similar products to yours on
the e-commerce sites of your competitors.
Pricing Analysis
Pricing analysis is a process of evaluating your current pricing strategy against market
demand. Generally, pricing analysis examines price independently of cost. The goal of a
pricing analysis is to identify opportunities for pricing changes and improvements.
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How to Conduct a Pricing Analysis :
1. Determine the true cost of your product or service.
To calculate the true cost of a product or service that you sell, you’ll want to recognize all
of your expenses including both xed and variable costs. Once you’ve determined these
costs, subtract them from the price you’ve already set or plan to set for your product or
service.
2. Understand how your target market and customer base respond to the pricing
structure.
Surveys, focus groups, or questionnaires can be helpful in determining how the market
responds to your pricing model. You’ll get a glimpse into what your target customers value
and how much they’re willing to pay for the value your product or service provides.
3. Analyze the prices set by your competitors.
There are two types of competitors to consider when conducting a pricing analysis: direct
and indirect.
Direct competitors are those who sell the exact same product that you sell. These types of
competitors are likely to compete on price so they should be a priority to review in your
pricing analysis.
Indirect competitors are those who sell alternative products that are comparable to what
you sell. If a customer is looking for your product, but it’s out of stock or it’s out of their
price range, they may go to an indirect competitor to get a similar product.
4. Review any legal or ethical constraints to cost and price.
There’s a ne line between competing on price and falling into legal and ethical trouble.
You’ll want to have a rm understanding of price- xing and predatory pricing while doing
your pricing analysis in order to steer clear of these practices.
Analyzing your current pricing model is necessary to determine a new (and better!) pricing
strategy. This applies whether you're developing a new product, upgrading your current
one, or simply repositioning your marketing strategy.
Next, let’s look at some examples of pricing strategies that you can use for your own
business.
Pricing Strategy Examples
Dynamic Pricing Strategy: Chicago Cubs Freemium Pricing Strategy: HubSpot Penetration
Pricing Strategy: Net ix Premium Pricing: AWAY Competitive Pricing Strategy: Shopify
Project-Based Pricing Strategy: Courtney Samuel Events Value-Based Pricing Strategy:
INBOUND Bundle Pricing: State Farm Geographic Pricing: Gasoline
Pricing models can be hard to visualize. Below, we’ve pulled together a list of examples of
pricing strategies as they’ve been applied to everyday situations or businesses.
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1. Dynamic Pricing Strategy: Chicago Cubs
I live in Chicago ve blocks away from Wrigley Field, and my friends and I love going to
Cubs games. Finding tickets is always interesting, though, because every time we check
prices, they’ve uctuated a bit from the last time. Purchasing tickets six weeks in advance
is always a different process than purchasing them six days prior — and even more sox
pricing at the gate.
This is an example of dynamic pricing — pricing that varies based on market and customer
demand. Prices for Cubs games are always more expensive on holidays, too, when more
people are visiting the city and are likely to go to a game.
(Another prime example of dynamic pricing is INBOUND, for which tickets get more
expensive as the event nears.)
2. Freemium Pricing Strategy: HubSpot
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HubSpot is an example of freemium pricing at work. There's a free version of the CRM for
scaling businesses as well as paid plans for the businesses using the CRM platform that
need a wider range of features.
Moreover, within those marketing tools, HubSpot provides limited access to speci c
features. This type of pricing strategy allows customers to acquaint themselves with
HubSpot and for HubSpot to establish trust with customers before asking them to pay for
additional access.
3. Penetration Pricing Strategy: Net ix
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Net ix is a classic example of penetration pricing: entering the market at a low price (does
anyone remember when it was $7.99?) and increasing prices over time. Since I joined a
couple of years ago, I’ve seen a few price increase notices come through my own inbox.
Despite their increases, Net ix continues to retain — and gain — customers. Sure, Net ix
only increases their subscription fee by $1 or $2 each time, but they do so consistently.
Who knows what the fees will be in ve or ten years?
4. Premium Pricing: AWAY
There are lots of examples of premium pricing strategies … Rolex, Tesla, Nike — you
name it. One that I thought of immediately was AWAY luggage.
Does luggage need to be almost $500? I’d say no, especially since I recently purchased a
two-piece Samsonite set for one-third the cost. However, AWAY has still been very
successful even though they charge a high price for their luggage. This is because when
you purchase AWAY, you’re purchasing an experience. The unique branding and the
image AWAY portrays for customers make the value of the luggage match the purchase
price.
5. Competitive Pricing Strategy: Shopify
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Shopify is an ecommerce platform that helps businesses manage their stores and sell their
products online. Shopify — which integrates with HubSpot — has a competitive pricing
strategy.
There are a number of ecommerce software options on the market today — Shopify
differentiates itself by the features they provide users and the price at which they offer
them. They have three thoughtfully-priced versions of their product for customers to
choose from with a number of customizable and exible features.
With these extensive options tailored to any ecommerce business' needs, the cost of
Shopify is highly competitive and is often the same as or lower than other ecommerce
platforms on the market today.
6. Project-Based Pricing Strategy: Courtney Samuel Events
Anyone who's planned a wedding knows how costly they can be. I'm in the midst of
planning my own, and I've found that the bundled, project-based fees are the easiest to
manage. For example, my wedding coordinator Courtney charges one at fee for her
services. This pricing approach focuses on the value of the outcome (e.g., an organized
and stressless wedding day) instead of the value of the time spent on calls, projects, or
meetings.
Because vendors like Courtney typically deliver a variety of services — wedding planning,
day-of coordination, physical meetings, etc. — in addition to spending time answering
questions and providing thoughtful suggestions, a project-based fee better captures the
value of her work. Project-based pricing is also helpful for clients and companies who'd
rather pay a at fee or monthly retainer than deal with tracked hours or weekly invoices.
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7. Value-Based Pricing Strategy: INBOUND
While INBOUND doesn't leave the ultimate ticket price up to its attendees, it does provide
a range of tickets from which customers can choose. By offering multiple ticket "levels,"
customers can choose what experience they want to have based on how they value the
event.
INBOUND tickets change with time, however, meaning this pricing strategy could also be
considered dynamic (like the Cubs example above). As the INBOUND event gets closer,
tickets tend to rise in price.
8. Bundle Pricing: State Farm
State Farm is known for its tongue-in-cheek advertisements and its bundle deals for home
and auto insurance. You can receive a quote on one or the other, but getting a quote on
both can save you money on your premiums.
State Farm bene ts from bundle pricing by selling more policies, and consumers bene t by
paying less than they normally would if they used two different insurance providers for
home and auto coverage.
9. Geographic Pricing: Gasoline
Gasoline is notorious for having a wide range of prices around the world, but even within
the United States, prices can vary by several dollars depending on the state you live in. In
California for example, gas prices have consistently hovered around $3 in the summer
months for the past 10 years. On the other hand, gas prices in Indiana have been in the $2
range during the same time period. Laws, environmental factors, and production cost all
in uence the price of gasoline in California which causes the geographic disparity in the
cost of the fuel.
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